Meta has spent $45 billion over four years chasing its metaverse dream

More than four years since Mark Zuckerberg rebranded Facebook as Meta in pursuit of his metaverse vision, the company has invested billions in the endeavor, but the results have been less than desirable. The ongoing financial losses have cast doubts on the viability of the strategy over the long term.

Insiders familiar with the situation have revealed that the metaverse project has evolved into a financial black hole, devouring a staggering $45 billion by early 2025. This amount is almost equivalent to the combined market capitalization of social media competitors like Snap and Pinterest or what Elon Musk paid to acquire Twitter. Zuckerberg’s warning during last year’s earnings report about losses continuing to “increase meaningfully” has sparked concerns.

An in-depth discussion with over a dozen former high-ranking employees of Reality Labs shed light on the dysfunctional and disorganized nature of the division. Constant changes in leadership and frequent reshuffling have reportedly created turmoil within the wing, with many managers coming from other Meta divisions without possessing the necessary expertise in AR and VR.

One former research staff member painted a picture of chaos within the work environment, highlighting the promotion of “local heroes” from platforms like Instagram to lead virtual reality teams, despite lacking relevant experience. Another former employee criticized Meta for haphazardly assigning AR and VR roles to individuals who lack a fundamental understanding of the technology. This cocktail of unqualified leadership combined with an ambiguous product strategy has played a significant role in the division’s astronomical losses.

Financial records have shown a worrying trend in escalating losses over the past few years – surpassing $6 billion in 2020, $10 billion in 2021, $13 billion in 2022, and $16 billion in 2023. The division’s loss of an additional $3.8 billion in the first quarter of 2024 effectively wiped out its total revenue from 2022 and 2023 combined.

Despite the mounting expenses, the division has witnessed a steady decline in annual revenue since 2021, attributed to poor sales and the consistent failure to gain widespread traction in the market. Wall Street analyst Gene Munster from Deepwater Asset Management labeled the division as a “financial disaster” that is dragging down Meta’s stock value.

While some investors initially held out hope for the long-term potential of AR and VR, that optimism is now starting to wane. Unless there is a rapid surge in mainstream adoption, the idea of sustaining annual losses of $10-15 billion on Zuckerberg’s metaverse aspiration becomes increasingly unsustainable.