Mark Zuckerberg puts Facebook on a long and expensive road to metaverse reality

Facebook said Monday that its spending on Facebook Reality Labs, where the company works on augmented and virtual reality, would reduce total operating profit by about $ 10 billion this year. “I expect this investment to continue to grow over each of the next several years,” Zuckerberg said.

The CEO of Facebook has become one of the most vocal supporters of online worlds where people exist in immersive, virtual and shared spaces, increasingly called the metaverse. Rooted in sci-fi novels like “Ready Player One” and “Snow Crash”, the metaverse represents a digital reality where people playing through avatars could attend concerts with friends or try on clothes in stores, just like they would offline, out in the real world. In some visions, they cut across technological platforms.

“Over the next decade, these new platforms will start to unlock the types of experiences I wanted to create even before I started Facebook,” Zuckerberg said on a results conference call Monday.

This decision is becoming a central part of Mr. Zuckerberg’s drive to serve young adults. The experiences the company will introduce as it creates the Metaverse should attract and excite this audience, he said.

But realizing this vision will neither be quick nor cheap. Analysts say some of the foundational elements of the Metaverse don’t exist yet and will take time to build them. “We see the full vision of the metaverse decades away,” Jefferies analysts said, although they expressed a bullish outlook for the concept.

Total spending for the Facebook business could climb to $ 27 billion next year, to $ 97 billion, the company said, as it spends on people and infrastructure. Capital spending on things like network infrastructure and data centers is expected to increase by nearly 80% next year, the company said.

The potential gain, Zuckerberg said, could be substantial, especially by strengthening the company’s role as an online marketplace. Facebook’s revenue today is dominated by ad sales.

“If you are in the Metaverse everyday, you will need different clothes and digital tools and different experiences. Our goal is to help members reach 1 billion people and hundreds of billions of dollars in digital commerce, ”he said.

Zuckerberg’s vision of users interacting more closely with his services takes shape as Facebook faces wave of criticism from lawmakers, academics and users over the Wall’s “Facebook Files” series revelations Street Journal, which has shown that the company knows its platforms are Monday, he defended the company by saying, “I am proud of our record of the complex trade-offs involved in operating services on a global scale. and I’m proud of the research and transparency we bring to our work. “

Video game companies and other tech giants are also scrambling to grow their metaverse platforms and establish early dominance over what could become a big money maker and definitely change the way people interact with each other.

Some early versions of what could be considered the metaverse already exist in some companies. Epic Games Inc. hosted a Travis Scott concert in their hugely popular Fortnite video game a few months after the pandemic began. Over 12 million people attended. The Roblox Corp. hosted an immersive experience in May to celebrate the 100th anniversary of designer label Gucci, where users could purchase limited-edition items for their avatars. It also hosted a Twenty One Pilots concert last month.

Calculating the money to be made in the metaverse is difficult, said Andrew Uerkwitz, analyst at Jefferies, but the video game industry provides an indication of the market’s potential. “People are willing to spend over $ 80 billion a year on virtual goods,” he said, noting that the revenue generated in the metaverse “could be very, very large.”

But implementing the concepts of the metaverse will still require companies to overcome a set of hurdles, analysts say. Latency, for example, the time it takes for data to travel from one point to another and back, is currently too slow to support the concept, Jefferies said in his report. Additionally, virtual currencies need to evolve further, according to the report, to properly develop metaverse as markets.

Tech companies that want to become major players in the field will need strong video game operations, says Michael Wolf, co-founder and CEO of consultancy firm Activate Inc. Some tech companies could end up paying big bucks. to expand their gaming activities to bolster their metaverse aspirations, he told the Wall Street Journal’s Tech Live conference last week.

Facebook agreed in 2019 to acquire PlayGiga, a Madrid-based company specializing in cloud-based games. And Microsoft Corp., which owns Xbox and offers its own virtual reality headset, earlier this year made a $ 7.5 billion purchase from video game company ZeniMax Media Inc.

In August, Facebook launched public testing of Horizon Workrooms, an app that allows people wearing its Oculus Quest 2 virtual reality headsets to enter virtual offices as avatars and participate in meetings while seeing their computer screen and their board. The company recently announced that it plans to hire 10,000 workers in Europe over the next five years to help build the metaverse.

Mr Zuckerberg, during the call for the results, said the financial gain wasn’t coming anytime soon. “Later in this decade, we would expect it to be more of a real business story. “

Not all tech companies are aligned with the Metaverse vision. Evan Spiegel, chief executive of Facebook rival Snap Inc., which also invests in augmented reality, says the concept originated in fiction to describe a collapsing world. “We are really interested in augmented reality because it is anchored in the world we share,” he told the WSJ Tech Live conference.

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Corina C. Butler

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