Meta’s VR division lost over $10 billion while creating Metaverse in 2021

And the number of active users has declined in a first.
Ameya Paleja

After switching its focus from being a social media company to one building Metaverse, Mark Zuckerberg's company Meta participated in its first earnings call, CNBC reported. While the social media segment is still raking in profits, its Reality Labs division, tasked with building the metaverse, revealed record losses: $10 billion in 2021.

Last year, when Zuckerberg had announced his plans to hire 10,000 engineers to build Metaverse, he also knew that the company would have to dig deep to make this happen and losses were a part of the deal, CNBC reported. In its earnings call, Meta's Chief Financial Officer David Wehner attributed $4.2 billion of the losses to employee costs, research and development, and the gear it had sold so far.  

Even though Meta opened doors to its Horizon Worlds in December last year, these are just the baby steps of what the metaverse is expected to be. Reality Labs has been posting losses since 2019 in this area, even as its revenues have quintupled from $500 million to over $2.27 billion in three years. The $10.19 billion on this revenue is also a sign that building the metaverse isn't for the faint-hearted.

Even if that were true, Meta still needs to make this work. As Vox pointed out from the numbers of the earnings call, Meta has actually seen a dip in its number of users for the first time in its history. While this had been seen for the U.S. market before, Meta's expansion to other countries meant that the total number of users kept rising until now.

Apart from an aging user base, its social media segment has also been at the receiving end of the growing popularity of TikTok, whose feature the company has cloned but not been able to replace. Zuckerberg acknowledged the threat from the micro-video site and its massive popularity during the earnings call, The Vox reported

While the company's revenues in the last quarter have increased 20 percent over the previous year, they have also been less than what they could have been, had Apple not implemented its new policy with regards to data that can be tracked by apps. We had reported in November last year that Meta could see up to eight billion in revenue lost due to this change, and the company needs a new product offering to replace its aging products. 

Building the metaverse could take up to another decade and a half, experts told CNBC. It remains to be seen when Meta can make it profitable, especially with companies like Microsoft keen to tap into this trillion-dollar enterprise

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