Can Mark Zuckerberg Go Broke?
It was a rough day to be Mark Zuckerberg.
For the second time in 2022, Meta suffered a value destruction event of historic proportions, as investors and analysts recoiled at the sight of a second consecutive quarterly revenue decline and ballooning losses tied to Zuckerberg's metaverse ambitions.
To quickly recapitulate, losses in Reality Labs topped $3.6 billion in Q3, revenue in the virtual reality unit missed estimates badly and company-wide profits halved, while expenses are now expected t
“On paper, Zuckerberg has lost an average of $256 million per day for 13 months running….”
That is a truly mind-boggling stat.
“And it’s just not clear if we weren’t driving this forward that anyone else would be.”
this is such an obvious self-own it borders on satire.
I mean, doesn’t that tell him that there is no market for this? Otherwise he’d be facing at least SOME competition.
An important distinction between Apple and Meta, is that Apple has chosen to develop new products/frontiers behind closed doors- which, at least today, seems very smart.
It looks as if the timing of Sheryl Sandberg’s departure was a statement.
Apple hasn’t developed a truly new product in 7 years. At this point they are just borrowing from their competitors and branding it as some magic new technology.
Apple hasn’t developed a truly new product since around 1988. Do you think they actually invented the smart phone? They invented and patented the glass rectangle. Everything else was an assembly of existing technology in Apple’s little garden. Done well, I acknowledge.
It’s their innovation rather than true invention that sets them apart. There were MP3 players before the iPod, but none with such a simple single button click-wheel interface. Then they integrated it with iTunes, turning the product into a revenue stream rather than a one-time hardware sale. They didn’t invent smartphones, but were the first with a touch screen (and no physical keyboard). They didn’t invent headphones, but pioneered cordless Bluetooth ear buds.
I’m actually not a fan of Apple, but one of my worst calls ever has been to continuously disregard Apple’s prospects (especially in the late 90s > early aughts).
Funny how all those things things that looked like terrible decisions at the time are now lauded. None of these were things people were asking for, Apple just declared, “This is how it’s done now” and billions of people said, “We hear and obey.” No keyboard, nonremovable battery, etc. I remember when the iPod came out… it didn’t seem “simple” so much as “stupid”. I had an Archos at the time, which could record, ran on AA batteries so I had the option to use rechargables or not, and could even, if you were so inclined, be flashed with custom firmware for lots of advanced features. Who looked at that and said, “Yeah, but I’d rather have none of those features and just one button, and have to get RSI moving my thumb in circles for an hour to scroll, for twice the price”? The Archos sure looked like the future at the time.
I mean, look, Apple is worth what they’re worth while I’m worth what I’m worth, so I guess we know who’s right. But it still mystifies me.
I guess people really, really liked those recycled 1960s Braun product visual designs.
META and AAPL seem to be working on different usage cases for VR/AR.
META has been working on gaming and social usage. The gaming usage is already here, and a lot is done on META’s Oculus 2 goggle due to the accessible price ($400). The social usage is the awkward work-in-progress, but obviously you can’t grow a VR social ecosystem behind closed doors. AAPL’s intended usage case is working on is (are) unclear to me. Their AR goggle may not be suitable for VR gaming (cost, AR vs VR, AAPL and gaming seldom get along). It may not be usable in META’s VR social ecosystem, for obvious reasons. Other companies are focused on productivity, business, industrial, and technical uses. META’s Oculus Pro seems to be oriented there.
I think AR/VR will eventually be big with abundant opportunities for advertising and other revenue. Whether META will be “the”, or “a”, winner I don’t know. They have a big lead but it is still such early innings. Still, Reality Labs isn’t harming the Family of Apps business or its cyclical recovery, even if it is slashing META’s EBITDA to $50BN (rough 2023E). Value RL at zero and FoA at just 8X EV/EBITDA and META’s EV could be $400BN. At $264BN mkt cap, META discounts RL as worthless and FoA in such terminal decline such that its only worth 5-6X EBITDA. Just personal opinion.
I’m still trying to figure out why people think this is going to work out differently than Second Life.
It’ll be different from Second Life because SL was profitable.
Mark Zuckerberg called people who handed over their data “Dumb Fu–s.”
Well, in fairness, he was right. 🙂
This discussion tickles my funny bone. MZ was foolish in his thinking and careless in his calculation. But each of us is an island of awareness and understanding. Relative to other critters that still remain on the earth, we have “advanced” brain capacity and intelligence. Bully for us! Human intelligence is greater than swine!
Consciousness of our conscious is what really differentiates us from other earthly creatures. So said the philosophers I studied with at the university. We are able to evaluate our own thinking and weigh its value and usefulness. We can grow our intelligence and build accomplishments that magnify our visibility and enable value in the broader society. But our conscious capacity is limited. Our emotions and impulses can impact our capacity for critical thought, and result in less conscious and less careful actions on our part.
MZ’s judgement about the risk of this venture into alternate reality appears to have been an error. In a way it’s understandable. Succeeding in business requires passion and action, which he obviously had for this project. And he definitely applied himself in an effort to make it feasible.
In my perception, MZ is not the most sympathetic character, but I can understand his mistake. At the same time, I’m human. We’re all human. We all make misjudgments. But maybe not with the same dollar impact on our businesses.
I appreciated this @CgoDave. MZ is a human being, just like the rest of us.
I dunno, it seems to me he’s just been trying to find his second major success to prove he’s not a one-hit wonder. First it was those little tablet video phones, then it going to be Libra cryptocurrency, now it’s Second Life^h^h^h^h^h^h the Metaverse, next it’ll be, I dunno, a Facebook self-driving EV or something.
He’s assuming that people will flock in droves to don wearable devices and lose themselves in an alternate reality. Who knows, maybe they will. He’d better hope so. At this rate, he’s months away from the bread line.
Zuckerberg opinion on VR is totally off, there is no market. Meta is perpetuating societies problems with technology, we have become to reliant on it and it’s not in the future.
If I’m a major shareholder and you tell me, in confidence, that you’re secretly plowing money into a covert initiative to develop a Mission Impossible-style contact lens for the masses that’s going to bring the wonders of augmented reality and connectivity directly to consumers’ corneas or that you’re working on a metaverse project that combines Inception-style dream building and The Matrix into a literal alternate reality, then sure, I’m excited. If you tell me you’re working on Grand Theft Auto powered by crypto, physical headsets and ways for people to bring 3D modeling to Zoom meetings when you could be putting every ounce of energy you have into leveraging one of the most powerful datasets ever assembled, then we have a problem.
This.
But the thing is – don’t we need to go through the GTA (powered by crypto or not), physical headsets, 3D modeling in Zoom calls on our way to MI-style contact lenses and Inception-style dream building and the cyberspace of the Neuromancer?
The pendulum is swinging against leveraging that dataset, though. Privacy concerns that lagged the initial starry-eyed infatuation of new tech has begun to catch up. I don’t think it’s safe to assume that Facebook is going to be able to pursue that sort of tracking operation indefinitely — especially in a world where social media is ubiquitous and motivated by trends, not technology. Meta would have to just buy every competitor indefinitely, and again this is assuming that other phone manufacturers don’t follow Apple’s path. Is that sustainable? Especially given the rise of “hipster antitrust”?
If anything i think Mark is trying to recapture the early magic of Facebook, which allowed a type of technological connectivity you couldn’t get anywhere else. Some of his comments regarding the challenge and promise of being able to virtually replicate non-verbal communication is right on the money. Everything we do is communicative, from how we dress to how we move to how we frown. Being able to replicate all of that in a natural way will absolutely be revolutionary. It opens up the other half of our behavioural language that has been muted since the internet revolution began.
That said, the best question to ask is whether Meta is positioned to be the next “Facebook” of the metaverse, or if it’ll be the early-but-flawed Friendster or Myspace.
If management and BOD (including Marc Andreessen) are believers, now (as in as soon as legal under SEC rules) would be a good time to buy the stock.
The problem that Facebook has is they do not have platform they own. They are an app on some one else’s device which are owned by Apple, Microsoft, Google etc.. Mark want to create a new one and own it, it’s expensive and not guaranteed. It’s a race where they have to own a platform or get eaten by the giants.
Such colossal wealth destruction could not have happened to a better man.
I remember once there was this kid named Edsel…
Only 200,000 of the company’s more than 2 billion daily users have tried this for a month or more. Where will the money come from? Read “Snow Crash” and see what the creator of the ‘verse thought might well happen. And he didn’t think of putting in contacts.
Mr. Lucky, I have been reading more sci-fi, lately. Historically, I did not read much sci-fi and I had never heard of “Snow Crash”. From my quick Wikipedia read, it looks like a good story and also a currently relevant story.
Nester – it is a fun read. I read it when it came out around 1992 and had no idea how prescient it was. Amazing!
If you are pressed for time, just read the first 50-100 pages.
I’m just mystified by the sheer dollar amounts Meta is burning on Reality Labs. A typical AAA game budget is in the neighborhood of ~$300 million. But what we’ve seen so far of Meta’s ‘Verse is lower quality than what Second Life was capable of in 2003, and they’re burning through over $10 billion/year. Granted Meta is working on more than just their virtual world, but it’s still an astonishing amount of R&D for so little product.