Zuckerberg's $88bn metaverse flop

In 2021, Mark Zuckerberg unveiled a plan to completely reinvent his company - and revolutionise the internet.

He was so serious, he even renamed his business to tally with his vision.

The idea of the 'metaverse' - a digital world that lets people socialise, play and even work virtually, rather than in-person - had already existed.

It actually came from a '90s sci-fi novel called Snow Crash, which paints a dystopian future of privatised countries, where the metaverse serves as a class and commerce-based escape.

This, it seems, was a source of inspiration to a lot of people in Silicon Valley - including the man behind Facebook.

Mark Zuckerberg had shown an interest in virtual reality before.

Facebook had acquired VR headset maker Oculus VR in a multi-billion dollar deal back in 2014.

Up until that point, it had focused primarily on gaming - but the metaverse pitch aimed to make it much, much bigger than that.

What Zuckerberg was promising with his metaverse was essentially the next stage of the internet.

So, rather than you using your PC or phone to visit a website - like Facebook - where you would interact with friends or collages via a screen, you would instead put on a VR headset and a digital representation of you (avatar) of you would "go" there.

This, we were told, would be far more immersive, productive and enjoyable.

Rather than sending messages or doing video chats with friends, in the metaverse you and your friends’ avatars could gather in a virtual room.

Maybe you might even go along to a virtual concert together.

Or rather than wasting time and resources having people travel to the office - or using the likes of Zoom or Teams - a company could get the best of both worlds by hosting a virtual meeting in the metaverse.

And Zuckerberg hoped that Facebook - or Meta as it became - would be the platform that hosted all of these interactions.

It would be the foundation that other companies would build their apps and worlds within, in the same way that Microsoft, Google and Apple had been the platforms for the PC and smartphone.

That meant it would get a cut of revenue - which could be anything from an app people paid for, to the virtual ticket you bought for that metaverse gig, to the virtual clothes you bought for your avatar.

But, of course, this is Facebook so it was also looking at the prospect of all the data it would gain access to, which could then be converted into advertising revenue.

How much did they spend trying to make it happen?

Helpfully, as part of the company's 2021 pivot, Facebook/Meta started to break out the money it was making - and spending - on what it called its 'Reality Labs' division.

This was the part of the business that housed Oculus and their Metaverse.

And when you add up its financials between 2019 and 2025, the company has so far lost a combined $88 billion on this venture.

Last year was its worst so far - with a loss of $19.2 billion - and that's despite the division generating north of $2 billion of revenue each year for some time now.

But the total cost of Meta's Metaverse is probably a bit bigger than that - because a lot of other big firms got caught up in the initial hype.

Disney, for example, set up a small (now shuttered) division of the company to focus on the metaverse.

Other businesses appointed 'chief metaverse officers' to ensure they weren't going to be left behind.

And as absurd as that may seem now, it is worth remembering the context of all of this.

Because, when Meta unveiled its plan in 2021, much of the world was still dealing with pandemic lockdowns and restrictions.

We had all begrudgingly gotten used to the idea of living more of our lives digitally, and we were also seeing how well many types of jobs could function remotely.

It should be said, though, that the metaverse concept was also immediately met with a lot of scepticism - and outright scorn - too.

People questioned how much anyone would actually want to socialise in a digital world - especially once pandemic restrictions eased.

They also questioned how much money people would spend on virtual items (although that is something that already happens in a lot of popular games).

Many were also uncomfortable with the idea of Facebook having access to even more of their lives, interests and habits, and the prospect of essentially living in a world where they were constantly bombarded with personalised ads.

But even on a far more fundamental level, a lot of people poked fun at the virtual world Zuckerberg was advocating - because it looked like an out-of-date video game rather than some futuristic utopia.

Many compared the graphics to those of the Nintendo Wii - which had come out in 2006 - though at first Meta's avatars did not even have legs.

So what's happened to its metaverse?

It's essentially dead now - at least that vision of a digital world where we'd work and socialise.

Last month Meta announced it was going to shut down Horizon Worlds, which was the platform that hosted this supposed immersive world.

It later said it would keep some apps available on it, but it wouldn't add any new ones.

That follows the shuttering of multiple VR gaming studios, and the laying off of a sizable portion of its Reality Labs division.

And in company statements or speeches by executives, including Zuckerberg, where it would have previously been talking a lot about the metaverse as the future, now it's putting all of that focus, and investment, into artificial intelligence.

Meta is planning to spend as much as $135 billion on AI infrastructure this year alone.

Which almost makes that $88 billion loss on the metaverse over seven years seem modest.

Was that big loss all for nothing?

No - it wouldn't be fair to characterise it as a total loss.

For a start, Meta is still talking about the metaverse, albeit much more quietly than was the case a few years ago.

It's also a very different vision to the immersive world Zuckerberg pitched before.

Now its metaverse is really just a number of different, relatively niche applications for virtual reality headsets.

Gaming is one, education is another.

And the company is very much is a leader in the virtual reality space, even if that just happens to be a much smaller market than it might have hoped.

And the billions it would have invested in Reality Labs over the years has also gone towards the development of other products, including the glasses and sunglasses that Meta have made with Ray Bans and Oakley.

These are essentially regular-looking glasses that have a small computer packed into the frame.

They are also relatively niche at this point, and have led to concerns around privacy, because the built-in cameras make it possible for people to record what's in front of them without it necessarily being obvious to others that they're doing so.

But that technology is slowly advancing, the latest versions make it possible for the likes of messages to be projected onto the lens, so the user doesn't need to take their phone out.

Meta also has a concept product called Orion that would add augmented reality functions to these kinds of glasses - this is where digital data is overlayed on what you see around you, rather than the user being immersed into a fully virtual world.

That digital data could be contextual information, like telling you more about what you're looking at, or it could be as simple as making it look to you like there's a large screen floating in front of you.

This kind of AR is still very much in its infancy, though, and it will take some time - if ever - before it's big enough to repay the tens of billions that's being invested in the technology.

They're not the only ones to have been burned by virtual reality, are they?

No, they join a long list of companies that tried to make mass-market virtual reality work, only to fail.

It's not the earliest example but you can go back to the mid-90s and Nintendo’s Virtual Boy, which was a headset-based spin-off from the hugely popular Gameboy.

The Virtual Boy was more of a 3D gaming device than actual VR, but regardless it was a huge flop, not least because a lot of users ended up with headaches and nausea after using it.

Around 14 years ago, Google unveiled the Google Glass, which was an early AR headset that could be seen as a precursor to what Meta is trying with its glasses today.

That never really got beyond the developer stage and into a mass market consumer product, though.

Google did try targeting it as a tool for factory workers but eventually ceased its production altogether.

More recently, though, it has launched an operating system for AR and VR headsets and is reportedly planning another go at smart-glasses too.

Meanwhile, in recent years, we've also had VR headsets from the likes of HTC, Samsung and Sony, with what can best be described as mixed results.

Yes, it launched its Vision Pro headset just over two years ago.

It's an augmented reality headset but it achieves this in a different way to to the likes of Google Glass and Meta Glasses.

That's because it’s full headset like a VR device which then uses cameras to stream an image of what’s in front of the user, in what's called passthrough.

Virtual elements are then added in.

Apple reportedly spent somewhere between $10 billion and $30 billion developing this product, and there were high expectations around it.

Apple generally isn't first to a market; but when it does come along with something it tends to execute it better than most others.

As a result there was a feeling that this could be the product that could take VR and AR into the mainstream ...

but that hasn't happened.

Now, whether the Vision Pro has been a success or a failure is debatable.

On the one hand, it's thought that well below one million Vision Pro headsets have been sold so far.

For context, there were north of 245 million iPhones sold last year alone.

There are lots of reasons for that lack of Vision Pro sales, the lack of an obvious use-case being one, but really one of the big impediments is the fact that the headset costs at least €3,700.

And even now, two years on, it hasn't launched in a lot of markets, including Ireland.

But some Apple fans argue that this was the company's plan all along - it launched an expensive, high-end model so that developers and power-users would buy it and then figure out what the use cases means for them.

Then, once they got their technology and supply chains perfected they could come back and launch a more affordable, consumer-focused version.

With no sign of that cheaper version two years later, the jury is still out on that theory.

But what the case of both Meta and Apple's attempts at virtual and augmented reality projects do highlight is just how much money these companies are making.

Meta has lost $88 billion on Reality Labs since 2019, but over the same period of time it has reported a combined $272 billion in profits.

That's the figure after its $88 billion VR loss is taken into account.

Apple, meanwhile, spent as much as $30 billion on the Vision Pro.

Last year alone it had a net profit of $112 billion, so it could have paid for the development of the headset three times over in a single year, and still walked away with what most companies would consider to be an extremely healthy profit.