Reality Labs' losses widen as Meta continues to "spend money".

Despite the decline in revenue and profits for Meta in Q4 2022 and the full year, it still exceeded the expectations of Wall Street analysts. After the financial report was released, on the afternoon of February 1st, Eastern Time, Meta's stock price rose to $182, an increase of 18.86%. Over the past 52 weeks, the company's stock price has reached a high of $328 and a low of $88.

The stock price opened higher after the financial report, but the performance of Reality Labs was eye-catching in the Meta financial report. It is the representative work of Facebook's parent company after renaming to Meta, and to some extent, it is regarded as a "barometer" for the layout of the Internet technology giant in the metaverse. It is not only a guide for product technology direction, but also a scale for observing the input-output ratio of a company after turning to the metaverse.

2022年，这个"量表"难看。

Meta's financial report shows that Reality Labs contributed $727 million in revenue in Q4, a 17% decrease from $877 million in the same period last year. For the 2022 fiscal year, the department's business revenue was $2.159 billion, a 5% decrease from $2.274 billion in 2021. In stark contrast, the department's operating losses were $4.279 billion in Q4, up 29.5% from $3.304 billion in the same period last year, and a total loss of $13.717 billion for the year, a 34.57% increase from $10.193 billion in the previous year.

Reality Labs' loss in 2022 exceeded its revenue by 6 times

In other words, Reality Labs' loss in 2022 was 6.35 times its revenue. Meta also stated that the loss was mainly due to the decline in sales of the VR headset Quest 2. According to research firm NPD Group, as of early December last year, sales of VR headsets in the United States in 2022 decreased by 2% compared to the previous year. This includes the consumer-level Quest 2, of course.

Meta probably saw the unfavorable situation early on and attempted to reduce losses, but instead of increasing sales, they raised prices. In July of last year, Quest 2 quietly increased by $100, with the 128GB version now priced at $399 and the 256GB version at $499. At the time, it was said to be due to inflationary pressures causing supply chain costs to rise, hence the necessary price increase. In October, the company launched the even more expensive Quest Pro, priced at $1500, which is directly targeted at more affluent B2B companies and positioned as an "enterprise work device".

From the results, the "price increase + new release" strategy failed to reverse Reality Labs' "battle damage". In Meta's entire revenue, the revenue generated by Reality Labs last year (2.159 billion US dollars) accounted for only 2% of the company's annual revenue (116.609 billion US dollars), but the department's loss of 13.717 billion US dollars has accounted for more than 50% of the company's profit (23.200 billion US dollars).

Meta's new CFO, Susan Li, said that these costs will continue to rise this year.

Meta uses AI to enhance efficiency, and the metaverse strategy remains unchanged

Reality Labs is burning so much money, what does Mark Zuckerberg plan to do?

After releasing its financial report, Meta's CEO positioned 2023 as the "year of efficiency" for Meta during an investor conference call, with plans to further streamline the company. Last year, the company had already undergone layoffs and departmental restructuring, with approximately 11,000 employees being laid off in Q4 alone.

Meta is expected to incur an additional $1 billion in restructuring costs in 2023. This means that while layoffs and restructuring can help "trim the fat," they will also come at a high cost. Zuckerberg stated that the efficiency measures in 2023 will also include the deployment of artificial intelligence (AI) tools that can improve engineer productivity.

"When people talk about efficiency, they often prioritize cutting the big items, but in reality, I believe that becoming a better company means being able to do more in the same amount of time, because higher operational efficiency allows us to complete tasks with fewer resources," Zuckerberg's statement implies his attitude towards Reality Labs: the department will not be cut.

More specifically, "So far, I haven't seen any signs that indicate we should change Reality Labs' long-term strategy," he added. "We are constantly adjusting the specific execution methods."

One dark and one bright two kinds of rhetoric are much softer than last year's "increased investment" statement that directly angered shareholders. Smart Zuckerberg also gave progress: Quest 3 headsets will use Meta Reality mixed reality system, and this system technology is expected to become the benchmark for all future virtual / augmented reality hardware. The market predicts that Quest 3 will be released in October this year, and according to previous official news, the price will be in the range of $300 to $500.

Meta's Quest Headset

"The MR (Mixed Reality) ecosystem is relatively new, but I believe it will grow a lot in the next few years," Zuckerberg's judgment may be based on the growth data brought by the Meta VR ecosystem. He said that currently, more than 200 VR applications have earned $1 million or more through Meta's ecosystem. Currently, there are about 460 VR applications in the Meta Quest store.

In 2023, if the supply chain cost of hardware does not decrease, the metaverse will still be a money-burning place for Meta. However, based on Mark Zuckerberg's statement, under the premise of "not abandoning or giving up", Reality Labs may not only focus on hardware this year, but also make a big cake on systems and applications, forming an ecosystem and profiting from VR application stores like Apple's AppStore.