Facebook invests billions in Metaverse efforts as ad business slows

New Delhi: Facebook on Monday said it will start publishing the financial results of its augmented and virtual reality labs as a separate entity, where it is investing billions in its ambitions to build “metaverse” and As it described its core advertising business faces “significant uncertainty.”

Facebook, which reported a 17% profit in the third quarter, warned that Apple’s new privacy changes will weigh on its digital business in the current quarter. The social media company reported quarterly revenue below market expectations, which Chief Operating Officer Sheryl Sandberg told analysts was due to the iOS changes.

Facebook’s Chief Financial Officer David Weiner said the company expects its investment in its hardware division, Facebook Reality Labs, to reduce total operating profit by about $10 billion in 2021.

The financial commitment to this hardware-focused entity, which will serve Facebook’s “Metaverse” ambitions, comes in the wake of coverage of leaked documents by the company’s former Facebook employee and whistleblower Frances Haugen, in which she said that the company had scuttled users. Gain over security is chosen. CEO Mark Zuckerberg began Monday’s analyst call by issuing a defense against criticism stemming from the documents, which he said painted a “false picture of our company.”

The CEO has said that in the coming years, Facebook will not be seen as a social media firm but as a company focused on the metaverse. The term buzzy broadly refers to a shared virtual environment that can be accessed by people using different devices.

Facebook, which has invested heavily in virtual reality (VR) and augmented reality (AR), including companies like Oculus, this year formed a product team to work on the metaverse. This month, it said it planned to hire 10,000 employees in Europe over the next five years to work on the initiative.

“It’s not an investment that’s going to be profitable for us any time in the near future,” Zuckerberg told analysts. “But we basically believe that the Metaverse is going to be the successor to the mobile Internet.”

Wehner said that from the fourth quarter of 2021, it will break out Facebook Reality Labs as a separate reporting segment from Facebook’s family of apps.

Shares of the company were up about 1% in after-trade trading on Monday. Facebook, whose shares have risen nearly 20% so far this year, is about $85 billion away from securing a spot in the $85 billion club and joining new entrant Tesla Inc.

retooling

The world’s largest social media network is under scrutiny from global lawmakers and regulators, including the Federal Trade Commission, which has filed an antitrust lawsuit alleging anti-competitive practices.

Whistleblower documents first reported by the Wall Street Journal have sparked an investigation into the company. They include internal research and reports about the effects of Instagram on the mental health of adolescents and whether Facebook’s platform fuels division, as well as its handling of the activities surrounding the January 6 Capital riots and events around the world. Regarding discrepancies in the company’s content moderation for users.

For the third quarter, Facebook reported monthly active users of 2.91 billion, up 6% from a year ago, but lower than analysts’ estimates.

On the call, executives emphasized the company’s focus on attracting young adults through its short video feature “Reels.”

“We are redesigning our teams to make young adults our North Star, rather than adapting to the vast majority of older people,” Zuckerberg said, adding that a change would involve “years, not months, a whole lot more.” It will take to execute in kind.”

The leaked documents show Facebook’s ongoing concerns about its appeal to younger users, as rivals like TikTok have enjoyed popularity with teens. They also show the company’s difficulties in dealing with users who create multiple accounts on its platform.

Facebook said it expects fourth-quarter revenue to be between $31.5 billion and $34 billion. Analysts had forecast a $34.84 billion or 24.1% jump in revenue, according to data from Refinitiv’s IBES.

Its third-quarter revenue also bore the brunt of Apple’s privacy rules, making it harder for brands to target and measure their ads on Facebook. The COO, Sandberg, said Facebook expects to solve “more than half” of the problems by the end of this year, which led to under-reporting.

Haris Anwar, an analyst at Investing.com, said: “The changes to Apple’s privacy settings haven’t caused Facebook any major damage, at least not yet.” “Although revenue and user numbers declined slightly in the last quarter, the company’s earnings power still remained intact.”

The company’s total revenue, which primarily includes ad sales, rose to $29.01 billion in the third quarter, up from $21.47 billion a year ago, missing analysts’ estimates of $29.57 billion. Sandberg said Facebook advertisers have also been hit by global supply-chain disruptions and labor shortages, which have hit advertising demand in many regions and regions.

Facebook said it repurchased $14.37 billion in stock during the third quarter and announced an additional $50 billion in share buybacks.

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