The cost of Zuckerberg’s metaverse: $2.8 bn in losses, while employees are waiting for layoffs

The irreplaceable head of Meta Mark Zuckerberg lately is not interested in anything but the metaverse, considering it the future of the Internet. And this hits not only the company’s wallet — the creation of the technology costs a lot of money, but also its employees — recently, Meta froze hiring, and now it may plan to lay off staff.

To make matters worse, there seems to be virtually no coherent strategy for implementing Zuckerberg’s vision. Well, no brief, no talk.

Hire freezing 

In May, it was revealed that Meta had decided to abandon its investments in several of its products, including teams it had built at the beginning of the pandemic, to compete with Zoom and create shopping features. Consequently, the company suspended hiring for certain engineering positions, hiring recruiters, and low-level data specialists. 

However, Meta leaders have begun to tell specific teams that they will not be able to hire new engineers or receive internal transfers. The main reason is that particular products are not profitable or strategically important enough to continue investing in them despite Meta’s share price falling further. Product development teams, including Facebook Dating and Gaming, Messenger Kids, Commerce, and Remote Presence, have already suffered technical freezes. 

While the hiring freeze has made employees fear layoffs, CEO Mark Zuckerberg later told an internal meeting that no job cuts were planned.

“I can’t sit here and promise that as the situation changes, we won’t have to do that. But I can tell you that we’re not anticipating that today. We’re bringing growth to a level that we think will become manageable over time,” he said. 

Inside Reality Labs, which makes the metaverse software and hardware that Zuckerberg is banking on for the company’s future, CTO Andrew Bosworth told employees that some projects would be stripped of priority in favor of others. 

Witch hunt 

However, despite Zuckerberg’s promises, the company’s employees expect layoffs. According to Insider, Meta’s head of HR, Lori Goler, advocated layoffs of the employees above in a July memo because, she thinks, “the company needs to operate at an increased rate.” 

The Insider source, who is aware of the discussions among Meta’s top management, claims that this year the scale of layoffs could reach 10% of its staff. He added that layoffs have not yet begun but are just around the corner. 

Another tech giant employee interviewed by Insider described a “witch-hunt” atmosphere, with development managers searching for suitable candidates to lay off and constantly reminding teams of the company’s expectations. Another employee said he was recently offered to leave on his own with severance pay. It is reported that he decided not to wait for a possible layoff and accepted the “offer.” 

A Meta spokesman told Insider that it has no plans to cut people at the moment. But he added that any company that wants to be successful long-term has to prioritize hard and work hard to achieve its goals. 

The company’s expenses 

Meta recorded losses of $2.81 billion on its Reality Labs, a virtual reality division, for the quarter that ended in June. This spending indicates the company’s and its founder’s desire to move the social media giant into the metaverse. 

For the company, such spending on virtual reality is a significant but affordable expense — it earned $28.82 billion in revenue and $8.36 billion in operating profit for the quarter. Meta also reported its first-ever year-over-year revenue decline and issued a subdued digital advertising forecast as it faces increasing competition from TikTok. It posted revenue nearly 1% lower than a year earlier and slightly below Wall Street expectations ($28.9 billion). 

It is reported that Meta has mainly spent money to buy VR and AR companies and startups that develop basic headset technology. Earlier, the FTC also sued the company to block its purchase of the maker of the popular VR app Supernatural. These kinds of acquisitions will face significant regulatory oversight in the future. Meta’s stock closed up more than 6% and fell more than 4% in the hours after the report was released.

Is it worth the effort? 

The launch of new products is inherently fraught with the risk of failure. No one is immune to it. Every year, one way or another, a major franchise or development with tens or hundreds of millions of dollars in investments hits the news headlines as loss-making, failing, and so on. 

Companies see the metaverse as the next step, reducing risk when launching new products and monetizing existing ones. Risk is inversely proportional to control; by definition, the meta-village gives almost total control. 

The metaverse, a closed platform run by a single company, also allows you to create a monopoly out of thin air. After all, it binds intellectual property and products on a single, proprietary platform beyond anyone’s control. It is no more negotiating with others, including Apple and its App Store, Microsoft and its Windows or Xbox, Google, and so on. 

Most importantly, the metaverse is a virtual space in which a company gathers all consumers from various audiences, consistently sells its content, collaborations, multi-universes, and products to them, and collects and deepens data to improve sales and retention of members. 

For some people, the metaverse is just a place to escape the real world. But we should not forget that one can work and have fun in this virtual world. Total control for the company in exchange for opportunities for users. It may be worth the current losses after all. What do you think?