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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
There is a good chance that by the end of this year, Meta’s grand experiment in virtual reality will have racked up more than $50bn in operating losses. It is a shocking tally. Yet it has largely side-stepped attention.
Against the odds, 2023 has been pretty good for Mark Zuckerberg’s social media company. Meta has carved out an important place in the artificial intelligence pantheon by opting to share its work — democratising generative AI while everyone else tries to hoard it. Digital advertising has recovered, lifting revenues. The share price is surging back towards a record high.
That’s quite a feat when you consider how bad things looked at the start of the year. Annual revenue had fallen and the metaverse was being mocked for its weird, legless avatars. In response, Zuckerberg declared a Year of Efficiency. Low priority projects were cancelled, listings were removed and 21,000 job cuts were announced over the course of two lay-offs.
Investors loved the brutality. Never mind that metaverse losses are expected to keep rising and the workforce is still bigger than it was pre-pandemic, the share price has increased by more than 160 per cent this year.
Meta can even take some credit for the advertising market rebound. Not every social media company has shared in the spoils. In the first nine months of the year, Meta’s revenues were up while Snap’s were down. Elon Musk’s misadventures at X, where advertisers are falling over themselves to run away, makes for a flattering comparison too.
There have been some other wins. Short videos on Instagram Reels, a challenge to TikTok’s popularity, are keeping users glued to their screens. The opportunistic release of a new Twitter-like platform called Threads was quickly downloaded by tens of millions of people this summer, though it has since lost steam. Incredibly, Meta is still expanding its entire user base too, despite having already signed up nearly half the world’s population.
Two things we haven’t seen so much of this year: Mark Zuckerberg and the metaverse. It has been four years since Meta’s founder graced us with his annual new year’s resolutions, telling us what books he’ll read or which states he plans to visit. Bar squaring up to Musk online, he seems to have largely given up on the idea of building a public persona. That role has instead fallen to Nick Clegg. The former deputy prime minister of Britain, whose Instagram account frequently shows him wearing a very un-Silicon Valley-like suit and tie, is now often the face of Meta.
Meanwhile, chatter about the metaverse is barely audible. The company released a cheapish $500 virtual reality headset this year called Meta Quest 3 to fairly good reviews. But there is simply not enough to do once you enter the virtual world. Interest is tepid. Most of us don’t want to wear headsets while we work or meet friends.
Supposedly, Meta is cooking up ways to knit AI and the metaverse together. For now, however, it is AI announcements which generate much more excitement. This week. Meta released Imagine, a standalone AI image generator that is similar to OpenAI’s DALL-E. It has also expanded its odd collection of AI characters across Instagram, WhatsApp and Messenger and is experimenting with “long-term memory” that will enable those characters to remember conversations. If you want to text back and forth with a chatbot who has the face of model Kendall Jenner and will remember your birthday, now’s your chance.
Will the metaverse make a comeback in 2024? Perhaps. After all, Meta’s recovery was not on many bingo cards for this year. Revenue from the metaverse Reality Labs unit is likely to fall compared to 2022. That’s a low bar from which to improve. Deloitte predicts a rise in practical, enterprise-focused applications: less games, more work.
But Meta has a number of other pressing matters to attend to. This week New Mexico accused the company of failing to protect users by allowing sexual content to be recommended to underage account holders. EU regulators want to know more about the ways in which it protects children on Instagram. In the US, the Federal Trade Commission is trying to stop it monetising data from users under the age of 18.
It also seems likely that AI will keep hogging the limelight, for good and bad reasons. This week, Meta launched an alliance of AI companies and research institutions to develop open AI resources. Remember too that 2024 is an election year for many countries, including the US, UK, Indonesia, Mexico, India and Taiwan. AI generated content could put disinformation and misinformation campaigns on steroids across social media.
It seems likely, therefore, that Zuckerberg’s virtual reality project will continue to trundle on, racking up losses and accounting for a tiny fraction of sales while generating only modest public interest. He may have renamed Facebook and committed billions of dollars but he cannot force us to care about the metaverse.
elaine.moore@ft.com
