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In context: Could Mark Zuckerberg's bet on the metaverse be his downfall? Facebook parent company Meta has seen $65 billion wiped off its market value as profits halved during the last quarter and it continues to pour money into projects many have little faith in. The company's declining value, which is down $520 billion over the last year, has left it at risk of losing its status as one of the top 20 biggest US firms.
Like most businesses, Meta is suffering the effects of the economic slowdown that has seen advertisers spend less on marketing, which makes up most of Meta's revenue. Its net income in Q3 was down 52% to $4.4 billion, lower than analysts' estimates of $5 billion, while revenue was down 4% to $27.71 billion, which was higher than expected.
In addition to the falling revenue, Meta has been worrying investors with the amount of money being poured into its VR/MR ambitions, aka the metaverse. Reality Labs, the division responsible for this unit, was down another $3.7 billion in Q3. That follows the $3 billion it lost in Q2 and the $2.96 billion from the first quarter of 2022. The division hemorrhaged $10.2 billion throughout 2021, and Meta expects the unit's operating losses to grow significantly year-over-year in 2023. Meta predicts total expenses for this year to reach between $85 billion and $87 billion.
Facebook's market cap reached $1 trillion last June; it hit the milestone faster than any other company. At the start of the year, it was the sixth biggest firm in the US by market cap. But the social media giant's fortunes have been in freefall since changing its corporate name to Meta. According to Bloomberg, Meta's market cap could be around $283 billion if it opens trading in line with the premarket, putting it in 20th place on the biggest-companies list.
Despite losing billions and an analyst's prediction that many business projects in this area will close by 2025, Zuckerberg is doubling down on the metaverse. "Look, I get that a lot of people might disagree with this investment, but from what I can tell, I think this is going to be a very important thing," he said. "People will look back a decade from now and talk about the importance of the work being done here."
Meta's decline is reflected in Zuckerberg's falling place on Bloomberg's Billionaires Index. The CEO has seen his fortune fall by $76.8 billion over the last 12 months, dropping to $48.9 billion and placing Zuck in the 23rd position on the list. For comparison, the soon-to-be Twitter owner Elon Musk sits in number one place with a fortune of $211 billion.