Newly renamed Meta is investing heavily in its futuristic “metaverse” project, but for now it depends on ads for almost all of its revenue. So when it posted significantly higher costs but gave a weak revenue forecast on Wednesday night, investors were spooked; which knocked nearly $200 billion off the valuation of the company formerly known as from Facebook.
Shares of Meta fell 22.9% to $249.05 in after-hours trading. If the decline continues through Thursday’s market open, the company’s overall value, known as its market capitalization, is on track to fall by a figure larger than the size of the entire Greek economy, based on World Bank data.

 

unnamed

Zuckerberg, CEO Meta

The Metaverse is a sort of animated Internet, or at least rendered in 3D. Meta CEO Mark Zuckerberg described it as a “virtual environment” you can immerse yourself in. Theoretically, the metaverse would be a place where people can meet, work, and play using virtual reality headsets, augmented reality glasses, smartphone apps, or other devices.

Meta invested more than $10 billion in its Reality Labs segment — which includes its virtual reality headsets and augmented reality technology — in 2021, contributing to lower earnings in the quarter. It increased its workforce by 23%, ending the year with 71,970 employees, mostly in technical roles.

The company also said current-quarter revenue is likely to fall below market expectations, in part due to growing competition from TikTok and other rival platforms vying for people’s attention. Sheryl Sandberg, Meta’s chief operating officer, said on a conference call with analysts that global supply chain issues, labor shortages and earlier than usual holiday spending  by advertisers were putting pressure on the company’s advertising sales.

How does Apple influence it?

Apple’s recent privacy changes make it harder for companies like Meta to track people for advertising purposes, which also puts pressure on the company’s revenue. For months now, Meta has been warning investors that its earnings cannot continue to grow at the blistering pace they are accustomed to.

“The Metaverse is far from profitable or making up for the ad revenue shortfall after Apple’s policy change,” said Raj Shah, analyst at digital consultancy Publicis Sapient.

Changing people’s online behavior is also limiting Meta’s ability to make money. More people watch videos, like Instagram Reels which makes less money than more established features.

Zuckerberg is betting the metaverse will be the next generation of the internet because he thinks it’s going to be a big part of the digital economy. He expects people to start seeing Meta as a “metaverse company” in the coming years, rather than a social media company.

For now, however, the metaverse exists only as an amorphous idea envisioned – and named – by science fiction writer Neal Stephenson three decades ago. It’s not yet clear whether this will be the next iteration of human-computer interaction as Zuckerberg sees it, or just another playground for techies and gamers.

This could scare off investors, who tend to prefer immediate, or at least quick, results on investments.

This article first appeared on GlobalNews.