While Meta Platforms, Inc. (formerly Facebook) reports significant earnings since the 2022 slump. However, its metaverse division is reported to lose close to $50 billion in last 5 years.
Meta forayed into the metaverse through its Reality Labs unit, focusing on developing metaverse-related technologies. Recent data from AltIndex.com reveals that Meta’s Reality Labs unit has accumulated nearly $50 billion in operating losses over the past five years.
In 2019, the metaverse division of Meta reported an operating loss of $4.5 billion, but in a year’s time, this figure increased by 46% to $6.6 billion. The situation worsened in 2021, witnessing a staggering 54% increase in the operating loss to reach $10.2 billion. This negative trend persisted into 2022, with the Reality Labs division’s losses surging by 34% to $13.7 billion.
Even though Meta managed to recover from the setbacks of 2022 with impressive overall earnings, the metaverse division remains a financial burden. In the first nine months of 2023, the operating loss for the Reality Labs unit spiked by 21% year-over-year, accumulating a five-year total loss of $46.5 billion.
Despite these mounting losses, Mark Zuckerberg, Meta’s CEO, remains optimistic about the long-term prospects of the metaverse project. He anticipates that the metaverse will eventually boost the company’s operating income. Nevertheless, at present, the metaverse investments are proving to be a significant drag on Meta’s financial performance. In 2022, Meta witnessed a sharp drop in its operating margin, falling from 40% to 25%, and its total operating profit decreased by 38% year-over-year to $28.9 billion.
Meta has initiated cost-cutting measures, but it foresees that Reality Labs’ operating losses will continue to grow in 2024, further highlighting the short-term challenges the metaverse project presents for the company.
Prospects of a Vast Metaverse Market
Notwithstanding these financial setbacks, Meta’s bold venture into the metaverse is driven by the promise of a vast and lucrative market. According to Statista’s projections, the global metaverse market is expected to reach over 1.1 billion users within the next two years. By the end of this decade, this user base is predicted to expand to over 2.6 billion.
In terms of market potential, the conservative scenario indicates that the revenue opportunity for metaverse products and services could reach $1.91 trillion by 2030. In an optimistic scenario, where 35% of the digital economy shifts to the metaverse, this value soars to $4.44 trillion. Despite the short-term financial challenges, Meta remains focused on capitalizing on the long-term prospects of the ever-expanding metaverse market.