Do you hear that? It’s the sound of every Meta executive breathing a deep sigh of relief, because unlike last quarter, Facebook’s daily active users (DAUs) are up… a little.
For the second time since its rebrand from Facebook, Meta has reported its quarterly earnings. Last time, the Facebook platform reported its first decline in DAUs in its eighteen-year history, but now, Facebook boasts 1.96 billion DAUs, up from 1.92 billion last quarter.
Of course, Meta’s family of apps – Facebook, Instagram, WhatsApp, Messenger – isn’t the star of the show. As CEO Mark Zuckerberg explained, the revenue from these apps is helping to fund Meta’s projects in virtual reality, which he is betting will become the company’s crown jewel in the future.
Was this worth renaming the company for? In Q1 alone, Meta’s Reality Labs operated at a loss of $2.96 billion, and last year, Reality Labs lost over $10 billion.
“It’s not going to be until those products really hit the market and scale in a meaningful way, and this market ends up being big, that this will be a big revenue or profit contributor to the business,” said Zuckerberg. “This is laying the groundwork for what I expect to be a very exciting 2030.”
Horizon Worlds, Meta’s social VR app, started rolling out creator monetization features late in the quarter, but those in-app purchases won’t move the needle much if the platform doesn’t significantly woo more users. Soon, Meta will roll out a web version of Horizon Worlds, welcoming people who don’t have $300 to drop on a headset. Zuckerberg said that Horizon is the “centerpiece” of the company’s strategy to develop the metaverse.
“I recognize it’s expensive to build this. It’s something that’s never been built before,” Zuckerberg said. He conceded that because of these investments, Meta’s overall profitability won’t grow in 2022, especially since ad revenue hasn’t grown as fast as expected.
Like its competitors at Snapchat and YouTube, Meta also cited a downward trend in ad revenue due to the Russian War on Ukraine (Facebook is now banned in Russia). Overall, Meta’s quarterly revenue rose by 7%, missing analysts’ 7.8% expectation. The combination of increased DAUs and lower-than-expected ad revenue can be explained by the fact that Meta’s apps are growing in regions like the Asia-Pacific region, where ads cost less, rather than the U.S. and Europe.
Meta’s most promising money-maker from Reality Labs are the headsets themselves. The Meta Quest 2 had a big bump in sales during the holiday season, and the company is already looking toward releasing its newest headset later this year, codenamed “Project Cambria.”
Zuckerberg said that the new, premium headset will be “focused on work use cases and eventually replacing your laptop or work setup.” Meta is also building eye-tracking and face-tracking so that when you’re socializing in VR, people will be able to perceive your real-life facial expressions. He added that we can expect more news on the headset in the months ahead.
Back on its family of apps, Meta faces competition from TikTok as it aims to overtake the platform as the leader in short-form video. But Zuckerberg reported that his company’s investment in its TikTok clone Reels is working, noting Reels makes up 20% of the time that users spend on Instagram. Plus, video accounts for 50% of the time that users spend on Facebook.
“I’m just trying to lead the company in a way where we’re positioning ourselves as the premier company for building the future of social interaction and the metaverse,” Zuckerberg said. “If you care about those things, I think we’re getting the best people to come work here.”
