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Zuckerberg Has Bad News About Facebook's New Big Thing

Social-media giant Meta/Facebook is betting on a virtual world with uncertain economic prospects.
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The metaverse is the future, says Facebook, which since late October has called itself Meta Platforms  (FB) - Get Meta Platforms Inc. Report

For now, more questions than answers are emerging around this concept, of a virtual world in which we will interact via technological tools, like virtual-reality headsets, powered by technology such as augmented reality.

But Mark Zuckerberg, chief executive of the social-media giant, believes in it. The parent of Instagram, WhatsApp, Facebook and Messenger is convinced that the Menlo Park, Calif., company will soon reap the rewards of this daring bet. 

Meantime, the metaverse remains a source of losses and things are not about to change, Zuckerberg has just warned.

Facebook's projects related to this immersive world will have "significant" financial losses over the next three to five years, the mogul told shareholders at the annual meeting on May 25. Holders should brace themselves for additional losses linked to the metaverse.

Zuckerberg was responding to an investor's question about the return on investment of billions of dollars spent on metaverse-related projects.

"We want to get the hardware to be as affordable as possible for everyone and make sure the digital economy grows," Zuckerberg said. 

For the first quarter, Reality Labs, the division that houses Meta's metaverse plans, posted a $2.96 billion loss on revenue of $695 million. In all of 2021 Reality Labs had a loss of $10.2 billion.

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The Reality Labs division has some 10,000 employees and Facebook plans to double the workforce. But the company recently froze hiring amid growing concern about advertising revenue due to the economic downturn.

Meta purchased VR company Oculus in 2014 and rebranded its pioneering technology, changing the name of its flagship headset Oculus Quest to Meta Quest.

The Meta Quest headset sold 8.7 million units in 2021, indicating that it has an audience for VR beyond the videogame-centric base for which Oculus was originally created. 

Facebook this year plans its newest VR headset, which is specifically designed for work. Named Project Cambria, it was announced in October 2021 and promises to mirror users' facial expressions in VR for a more realistic metaverse experience.

As TheStreet's Colette Bennett wrote earlier this month, "selling its Project Cambria headset will likely prove to be a much bigger challenge, especially since it will cost a lot more than the Meta Quest models."

It should cost more than $800.

In addition to virtual-reality headsets, Facebook is looking to enable creators to monetize what they're building in Horizon Worlds, their social metaverse platform for Quest VR headsets.

The company is planning to take an overall cut of up to 47.5% on the sale of digital assets on Horizon Worlds. 

This overall charge is composed of a 30% hardware platform fee for sales made through Meta Quest Store, where it sells apps and games meant for its virtual reality headsets, and a further 17.5% cut as its Horizon platform fees,