Meta must cut its spending and public focus on the Metaverse if it is to “get its mojo back” and halt its falling share price, a major shareholder said Monday (October 24).
In an open letter, Brad Gerstner, CEO of Altimeter Capital Management, a longtime meta-investor with 2.5 million shares in the social media and tech giant, warned that he’s “drifted into the land of excess — too many people, too many Ideas, Too Little Urgency” as a result of its intense focus on a metaverse that even it believes is at least 10 years and $100 billion away.
Gerstner called on Meta to cut Metaverse spending to $15 billion a year from the $10 billion promised by CEO Mark Zuckerberg, saying Meta should spend no more than $5 billion a year and cut its bloated workforce by 20%.
More specifically, Gerstner said, “People are confused as to what the metaverse even means. If the company was investing $1-2 billion a year on this project, this confusion might not even be an issue.”
He’s far from the only critic of Meta’s Metaverse. A big problem is that it looks far less impressive than other Metaverse platforms that are much older, like Roblox and Second Life, or much cheaper, like fledgling blockchain-based Decentraland and The Sandbox.
The problem is that the current metaverse of the meta is really thrown together on Horizon Worlds, a much simpler and graphically weaker platform built purely as a starting point for virtual reality (VR) games that use the company’s Oculus VR headset became. That’s why the widely ridiculed avatar virtual selfie Zuckerberg posted on Aug. 15 was dubbed for its ’90s-era graphics and “soulless” eyes, not to mention a lack of legs that other platforms have managed .
A real bang
With Meta’s stock price down more than 60% since Zuckerberg changed the company’s name from Facebook on Oct. 28, 2021, Gerstner said that “lack of focus and fitness … is deadly when growth slows and turns.” technology is changing”.
Much of this shareholder punishment was based on the company’s overwhelming publicity on the Metaverse, both due to the size of its investments — Meta’s shares fell a staggering 20% as Q4 2021 earnings missed analyst estimates, in large part this has prompted losses in its Reality Labs Metaverse division — and because it appears to be ignoring more pressing issues like the lack of traction of Reels, its short-video answer to TikTok.
Meta will report its third quarter results on Wednesday, October 26th.
The cuts described would free up $20 billion in capital spending, according to Gerstner. “There’s no doubt,” he added, that doing so would boost Meta’s stock price.
Reality vs Virtual Reality
Gerstner pointed out that Meta’s heavy investment in artificial intelligence, or AI, is actually significantly higher than Metaverse’s spending – and expected to yield big benefits much sooner – and suggested that “the company’s renaming to Meta may have been the cause.” could be the world concluding that you spend 100% of your time on reality labs instead of AI or the core business.”
That is, he added, “certainly the perception.”
Given that when Zuckerberg announced the announcement, “From now on we’re going to be Metaverse first, not Facebook first” and called it “the future we stand for,” the reason for that perception isn’t hard to figure out.
A much smaller Metaverse investment in the $1 billion to $2 billion range would have allowed Meta to “just do quiet research and development and investors would focus on core business and breakthroughs in AI.”
Trying to make it clear he wasn’t opposed to the company’s metaverse future, Gerstner said the company “should be making some of these important investments” in augmented reality (AR), VR, and immersive 3D.
Still, he added that Meta has an “estimated investment of over $100 billion.
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