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CEO Mark Zuckerberg said that Facebook will now focus on AR and VR with a $10bn investment in 2021 alone.
Facebook has reported strong third-quarter growth amid a recent spate of negative publicity, with CEO Mark Zuckerberg looking to the company’s new metaverse project for future growth.
Profits were up 17pc to more than $9bn and revenue was up 35pc to more than $29bn compared to the same period last year. Facebook also reported a rise in monthly active users, up 6pc to 2.91bn, while almost 3.6bn people actively used one or more of its services.
Staff headcount was also up 20pc to more than 68,000 people globally, and Facebook recently announced that it will hire 10,000 people in the EU to work on its planned metaverse project, creating an online world of augmented and virtual reality.
On a call with shareholders yesterday (25 October), Zuckerberg also said that Facebook will now focus its attention on the metaverse and attracting new young users aged between 18 and 29. It comes at a time when leaked internal documents show Facebook is struggling to attract US users under 30.
$10bn investment in AR/VR
Facebook is ramping up its investment in the AR and VR space, including software and hardware, with an expected spending of $10bn in 2021 and further investment in the next several years.
To reflect this renewed focus, Facebook will change its financial reporting from Q4 to disclose earnings for Facebook Reality Labs, the segment responsible for AR, VR and the so-called metaverse. This will be separate from its family of apps, which includes Facebook, WhatsApp, Instagram and Messenger.
Another major change is expected this week, with Facebook reportedly set to rebrand its parent company with a new name to reflect its focus on the metaverse.
The number of teenage users of the Facebook app in the US has declined by 13pc since 2019 and is projected to drop by 45pc over the next two years, according to internal documents disclosed to the US Securities and Exchange Commission by whistleblower Frances Haugen and seen by The Verge.
“Over the last decade, as the audience that uses our apps has expanded so much and we’ve focused on serving everyone, our services have gotten dialled to be the best for the most people who use them rather than specifically for young adults,” Zuckerberg said on the earnings call.
Increasing competition in the young user space from services such as Apple’s iMessage and TikTok has contributed to Facebook’s decline in young users, said Zuckerberg, adding that “TikTok is one of the most effective competitors we have ever faced”.
To combat this, Facebook is retooling its teams to treat younger audiences as their “north star”, in a move that will see Reels and other video-based features take centre stage on Instagram and Facebook.
“This shift will take years, not months, to fully execute, and I think it’s the right approach to building our community and company for the long term,” Zuckerberg said.
Challenges ahead
Zuckerberg acknowledged some of the other challenges the company is facing and will continue to face as it heads into Q4 and the new year.
Apple’s iOS privacy changes that allow users to prevent apps from collecting their data was not received well by Facebook earlier this year.
“The changes are not only negatively affecting our business, but millions of small businesses in what is already a difficult time for them in the economy,” Zuckerberg told shareholders on the call this week. But he added that Facebook expects to be able to “navigate these headwinds over time” with investments that it is making.
Facebook’s earnings came amid the latest wave of reports yesterday based on leaked internal documents. The ongoing leaks cast doubt on Facebook’s continued growth, even as shares rise and investors continue to look past the revelations and allegations raised by the whistleblower.
These include accusations of Facebook prioritising growth over safety, like banning anti-government posts in Vietnam, issues with moderating non-English speech, and the failure to crack down on human trafficking via its apps.
Facebook was also criticised for its lack of a clear playbook to handle misinformation on its platform relating to the US presidential elections last year and the Capitol attack in January.
Yesterday, Haugen accused Facebook of “making hate worse” in a speech to UK lawmakers. “Facebook has been unwilling to accept even little slivers of profit being sacrificed for safety,” she said, adding that Instagram was “more dangerous than other forms of social media”.
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