John Paul M. Joaquin Tech 04.28.2022 02:Apr AM EDT

Investors Scared of Zuckerberg's Plan To Throw More Money at Metaverse

Meta's CEO, Mark Zuckerberg, seems extremely fascinated with everything about the metaverse. He even went all-in on the idea when he announced that Facebook Inc. would be renamed "Meta."

However, the company's investors are not as enthusiastic as Zuckerberg and are more skeptical of the company's prospects in its current venture.

Meta's investors are currently uncomfortable with Meta's level of spending on the metaverse, especially when the payout is years away, per a recent report from The Verge.

The social networking company previously announced it would be establishing its first-ever physical store where it can promote the metaverse while selling its metaverse-capable hardware to customers.

Meta's Investors' Woes

According to The Guardian, analysts have warned that meta's investment in the metaverse will be a slow payoff, as evidenced by the operating cost of its virtual reality research and product development sector, Reality Labs, which cost the company around $2.96 billion.

Reality Labs' latest operating cost is $1.13 billion higher than in 2021, which was $1.83 billion.

Additionally, Meta's stock had fallen by nearly 50%, which negatively offset its growth in the past five years since the company rebranded from Facebook in October 2021, when Zuckerberg revealed he was spending $10 billion annually on Reality Labs, according to a separate report from The Verge.

Zuckerberg explained that he expected his investment to grow despite returns not arriving until at least the latter half of the 2020s.

Investors are also worried about Meta's slower growth rate due to younger users switching to TikTok and Apple's ad tracking changes, costing the company $10 billion in lost revenue, per the New York Times.

You may remember that Meta previously went against Apple's App Tracking Transparency feature, which it launched in early May 2021, by encouraging iOS 14.5 users to enable tracking, which lets its apps remain "free of charge," per 9to5Mac.

The Verge stated that investors may have had a positive look to Zuckerberg's rebranding to Meta if his core business of ad-driven social media was growing like it was in the past.

Zuckerberg's Reponse And Meta's Recovery

Zuckerberg's was said to have acknowledged the woes of Meta's investors in a call with them on April 27, saying that investment in the metaverse "differed from past product launches" as virtual reality has a high barrier of entry and that it includes hardware.

"It's not going to be until those products (Meta's metaverse-related 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. This is laying the groundwork for what I expect to be a very exciting 2030," Zuckerberg said during the call, per Tech Crunch.

Meta's CEO also admitted that it was expensive for the company to develop and build a web version of Horizon Worlds and creator monetization features in Meta social VR app as they were something that were never built before.

Zuckerberg also added that Meta's overall profitability wouldn't grow in 2022 due to the investments made and ad revenue not growing as quick as intially expected.