Mark Zuckerberg’s dive into metaverse misses mark

The new unit, dubbed Facebook Reality Labs, will disclose revenue and operating profit from where the physical and virtual worlds collide

  
Facebook CEO Mark Zuckerberg testifies before a House Energy and Commerce Committee hearing regarding the company’s use and protection of user data on Capitol Hill in Washington, U.S., April 11, 2018.

Facebook CEO Mark Zuckerberg testifies before a House Energy and Commerce Committee hearing regarding the company’s use and protection of user data on Capitol Hill in Washington, U.S., April 11, 2018.

REUTERS/Leah Millis

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

NEW YORK  - Mark Zuckerberg is taking investors deeper inside the metaverse. Alongside its quarterly results, Facebook on Monday unveiled plans  for a new reporting structure that will provide more financial information about the company’s augmented reality initiatives and beyond. Any extra clarity is welcome, but the changes avoid breaking out information about more important operations such as Instagram.

The new unit, dubbed Facebook Reality Labs, will disclose revenue and operating profit from where the physical and virtual worlds collide. The flagship social network, Instagram and WhatsApp are being lumped together separately in a second division called Family of Apps, whose services account for most of the top line. In the third quarter, the company’s total revenue grew 35% from a year earlier, to $29 billion.

Those businesses are slowing. In particular, privacy changes implemented by Apple to its mobile operating system is hurting advertising at Facebook and causing “significant uncertainty”. Facebook Chief Operating Officer Sheryl Sandberg said it would take time to rebuild its targeting and measurement abilities. The number of people Facebook is attracting from the United States and Canada – its most lucrative user base — is stalling. Facebook also admitted the competition for teen members is tough because many are flocking to TikTok and Snapchat. That’s a big reason why divulging more about Instagram, which attracts younger audiences, could be valuable.

Facebook has been under siege following a whistleblower’s exposure of internal documents that suggest the $915 billion company puts profit ahead of controlling the divisive and toxic content dispatched across its networks. The scandal contributes to growing questions about the ability to sustain scorching ad growth. All that makes it somewhat understandable why the founder is fixating on the future, but it’s also a bad time to be hiding behind the headset. 

CONTEXT NEWS

- Facebook said on Oct. 25 that it plans to break out Facebook Reality Labs, or FRL, as a separate reporting segment starting with fourth quarter results. The new unit will provide revenue and operating profit for its augmented and virtual reality hardware, software and content. The other segment, Family of Apps, or FoA, will include Facebook’s flagship network, Instagram, WhatsApp and other services.

- The social networking company reported that third-quarter revenue rose 35% from a year earlier to $29 billion. It forecast fourth-quarter revenue to be in the range of $31.5 billion to $34 billion, citing “headwinds” from privacy changes that Apple made to its mobile operating system that affect targeted advertising.

- Facebook also said it would increase to its share repurchase program by $50 billion.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Jeffrey Goldfarb and Katrina Hamlin) ((For previous columns by the author, Reuters customers can click on SABA/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe | jennifer.saba@thomsonreuters.com; Reuters Messaging: jennifer.saba.thomsonreuters.com@reuters.net))


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