Zuckerberg: Metaverse investment will not produce immediate results, and a true business model may take ten years

On October 25th local time, Facebook released its third-quarter financial report ending September 30, 2021 after the U.S. stock market closed on Monday, with a net profit of US$9.19 billion, a year-on-year increase of 17%.

During the earnings call, Facebook CEO Mark Zuckerberg reiterated that Facebook plans to invest heavily to build its "Metaverse" vision. He said, "Our goal is to help the Metaverse cover 1 billion people." He also said that the Metaverse can enable hundreds of millions of digital businesses, hinting that Facebook is working to create its own AR/VR platform to reduce its dependence on Apple or Google.

Facebook shares rose 1.26% to $328.69 on Monday, giving it a market value of more than $920 billion. They were up about 2% in after-hours trading.

Metaverse investment may bear fruit in ten years

Facebook said that starting from the fourth quarter of 2021, Facebook plans to disclose the financial data of Facebook Reality Labs (FRL) separately in its financial report. "The new reporting structure will more clearly show the profitability of Facebook's advertising business."

As early as May this year, Facebook stated that it would transform into a metaverse company within five years. Recently, it announced that it would recruit 10,000 engineers in Europe to develop the metaverse, although the industry has not yet had a clear definition of what the metaverse is.

Facebook said it is investing significant resources in augmented and virtual reality products and services, and expects that investment in Facebook Reality Labs will reduce overall operating profit by approximately $10 billion in 2021. Facebook also hopes to continue to increase investment in the coming years.

Zuckerberg said that investments in the metaverse will not bring immediate profits, and it is expected that perhaps later this decade, it may become more like a real business story.

According to the financial report, Facebook's revenue in the third quarter was US$29.01 billion, a year-on-year increase of 35%; its net profit was US$9.194 billion, a year-on-year increase of 17%. Both revenue and net profit were lower than Wall Street expectations.

Among them, Facebook's revenue from advertising business in the third quarter was US$28.276 billion, a year-on-year increase of 33%; Facebook's revenue from other service fees in the third quarter was US$734 million, a year-on-year increase of 195%.

The average monthly active users (MAU) in the third quarter were 2.91 billion, a year-on-year increase of 6%, in line with expectations.

Responding to external accusations

The news comes as Facebook faces a series of turmoil, including accusations that its platform is flawed.

Zuckerberg responded to a leak of documents by a former employee during the earnings call, who provided the media with internal research from Facebook, saying that Facebook had long been aware that its services could have a negative impact on users' mental health.

"Social media is not the primary cause of these problems," Zuckerberg said. "In other words, no matter what Facebook does, it can't solve these problems on its own." He called for more regulation so that companies like Facebook are not forced to choose between these complex options.

Zuckerberg said the problems are largely about balancing different and difficult social values.

In the earnings call, Zuckerberg announced Facebook's new strategy. He said that Facebook does not want to cater to as many people as possible, but will focus more on young people aged 18 to 29.

Facebook said in its earnings call that factors such as changes in Apple's iOS, the macroeconomy and the COVID-19 pandemic will continue to have an adverse impact, leading to significant uncertainties in the fourth quarter.

This year, Apple added a user privacy feature to iOS, allowing users to choose whether to allow apps to track personal information, which is closely related to Facebook's advertising revenue - choosing to turn it off means that advertisers will find it difficult to deliver targeted ads.

Facebook COO Sheryl Sandberg said that the headwinds related to iOS began in the second quarter and intensified in the third quarter, affecting ad prices and measurement. She said, "We believe we are underestimating conversions for iOS app install ads. We are making progress on this issue."