Not so meta after all

A famous scene in The Social Network depicts Sean Parker telling Mark Zuckerberg to “Drop the ‘The.’ Just ‘Facebook’. It’s cleaner.”

Now, Zuckerberg’s cutting the “Meta” out of Meta Platforms.

Bloomberg reported today that the company plans to reduce the budget for its metaverse unit by up to 30% next year, a business segment that includes teams working on Quest virtual reality headsets and the social platform Horizon Worlds. Shares rose 3.43% on the news.

What’s in a name?

Zuckerberg rebranded Facebook as Meta Platforms in October 2021, back when the metaverse was all the rage. In the years since, the new focus has proven to be an expensive folly.

The company’s metaverse team is part of its Reality Labs division, a unit dedicated to projects that may not be profitable in the near future but will pay out over the long term. But it’s not easy for investors to stomach those expensive bets: Reality Labs lost $4.4 billion in Meta Platforms’ most-recent quarter, offset by sales of just $470 million. In fact, Bloomberg estimates that the division has lost over $70 billion since the beginning of 2021.

Investors pushed shares higher today in the hopes that cutting the metaverse team’s budget will mean lower losses in the coming quarters, and that the money will instead go toward winning the AI race.

A new, new direction

Despite the losses, Zuckerberg was still touting the metaverse’s potential as recently as January.

“This is also going to be a pivotal year for the metaverse,” he said on Meta’s fiscal Q4 earnings call. “This is a year when a number of long-term investments that we've been working on that will make the metaverse more visually stunning and inspiring will really start to land.”

Things clearly haven’t worked out the way Zuckerberg wanted when he bought into the hype and turned his company’s attention toward a new, largely unproven technology. Now, his focus is squarely on AI—a new, largely unproven technology.

Here’s hoping history doesn’t repeat itself.—MR

I salute Meta’s move. It’s incredibly hard for public companies to pivot, especially when they are massive (reminder: Meta’s market cap is nearly $1.7 trillion). CEOs often don’t like to admit something isn’t working, but the ability to call it is a critical one. And the willingness to experiment is key to understanding the success of another tech power player: Amazon.

Amazon has a laundry list of misfires, including acquisitions and in-house ventures. But the company is fine with failing quickly, and management’s agile mentality has helped power the stock to new all-time highs just last month.

Tune in to today’s episode to learn more about Amazon’s long list of high-profile failures, and its latest $4 billion bet.—AB