Why Mark Zuckerberg’s metaverse gamble failed

Less than two years ago, Facebook boss Mark Zuckerberg bet the house on the metaverse. Zuckerberg believed that his virtual reality world was the future. Now, with the rapid progress of artificial intelligence, he appears to have made a calamitous mistake. The metaverse isn’t yet dead — but its future looks far from rosy.

Having recently taken a trip to the metaverse, I can’t say I’m surprised that Zuckerberg’s pet project has failed to catch on. At Meta’s shiny new offices in London’s King’s Cross, large black headsets were strapped over our eyes. Before long, by the wonders of Meta’s technology, we were transported from our real meeting room to a virtual one. Our faces suddenly seemed unfamiliar and we no longer had legs. Despite this affliction, the meeting proceeded as planned and we were taken on a tour through our new 3D surroundings — complete with interactive whiteboards, instant teleportation around the room and interchangeable panoramic views through the windows.  

It was all great fun. But as I made my way home, I wondered what the point of it had been. Could this meeting not just have been done over email? 

That hasn’t stopped the social media giant pumping oodles of cash into its grand project

A lot of people, and a lot of businesses, seem to be wondering the same thing. Few have said publicly they plan to roll out Horizon Workplace, Meta’s app for virtual office meetings; Horizon Worlds, its virtual social network, reportedly saw its user base decline from 300,000 to below 200,000 last year. 

Meta boasts that 70 percent of businesses plan to increase their spend on augmented reality (AR) and virtual reality (VR) technologies. But, for now, the reality is that the metaverse has failed to take off.

When I interviewed a member of Meta’s board last year, she told me that one of the advantages of the metaverse was that it had “a lot of optionality.” 

“If tomorrow, I want to show up like a rabbit, then I can show up like a rabbit,” she said. 

And yet, to Meta’s astonishment, even the prospect of dressing up like a domestic animal at work has so far failed to attract firms to its tech-filled goggles. But that hasn’t stopped the social media giant pumping oodles of cash into its grand project in an increasingly frantic bid to make it into a business. 

Meta’s Reality Labs division, which develops its metaverse technologies, made a mind-boggling $25 billion loss between 2021 and 2022, against sales of barely more than $4 billion. To put that into perspective, the sums lost are roughly equivalent to the combined market caps of rivals Snap and Pinterest.

While Zuckerberg was piling cash into his pet project, other big tech firms were quietly working on a very different technology: AI. OpenAI, now owned by Microsoft, unveiled ChatGPT late last year, and it didn’t take long for the technology to take off.

Within months, users of the service reached over a billion; their imaginations were captured by the enormous possibilities the new technology might bring, as well as the limitless boring work tasks it might obliterate. 

Today, I rarely have a conversation with a company CEO without them volunteering their plans to build ChatGPT-inspired tools. Plans for the metaverse? Not so much. 

To many, Meta’s bet on the virtual world now looks like a huge misstep. The company’s share price is down 30 percent over the past two years, and in recent months it has laid off more than 20,000 employees. Zuckerberg told staff last November: “This is a sad moment, and there’s no way around that. I got this wrong, and I take responsibility.”

Spare a thought for Zuckerberg, though. The man has been the victim of his own success. Between his three social media sites Facebook, Instagram and WhatsApp, he has been able to reach the majority of people on the planet. There is precious little opportunity to grow these much further, and starting a fourth one from scratch could end up cannibalizing user activity on the other three. So Zuck felt forced to take a gamble on something different. 

If Meta had rolled out its technology in the first weeks of the coronavirus lockdown, it may well have proved a hit. But three years on, it’s a much more difficult sell to workers still recuperating from Zoom fatigue. AI has arrived, it is here to stay and it has already claimed the metaverse as its first victim. 

This article was originally published on The Spectator’s UK website.