Meta burned $2.96 billion on Reality Labs last quarter

Meta's first-quarter financial results for 2022 are here and a bit mind-boggling. It's the first full year that the company is operating under the "Meta" branding, with a big pivot towards being a "metaverse company." And so far its Reality Labs division is losing almost $3 billion a quarter ($2.96 billion, to be precise), while only pulling in about $650 million in revenue.

In the first quarter of 2021, Meta Reality Labs had lost $1.8 billion while pulling in $534 million in revenue. These numbers were also reflected in its full-year results for 2021. 

With roughly 17,000 employees plugging away on Reality Labs products, that's obviously a lot of mouths to feed for a new vision of the internet. In the context of Meta's overall business, it's still not driving the company into the red (its overall revenue for the three-month period ending March 31 2022 was $27 billion, mostly driven by $26 billion in revenue from the "Facebook family of apps").

Investors were apparently satisfied with these results, as Meta's stock ticked upward 13 percent in after-hours trading. 

In comments to investors, Meta CEO Mark Zuckerberg said that a browser-based version of Horizon Worlds, its shared-world metaverse app for Meta Quest 2, will becoming later this year. A new virtual reality headset called "Project Cambria" will also debut in 2022, and will be aimed at the professional market. The device is meant to "replace your laptop or work setup," and will feature advanced eye-tracking tech.

Zuckerberg also stated that Meta's goal is for Horizon Worlds users is that if they use a virtual reality headset like Quest 2 or Project Cambria, their facial expressions will be translated onto their in-world digital avatars. This was part of his argument that the VR versions of Horizon Worlds would be the peak experience for the metaverse app.

There is kind of a confounding loop to Zuckerberg's argument. Horizon Worlds in VR needs users, users need content, that content will supposedly come from creators making cosmetic items and experiences. Except said creators will apparently need to pay up to 47.5 percent in fees to sell those virtual experiences. 

Meta's argument is that those part of those fees will go to other platforms as Horizon Worlds spreads to other devices, but if the Meta Quest version of Horizon Worlds is meant to be the ideal version of the surface...but creators and developers make less money than would on other platforms...it's very confusing still what is supposed to attract audiences and developers to this VR world.

Given that our inboxes are filling up with a high number of "metaverse" pitches, Meta faces stiff competition for attracting creators to its platform. At some point, it's got to show gains for all this spending.

These priorities are apparently "the right places" for Meta to "double down" on its work, per Zuckerberg (along with a number of AI and advertising-related improvements that aren't game related). It is worth noting that despite these current expenses, Zuckerberg has repeatedly insisted this is a long term, slow shift for the company. Our kvetching here may all be for nothing.