Meta Platforms Faces the Reality of Reality Labs Future

Meta Platforms continued to face the reality of a poor showing from its metaverse division during 3Q23. However, booked gains in revenue and profit as cost-cutting measures began to pay off.

Net profit grew 164% to $11.5 billion, with improved advertising sales contributing to a 23% rise in revenue to $34.1 billion. Costs fell 7% to $20.4 billion. Reality Labs' revenue fell 26% to $210 million, primarily due to lower Quest 2 sales. In earnings documents, Meta Platforms predicted the unit’s losses to increase meaningfully because of ongoing AR/VR product development.

Advertising revenue rose 24% to $33.6 billion and impressions 31%, which CFO Susan Li explained on its earnings call was mostly driven by Asia-Pacific. She said its short video platform Reels had driven a more than 40% increase in time spent on Instagram, saying the service is now a core part of their apps.

Meta Platforms plans to grow Reels as part of its overall portfolio of video services, which Li said accounts for more than half the time spent on its Facebook and Instagram platforms. CEO Mark Zuckerberg noted its Threads platform had just under 3 million users. “I’ve thought for a long time that there should be a billion-person public conversations app that is a bit more positive,” he stated. “If we keep at this for a few more years, then I think we have a good chance of achieving our vision there.”

Zuckerberg claimed AI language model Llama 2 is now the leading open-source model with more than 30 million downloads in September. “Beyond that, there is also a different set of sophisticated recommendation AI systems that power our feeds, Reels, ads, and integrity systems, and this technology has less hype right now than generative AI, but it is also very important and improving very quickly.” He said AI-driven feed recommendations led to a 7% increase in time spent on Facebook and 6% on Instagram.