The metaverse will have to wait. Meta has frozen the hiring of new employees in an attempt to improve its accounts this second quarter of 2022, according to CNBC, after six financially weak months that have sowed concern among its investors. A decision that will inevitably delay the development of the aforementioned digital universe, since Mark Zuckerberg assured a few months ago that they would need at least 10,000 new workers for it.
A delay that, if prolonged, could ruin Zuckerberg's megaproject, since the metaverse has become a money-burning machine that is far from profitable at a time when the company, for various reasons ( decline of Facebook, scandals, fines and unfavorable global economic context), is having increasingly worse economic results.
Bad results. Since Zuckerberg announced his bet on all or nothing for the metaverse, the results of his company have been increasingly affected. During the last quarter of 2021 Meta had 8% less profits, and during the first quarter of 2022 its profits fell again, in this case by 21%.
Despite all this, Meta continues to make money, but much less than before. Thus, while in the last quarter of 2020 its profits grew by 58%, in the same period of 2021 they grew by 35% and in the first quarter of this year by 21%. And this is not all, since the company's internal forecasts predict that profits will continue to sink during this second quarter of 2022.
The responsible. Part of the blame for this drop in profits lies with the huge investment it is making in the metaverse. Specifically, in the first three months of 2022, the development of this digital universe swallowed 3,000 million dollars without reporting any profit. Although during the previous quarter, the last of 2021, it was even more voracious: it devoured 10 billion.
But this huge investment is not the only one responsible for the slowdown in Meta's profits. The company has been facing a major reputation crisis for several months since the Facebook Files were published, which has driven some advertisers away from the company. Likewise, Apple's privacy changes and the global economic situation are also affecting its advertising revenue.
Things can get worse. To the expense of the metaverse and the decrease in advertising revenue, which will continue during 2022, a third factor could be added that would further enhance the benefits of Meta: fines. Those of Mark Zuckerberg are facing two new legal battles this 2022, one in the United States and the other in the United Kingdom, which could be very expensive.
The American trial. In the United States, on January 11, a court in the District of Columbia admitted an antitrust lawsuit filed by the Federal Trade Commission of that country against Meta, by which the US state body denounced that the company has an illegal monopoly in the services of social networks by having acquired two direct rivals of Facebook, Instagram and WhatsApp, and increasingly integrating some platforms with others.
This type of lawsuit against Facebook, now Meta, is not new, since in 2020 the court dismissed one of a similar nature. But this time, on the other hand, the judge has considered that the evidence provided is more solid and detailed than before, so he admits it for processing, rejecting the allegations of those of Zuckerberg and allows the US justice to investigate whether, indeed, the conglomerate digital exerts an excessive dominance of the digital market.
In this way, if the US justice reaches the conclusion that the company exercises a monopolistic position in the market, it could force it to get rid of two of its most profitable businesses, especially Instagram.
The British Trial. On the other hand, on January 14 it was made public that the United Kingdom's Financial Conduct Authority had filed a class action lawsuit against Meta for nearly 2,800 million euros for abusing its market dominance in the British Isles to exploit information from 44 million users, according to Reuters.
The lawsuit states that Facebook used its dominant position in the social network market between 2015 and 2019 to impose unfair terms and conditions on its users, from whom it demanded the delivery of very valuable personal data to access the social network, giving it the power to Zuckerberg's company to exploit them as they wished.
The solution: hire less. The metaverse will continue to devour money and the problems with advertisers do not seem to be resolved in the remainder of 2022, especially since the slump in the world economy does not seem to begin to overcome, at least, until 2023. And to this we must add possible judicial sentences that increase the bloodletting. For all these reasons, Meta has decided that the best option to stop the bleeding is, for the time being, to park its ambitious hiring plan.
The metaverse is reeling. And that brake on hiring, if prolonged for a long time, could endanger Zuckerberg's megaproject. Because the development of the metaverse is a race against time for several reasons that requires a lot of manpower: on the one hand, Meta cannot afford to lose between 3,000 and 10,000 million per quarter indefinitely in its development with no sign of income, and on the other, because Rivals are going to tighten and the company's big bet to make its investment profitable is to get there first and market multiple aspects of this digital universe.
