Meta Platforms CEO Mark Zuckerberg told CNBC’s Jim Cramer on Wednesday that the metaverse could be a huge part of the social network operator’s business in the second half of the decade.
“We’re hoping to get to about a billion people in the metaverse doing hundreds of dollars of commerce, each buying digital goods, digital content, different things to express themselves, so whether it’s clothes for their avatar or different goods digital tools for their virtual home or objects to decorate their virtual conference room, utilities to be able to be more productive in virtual and augmented reality and throughout the metaverse,” he said.
Investors halved the company’s market capitalization this year as growth slowed and its daily active user count fell sequentially for the first time between the past two quarters. Zuckerberg is increasingly steering the company toward what he sees as the next generation of content, a virtual world where people can buy and sell digital goods for avatars that can communicate with each other. The company’s ticker symbol changed from FB, a relic of its history as a pure social media provider, to META earlier this month.
But the company’s investment in augmented reality and virtual reality dates back to 2014, when it paid $2 billion for headset maker Oculus VR. Headset shipments did not outnumber PC or smartphone shipments. Zuckerberg expressed optimism about the performance of his current-gen Meta Quest 2, which starts at $299.
“Quest 2 was a hit,” Zuckerberg told the “Mad Money” host.
“I was really happy with how it turned out. It exceeded my expectations. But I still think it will take some time for it to reach the scale of hundreds of millions or even billions people in the metaverse, just because things take a while to get there. So that’s the North Star. I think we’ll get there. But, you know, the other services that we run are already at a a little larger scale today.
Experiences in the Metaverse can be more immersive than text, photos or video, which are ubiquitous on Meta’s Facebook and Instagram, and so this will be a big theme for Meta over the next decade, Zuckerberg said.
Zuckerberg met Cramer in the Metaverse. The Facebook co-founder said such experiences can foster a sense of togetherness, even if people are physically across the country. He said it’s possible to make eye contact, which isn’t guaranteed on video calls, and use spatial audio that allows for quiet side conversations.
The technology “basically adds in to give it that realistic sense of presence,” he said.
To bring this to customers over the next few years, Meta will need to release a stack of hardware, software, and experiences.
“We’re at this point, you know, a company that can afford to make big investments in long-term research, and that’s an important goal,” he said.
He expects the economy around the metaverse to be massive, he said.
Meta Platforms had 3.64 billion monthly active people in its app family in the first quarter, up 6% year-over-year. WhatsApp hit 2 billion users in 2020, and this is also an area where Zuckerberg sees potential for growth.
“You know, our playbook over time has been to create services, to try to serve as many people as possible – you know, to offer our services to a billion, two billion, three billion people, then we basically expand monetization after that,” Zuckerberg says. “And we’ve done that with Facebook and Instagram. WhatsApp is really going to be the next chapter, with business messaging and commerce being a big thing there.”
AI making recommendations, similar to TikTok
In addition to its metaverse spending, Meta is investing heavily in the development of artificial intelligence, which can boost advertising — the source of about 97% of revenue — and the company’s existing apps, Zuckerberg said.
“We basically go from having most of the content you see on Facebook and Instagram come from your friend or follow the graph, to now, you know, over time more and more of that content comes from recommendations from the ‘IA,” says Zuckerberg. “And as the AI recommendations get better, you have access to, you know, not just the content of the people you follow, but the whole universe of content that’s out there.”
It’s a concept that TikTok, owned by China’s ByteDance, has used to propel itself towards one billion monthly active users. Meta sought to respond to rapid growth with the introduction of its Instagram Reels feature in 2020. Reels account for more than a fifth of the time people spend on Instagram, Zuckerberg told analysts on the call for media. Meta’s first quarter results in April. Now, he expects AI improvements to make Reels more appealing to Instagram users.
“Our AI system can choose based on what it knows about you and what you’re personally interested in and what you want to see,” he said. “So as we get better, you know, our engineers make improvements to the models every week. We check something and, you know, the relevance goes up a couple percent. And then we repeat and do that next week And, you know, that’s just a big part of what I’ve always been focused on in running this business, getting really fast speed, so we can keep making rapid improvements to that.”
Meta is also investing in hardware for AI, alongside other big tech companies, such as Alphabet and Microsoft.
“We just brought the AI research supercluster online, which you know will be the fastest AI supercomputer when it’s fully built later this year, so our researchers can create new models bigger to both rank and get better recommendations on our social media services and ads.”
The company will slow its investment in AI in the event of a recession, Zuckerberg said.
Comments on Sandberg’s departure
Zuckerberg answered questions about the departure of Sheryl Sandberg, the company’s chief operating officer. Sandberg grew Facebook’s advertising business, making possible its IPO in 2012. The Wall Street Journal reported that she left after Meta began a review of her use of company resources for planning wedding. A spokesperson for Meta told the newspaper that internal investigations into Sandberg had nothing to do with his choice to resign.
“I don’t think any of the things that were reported contributed to his leaving the company,” Zuckerberg said. “Of course you should ask her about it. But what I can say is that I have nothing but gratitude for the amazing job she has done in the business. She will stay. on our board. She’s a key person. She’s a close friend.”
— CNBC’s Jonathan Vanian contributed to this report.
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