Meta Platforms CEO Mark Zuckerberg told CNBC’s Jim Cramer on Wednesday that the metaverse could be a considerable part of the social-network operator’s business in the second half of the decade.
“We hope to basically get to around 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 that’s clothing for their avatar or different digital goods for their virtual home or things to decorate their virtual conference room, utilities to be able to be more productive in virtual and augmented reality and across the metaverse overall,” he said.
Investors have cut the company’s market capitalization in half this year as growth has slowed and the number of its daily active users declined sequentially for the first time between the last two quarters. Zuckerberg has been increasingly directing the company toward what he views as the next generation of content, a virtual world where people can buy and sell digital clothes and other goods for avatars who can communicate with one another. 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. Shipments of headsets have failed to outnumber shipments of PCs or smartphones. Zuckerberg expressed optimism about the performance of its current-generation Meta Quest 2, which starts at $299.
“Quest 2 has been a hit,” Zuckerberg told the “Mad Money” host.
“I’ve been really happy with how that’s gone. It has exceeded my expectations. But I still think it’s going to take a while for it to get to the scale of several hundreds of millions or even billions of people in the metaverse, just because things take some time to get there. So that’s the north star. I think we will get there. But, you know. the other services that we run are at a somewhat larger scale already today.”
Experiences in the metaverse can be more immersive than text, photos or videos, which are pervasive on Meta’s Facebook and Instagram, and so it will be a big theme for Meta over the next decade, Zuckerberg said.
Zuckerberg met with Cramer in the metaverse. The Facebook co-founder said such experiences can foster a sense of being together, even if people are physically on the other side of the country. He said it’s possible to make eye contact, which isn’t guaranteed on video calls, and use spatial audio that allow for quiet side conversations.
The technology “basically adds up to making it deliver this realistic sense of presence,” he said.
Bringing that to customers over the next several years will require Meta to release a stack of hardware, software and experiences.
“We are at this point, you know, a company that can afford to make some big long-term research investments, and this is a big focus,” he said.
He expects the economy around the metaverse to be massive, he said.
Meta Platforms had 3.64 billion monthly active people across its family of applications in the first quarter, up 6% year over year. WhatsApp reached 2 billion users in 2020, and it’s also an area where Zuckerberg sees the potential for growth.
“You know, our playbook over time has been build services, try to serve as many people as possible – you know, get our services to a billion, two billion, three billion people, and then we basically scale the monetization after that,” Zuckerberg said. “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.”
In addition its metaverse spending, Meta is investing heavily in the development of artificial intelligence, which can bolster advertising — the source of around 97% of revenue — and the company’s existing applications, Zuckerberg said.
“We’re basically shifting from having most of the content that you see in Facebook and Instagram come from your friend or follow graph, to now, you know, over time, having more and more of that content just come from AI recommendations,” Zuckerberg said. “And as the AI recommendations get better, you get access to, you know, not just the content from the people who you follow but the whole universe of content that’s out there.”
It’s a concept that TikTok, owned by China’s ByteDance, used to propel itself to a billion monthly active users. Meta sought to respond to the rapid growth with the introduction of its Reels feature of Instagram in 2020. Reels makes up over one-fifth of the time people spend on Instagram, Zuckerberg told analysts on Meta’s first-quarter earnings call in April. Now he expects AI enhancements to make Reels more compelling to Instagram’s users.
“Our AI system can choose based on what it knows about you and what you personally are going to be interested in and learn about, what you want to see,” he said. “So as we get better at that, you know, our engineers are shipping improvements to the models every week. We check something and you know, relevance goes up by a few percent. And then we repeat and do that the next week. And, you know, this is just a huge part of what I’ve always focused on in running this company, is getting the velocity to be very quick, so we can keep on making fast improvements to this.”