Facebook's bet is really about platform control: as related coverage notes, it lost out to Apple and Google on smartphones, and VR/AR are its attempt to own the next hardware cycle instead of renting someone else's. The company has been building toward this for years — it doubled its $250M VR content fund in 2016, and its Oculus acquisition had already tripled VC deal flow into AR/VR.
First-order effects
Starting Q4, Facebook will report FRL as a separate segment — meaning investors see, for the first time, exactly how much revenue the metaverse effort brings in against the $10B+ it costs.
The money flows directly into metaverse apps and related hardware, sustaining the developer content ecosystem seeded by earlier funds.
Second-order effects
Separate P&L disclosure creates a public benchmark that rival AR/VR efforts at Apple and Google will be measured against, pressuring them to either match the spend or cede the platform race.
Hardware suppliers and content developers tied to FRL gain a funded, multi-year customer whose commitment is now auditable each quarter rather than buried in ad revenue.
Third-order effects
The disclosure sets up the accounting arc that follows: when Meta breaks out Reality Labs results, it reports $10.2B in 2021 losses on $2.3B revenue, and cumulative investment climbs past $80B — a structural shift where a social ads company permanently subsidizes a hardware platform business.
If the pattern holds, big-tech competition reorganizes around who owns the next computing platform, with quarterly segment losses as the accepted price of entry.
The trend: Platform incumbents that missed mobile are converting advertising profits into decade-long AR/VR hardware subsidies, and segment-level accounting is making the true cost of the metaverse race visible.
It's because FRL is a cash suck. Long term investments in the future that will bring down overall profitability. they want to show that facebook still makes monney with its family of apps, i.e. FB, IG, WA, Messenger
And OK, maybe some people believe (or believed) that FB actually could (or did) achieve great success in detecting and removing things like hate speech. Those people may include lawmakers or staffers who heard this pitch from platforms. There is no excuse for that fallacy now.
OK, investments only Facebook and Google can afford. And literally no one else. Regulating the whole Internet as if it were Facebook (or Google) is madness. And it's madness that serves incumbent megaplatforms' interests.
👇💯and it goes beyond content moderation. Facebook has poured $$$ into research/product. It's still not enough, and still doesn't work. We need laws/regs that envision a post-FB world where SMEs (esp. non-American and -European) can innovate, scale, *and* respect human rights. htt…
This remark should be a giant red flag about laws that would effectively require every potential competitor to make investments only Facebook can afford, in pursuit of results that only Facebook believes it has achieved. https://twitter.com/...
“Starting with our results for Q4, we plan to break out Facebook Reality Labs, or FRL, as a separate reporting segment... We expect our investment in FRL to reduce our overall operating profit in 2021 by approximately $10 billion.” https://investor.fb.com/...
“Metaverse is a major area of investment & an imp part of our strategy going forward. Our goal is to help metaverse reach a billion people and hundreds of billions of dollars of digital commerce this decade,” Facebook cofounder Mark Zuckerberg. By @tsuvik https://www.moneycontrol…
wouldn't be shocked if this is the last time we get Facebook blue-specific metrics, which is something management has signaled will happen eventually (blue app growth has plateaued) next quarter the company will break out Reality Labs and “Family of Apps” as their own segments
$FB revenues up a cool 35% y/y Total expenses up 39% EBIT 36% vs 37% y/y New reporting segments FoA: Family of Apps (fb/ig/wa) FRL: Facebook Reality Labs (ar/vr software, hardware, content) Getting serious about the Metaverse.
So FB slightly misses on 3Q numbers, warns of uncertainty 4Q...but then offers more buyback which may be helping stock...+2.7% after hours >3.5b ppl use one if its apps each moth. Zuck doubling down on Metaverse future with new segment Facebook Reality Labs.
Holy moly Facebook is spending $10B plus on AR / VR and metaverse apps and services this year, is warning investors that spending will increase in coming years. https://www.protocol.com/...
just saying that creating a holding company with multiple reporting segments is a good move ahead of a big corporate rebrand that will distance you from the segment that is growing the slowest 🙃
If you can spend your way to operational success, the Oculus and $FB's vision for the metaverse is going to happen. (I get it: It takes more than spending. Still, Zuck is all in on this. I'm not going to be the one to bet against it). https://twitter.com/...
You aren't a successful big tech company until you have some other bets category that costs billions a year to show you can still innovate. https://www.protocol.com/...