Meta stock mauled as Facebook reports billions in metaverse losses

Meta, the company formerly known as Facebook and currently desperate to make the metaverse happen, has reported its Q4 and full year 2021 results, and if you thought the Oculus rebrand was bad then you haven't seen the company's VR losses. CEO Mark Zuckerberg put on a brave face for the 2021 financials, claiming to be "encouraged by the progress" in areas like virtual reality and commerce, but breaking out Reality Labs separately this time around has only emphasized how much work there is to be done.

It's Meta's first time splitting its financial results into two segments. Family of Apps, or FoA, is what we'd probably consider Facebook's core business, at least traditionally. It includes Facebook, Instagram, Messenger, WhatsApp, and other services.

Independent from that, though, is Reality Labs, or RL. That consists of augmented and virtual reality related consumer hardware, software, and content, Meta says — in short, everything it's piecing together from Oculus and beyond, in the name of building the metaverse the company insists is the future of being social online. Reality Labs is the dark cloud hanging over Meta's 2021.

Family of Apps has seen a bumper year, in fact, with almost $57 billion in operations income. Of 2021, Q4 was the most successful quarter for FoA, with almost $15.9 billion in income. Reality Labs, though, proved to be an anchor: it saw over $10 billion in losses in income, up considerably from previous years, and with Q4 the worst quarter of 2021 overall.

Certainly, it's not like Meta had a bad year, financially at least. The company made nearly $40 billion in net income in 2021, a 35% year-on-year increase. Ad impressions were up 10% year on year, and average price per ad increased 24% in the same period. Facebook daily and monthly active users were both up, 5% and 4%, respectively.

Despite all that, investors have been quick to scorn the stock. Meta is down more than 20%, with even the positive results for 2021 falling short of what the market had been expecting. Meanwhile, warnings about what might impact Q1 2022 – including changes in iOS affecting ad targeting, supply chain disruption to advertiser spend, and lower monetization as more users watch Reels rather than Feed or Stories – have also seemed to spook shareholders.

Facebook's transition to Meta, billed as a way of underscoring just how important the company sees the so-called metaverse as being to its future, has been a rocky one. Despite the fanfare from Zuckerberg & Co, the value and vision of the metaverse were met with ongoing skepticism. Meanwhile, the decision to rebrand the recognizable Oculus name to Meta led to accusations that management were squandering what value they'd built up in one of their most expensive acquisitions.

Name aside, Meta does have big plans for virtual reality hardware and beyond. Zuckerberg has signaled that Meta will invest heavily in developing software and hardware, as it attempts to make virtual reality worlds not only somewhere people go for short periods of gaming, but a hub for entertainment, workplace interaction, and general socializing. There, it faces expected competition from Apple, which has long been rumored to be working on its own mixed reality project with several generations of AR/VR glasses and wearables allegedly in the pipeline.