Zuckerbeg spending ‘like a drunken sailor’ on metaverse

Last week was another brutal one for Facebook parent Meta, with the stock losing a quarter of its value after a disastrous earnings report.

Facebook has been hurt by a weakening global economy, increased pressure from competitors such as TikTok as well as changes to Apple’s iPhone privacy features, resulting in profits falling well short of expectations. However, the big issue was the 19 per cent surge in expenses, driven by chief executive Mark Zuckerberg’s ongoing obsession with the so-called metaverse.

Days before the earnings release, Meta investor Brad Gerstner complained in an open letter to Zuckerberg that total employees had soared from 25,000 to 85,000 in the past four years; that even excluding its metaverse investment, Meta’s capital expenditures exceeded those of Apple, Tesla, Twitter, Snap, and Uber combined; that the company was making a “supersized and terrifying” bet on an unproven technology that may take a decade to yield results; and that metaverse spending should be capped at $5 billion a year.

It seems Zuckerbeg isn’t listening, with metaverse losses expected to “grow significantly” in 2023. When an analyst asked about revenue opportunities offered by Meta’s “experimental bets”, Zuckerberg gave a vague, woolly response that amounted to little more than: trust me, I think this will work out. The problem is, investors don’t trust Zuckerberg.

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“An absolute train wreck”, said Wedbush, which questioned Meta’s “head-scratching” metaverse bet. “Downright scary”, said Third Bridge. Ballooning expenses showed “an almost total disregard for investor expectations”, complained Bernstein analysts, while start-up investor Jason Calacanis said Zuckerberg was “spending money like a drunken sailor” and making the “highest-risk bet” he had ever seen for a tech company.

One crumb of hope: Meta is cheap, trading on less than eight times trailing earnings. However, with shares having lost almost three-quarters of their value and are now back at 2016 levels, that may offer investors little consolation.