Mark Zuckerberg wearing the Oculus virtual reality headset.
Glenn Chapman | Getty Images
Facebook is no longer Facebook.
The company announced its new corporate name, Meta, on Thursday, a signal CEO Mark Zuckerberg plans to steer the company beyond traditional social media and build what he believes will be the next wave of personal computing in virtual worlds experienced through computerized glasses.
It’s a risky move from a company valued at about $900 billion. While Facebook’s core digital ads business continues to grow, it now plans to invest billions per year into turning a sci-fi concept of a metaverse into reality.
Facebook’s pivot also echoes what Google did back in 2015 when it reorganized into Alphabet, a collection of companies designed to use Google’s profits and invest them in a smattering of futuristic projects. Those projects are called Other Bets and include things like self-driving cars and even curing death.
And Alphabet’s results over the last six years paint a decent picture of what Facebook can expect to experience as it spends billions to make science fiction into science fact. At the same time, Facebook’s approach is more focused than Alphabet’s.
Here’s how the two strategies stack up:
Zuckerberg won’t disappear as Larry Page did. When Google reorganized into Alphabet, co-founder and CEO Larry Page kept his job but handed the Google part of the business over to Sundar Pichai. After that, Page largely disappeared from the public view, and it was never quite clear what he was working on as other executives like Pichai and CFO Ruth Porat ran day-to-day operations. Eventually, Page stepped down as CEO and gave Pichai full control over Alphabet as CEO.
Zuckerberg made it clear on Thursday he’s not going into hiding the way Page did. Zuckerberg is going to be the face of Meta’s new direction in the years to come. And since Zuckerberg still controls the company, he will also have to own any future controversies that come its way.
Both companies take money from their massively profitable ads businesses to invest in future technologies. As innovative as Google and Facebook may portray themselves, their core business is rather boring: digital ads. But both companies have turned their digital ads businesses into money-printing machines. And that money is being reinvested into future technologies and projects to protect from future disruption.
So far, we haven’t seen it pay off for Alphabet. In fact, Google has already reabsorbed some of Alphabet’s Other Bets, such as the smart home division Nest. Other projects were killed, like Project Loon, a part of Alphabet that tried to deliver internet from high-altitude balloons to people in areas that don’t have access to the internet. It’s also a money sink. Alphabet’s Other Bets segment lost $1.29 billion in the third quarter.
That should be a signal to Meta that even the most ambitious ideas require more time and money than a publicly-traded company might be willing to spend. (It also helps explain why Alphabet companies like Waymo and Verily have been raising a lot of money from investors outside of Alphabet.)
How much will Zuckerberg be allowed to spend to make the metaverse? Zuckerberg said this week that Meta will spend about $10 billion over the next year hiring staff and developing the technologies for the metaverse. But it’s also clear that the technology needed to make the metaverse a reality is quite far off. (Zuckerberg said 10 years, but it really is anyone’s guess.)
That means it can only get more expensive and time-consuming for Meta to buy its way into building the metaverse, if it can do so at all. And at some point, Facebook’s investors could get impatient waiting for it to happen.