Facebook will spend $10 billion on its metaverse division

This year, Facebook plans to invest at least $10 billion in Facebook Reality Labs, its metaverse division tasked with developing AR and VR hardware, software, and content.

“We are committed to bringing this long-term vision to life, and we expect to increase our investments over the next several years,” the company said in a third-quarter earnings release issued this afternoon. AR and VR, according to Facebook, are central to “the next generation of online social experiences.”

The division, which already produces the Oculus Quest headset and the Portal line of calling devices, is clearly being positioned as Facebook’s next big thing. For starters, CEO Mark Zuckerberg has been talking about the metaverse nonstop for months. And today, Facebook announced that it will begin reporting earnings for its Reality Labs segment separately, while Facebook’s main ad business — a staggering $28 billion in the last quarter alone — will be reported under a different bucket. It’s a signal to investors that the Reality Labs business is important and should be valued independently of how they value Facebook today.

It’s also an attempt to divert attention away from what else is going on in Facebook’s earnings today. The company missed revenue expectations by around $1 billion (which isn’t much on Facebook’s scale), which speaks to some of the company’s current struggles. Facebook attributes this to a number of factors, including COVID-19, the economy, and Apple’s recent ad-tracking changes — as we saw last week when Snap also reported earnings.

In April, Apple released an update to iOS that included a new privacy feature that required users to actively opt in to allow apps to track them across apps and websites. Initially, social media companies said they weren’t sure how much it would affect their ad businesses, which rely on tracking in part to determine ad effectiveness.

Facebook has had a difficult few weeks. A series of stories in The Wall Street Journal detailed significant missteps by the company, including moderation issues and concerns about the mental health of younger users; the whistleblower who leaked those documents then testified before Congress; and just this morning, dozens of stories covering even more problems for Facebook, including concerns about declining teen usage, were published by a consortium of news outlets. In the midst of it all, Facebook’s apps went down for a good chunk of a day in early October.

During a conference call with investors on Monday, CEO Mark Zuckerberg took a defiant stance on the leaked documents, saying they were part of a “coordinated effort” to “paint a false picture of our company.” He then quickly shifted to discussing Facebook’s efforts to court young people and build the metaverse, reinforcing the idea that the company would like to push toward something new where it might be able to avoid some of the scrutinies.

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