Social-media service will retain Facebook name as umbrella company readies billions in investments in new mixed-reality platform.
By guest author Sarah E. Needleman from the Wall Street Journal.
Facebook Inc. FB 1.51% Chief Executive Officer Mark Zuckerberg said the company changed its name to Meta to reflect growth opportunities beyond its namesake social-media platform in online digital realms known as the metaverse.
“Over time I hope our company will be seen as a metaverse company,” Mr. Zuckerberg said Thursday. He unveiled the name, formally Meta Platforms Inc., for the company that also includes Facebook, Instagram, WhatsApp and other products during Facebook’s annual developer event, where he detailed his vision for the metaverse that he sees as key to the tech giant attracting younger users.
“We’ve gone from desktop to web to phones, from text to photos to video, but this isn’t the end of the line,” Mr. Zuckerberg said at the social-media giant’s annual developer forum called Facebook Connect. “We believe the metaverse will be the successor to the mobile internet.”
Facebook is already investing heavily in creating that new reality of shared online spaces inhabited by digital avatars, with projects ranging from virtual-reality glasses to an e-commerce platform. “We expect to spend many billions of dollars for years to come,” Mr. Zuckerberg said.
The company on an earnings call Monday already said that Facebook Reality Labs, which encompasses augmented-reality and virtual-reality products and services, is becoming a separate reporting unit and that spending for it would reduce this year’s total operating profit by USD 10 billion. Mr. Zuckerberg at the time said Facebook was “retooling our teams to make serving young adults their North Star.”
The metaverse that he has been increasingly promoting also gives him a comfortable topic to focus on as Facebook faces intense criticism from lawmakers, researchers and users over revelations in The Wall Street Journal’s Facebook Files series, which showed that the company knows its platforms are riddled with flaws that cause harm. Mr. Zuckerberg has said the criticism paints a false picture of the company he co-founded.
At Thursday’s (Oct. 28, 2021) event the Facebook chief also addressed the decision to discuss emerging plans while the company faces such scrutiny. “I know some people will say this is not a time to focus on the future,” Mr. Zuckerberg said, but argued that it is important to move forward even if mistakes are made along the way.
The company’s shares, starting Dec. 1, are slated to trade under the stock symbol MVRS, giving up the two-letter format it had with FB. Facebook shares rose 1.5% Thursday.
The name change appears to veer away from Facebook’s move two years ago to revamp its logo and corporate identity and boost the name’s prominence by attaching “from Facebook” to the various other brands the company started or acquired over the years.
Other companies have renamed or rebranded themselves over the decades for many reasons. Philip Morris changed its name in 2003 to Altria Group Inc. amid widespread condemnation of Big Tobacco over cigarettes’ harmful heath effects.
Apple Inc. shortened its name from Apple Computer in 2007 to reflect the growth of other products like iPods and iPhones. Google restructured in 2015 to create a parent company named Alphabet Inc. that housed its array of side businesses.
Facebook traces its name to the company’s origin, when Mr. Zuckerberg, then a student at Harvard University, named an early version of the site after the term for the school’s student directories. “I used to love studying classics,” he said Thursday, “and the word ‘meta’ comes from the Greek word meaning ‘beyond.’ For me, it symbolizes that there is always more to build.”
Bank of America analysts in an investor note Tuesday called the metaverse a compelling concept that “has a reasonable chance of mass market adoption with Facebook’s strong backing.” But they cautioned that the company’s ambitions in this area would likely take many years to come to fruition. “Long-term holders will need to have a strong belief in Facebook’s vision for the metaverse business model to want to hold the stock,” the analysts said.
Facebook is one of many big tech companies with metaverse-related objectives. Microsoft Corp. , Nvidia Corp. , Unity Software Inc. and others have said they are developing tools, services or content for the metaverse.
Some early iterations of the metaverse already exist. Roblox Corp. and Epic Games Inc. have hosted virtual concerts with millions of attendees who appeared as avatars. Similarly, virtual-reality applications such as “Rec Room” and “AltspaceVR” let people socialize as avatars. Some tech-industry forecasters have said in the future such experiences will evolve to become almost lifelike.
Mr. Zuckerberg has said it would take time before the metaverse becomes lucrative for his company. “Building the foundational platforms for the metaverse will be a long road,” he said on Monday’s call, adding, “Later in this decade is when we would sort of expect this to be more of a real business story.”
At Thursday’s event, the Facebook chief took an implicit swipe at rival Apple for the fees it charges on its App Store. “I believe that the lack of choice, high fees are stifling innovation and stopping people from building new things and holding back the entire internet economy,” Mr. Zuckerberg said. He has groused for years that Apple holds too much sway over the social-media giant’s business. Apple has defended its App Store policy as benefiting consumers.
“We want to serve as many people as possible,” Mr. Zuckerberg said. “That’s the approach that we want to take to help build the metaverse, too.”
He said the company is building a social platform for the metaverse called Horizon, a beta version of which started rolling out last year. And Facebook is working to bring Messenger calls to virtual reality, enabling people to more easily explore virtual worlds or join games together, as well as creating a marketplace for its Horizon platform and office-related features, he said.
Facebook said earlier this month that it plans to create 10,000 jobs in Europe over the next five years to work on metaverse-related endeavors. The company also has introduced Oculus-branded virtual-reality headsets, and it joined with Ray-Ban to develop smart sunglasses that went on sale for USD299 last month. New gadgets are in development, Mr. Zuckerberg said.
“I view this work as critical to our mission because delivering a sense of presence—like you’re right there with another person—that’s the holy grail of online social experiences,” Mr. Zuckerberg said Monday.
Facebook’s Four New Letters Won’t Spell Alphabet
Social network’s new Meta identity doesn’t compare well with Google’s earlier shift.
By guest authors Laura Forman and Dan Gallagher from the Wall Street Journal
The most controversial company in tech needs the world to see it through rose-coloured virtual-reality glasses. But a rose by any other name has just as many thorns.
On Thursday, Facebook FB co-founder and chief executive officer Mark Zuckerberg announced that the social-media company was formally becoming Meta Platforms Inc., with the new name embodying the metaverse company Facebook has set its sights on becoming. The metaverse, according to Mr. Zuckerberg, will be a successor to the mobile internet—a place where you can socialize, work, play and buy with privacy and safety built in from day one.
On an earnings call Monday, Mr. Zuckerberg said his company would be broken into two business segments: Family of Apps, which includes Facebook, Instagram, Messenger, WhatsApp and other services; and Facebook Reality Labs, encompassing its augmented and virtual reality-related hardware and software content. A company that for nearly two decades has been synonymous with social media is now trying to rebrand itself as something much more, even ditching its FB ticker symbol. The stock will begin trading as MVRS on Dec. 1.
The timing is both curious and convenient, coming as the company is ensnared in a new controversy caused by the leaking of thousands of internal documents by a whistleblower. Facebook has arguably been in crisis mode since the Cambridge Analytica scandal in 2018. Still, the company that started as a dorm-room project and now has more than 3.5 billion people using at least one of its apps monthly has proved to be financially resilient with a market value not far from USD1 trillion. Can such a big business pull off such a big change?
Facebook’s move has elicited comparisons with Google’s reorganization into the company currently known as Alphabet. That move, completed in October 2015, effectively separated the Google business from the moonshot projects dear to its founders’ hearts. The latter group was lumped into a business segment called Other Bets, the results for which were reported alongside those of Google’s main operations.
But they were relatively small, generating just USD448 million in revenue in 2015—about 0.6 % of the parent company’s total. That gap has only widened, as the main Google advertising and cloud businesses have prospered. Six years later, Other Bets now makes up only about 0.4 % of Alphabet’s revenue.
Losses, however, were big coming out of the gate. Other Bets lost a little over USD 3.5 billion in 2015, driven by its many early-stage ventures, such as life sciences, drone delivery and self-driving cars. Reporting them separately flattered Google’s core operating margins. That resonated with investors who had become worried about the company’s propensity to spend on projects that its founders conceded were “pretty far afield” for an online advertising company. Google’s shares had lagged behind the Nasdaq Composite for most of the 12-month period before the reorganization announcement in August 2015. They then beat the index by 20 percentage points in the following 12 months.
Facebook has superficial similarities. A 10-bagger for investors—from its public offering in 2012 through the beginning of this year—the company has shed nearly USD200 billion in market value in less than eight weeks, as investors feared the latest revelations were especially damaging.
Facebook will be hard-pressed to repeat Alphabet’s magic. The company’s nonadvertising revenue of USD2.8 billion over the past four quarters is nearly four times that of Alphabet. Its metaverse investments—which will be better reflected in the new reporting structure—will far exceed Alphabet’s ventures. Facebook says such spending will reduce its operating profit by USD10 billion this year alone.
And, unlike at Google, which hardly missed a step, those outlays will come when Facebook’s advertising revenue growth is seen decelerating by nearly 22 percentage points over the next three years. Even that slower pace hinges on successfully targeting younger users—the very demographic that the Journal’s recent reporting showed Facebook in some cases knowingly harmed. That makes a face-lift for Facebook not a nice-to-have, but an imperative.
It won’t be easy. Google’s reorganization involved the company’s two idiosyncratic founders stepping back from the day-to-day management of Google’s ad engine. Facebook’s Mr. Zuckerberg, a more divisive figure, was clear on Thursday that he intends to be the face of his company’s past, present and future. His being at the helm is a bit like an actor trying to shake a famous part to play an entirely new one convincingly. Facebook seems to be trying to assume the role of a responsible, visionary company after nailing the role of a company that moved fast and broke things for far too long.