Meta's Metaverse Cuts Not Surprising: EMARKETER's Smiley

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00:00What's interesting about this is the consumer's general attitude to technology, right?

00:07Am I going to use an AI tool every day or am I going to jump headfirst into the metaverse?

00:12It's a big share move, but I think what I find interesting about your response is that you don't

00:17find it that surprising that there is being a cutback in the metaverse initiative.

00:22No, I really don't find it surprising. If anything, I think people will wonder

00:26why these cuts haven't happened sooner, because I think even though AI and social media still remain

00:34incredibly popular, the reality is that a lot of people are actually trying to spend less time on

00:40screens, less time with technology. Even our own forecast showed that next year, at least in the

00:45U.S., we do expect users on social media to spend less time on these social networks.

00:51And so, again, that's not to say they still don't spend incredible amounts of time on social

00:56with AI platforms, with technology in general, but there is a bigger push to pull back. And so

01:02I think even a few years ago, it really wasn't the time for the metaverse, clearly. And I think

01:06now it definitely is not.

01:09To recap, this reporting is according to sources, and it's 30% budget cuts for metaverse,

01:14but that will include an element of layoffs. I'm trying to understand the difference, right?

01:18Caroline and I have both spent a lot of time using mixed and virtual reality headsets,

01:22and I've spent a lot of time using Ray-Ban meta smart glasses, right? Through one, you access the AI,

01:28the smart glasses, voice assistant-based AI with camera. The other, you immerse yourself in a

01:33virtual world. But why isn't there a sort of recognition of the overlap of those two domains?

01:40Yeah, I mean, there certainly is some overlap, but I think, again, that there's sort of, even when you

01:45look at meta's business overall, right? Like, we are seeing how AI is helping the business incredibly so.

01:50It's helping their bottom line. It's helping their algorithms become more powerful and keep

01:55people on the platform longer. But these loftier goals, these loftier ideas around super intelligence

02:02and even the metaverse are, we're just still not there yet. And I think that demand isn't even

02:07quite there yet to be justifying these massive amounts of spending. I mean, we even see this with

02:12smart glasses. I will say, I do think the smart glasses are having a bit of momentum. They've had

02:17some stumbles recently. But there certainly is some momentum there. But it's far from, you know,

02:21a big portion of meta's business and likely won't be so for quite some time. And so, yeah,

02:27like you said, there is some overlap. But I still think there's the reality of what consumers are

02:32comfortable with now versus what they're going to be comfortable with 10, 20 years from now,

02:35which is just really hard to predict.

02:37OK, Minda, let's go to, therefore, the vast amounts of money being spent on the AI focus. And

02:42that's what's got investors riled, worried about the amount of debt that's going to have to be

02:46deployed, the potential move to negative cash flow, for example. Is that wise? When you're

02:52thinking about the intertwining of AI with social media, for meta, it really paid off because it

02:56was more effective and advertisers loved it. But what about actually our use cases and how super

03:01intelligence is going to win for their business model?

03:04Well, yeah, that's exactly right. I mean, we are, like I said, we are seeing how AI clearly is helping

03:08their business. But I think they are stumbling a lot more with their consumer-facing ventures in

03:13this space. I mean, even recently, when you look at Meta AI, their standalone app, it, of course,

03:20Meta AI has been, you know, worked in all of their major platforms. You can use it on Instagram,

03:24Facebook, WhatsApp. But the standalone app, as of last month, only had about three and a half million

03:29users globally. So that's, I mean, three and a half million is a lot of people. But when you look

03:34at the billions and billions of people that use their other platforms, it's actually quite small.

03:38So, again, the demand for just like a pure play AI platform from Meta is still relatively small,

03:45especially when they are competing with ChachiBT and some of these other players. And so, yeah,

03:51there's sort of the business lane and the consumer lane. And I think the consumer lane,

03:54they're really having some struggles there.

03:56But people are really using AI within WhatsApp, within Instagram. And then there's the issue of

04:03competition, whether they're stifling it. Over in the EU, they're worried about perhaps some policy

04:06changes to what they're offering of which companies who basically integrate in the API.

04:12And it looks as though both Copilot and Microsoft and the OpenAI could be pulling back from WhatsApp.

04:17Yeah, yeah, for sure. I mean, I have to say, I wasn't surprised to see the EU crack down on that.

04:22We've seen them kind of come down on Meta quite a bit recently. But it kind of goes back to my earlier

04:27point of what I was saying that Meta AI doesn't have that many users quite yet. That's why they're

04:32really kind of relying on putting it in their more mainstream platforms, trying to get people

04:37to use it on WhatsApp, especially in Instagram and Facebook. And so, you know, again, I wasn't

04:42surprised to see that they're making that push. But I'm also not surprised to see that pushback,

04:46that legal pushback that's happening, especially in an environment where Meta has really just been

04:51under the regulatory microscope lately. Here in the US, of course, it recently won its antitrust trial.

04:56But when we look into next year, I think Meta, but also just social platforms in general,

05:01they're facing so much regulatory pressure at the moment.

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