Facebook is investing billions in the metaworld as the advertising business slows down

October 25 (Reuters) – Facebook Inc (FB.O) said on Monday that it will start publishing the financial results of its augmented and virtual reality labs as a separate unit, where it invests billions in its ambitions to build a “metaverse” and because it said it the main advertising business faces “significant uncertainty”.

Facebook, which reported third-quarter earnings rose 17%, warned that new changes to Apple Inc.’s privacy (AAPL.O) would affect its digital business in the current quarter. The social network reported that quarterly revenues are lower than market expectations, according to analysts, Chief Operating Officer Cheryl Sandberg, due to changes in iOS.

David Wener, Facebook’s chief financial officer, said the company expects its investment in Facebook’s Reality Labs hardware to reduce overall operating income in 2021 by about $ 10 billion.

The financial commitment to this hardware-focused unit, which will work on the ambitions of Facebook’s “metaverse”, arises when the company is overwhelmed by coverage of documents posted by former Facebook employee and informant Francis Haugen, who said the company chose to make a profit. rather than user security. read more CEO Mark Zuckerberg began an analyst call on Monday to defend against criticism stemming from documents that he said create a “false picture of our company.”

The CEO said that in the coming years, Facebook will not be seen as a company on social networks, but as a company focused on the metaverse. Noisy term refers widely to a shared virtual environment that can be accessed by people who use different devices. read more

Facebook, which has invested heavily in virtual reality (VR) and augmented reality (AR), including the acquisition of companies such as Oculus, has created a team of products this year to work on the metaverse. This month, the company said it plans to hire 10,000 employees in Europe over the next five years to work on the initiative. read more

“This is not an investment that will be profitable for us in the near future,” Zuckerberg told analysts. “But we basically believe that the metacosm will be the successor to the mobile Internet.”

Wehner said that starting in the fourth quarter of 2021, Facebook Reality Labs will be a separate reporting segment from the Facebook application family.

Shares of the company rose about 1% in non-trading trades on Monday. Facebook, whose shares have risen about 20% this year, has about $ 85 billion left over from regaining a $ 1 trillion seat at the club and joining new member Tesla Inc (TSLA.O).

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This illustration, taken on March 25, 2020, features a 3D printed Facebook logo on the keyboard. REUTERS / Dado Ruvic / Illustration / File Photo / File Photo

The world’s largest social network is under close scrutiny by global lawmakers and regulators, including the Federal Trade Commission, which has filed an antitrust lawsuit against anticompetitive practices. read more

The informant’s documents, first reported by the Wall Street Journal, intensified the company’s investigation. These include internal research and reports on Instagram’s impact on adolescent mental health and whether Facebook platforms are contributing to the split, as well as how it responds to the January 6 Capitol riots and the inconsistency of moderating the company’s content for users around the world. read more

In the third quarter, Facebook reported 2.91 billion active users per month, which is 6% more than a year ago, but less than analysts estimate.

During the conversation, the leaders stressed that the company is focused on attracting young people, including through a short video “Reels”.

“We are re-equipping our teams to serve young adults as their North Star, not to optimize for more seniors,” Zuckerberg said.

The published documents show Facebook’s constant concern about its attractiveness to younger users, as rivals such as TikTok are popular with teenagers. They also show the company’s difficulty working with users who create multiple accounts on its platform.

Facebook said it expects fourth-quarter revenue to range from $ 31.5 billion to $ 34 billion. According to IBES from Refinitiv, analysts forecast revenue of $ 34.84 billion, or a jump of 24.1%.

Its revenue in the third quarter also faced the burden of Apple’s privacy policy, which made it difficult for brands to target and measure their advertising on Facebook. Sandberg, the chief executive, said Facebook expects it to address “more than half” of the problems that led to understated reporting by the end of this year.

“Changes in Apple’s privacy settings haven’t hurt Facebook significantly, at least not yet,” said Harris Anwar, an analyst at Investing.com. “Despite the fact that the revenue and the number of users over the last quarter were slightly affected, the company’s profitability remains unchanged.”

The company’s total revenue, which mainly consists of advertising sales, rose to $ 29.01 billion in the third quarter from $ 21.47 billion a year earlier. According to Sandberg, Facebook advertisers have also suffered from global supply chain disruptions and labor shortages, which has affected the demand for advertising in a number of sectors and regions.

Facebook said it bought $ 14.37 billion worth of shares in the third quarter and announced an additional $ 50 billion in share buybacks.

Report by Elizabeth Calliford in New York, Nivedita Balu from Bangalore and Sheila Dang in Dallas. Edited by Arun Koyur, Peter Henderson and Matthew Lewis

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