Original title: "Reality Labs' losses widen, Meta continues to "spend money"" Original author: Luo Luo, Meta Universe Daily Explosion Original source: Hive Tech Early in the morning of February 2, Beijing time, Facebook's parent company Meta released its 2022 fourth quarter (Q4) and full-year financial report. Data showed that Meta's revenue and profit "doubled down", with revenue and net profit last year down 1% and 41% respectively from the previous year. It is not difficult to find from the financial report that social application families such as Instagram, WhatsApp and Messenger are still Meta's main revenue generators, with more than 98% of the full-year revenue of $116.609 billion (US$114.45 billion) contributed by these businesses. This part of revenue is down 1% from last year, but there is no harm without comparison. Reality Labs, which was entrusted by Meta with the strategic task of the metaverse, contributed only $2.159 billion in revenue for the whole year, down 5% from the previous year. Not to mention, it also widened its losses to $13.72 billion, and the loss in 2021 was $10.19 billion. Meta said this was due to the decline in sales of its Quest 2 headset. Reality Labs has suffered serious "battle damage", but Meta's CEO Mark Zuckerberg still has not changed his original intention. "So far, I have not seen any signs that we should change Reality Labs' long-term strategy." He said in a conference call that the Quest 3 consumer headset launched later this year will use the Meta Reality mixed reality system. Meta's new CFO revealed that Reality Labs' investment costs will continue to rise this year. In the metaverse, Zuckerberg is going to soar all the way. Reality Labs' losses exceeded its revenue by 6 times. Although Meta's revenue and profit in Q4 and the whole year of 2022 declined, they still exceeded the expectations of Wall Street analysts. After the financial report was released, Meta's stock price rose to $182 in the afternoon of February 1, Eastern Time, an increase of 18.86%. In the past 52 weeks, the company's stock price has reached a high of $328 and a low of $88. The stock price got off to a good start after the financial report, but Reality Labs' performance was dazzling in Meta's financial report. It is the representative work of Facebook's parent company after it was renamed Meta. To a certain extent, it is regarded by the outside world as a "weather vane" for the layout of the metaverse by Internet technology giants. It is not only a guide to the direction of product technology, but also a scale for observing the input-output ratio of a company after turning to the metaverse.In 2022, this "scale" is ugly. Meta's financial report shows that Reality Labs contributed $727 million in revenue in Q4, down 17% from $877 million in the same period last year; in fiscal 2022, the department's business revenue was $2.159 billion, down 5% from $2.274 billion in 2021. In sharp contrast, the department's operating loss was $4.279 billion in Q4, compared with $3.304 billion in the same period last year, a year-on-year increase of 29.5%; the full-year loss was $13.717 billion, an increase of 34.57% from $10.193 billion in the previous year. Reality Labs' losses in 2022 exceeded its revenue by 6 times. In other words, Reality Labs' losses in 2022 were 6.35 times its revenue. Meta also said that the loss was mainly due to the decline in sales of the VR headset Quest 2. According to data from research firm NPD Group, as of early December last year, sales of VR headsets in the United States as a whole fell 2% in 2022 from the previous year. This of course includes the consumer-grade Quest 2. Meta probably saw the unfavorable situation a long time ago and tried to narrow its losses, but the way was not to expand sales but to increase prices. In July last year, Quest 2 quietly increased by $100, with the price of the 128G model rising to $399 (about 2,688 yuan) and the 256G model rising to $499 (about 3,361 yuan). At that time, it was said that the supply chain costs had risen due to inflationary pressure, so the necessary price increase was made. In October, the company launched the more expensive Quest Pro, priced at $1,500. This device is directly aimed at B-side companies with more purchasing power and is positioned as an "enterprise work device." Judging from the results, "price increase + new products" failed to reverse Reality Labs' "battle damage." Of Meta's total revenue, Reality Labs' revenue last year ($2.159 billion) only accounted for 2% of the company's annual revenue ($116.609 billion), but the $13.717 billion lost by this department accounted for more than 50% of the company's profit ($23.200 billion). Meta's new CFO Susan Li said that these costs will continue to rise this year. Meta uses AI to increase efficiency, and the metaverse strategy remains unchanged. Reality Labs is burning so much money, what does Mark Zuckerberg plan to do? After releasing the financial report, Meta's CEO positioned 2023 as Meta's "year of efficiency" in a conference call with investors, and plans to continue to streamline the company.Last year, the company had already carried out layoffs and departmental restructuring, firing about 11,000 employees in Q4 alone. Meta expects to incur another $1 billion in restructuring costs in 2023. This means that although layoffs and restructuring can "slim down", they will also come at a high cost. Zuckerberg said that efficiency gains in 2023 will also include the deployment of artificial intelligence (AI) tools that can improve the productivity of engineers. "When people talk about efficiency, many times they prioritize which big things can be cut, but in fact, I think that being a better company is being able to do more in the same amount of time, because with more efficient operations, you can get the job done with fewer resources," Zuckerberg's tone hinted at his attitude towards Reality Labs: the department will not be laid off. To be more specific, "So far, I have not seen any signs that we should change the long-term strategy of Reality Labs." He added, "We are constantly adjusting the specific implementation methods." The two words of one dark and one bright are much softer than the statement of "increasing investment" that directly angered shareholders last year. The smart Zuckerberg also gave progress: the Quest 3 headset will adopt the Meta Reality mixed reality system, and it is expected that this system technology will become the benchmark for all future virtual/augmented reality hardware. The market predicts that Quest 3 will be released in October this year. According to previous official news, the price is in the range of US$300-500. Meta's Quest headset "The MR (mixed reality) ecosystem is relatively new, but I think it will grow a lot in the next few years." Zuckerberg's judgment may be based on the growth data brought by the Meta VR ecosystem. He said that there are already more than 200 VR applications that have made $1 million or more with the help of Meta's ecosystem. Currently, there are about 460 VR applications in the Meta Quest store. In 2023, if the cost of the hardware supply chain does not decrease, the Metaverse will still be a big money-burning place for Meta. However, judging from Zuckerberg’s statement, under the premise of "not abandoning or giving up", Reality Labs’ focus this year may no longer be solely on hardware. It will also expand the pie in systems and applications, form an ecosystem, and grab profits from VR application stores such as Apple’s AppStore.