Technology

Meta faces the identical problem as Alphabet

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Mark Zuckerberg wears the virtual reality headset from Oculus.

Glenn Chapman | Getty Images

Facebook is no longer Facebook.

The company announced its new company name, Meta, on Thursday, a signal that CEO Mark Zuckerberg plans to take the company beyond traditional social media and build what he believes is the next wave of personal computing in virtual worlds experienced through computerized glasses will.

It’s a risky move from a company worth roughly $ 900 billion. As Facebook’s core business of digital ads continues to grow, it now plans to invest billions annually in implementing a science fiction concept of a metaverse.

Facebook’s Pivot also echoes what Google did in 2015 when it restructured into Alphabet, a collection of companies looking to take advantage of Google’s profits and invest in a few futuristic projects. These projects are called Other Bets and include things like self-driving cars and even the healing of death.

And Alphabet’s results over the past six years paint a decent picture of what Facebook can expect when it spends billions turning science fiction into science fact. At the same time, Facebook’s approach is more focused than Alphabet’s.

This is how the two strategies stack up:

Zuckerberg is not going to go away like Larry Page. When Google reorganized into Alphabet, co-founder and CEO Larry Page kept his job but passed the Google portion of the business to Sundar Pichai. After that, Page largely disappeared from the public eye and it was never entirely clear what he was working on as other executives like Pichai and CFO Ruth Porat ran day-to-day operations. Eventually, Page stepped down as CEO and gave Pichai full control of Alphabet as CEO.

Zuckerberg made it clear on Thursday that he won’t hide like Page. Zuckerberg will be the face of Meta’s new direction in the years to come. And since Zuckerberg still controls the company, he must own any future controversy that comes his way.

Both companies are taking money from their massively profitable advertising businesses to invest in future technologies. As innovative as Google and Facebook may be, their core business is rather boring: digital ads. But both companies have turned their digital ad businesses into money printing machines. And that money is reinvested in future technologies and projects to protect against future disruptions.

So far, this has not paid off for Alphabet. In fact, Google has already reabsorbed some of Alphabets Other Bets, such as the Nest smart home division. Other projects were killed, such as Project Loon, a part of Alphabet that tried to deliver internet from high altitude balloons to people in areas with no internet access. It is also a donor of money. Alphabet’s Other Betting segment lost $ 1.29 billion in the third quarter.

This should be a signal to Meta that even the most ambitious ideas require more time and money than a listed company would be willing to spend. (It also helps explain why Alphabet companies like Waymo and Verily have raised a lot of money from investors outside of Alphabet.)

How much can Zuckerberg spend on the Metaverse? Zuckerberg said this week that Meta will spend approximately $ 10 billion over the next year to hire staff and develop the technologies for the Metaverse. But it is also clear that the technology needed to make the Metaverse a reality is quite a long way off. (Zuckerberg said 10 years, but it’s really everyone’s guess.)

This means that it can only become more expensive and time-consuming for Meta to buy into building the Metaverse, if this is at all possible. And at some point, Facebook’s investors might be impatient for it to happen.

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