Meta is pushing the metaverse aside for AI

On Tuesday Facebook parent Meta (META) announced that it will lay off another 10,000 employees. The move is part of CEO Mark Zuckerberg’s so-called “Year of Efficiency” during which the company is cutting back on spending amid falling digital advertising revenue and rising interest rates.

But buried in Zuckerberg’s statement about the layoffs was a clear message to both Silicon Valley and Wall Street: Artificial Intelligence is now as important to the company as the metaverse.

The reason? If Meta can build out its AI capabilities, it could find itself back in Wall Street’s good graces, and earn itself the capital it needs to advance its metaverse ambitions over the coming years.

Need proof of the move? A quick look at Zuckerberg’s Facebook post announcing the layoffs will tell you just how important AI is to the company’s future. While talking about how Meta is investing in future technologies, Zuckerberg said, “Our single largest investment is in advancing AI and building it into every one of our products.”

And while he mentioned Meta’s work on the metaverse twice in his statement, it was only after talking about the firm’s AI efforts.

“We do leading work across a wide range of advanced technologies and then distill that into inspiring products that improve people’s lives,” Zuckerberg wrote.

“We [invest in] AI to help you creatively express yourself and discover new content, with the metaverse to deliver a realistic sense of presence, with new media formats to create richer experiences, with encryption to let you communicate privately in more and more ways, and with business tools to help reach customers, create opportunity and grow the economy.”

Part of the reason for the AI love is the hype train surrounding the topic kick-started by OpenAI’s ChatGPT, Microsoft’s (MSFT) Bing, and Google’s (GOOG, GOOGL) Bard. The other half of the equation, however, is Meta’s need to continue to compete with rival TikTok.

That company, which is facing its own existential problems, including a potential ban by the Biden administration, made its bones via its AI-powered For You page that serves you a never-ended stream of addictive short videos. And Meta is working hard to ensure it can match those capabilities.

Story continues

“One thing that is abundantly clear is that AI and the metaverse are front and center to Meta’s long term strategy,” Forrester VP and research director Mike Proulx told Yahoo Finance. “But the issue remains in the here and now; there’s only so much runway left for the company to deliver.”

Meta has been stung for its massive investments in Zuckerberg’s plan to turn the company into a metaverse first business. That includes the research and development of everything from the headsets needed to power that vision to the software that will run the apps.

In 2021, Meta reported a $10.1 billion loss from its Reality Labs business, which houses the company’s metaverse efforts. In 2022, that jumped to $13.7 billion.

A greater emphasis on AI, though, allows Meta to appease investors, while continuing to plow money into its metaverse ambitions. Especially since it’s expected to be years until the metaverse is a bankable reality, if ever.

“[Zuckerberg is] looking to invest in projects that can drive growth,” Deepwater Asset Management Managing Partner Gene Munster wrote in a recent note.

“Gone is the NFT experiment. More investment will be made in AI to improve Reels recommendations and advertisement measuring tools, adding large language model (LLM) features into messaging, and automating ad campaigns with creative content generation,” he said.

In other words. Meta is now a metaverse and AI company. At least for now.

Got a tip? Email Daniel Howley at [email protected] Follow him on Twitter at @DanielHowley.

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