Whatever Facebook does now will go wrong: Ethereum founder freezes Zuckerberg’s dreams for Web3

Meta's shares are down 54% since the start of this year compared to just a 20% drop in the broader tech index Nasdaq Composite.

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by Christiaan Hetzner

Many investors have suspected that Mark Zuckerberg’s dream of the metaverse is doomed to fail, with the result that Meta’s stock has lost more than half its value in the last six months.

Now they have a prominent critic on their side.

Vitalik Buterin, creator of the Ethereum blockchain that ranks second only to Bitcoin in total capitalization, said the Facebook founder and his company Meta are making billions of dollars in investments to create products that may never find a market.

“It’s too early to know what people really want,” he posted on Saturday. “So whatever Facebook creates now will go wrong.”

Zuckerberg cannot dismiss Buterin’s criticism lightly, since the latter describes himself as a fan of the metaverse.

Meta’s metaverse efforts, through its Reality Labs division, incurred an operating loss for the second quarter of nearly $3 billion.

Combined with steadily declining profits from its core businesses, Facebook and Instagram, quarterly profitability fell to just 29% from 43% in the prior period. This was Meta’s worst result since it released separate financials in the fourth quarter of 2020.

This has raised concerns that the group’s two main cash ‘engines’ can no longer compete with Chinese rival ByteDance’s hugely popular TikTok app and are now entering a period of managed decline.

Meta’s shares have fallen 54% since the start of this year compared to just a 20% drop in the broader Nasdaq Composite technology index.

And while Meta expects Reality Labs’ third-quarter revenue to decline sequentially after the second quarter, Zuckerberg confirmed that he was confident it would prove to be a “huge opportunity” for the company that was worth the cost.

The metaverse may potentially be years away, but companies are already buying virtual property despite the fact that there is no proven business model.

Yuga Labs recently sought to build on its success as the creator of the Bored Ape Yacht Club collection of non-traded assets (NFT) by launching a test demo of its new metaverse, Otherside, which attracted 4,500 people last month.

Aside from the complexity of achieving a shared virtual experience in real time, however, it is unclear what would pique the interest of buyers beyond financial speculation.

Meta meanwhile is pinning its hopes on this year’s release of Project Cambria, which is expected to be the successor to the Oculus Quest 2 virtual reality headset.

“It will be an advanced technology device focused on professional users and work, with mixed high-resolution color imaging,” Zuckerberg said Wednesday. “I think people will be quite surprised.”

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