Mark Zuckerberg imagines a billion people in the metaverse spending hundreds of dollars each

Meta Platforms CEO Mark Zuckerberg told CNBC’s Jim Cramer on Wednesday that the Metaverse could be a sizeable part of the social network operator’s business in the second half of the decade.

“We’re hoping to reach basically around a billion people in the metaverse, doing hundreds of dollars in businesses, each of which is buying digital goods, digital content, and various things to express themselves, whether it’s clothing for their avatar or various digital goods for their virtual home or things to decorate their virtual conference room, utilities to be more productive in virtual and augmented reality and in the whole metaverse overall,” he said.

Investors have halved the company’s market cap this year as growth has slowed and daily active users have fallen for the first consecutive quarters between the past two quarters. Zuckerberg has increasingly focused the company on what he sees as the next generation of content, a virtual world where people can buy and sell digital goods for avatars that can communicate with each other. The company’s ticker symbol changed earlier this month from FB, a relic of its history as a pure social media provider, to META.

But the company’s investment in augmented reality and virtual reality dates back to 2014, when it paid $2 billion for headset maker Oculus VR. Headset shipments have not exceeded PC or smartphone shipments. Zuckerberg expressed optimism about the performance of his current-gen Meta Quest 2, which starts at $299.

“Quest 2 was a hit,” Zuckerberg told the Mad Money host.

“I was really happy with how it went. It exceeded my expectations. But I still think it’s going to take a while before it gets to the scale of several hundred millions or even billions of people in the metaverse because things take some time to get there. So this is the North Star. I think we’ll make it. But you know, the other services that we run are already a bit larger in scope today.”

Experiences in the metaverse can be more immersive than the text, photos, or videos that are ubiquitous on Meta’s Facebook and Instagram, and as such it’s going to be a big topic for Meta over the next decade, Zuckerberg said.

Zuckerberg met with Cramer in the Metaverse. The Facebook co-founder said such experiences could foster a sense of togetherness, even when people are physically on the other side of the country. He said it’s possible to make eye contact, which isn’t guaranteed on video calls, and to use spatial audio that allows for quiet side conversations.

The technology “basically helps give that realistic sense of presence,” he said.

To make this available to customers over the next few years, Meta needs to release a stack of hardware, software, and experiences.

“We’re at that point, you know, a company that can afford to make some big long-term research investments, and that’s a big focus,” he said.

He expects the economy around the metaverse to be massive, he said.

Meta Platforms had 3.64 billion monthly active people across its family of apps in the first quarter, up 6% year over year. WhatsApp reached 2 billion users in 2020, and it’s also an area where Zuckerberg sees potential for growth.

“You know, our playbook over time has been building services, trying to serve as many people as possible — you know, take our services to a billion, two billion, three billion people, and after that we scale in Start monetization,” Zuckerberg said. “And that’s what we’ve done with Facebook and Instagram. WhatsApp will truly be the next chapter, with business messaging and commerce playing a big part there.”

AI makes recommendations, similar to TikTok

In addition to its Metaverse spending, Meta is investing heavily in the development of artificial intelligence that can power advertising — the source of about 97% of its revenue — and the company’s existing applications, Zuckerberg said.

“We’re basically transitioning from the fact that most of the content you see on Facebook and Instagram is from your friend or your follow graph, and now, you know, over time, more and more of that content is just coming from AI recommendations come,” Zuckerberg said. “And as the AI ​​recommendations get better, you get access to, you know, not just the content of the people you follow, but the entire universe of content that’s out there.”

It’s a concept that TikTok, owned by Chinese company ByteDance, has been pushing forward with one billion active users per month. Meta tried to respond to the rapid growth by launching its Reels feature from Instagram in 2020. Reels make up over a fifth of the time people spend on Instagram, Zuckerberg told analysts on Meta’s first-quarter earnings call in April. Now he expects AI improvements to make Reels more attractive to Instagram users.

“Our AI system can choose what to watch based on what it knows about you and what interests you personally and what you’re learning about,” he said. “As we get better at it, our engineers will deliver improvements to the models every week. We check something and the relevance increases by a few percent. And then we repeat that and do that for the next week. And, you know, that’s just a big part of what I’ve always focused on running this company, which is to get very high speed so we can keep improving that fast.

Meta is also investing in hardware for AI alongside other big tech companies like Alphabet and Microsoft.

“We just brought online the AI ​​research supercluster, which we believe will be the fastest AI supercomputer when fully scaled out later this year, allowing our researchers to build new and larger models to both achieve the ranking as well as recommendations via our social media services and advertisements.”

The company will slow its investments in AI in the event of a recession, Zuckerberg said.

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