Facebook Inc (NASDAQ:FB) warned that a significant slowdown in sales is likely in the second half of the year as it does not see the same pandemic trends continuing to help its business, but founder Mark Zuckerberg had some interesting comments on the creation of the 'metaverse'.
The social media behemoth reported US$29.1bn of revenue for the second quarter of 2021, up 56% on the same period a year ago thanks to higher advertising revenues as daily active users rose 7% to 1.9bn.
Net income doubled year-on-year to US$10.4bn, despite a US$2.1bn provision for taxes, and the company net cash levels swelled to US$64.1bn from US$62.0bn at the start of the year.
But management expects revenue growth rates in the third and fourth quarters to “decelerate significantly on a sequential basis as we lap periods of increasingly strong growth”.
Compared to pre-pandemic revenues from 2019, Facebook expects a “moderate” slowdown in the second half of the year compared to the past quarter.
Updates to Apple’s iOS platform are expected to exert a greater headwind on targeted adverts in the third quarter compared to the second.
Boss Zuckerberg, unlike other billionaires bewitched by space travel and the universe, instead said he was excited about progress “to start to bring the vision of the metaverse to life”, a science fiction concept of virtual space where users interact in the form of avatars.
He said the company believes that this “is going to be the successor to the mobile internet” and he expects it is “going to create a lot of value for many companies”.
Pre-market trading was indicating Facebook shares will open 3.5% lower at just over US$360.
Analyst Sophie Lund-Yates at Hargreaves Lansdown said Zuck’s metaverse plans “is little more than an ambition for Facebook at the moment, but the insularity bred by lockdowns could act as a catalyst for users.
“If the idea comes to fruition, it could be a valuable income source – having users become even more immersed in its stable of social networks would ultimately mean advertisers are willing to part with more money for the data those users leave behind.”
She said with Facebook and its WhatsApp and Instagram platforms already an integral part of our lives, this makes Facebook’s “some of the most reliable ad revenues in the world” and while growth is expected to temper as the previous year’s heights were lapped, “the draw of Facebook’s global audience shouldn’t be forgotten as the numbers iron themselves out”.
What is the metaverse?
“It's a virtual environment where you can be present with people in digital spaces,” said Zuckerberg on his call with analyst and reporters.
“You can kind of think about this as an embodied internet that you're inside of rather than just looking at. We believe that this is going to be the successor to the mobile internet.”
“You're going to be able to access the metaverse from all different devices in different levels of fidelity – from apps on phones and PCs to immersive virtual and augmented reality devices.
“Within the metaverse, you're going to be able to hang out, play games with friends, work, create, and more. You're basically going to be able to do everything that you can on the internet today as well as some things that don't make sense on the internet today, like dancing.”
Zuckerberg said he thought the “defining quality” of the metaverse is going to be one's presence there – “this feeling that you’re really there with another person or in another place” via avatars interacting with digital objects – “and this is going to lead to entirely new experiences and economic opportunities”.
He added: “I think that overall this is one of the most exciting projects that we’re going to get to work on in our lifetimes.
“But it's going to take a lot of work, and no company is going to be able to build this all by themselves.
“Part of what I've learned over the last five years is that we can't just focus on building great experiences -- we also need to make sure we’re helping to build ecosystems so millions of other people can participate in the upside and opportunity of what we're all creating.”
He said the metaverse will need new technology protocols and standards, new devices, new chips, new software such as for rendering engines and payment systems.
This means Facebook envisages the metaverse will be open to anyone who wants to contribute, in order for it “to fulfill its potential”.
“I expect this is going to create a lot of value for many companies up and down the stack, but it’s also going to require significant investment over many years.”