Facebook (META) started as a digital college yearbook that brought Harvard students into personal contact with each other. Monday three years ago, Mark Zuckerberg has rebranded his social media empire as Meta, where we bet billions on a future in which we would meet in virtual worlds.
“Today we are seen as a social media company,” Zuckerberg said on October 28, 2021, from the stage of the Facebook Connect augmented and virtual reality conference. “But in our DNA, we are a company that builds technology to connect people, and the metaverse is the next frontier, just like social networking was when we started.”
Zuckerberg said he hoped the metaverse would reach a billion people and trade for “hundreds of billions,” employing millions of people – all within ten years.
Since then, Meta has invested more than $63 billion in Reality Labs, its virtual and augmented reality technology division. The results include updated Quest headsets, which power Horizon Worlds, a virtual universe where custom avatars (initially designed without legs) wander through digital spaces, and a collaboration with Ray-Ban to develop AR glasses. These efforts led to skepticism from investors and lukewarm response from consumers.
But everything changed when ChatGPT arrived on the scene in November 2022. Meta was ready: the AI research department, led by pioneer Yann LeCun, had long been making progress in this field. And while Zuckerberg hasn’t given up on his upside-down dreams, his public messaging is increasingly focused on the transformative potential of generative artificial intelligence.
Those AI bets are already paying off. In July, Meta reported stronger than expected salescrediting AI improvements in ad targeting. The company is now introducing AI tools to help marketers improve their listings.
“There are all these jokes about how all the tech CEOs come on these earnings calls and talk about AI all the time,” Zuckerberg said this during the earnings call. “It’s because it’s actually super exciting and it’s going to change all these different things over multiple time horizons.”
He added that AI will “eventually impact almost every product we have in some way.”
The pivot turned out to be at the right time. After losing nearly two-thirds of its value in 2022, Meta’s stock price nearly tripled last year and is up more than 60% in 2024, hitting an all-time high of $595.94 per share earlier this month.
For Meta, the metaverse has faded and been replaced by all things AI, said Gene Munster, managing partner at Deep Water Management.
“They haven’t given up on the metaverse yet,” he said. “They are doing what every big tech company does, which is applying AI everywhere.”
Reality Labs will likely lose $20 billion this year, but Munster noted that about 70% of those investments will go toward AI-enabled glasses and wearables rather than Quest headsets. Meta has poured at least $10 billion into the development of AI glasses alone, which has helped give the company an edge over competitors in the space.
But Munster said that the company’s “drunk sailor” expenses on metaverse projects may not be sustainable alongside the growing costs of generative AI development, which has delivered clearer financial benefits. While Meta Reality doesn’t have to exit Labs completely, Munster says the next few years are crucial: either the hardware has to advance enough to prove the opportunity is real, or spending needs to be adjusted.
“You’re going to have to give,” he said.
The future of the internet is 3D
Although the name change took place in 2021, Meta’s investment in the metaverse vision began long before that. The company had bought VR headset maker Oculus for $2 billion in 2014, twice what it paid for Instagram two years earlier in a blockbuster deal. By the time of the Meta rebrand, the company had already invested an estimated $32 billion in Metaverse-related technologies.
But the ‘metaverse’ itself is often misunderstoodaccording to Matthew Ball, an entrepreneur and author of “The Metaverse: And How It Will Revolutionize Everything.” While many associate it purely with VR headsets and virtual worlds, Meta’s vision is actually about the evolution of the internet itself into a 3D medium that includes virtual reality, augmented reality and traditional screens.
“The metaverse is not limited to or even requires virtual reality,” Ball said. “Most people now believe that we won’t use any term to describe it – we’ll just call it the 3D Internet.”
But in the meantime, the proto-3D Internet is suffering. Global shipments of VR and AR headsets have fallen by about 28% since September last year, with growth expected in 2025. market researcher IDC. But Meta’s Ray-Ban (EL) smart glasses have achieved success, with more than 730,000 units sold in the first three quarters, according to CNBC. The second generation of the glasses, released in September, received updates such as better image quality, improved battery life and an AI voice assistant.
Meta’s recent triumph with Ray-Ban smart glasses has paved the way for an even more ambitious project: Orion. This groundbreaking prototype of glasses, which Meta has been developing for almost a decade, represents a significant leap forward in capabilities.
When Zuckerberg unveiled Orion in September, it created an unprecedented wave of excitement about Meta’s metaverse technology – a notable shift from the previously lukewarm response to the company’s metaverse initiatives. The device shows how AI can power next-generation augmented reality, with features such as real-time 3D mapping and advanced scene understanding.
“Without AI, it would be impossible to virtualize the real world, or perhaps build the fantastic world we imagined,” Ball said.
A new shiny distraction under a different name
In October 2021, when The Wall Street Journal began publishing The Facebook filesexposing the company’s knowledge of the harmful effects of its platforms, Zuckerberg unveiled his metaverse rebrand. This was just a few years after allegations of election interference around Cambridge Analytica‘s data collection on American voters that saw Zuckerberg appear before Congress multiple times.
At the time, Sara M. Watson, a technology critic and independent industry analyst, said, mentioned the name change a distraction that didn’t address what the company had already built and torn down. Now she sees the same playbook at work as Meta focuses on AI, amid lukewarm responses to the Metaverse projects.
Meta has been aggressive in the battle for cutting-edge AI. In July, Meta unveiled Lama 3.1the first openly available model that the company says rivals and in some cases exceeds the performance on benchmarks of several closed AI models, including OpeanAI’s ChatGPT and Anthropic’s Claude. When Zuckerberg published a 2,300-word blog post titled “Open Source AI is the way forward”, he positioned open models as a public good – while building another ecosystem that could entrench Meta’s power with the same ‘move fast and break things’ approach that led to congressional mea culpas and ultimately the name change .
If Llama becomes the main infrastructure for AI tools, Zuckerberg would gain the same kind of control over generative AI that he once had over social networks, despite Meta’s troubled history with platform power.
“You build something that everyone needs, and they build on top of that,” Watson says said. “Then you become essential, regardless of how you decide to generate revenue.”
