Facebook Inc. is heavily investing in its virtual and augmented reality division, Facebook Reality Labs, as the future of its advertising businesses becomes uncertain. The company reported a total revenue of $29.01 billion for the third quarter, primarily driven by ad sales, a significant increase from $21.47 billion the previous year. However, Facebook has warned that Apple Inc.’s new privacy rules will impact its digital business in the current quarter. Furthermore, Chief Financial Officer David Wehner revealed that the company’s hardware investments would result in an approximate $10 billion reduction in operating profit in 2021.

This push into the metaverse by Facebook comes amid controversy sparked by leaked documents from former employee and whistleblower Frances Haugen, alleging that the company prioritizes profit over user safety. In response, CEO Mark Zuckerberg has expressed his vision for Facebook to be recognized as a metaverse company rather than a social media platform in the coming years. To actualize this vision, Facebook has made significant investments in virtual reality and augmented reality, including the acquisition of companies like Oculus. The company recently formed a dedicated product team for the metaverse and announced plans to hire 10,000 employees in Europe over the next five years to drive this initiative forward.

Beginning in the fourth quarter of 2021, Facebook will report Facebook Reality Labs as a separate segment from its family of apps. Following this announcement, the company’s shares experienced a 2% increase in trading. Facebook is currently facing scrutiny from lawmakers and regulators worldwide, including an antitrust lawsuit filed by the Federal Trade Commission. The leaked documents have intensified this scrutiny, shedding light on internal research regarding Instagram’s impact on teen mental health and the company’s approach to divisive content and moderation.

There are also reports of Facebook employees expressing concerns about the company’s failure to effectively moderate rule-breaking content in regions where it could potentially cause significant harm. For the fourth quarter, Facebook expects its revenue to range between $31.5 billion and $34 billion, falling short of analysts’ predictions. This shortfall is attributed to the impact of Apple’s privacy rules, which have made it more challenging for brands to target and measure their ads on the platform.

Although the number of daily active users has increased by 6% to 1.93 billion compared to the previous year, Facebook’s third-quarter revenue failed to meet analysts’ expectations. When rumors emerged about a potential rebranding effort, Facebook neither confirmed nor denied them, stating that it does not comment on speculation. Despite the challenges faced, Facebook remains dedicated to investing in the metaverse and expanding its technological capabilities.

Useful links:
1. Facebook Bracing for Federal Trade Commission Antitrust Lawsuit
2. Facebook’s Effort to Rebrand Itself as Meta