MarketWatch First Take: What would Meta layoffs mean for Zuckerberg’s bold metaverse plan?

The tech giant had 87,314 employees at the end of September, a year-over-year increase of 28%. Earlier this year, the Verge reported that Meta’s Reality Labs division, which includes the metaverse, had over 17,000 employees.

Also read: Meta takes another subtle step toward a much-hyped metaverse

Meta’s stock rose 4.6% during Monday’s session.

Layoffs, if they happen, could come at a critical time for the tech giant’s bold metaverse plan, which Zuckerberg has touted as the next era of social technology. According to Meta, the metaverse, by harnessing 3-D technology, will let users socialize, learn, collaborate and play.

Any layoffs will be closely scrutinized for their impact on Reality Labs, an area where Meta has been throwing its cash. If Reality Labs emerges relatively unscathed from layoffs, it will underline the company’s commitment to the metaverse — but will also increase the pressure to deliver on something that, at this stage, is more hype than reality.

Meta certainly appears to be prioritizing Reality Labs. The company spent $9.17 billion on research and development in the third quarter, up from $6.316 billion in the same period last year. The company said this was mainly driven by hiring within the Family of Apps and Reality Labs segments, as well as by development costs for Reality Labs technology. Reality Labs reported a third-quarter loss that widened to $3.672 billion from $2.631 billion in the same period last year.

Now read: Facebook earnings cut in half, Meta stock sinks toward lowest prices in more than 6 years

But what if the metaverse strategy is completely misguided? “Mark Zuckerberg’s Metaverse bombs,” Mike Sington, a former senior executive at NBCUniversal, tweeted on Sunday.

Certainly, Wall Street has not been enamored with Meta’s recent performance as the tech giant nails its colors to the metaverse mast. Last month, Meta reported third-quarter earnings that sent the tech giant’s stock plummeting toward its largest weekly drop on record, losing more than 23% over the course of the week. The stock has fallen 71.8% this year and 44.2% over the last three months, outpacing the S&P 500 Index
SPX,
+0.84%
declines of 20.6% and 8.6%, respectively, over the same periods.

The layoffs, if they materialize, would also come hot on the heels of major job cuts at Twitter, with the microblogging site slashing over half of its more than 7,500 employees last week. The Meta cuts would be smaller on a percentage basis than those announced at Twitter, according to the Wall Street Journal.

Speaking during the conference call to discuss the company’s recent third-quarter results, Zuckerberg said that in 2023, Meta will focus its investments on a small number of high-priority growth areas. “So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year,” he added. “In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”

Opinion: Apple, more than Meta, holds the key to unlocking a ‘metaverse’-type world of AR

While many people are still scratching their heads over Meta’s metaverse plan, there are big revenue opportunities in the broader virtual world, according to metaverse analyst firm DappRadar. Citing DappRadar research, the BBC reports that $1.93 billion in cryptocurrency has been spent buying virtual land in the metaverse over the past year. DappRadar told MarketWatch that the virtual lands are NFTs, or non-fungible tokens, and the expenditure over the past 12 months relates to “virtual land trading volume.”