Why Meta’s Stock Crashed and VR Gaming Predictions - The Metacast by Naavik

[Music] they've taken a different approach where they have just retooled their entire organization they've called it meta we're doing the metaverse this is where we're going uh so who knows we'll you know remains to be seen if that will sort of play out in their favor [Music] hi everyone welcome to the metacast Roundtable by navic this is your One Stop podcast to stay up to date with all the latest game business news and their insights I'm joined by David Amor CEO of playmans and Matt Diane Lee product manager iea and also contributor at navic you may have seen in the latest navic digest his breakdown of Marvel's snap hi hello hello hey Matt got married congratulations Matt yes hi thank you thank you it was a

wedding where dogs were allowed many dogs were allowed dogs were encouraged what was your favorite wedding gift my favorite wedding gift uh You're gonna laugh but it was just having all of our friends and family there like more so than any any like present it was you know it's so rare to get people together in one place from all these different parts of your life you know both my fiance my wife now wife and I have have moved around quite a bit we have friends from all over the country all over the world so it was great to have everyone just in one place so we could celebrate together well it sounds like a well-rehearsed answer if you ask me yeah I don't know I didn't know you're going to ask me that question I was wondering if friends and family are listening to this podcast exactly I guarantee you they are not um I have a less exciting update but I couldn't play OverWatch too because I have a prepaid sim card and they don't allow that for players

who didn't own the previous OverWatch so I am a 30 year old who had to use my mom's phone number from Portugal in order to play OverWatch too so thank you for this really I can't begin to did you like it uh yeah it was okay oh dear that's the most negative I've ever heard the other thing I've learned about Maria is she doesn't really form an opinion until she's put in about 50 hours it was fun to play with my friend it definitely feels like the tanks are too op so it wasn't very fun I was a noob I would just get crushed all the time but yeah it's very beautiful the art it was good it was good anyway let's move on to this so today we're going to try a bit of a different format so if you have feedback please let us know send me an email you

have my email in the show notes first we're going to hit through some some updates very quickly we're going to go through PlayStations earnings Tick Tock is going to launch a playable games Tab Netflix acquires yet another game studio and we'll also quickly look at rovio's earnings today is the earnings earnings week and then we're going to go into the discussion topics where we'll be doing some analysis and predictions based on Microsoft's earnings and meta's earnings let's do it let's do it okay so I actually have the first update which is PlayStation's earnings so Sony's game and Network Services Division it reported revenues going up 12 year over year however their profit declined sharply by 49 they said that the decline in profit was due to an increase in the game development and acquisition costs that includes the bungee acquisition and also the negative impact of foreign exchange rates which we've been seeing being mentioned in many of these global

companies earnings calls the gaming division is going to revise the full year forecast down 12 percent um citing lower than expected sales of third-party games and if we look back our PlayStation's game launches in the past quarter I think you'll agree that there wasn't really anything that was surprising or a smashing hit to motivate those sales and then for the second quarter in a row now this is a really important takeaway the company saw a decline in the number of PlayStation Plus subscribers what may come as a surprise is that despite the decline in the subscribers Sony's Network Services Revenue which includes the PlayStation Plus actually increased by 10 so what does this tell us it says that it indicates that subscribers opted for the two higher price tiers of PlayStation Plus so the extra on the premium since the revenue per subscriber is up 21 year over year we'll keep it we'll be keeping an eye on on what the subscriber and

PlayStation Network um monthly active users decline means regardless of the revenue growth because this could be an indicator that the subscriptions addressable Market could be shrinking and it also increases PlayStations scanning the game where they have to keep investing and making the higher price tiers of their subscription attractive so that they do not lose subscribers to the lower tiers any quick thoughts before we move on you know I think what would you rather have an increase in revenue or decrease in profits if they if it's a decrease in profits because they're buying interesting Studios that feels okay you know don't suppose you want declining PSN numbers they do was it a decline in subscribers or a decline in the growth of subscribers um they lost subscribers The Last subscribers overall yeah there was a there's a decline in terms of the subscriber numbers and also a decline in the monthly active users however the revenue is up so even though they lost subscribers this like a percentage of the subscribers opted for the higher price tiers and that's how

yeah I I was going to ask him a little further away from console these days how much is the absence of a PlayStation 5 the fact that I can't buy a PS5 does that have a negative impact on Sony's numbers here you would think so um part of why we've seen also the revenues go go up in general is because they um solve some of their stock issues in terms of the production so we have seen healthier sales even though they're still below Target of what they're expecting to sell in terms of Hardware this year they still seem very confident that they'll be able to hit the numbers um probably because yeah the supply issues have been fixed and we still have the holiday season coming through okay yeah yeah so we'll keep we'll be keeping an eye on that oh no another update from me okay we'll jump in that very quickly so this is Tick tock's uh playable games tab in the last episode we discussed Marvel snaps mobile game launch which was published by newvers which is owned by bite dance who is also the parent

company of tick tock so Tick Tock is about to launch a new dedicated tab for mobile games and according to a Financial Times report um the sources say that the new tab will quote feature a host of mobile games where ADS can be served and users can pay for additional content so titles published by bitance are said to be in the mix so I hope we'll see Marvel snap being added to the top I'm shaking I'm shaking my head you can't have a store within a store they're not allowed to do that yeah that was going to be the the counter I mean I guess Facebook had the instant games right but they never were able to monetize you were never able to have iaps but then famously like because we had some of those so yeah this sounds like a store within the store I'm not sure apple is going to buy that are they friends with Tick Tock in there um well I think they already released some playable games but they're extremely basic and they don't have monetization it's more games that then

can be engaged for Content rather than them trying to monetize their games so I Marvel snap it would I think it would be good content but I think they will definitely hit that that wall of not being able to be a store within a store so we'll have to see what kind of games they're going to publish within this tab all right Matt all right next update so Netflix has acquired another gaming studio this one is called spry Fox Studio based out of Seattle um they're an independent developer financial terms were not disclosed uh spryfox was founded back in 2010 uh so a 12-year run before acquisition pretty good um Founders were David ettery and Daniel Cook both are ex of Microsoft [Music] um I had not heard of Daniel Cook but apparently a lot of folks in my network um were are and were impressed by his writing on game design is apparently a very well known game designer uh so kudos to those guys for the exit this is

the sixth in-house uh Netflix Studio joining Studios like next games night school Studio boss fight entertainment and others I should say that spryfox is known for making puzzle games and cozy games um I think their latest was a game called cozy Grove and they are saying that there are games will remain available for download in their current floor in their current forms on their current platforms they're already working on making cozy Grove too and quote a larger non-violent MMO uh so yeah I mean this is uh yet another notch and Netflix's belt I think it kind of makes sense from a genre perspective like you know cozy games kind of like you can play them uh passively idly while you're watching Netflix if you want it kind of fits in with some of the other genres that they've already acquired um next games being like a sort of a puzzle Studio casual studio um uh worth mentioning that this studio

spry Fox had previously partnered with epic for publishing cozy grow uh so sort of an existing relationship there and yeah as I mentioned 12 years before an exit which is a pretty good run for an independent studio uh they had from what I could see on crunchbase no Venture Capital backing or anything like that so uh I think it's a nice nice exit for the founders they're a great God I lost a lot of time to Triple Town you ever played that game I think it might have been the first ever merge is it was it the first ever merge game First Merch game I played for sure so good so good I just um you know great team as you say great designers um so I don't really understand the Netflix strategy of buying mobile games you would I would have thought it'd be more compatible with games that they stream in some way I don't understand what that is but uh anyway that's uh it's certainly a great developer to acquire we've made some great games yeah I think more to come here right we've I think we we on this podcast have already talked quite a bit about Netflix and uh yeah this is just another sort of

stepping stone for them so we'll see we'll see how it seems they seem serious didn't they I'm I'm all for non-violin games nowadays I'm really enjoying stray to finally have a game I can enjoy I don't have to kill anyone so and I love that they're doing cozy games do you know when an anime you know when an anime hugs something it's like you're squeezing it that's kind of what I want to do to this studio perfect okay last last update before we move into the discussion topics uh so rovio's third quarter earnings um if you remember in the first quarter Rovio reported strong results with an increase of Revenue and Dau which surprised the market at a time as a company that was being able to shine through the general downtrend and Performance Marketing struggles post iOS ATT um the Q3 results they report growth in Revenue about a decline and operating profit so but seeing rovia's continued Revenue growth between January and

September it continues to Stave off the industry industry's trend of decline so seeing some decline in their operating profit I don't think we need to be alarmist and just see how they continue to perform because they have strong indicators there in the earnings call they revealed new details about 10 new games that they're developing and they're doubling down on their strategy of live operations Talent they say that they are laying the ground to strengthen their position for further growth as the market recovers more than one new game is within the Angry Birds franchise so Rovio is remaining focused on the flagship IP and is spanning multiple genres such as a choice driven storyline game an RPG and Casual puzzle their most exciting bet is Angry Birds next I think that's a code name which is going to be a cross-platform multiplayer title that targets gen Z little more is noon but that definitely sounds really exciting additionally they had a team of

Industry veterans in Montreal who joined them and they're experts in doing prototyping and Market tests and they joined Rovio to produce hybrid casual games so it sounds like a perfect glove fit for rovious Ambitions yeah very excited we'll see where ovio goes what do you mean by cosplay you mean Playstation Xbox version if they didn't mention specific platforms I I assume at this mobile and then other platforms maybe PC yeah they haven't they haven't shared too much all right um so Matt you have Microsoft's earnings yeah more earnings um so let's see we're gonna talk about Microsoft uh I'm gonna quote a little bit from the axios article here um essentially they they suffered their slowest earnings growth in two years um and there were a lot of reasons offered in the various sources that I was reading one was the currency fluctuations that Maria mentioned earlier in the PlayStation piece I think

you'll see this with a lot of earnings calls coming up a strong dollar impacting currency um conversion uh there was also some credit to the cloud business maybe underperforming expectations that's a huge segment of Microsoft but of greatest interest to us of course is the gaming segment of Microsoft so um they had a seven percent drop in sales year over year the video game business the hardware sales of Xbox fell by 11 content and services were six percent lower um they're saying in part because of lower user engagement and they also said that Revenue would likely decline again this quarter one thing I learned in doing this research I did not realize is that the CEO Satya Nadella part of his compensation is tied to the performance of Xbox game pass and that was also an area of weakness in the earnings call just completed they were targeting a 73 growth rate for Game

Pass for the fiscal year ending in June and part of uh his performance incentives Satya nadella's performance incentives um are tied to this but they only achieve 28 compared to 73 Target so a huge Miss there um he missed out on 37 million dollars worth of stock don't feel too bad for him he still made 55 million dollars last year but uh anyways um uh Game Pass they were saying accounts for uh 10 to 15 of the company's content and services Revenue uh and uh Phil Spencer Head of Xbox was saying he doesn't really expect it to go beyond 15 uh in the future uh but uh you know to look at the bright side um Game Pass growth was quote incredible on PC they were up 159 year over year on PC so some solid growth there uh albeit in a smaller segment um and uh growth had slowed down on

Console um quote mainly because at some point you've reached everybody on console that wants to subscribe uh there was also I think I think this is kind of a vanity metric but maybe we can talk about this a little bit they said more than 20 million have streamed via cloud gaming um I think it's a vanity metric because it doesn't show like repeat engagement it's just a raw number so like I've used the cloud streaming and I've quickly exited out of it as well so um you know we can talk about that a little bit more when we get to the discussion here um so uh talking about lack of growth on Game Pass right so why do we think that might be uh they attributed it to a lack of major game releases um and I think that's true especially when you compare what they've done to say Sony or Nintendo uh quote one thing we've heard loud and clear is that it's been too long since we shipped what people would say was a big first party game that's Phil Spencer um so

um not a great report for Microsoft on the gaming front um we have a few things that we can look to in the future here the big sort of elephant in the room is the Activision Blizzard acquisition right so this is still kind of undergoing scrutiny uh in the EU and the UK um the EU has sent out questionnaires to developers on this topic the competitive markets Authority in UK is still looking into it they actually they issued a report that said the Microsoft Activision deal gives arrives gives rise to quote a realistic Prospect of a substantial lessening of competition in multi-game subscription Services uh should Microsoft put Call of Duty on Game Pass this is in the context of Call of Duty just having its biggest launch weekend ever at 800 million plus uh that's huge um I thought this was funny Modern Warfare 2 has sold 800 Million worth of copies in just its first three days beating out Modern Warfare 3. wait what

2011. yeah so the naming conventions a little bit funky time travel yeah Modern Warfare 3 came out in 2011. here we are 11 years later Modern Warfare two um yeah go ahead in terms of The Game Pass uh growth rate is that in terms of subscriber count I believe so yeah okay um uh you know what I'm looking at my notes I I'm not sure if it was uh revenue from Game Pass OR subscriber uh growth but but they were targeting 73 growth rate and they only achieved 28 yeah I think looking it emphasizes the point of seeing in PlayStation the decline in the number of subscribers that maybe they have reached just a natural ceiling in terms of how many people on the console they can convert but also we're going through a stage where a lot of people are cost cutting and you have multiple

subscriptions in the household and unless you have content that makes you subscribe I believe that consumers are becoming more Savvy where they'll cancel a subscription temporarily and just do more admin to make sure that they're only keeping on the subscriptions that they need to use so it could be a bigger impact than what's being communicated that the fact of Game Pass not having hit titles to draw players to subscribe I think it's interesting the PlayStation are down and Microsoft are up and uh we're giving Microsoft more of a hard time than PlayStation I know that in the markets it's always about delivering what you said you were going to deliver not what the actual numbers are it's relative to what you said was going to happen sorry I I get that I I also find that what Phil Spencer says I find in the most straight talking executive in the games business I mean what he said there he said two things that I think that you're we would say right we would

say yeah there hasn't been any enormous first party game recently that's pretty honest appraisal and the other one is hey I think anybody that wants a Game Pass is probably I've got one by now there's 25 million game passes and how many Xboxes are there active so I mean it can't be that you know yeah they didn't share um I don't know how you call the metric they didn't share to the number of of console yeah of console owners how many subscribed to the to the game packs if it's 25 if they're 25 million Game Pass is there seems to be subscriptions then uh that's got to be close to the number of active Xboxes hasn't it I mean I can believe that statement is what I have to say I don't know you know even if it's half then it's still some way into that um into that tool user base

I think they do know that they have to put out hit titles and it sounds like that is cooking in the oven right now they understand how important it is but if if it's not out right now I can understand why they're struggling to achieve their targeted growth rates Matt do you think that they had expectations when they set these targets that they would have had more hit titles released to the Game Pass than they actually did I think it's possible um they certainly weren't counting on Call of Duty right they had initially estimated that that deal would go through like June or July of next year so that wasn't baked in but um there was the Bethesda acquisition and I'm you know I'm just speaking from memory here but I'm fairly confident that the games like Starfield and other big hits from Bethesda have been pushed back a little bit uh so maybe that was uh that was a factor that's certainly one of their biggest upcoming you know Day One releases that they've been pointing to so certainly it's a possibility yeah if you set a target of

73 growth and you hit what was it 24 something 28. and to clarify I think it was Revenue because they don't I'm looking at the axios article now they don't publish their subscriber Target counts right and just thinking that for it to be that off the mark then it sounds like something that they expected to ship didn't ship right or something they expected to happen didn't happen it's not it's not a rounding error is it that's a significant Miss yeah in my experience so you you and I well you're working in an EA I've worked there before it's always about getting stuff out in the quarter and the pressure to do that feels like something slipped out to me um you know something that was interesting it came up as I was doing my research it was not so much related to gaming but I'm kind of making the connection as you were talking there David they mentioned there was a lot of um demand that had been pulled forward during covid where people were upgrading their PCS and they were spending on like

Office products for example and like you know getting the new version of Windows or whatever and that has kind of subsided now uh so perhaps that is also the case with um you know getting a new console uh during lockdowns and getting the game pass along with it or same thing for PC getting your new gaming PC and and getting Game Pass maybe some of that was pulled forward during the covid lockdowns and that has kind of subsided a little bit I'm speculating but it's possible they mentioned that effect as it relates to other segments of their business yeah yeah how much of I'm gonna throw a question you might not have the answer but how much of devices and services is games because it includes if I remember Microsoft that category includes things like mice and keyboards and various other things that I don't recall how much of his games putting me on the spot sorry hey Matt that's okay uh there's the town of research that you did on there I just uh yeah

you'd have it Aaron has listened to it right now yeah how do you not know my understanding from my research as well is that the PC game pass uh subscriptions and revenue is also a vanity metric because it was a fairly small number right to start with as well it sounds impressive actually in terms of results it's not that significant do you think uh you know if you're the president if you're the president of Microsoft do you think having conversations with Phil Spencer saying no you know I was planning on my seventh house that I was going to buy with this and you've missed the mark and now uh I'm taking a hit on it would you think it's all cool I'm up in the c-suite maybe it's somewhere in the middle yeah somewhere in the middle yeah I'm not going to invite you to my seventh house but I'm still gonna build it yeah it sounds like they have quite a lot on the line in terms of the Activision

Blizzard um acquisition I think so yeah yeah I mean that's it's a huge um source of content for them right um obviously Call of Duty is the jewel in that deal but um let's not forget all the blizzard titles let's not forget Candy Crush and everything from King giving them a major presence on mobile um so I mean that yeah that's um it's it's a huge gap for them and uh you know one thing I meant to mention there is um I think they they had um made the acquisition at something like 95 a share and Activision when I checked last night was trading at something like 73 roughly which implies that the markets are pessimistic let's say that the deal will go through um so we'll see obviously increase scrutiny uh I still think it's going to happen but um and and the company was saying it's still on track for that June 23 date so more to come there but uh as you

say a lot riding on this and um just to kind of like look ahead at some other sort of headwinds that they're facing they recently went through some layoffs um which uh did apparently touch the Xbox Division I don't know you know how how deep those layoffs were I think it was quoted around a thousand employees they're also in hiring freeze um and uh supposedly working on a mobile gaming store I don't know how true or not true that is the I was listening to the deconstructor of fun uh pod recently and they were very pessimistic on that being an actual story um yeah we discussed it last week as well we're also pessimistic we're hopeful but we don't know how feasible is actually going to be to deliver Yeah you mentioned store within a store earlier right like How's that gonna work um but you know let's let's just assume that they are doing this well if they don't get the Activision deal done then Candy Crush and all their mobile games

all the King mobile games uh the few blizzard mobile games like those are not coming um that's not filling their app story if they do do it yeah and there's there's I think I'm confident with their what their strategy and what will come next because seems like they're making the right bets in terms of clouds and trying to reach players through new devices they have the game pass on uh was it Quest is that how it's called the VR device of meta yeah yeah quests they did a partnership with twitch recently where I think if you make a payment to a Creator or reward you get a free PC game pass subscription for three months they're also doing the partnership with Samsung so that you can play via Cloud through the through the television so they're trying to reach players through these new platforms and it seems like the right call if they're starting to see a plateau in terms of subscriptions on console for example yeah additionally I

believe they're trying to find potential Acquisitions or Investments within Chinese game studios so that they can have more um titles that Target that market and to grow their presence I believe I read a quote that they want to try to help Studios based in China to release games more globally and I think from what I understood Xbox and Microsoft were always sour about the fact that they didn't sign ganshin impact I believe they were very close to signing it and then they decided to not go through or fell through and now it's not it's actually not available on the game pass you can play it on PC um through the epic game store for example but they missed out on that massive opportunity of gentian impact which for some markets it's almost as fundamental as fortnite is and so I think they're trying to shop around and try to find what's the next Kenshin impact for me it has caused some concern that

they're trying to find a hit title to a hit title and if we look at the past that hasn't gone very well because you already have such a strong presence in that market so we'll we'll have to see they're trying to expand further I think they're trying to also reduce the risk in case the Activision Blizzard acquisition falls through yeah they've never made much Headway into Asia right I mean uh always PlayStation is dominating Japan and I haven't seen them with a big presence in China I don't know that market particularly well but it doesn't seem that they it's a particularly Big Brand over there yeah it's probably a huge growth if they can get it right but uh historically I haven't been able to do that is that correct yeah and I was looking at uh there was a report recently from Nico Partners looking at the growth of female gamers in Asia and their preferred genres RPGs so like there is there is a market there and the second preferred genre is racing

so I don't know get get Forza over the line I'm not sure yeah but I just think the the style of games in China just feels so different from that the west and it's it's always hard as a western developer to try and understand exactly what kind of game should be acquired or or built for those markets unless you live and breathe those markets and Microsoft don't yeah overall it's leveling up their ability to detect those opportunities and get acquainted with the market and hopefully they're doing that after passing up against an impact and I believe a similar thing happened where they passed up G one of the gtas and then PlayStation really how that yeah yeah I think it was a PlayStation 2 one of the gtas so they lost that opportunity as well probably a bit sour of losing these big titles to Sunny well not Grand Theft Auto but breaking news this morning they invested in a Korean blockchain gaming company you'll be interested to know David I

really called called we made uh Microsoft did Microsoft did yeah they were one of one of the investors here there you go I didn't know they were doing M A and uh blockchain web3 maybe I need to call out some old friends in Microsoft perhaps okay so we'll next cover meta's earnings analysis so it's a bit tangential to to gaming I think is such a an important Market that could be developing in terms of VR and AR gaming that I think is important to to cover it so Mattis shares thanks by nearly 25 as a consequence of his quarterly results that reported profits had been halved during the third quarter so profits are down uh around 49 revenue is down four percent and costs are up 19. so Mets is continuing to experience the slowdown in terms of AD spend amidst

growing competition with Tick Tock for example but also continued headwinds from the iOS iOS ATT privacy changes and reduced as spend due to the economic downturn critics and shareholders are a bit angry and they heighten calls for meta to abandon its expensive pivot into the metaverse however meta shows no end Insight in wanting to abandon um their metaverse Pursuits the company further alarmed investors once they warned that losses for the reality Labs division which is the division that's exploring the metaverse would grow significantly next year with the overall Capital spending growing as much as 39 billion so meta's market cap I looked at from the beginning of the year is currently 250 billion so that is down nearly 75 from December 2021 which is at 950 billion meta is not having a very good time

no but they're doubling down on there it feels like uh it feels like a culmination of things like everybody's a bit down or meta anyway and then a lot of people dislike their metaverse plans where they're either because they don't believe in that strategy or they're just spending a ton of money and then you get a quarterly earnings for cool uh report that sort of reaffirms that things aren't going the way in which they'd hope it feels like a culmination of those things where everybody's starting to lose uh confidence in that company a little so the earning there's a big discussion going on at the moment as to whether the earnings Share value results from metas heavy investment into the metaverse or if it's also a heavily um being still being impacted with the effects of iOS ATT privacy changes do you have any thoughts I was just gonna say can it be both things can't both of those be true I think I think it can I did a lot of

research and I know that there are still headwinds happening in terms of the iOS ADT privacy changes but it seems like it's also due to the competition and looking further into how much they're investing into the metaverse which is without proof of return at the moment because uh if you look at Horizon worlds it's currently struggling to grow its user base the Avatar likes demo was not actually working Tech um their target was to reach uh 500 000 monthly active users but it currently stands at 200 000 and it is declining so they're making a heavy investment without a proven critical adoption of this technology I I think they're trying to build the market for VR yeah and that requires a heavy investment throughout years and you might only find out if you've managed to make a profit or get a return on that bet with a 10-year

Horizon and there's significant risk of failure so my question is how deep this metas or chests run out to create this Market yeah it's tough isn't it I think that if everybody believed in meta's vision of the metaverse then people would be more comfortable spending 15 billion dollars this year and 39 billion dollars next year in getting there and you're right like if anybody can then meta with the hardware and the bank balance could probably do it I think it's the the people don't feel confident in I don't know if it's about metaverse full stop or just matters version of the metaverse but uh it's very you don't find many supporters of their version that that I can see maybe it's just not fashionable to to get behind what matters doing but it just doesn't seem to have the market behind it Phil Spencer who is speaking about Phil Spencer previously as being very candid

with his thoughts he said in an interview about the metaverse which definitely seems like he was talking about meta without saying meta he says it's a poorly built video game building a metaverse that looks like a meeting room I just find that's not where I want to spend most of my time and the Horizon worlds that meta is building is basically a meeting room it's not very fun it's not colorful it's quite it seems quite serious and also I think they're also going to struggle to grow their user base anyway because it's currently limited so you have to have a quest um headset in order to participate so until you penetrate that market in terms of adoption then your your metaverse will feel very empty yeah I think I'm with Phil so the overall to give you a bit of a comparison the overall r d investment um totals over 100 billion and meta's annual expenditure in r d

comes close to Apple's yearly r d expenditure for his entire business like entire business we're talking about the mixed reality headset that they're exploring iPhone technology whatever else that they're trying to to make a bet on it's the same as meta sorry meta's investment in the metaverse what are they spending it all on it just seems like as you said there's a bit of a disconnect between the I haven't used it so maybe that's not fair but the videos that I've seen that doesn't look like it's had a ton of money spent on it I don't know I don't see it I don't know how the money breaks down but they're they're spending on software The Horizon worlds they're spending on Hardware the quest headsets and they're also acquiring VR Studios left and right um so there's at least those three big buckets that they're dumping millions billions into excuse me yeah and part of

the increased spend that they announced and frighten investors further is that they have to acquire more server infrastructure something like that which is it's a scale um the infrastructure for the for the metaverse so let's let's take a break from um the metaverse discussion so if we look up because the question overall is how much is ATT also having an impact So Meta estimated in February that the ATT changes would cost them an estimated 10 billion and lost Revenue in 2022 however I was reading the earnings called transcripts and they said the headwind to over to year-over-year growth from Apple's ADT changes the diminished in Q3 as we lap the First full quarter postal launch of iOS 14.5 however this was offset by weak advertising the men which we believe continues to be impacted by the uncertain and volatile macro economic landscape so even meta seems to confirm that it is a small impact maybe they're

not being fully for fight without about this it does sound like it's reduced ad spend and reduced Revenue that they're getting per ad in their products thus affecting this so my my prediction is that it is the investment into the metaverse without proven results of that return that is scaring their their shareholders yeah I think so I think that I would agree a bit of both but mostly metaverse a lot of spend no promise of return people not feeling particularly confident in their vision of the metaverse feels like it and maybe the ATT seems to affect meta more than other companies because they were really Geared for that targeting of users in a way that it feels like you and I Maria had a conversation with Mateo a couple of weeks ago we was talking about UA and he's saying hey you just got to approach your way in a different way and it feels like I've heard that from a few free-to-play companies and saying yeah you just don't do it the same way anymore you've got to put more legwork into it and maybe that you just end up

using Facebook less than you used to because the old method was to Target players through Facebook and the new method might be different social networks or different methods an additional to these causes that we're talking about meta is also trialling they're trying to implement reels uh in a response to the tick tock format however the reels Forma it increases the user engagement but it has a reputation of having lower monetization so at the moment they are sacrificing um the monetization in favor to increase user engagement and to increase ad Impressions per session and from their calls trans sorry from the earnings call transcript it sounds like they're still trying to figure out how to monetize it better so again like they're making this change to respond to the competitive market but still trying to scale up their monetization so another thought angle I had about

meta trying to create this this VR Market is that I it could be a Do or Die investment for meta we talk a lot about walled Gardens in the podcast and if we look at let's look at some of the other key players Microsoft has Windows and azir Amazon has AWS and a lot more Apple has iOS and the the devices Google has Android and then you have meta that doesn't own a hardware it doesn't own a platform so it ends up being at the mercy of the competitors platforms to reach the customers and I think they've learned a lot from you know Apple can change your policy and that affects their Core Business tremendously and so it sounds like they want to control the next platform they are making it bet that mobile will eventually be deprecated by the audience in favor of virtual reality it doesn't have to be VR could also be could also be ar

so what what yeah what do you think about that angle I was going to say that uh rumors have met his death have been exaggerated you know just double check they got three billion Dau across their products right so I think uh they just have so many eyeballs that they might be taking some missteps with product strategy or company strategy but they've just got so many people using their products that they it'd be a hell of afford to go from three billion down to and when you compare them with Tick Tock but sure I think uh tiktok's amazing but it's it's nothing compared with what the with the amount of users that use Facebook it's just maybe a bit more bleeding edge or some something so we care about the new incoming stuff is so many people use metas platforms that I don't see that going anywhere even if their share price and revenues are dipping yeah is it is it do or die I don't know

I agree with David like there and they're still in a fairly strong position um but they are clearly making a huge huge bet on this they obviously rename the company and I am I am hesitant to bet against Zuck um you know he has control over the company you know it's a it's still a founder-led company basically the way that that um his shares and voting rights are structured and he's committed to this like I know that he's actively involved in Horizon and the reality lab stuff and all of this so like it's absolutely a huge bet for them I think there are a lot of red flags many of which we've pointed out you know there are reasons why big companies are not good at innovating um you could go back to sort of the classic like innovators dilemma there's there are sort of structural organizational reasons why it's difficult to spin up something new and and uh disruptive within a large organization they've taken a different approach where they have just retooled

their entire organization they've called it meta we're doing the metaverse this is where we're going uh so who knows it will you know remains to be seen if that will sort of play out in their favor but um it's a huge bet I don't think they're going to collapse if it fails but they will be fundamentally um different if it does fail just from like a structural standpoint let alone all the money that they've poured into it and I'd like to see them I guess people seem to enjoy kicking metal I'd actually like to see them make some Headway there's so few companies in the world that can afford to take this kind of bit then to sort of hope that they fail uh if you believe in some version of the metaverse seems like a little bit chillish cutting off our nose despite her face I'd love them to figure some stuff out by spending a ton of money and getting a few things wrong before figuring out a version of this that works for everybody that you know I don't want that to be a monopoly of the

on the metaverse by any means but I'd love for them to make a bit of traction and warm people up to the idea of a metabus at least yeah my my indication for gaming is that we have to keep Nimble and we're going to as an industry have to keep Reinventing ourselves we had free to play now we're exploring wave three and with this kind of investment into AR and VR and mixed reality technology and the metaverse these new platforms might arrive who knows in five years time maybe 10 years but you know probably closer to the five years considering the investment that's being made and so we have to keep Nimble and look at the market and decide when to when to jump in I think that VR AR piece is going to be the biggest um you know immediate um result of all this like the there's the metaverse piece which is kind of big and amorphous um but the VR AR from a hardware and like platform standpoint they're clearly investing a lot there they're buying up

Studios from a gaming perspective I think that's where we'll see the most movement in the next you know three to five years is they're gonna be bringing on more users producing more content and creating an ecosystem for more VR AR content um uh so I personally I'm I'm bullish on the growth there will it be as big as mobile and console probably not uh probably not for quite a while if ever um but to me that's the the most immediate outcome setting aside the metaverse stuff yeah that's a good point and you would think that uh with apple building something then uh that would sort of now you've got two enormous players offering things in VR AR world uh both trying to outgun themselves in terms of creating engaging content and great hardware and maybe with the two of them are duking it out with the really trying to outdo each other then that's a win for consumers and sort of helps form a new market that would be nice I think it's a great angle to detach VR

AR Hardware like you're saying Matt from the meterus Ambitions the thing that concerns me about meta strategy is if we compare the investment that apple and meta are doing into the hardware you know but also the the metaverse it sounds like meta is building this VR Market they're spending to create the market whilst Apple seems to be riding the wave they were exploring this headset in terms of mixed reality but meta is making the biggest investment in trying to to achieve it so then the return on investment in terms of Apple will be will be higher and then additionally earlier in the week uh China's China China released its first action plan dedicated to Virtual Reality devices so I think we're also like China has huge Ambitions to become a tech leader globally so they're also we're also going to see competition Innovation coming from that market you think you're suggesting the apple coattailing on meta don't think Apple would like that statement well they're

not not query ceiling but they're being more more cautious they're not trying to get to the to maybe too early Market at the moment in terms of that investment yeah yeah another way to frame it is that apple is going after like a luxury um audience rather than Facebook going for a mass Market yeah yeah well we'll see with China also entering the market if they can get to the mass Market with cheaper headsets especially looking at the new Oculus with the 1500 yeah yeah that's pricey I I really don't know much about uh China's VR Ambitions is there a xiaomi or something released a VR headset is that is there Hardware out there I'm not I'm not sure it's more the global action plan they had a long action plan I'm not sure if it was 10 years but it's been going on for a few years that they want to overtake and be the global leaders in terms of tech and AI

better release some products then [Laughter] so just um something that I found really interesting and you uh Matt is about the structure of feta and how they have this unique structure in terms of Mark Zuckerberg being joint chair and CEO and controls 54 of the company's voting class shares where meta is uniquely positioned in terms of a publicly traded traded company to be able to be taking this bet with shareholders money essentially because he can make these decisions and he can you know don't he doesn't have to have significant concern over shareholder resistance and I found their original culture book someone share this on Twitter and one of their cultural pillars is Facebook was not originally created to be a company and another pillar was what would you do if you weren't afraid and I pick Kudos in big respect to Meza because I really feel that this culture has permeated their decision into

jumping and investing into their metaverse so one thing we haven't mentioned yet we've talked about meta kind of owning the AR VR space apple is coming there's also Sony uh operating in the VR space at least they just announced today as we're recording this that psvr 2 is going to be coming out in February and that's going to be priced at 500 roughly 550 dollars um which is what like half the price a little bit more than half the price of the the high-end um Oculus headset that we mentioned earlier um so certainly on the gaming front some competition there um worth noting you apparently cannot play original psvr games on the psvr too oh I hope that's not possible but presumably the reason why the cheaper holy say reason is that the brains of that device sit in a PlayStation not in the headset right whereas

uh or the all the messes Hardware is standalone okay yeah I actually don't know the answer to that but that makes a lot of sense yeah so they can afford um cuts and costs yeah they've got a list of some launch games that they're gonna have here there's a crossfire game if you know that series um Jurassic world I don't know nothing sounds like super crazy here but um yeah that's why that's an OVR as a consumer I haven't jumped into VR there isn't really a depth of games to justify the price point of acquiring the headset that then is likely to gather dust you know the limit says that I always have every I haven't really like you sort of tried out all these games and but I'll ask people periodically what's the game I should play for my VR headset and it's oh you've got to play Beat saber and I think beat saber is a great game but if that's always the answer then uh you know I'm waiting for something that uh is bigger than beat

saber I know that it is you know there's Fair escaped but uh Half-Life Etc but um when that's the answer that they always point me to then it's not time it's not my time for VR yet anyway well it's a good way to wrap up the the discussion building the metaverse is expensive gaming we're going to be here waiting to capitalize on this new platform and this new market and although meta is making a risky investment we're hoping for the best because that means more platform for us to make it fun maybe we'll be making the metaverse fun who knows well um yeah Matt David thank you so much for joining today that was a really interesting discussion thank you thanks for doing all the homework you did the heavy lifting on the homework guys appreciate that oh my God from his wedding full of Happiness

that's right um yeah if you want to join the conversation you can find us on navx Discord you can sign up to the navic digest newsletter and see all of this great content and insights in other formats you can see Matt's piece about Marvel snap and yeah we'll see you again next week thank you thank you for joining us [Music] thank you