Meta's metaverse division incurs $5.7 billion loss in the first half of the year, faces further accusations of illegal acquisitions by the Federal Trade Commission

After a $2.9 billion loss in Q1, Meta's metaverse division saw a slight improvement with a $2.81 billion loss in Q2; however, the situation worsened as the Federal Trade Commission sued Meta for allegedly attempting illegal acquisitions to strengthen its virtual reality empire.

First Quarter Loss of $2.9 Billion

During the first quarter, Meta's metaverse division Reality Labs saw revenue grow by over 30% year-on-year, but losses increased by nearly 40% to $2.9 billion. CFO Dave Wehner mentioned that the rise in development costs and expenses came from the App and Reality Labs divisions.

Founder Mark Zuckerberg noted that they later realized the high development costs of Reality Labs, with the long-term goal being to generate profits through the "Family of Apps" to fund Reality Labs.

Note: The metaverse division Facebook Reality Labs (FRL) is distinct from products like Instagram and WhatsApp, focusing solely on core hardware and software for creating virtual environments.

Nearly $2.81 Billion Loss in Second Quarter

According to the latest financial report, Reality Labs in the second quarter:

• Revenue: $452 million, a 35% decrease from the previous quarter, compared to $305 million in the same period last year.
• Loss: $2.806 billion, compared to $2.432 billion in the same period last year.

Reality Labs has incurred losses of $5.766 billion so far this year. Despite this, Facebook's founder Mark Zuckerberg remains confident in their strategic positioning, stating in the earnings call :

Given the constraints that some of our products and businesses are facing right now, I feel even stronger that over time, the platforms we're developing will unlock hundreds of billions, even trillions of dollars of value. The next milestones we need to watch are the social virtual world platform Horizon and the Avatars platform.

FTC Sues Meta

According to the U.S. Federal Trade Commission's announcement, Meta has been sued to prevent its acquisition of the VR developer Within, behind the fitness app Supernatural, alleging that Meta is attempting an unlawful acquisition to bolster its virtual reality empire.

FTC Bureau of Competition Deputy Director John Newman stated:

Meta already has a top-selling virtual reality fitness app and the ability to compete more aggressively with Within's mainstream apps, yet chose acquisition over strength to gain market share. This is an illegal acquisition, and we will seek any appropriate means to prevent it.