Meta CEO Mark Zuckerberg makes a U-turn on metaverse spending as Reality Labs is hit with a new 'efficiency' mantra

• Meta CEO Mark Zuckerberg for months has defended losing tens of billions on his metaverse ambitions.
• Zuckerberg's tone has shifted to one of cost-cutting and "efficiency."

Meta CEO Mark Zuckerberg has gone in a few months' time from pushing the metaverse as the future of his company to it being just another long term project.

The Reality Labs division, tasked with building the metaverse, lost $13.7 billion this year, according to Wednesday's disclosure. Zuckerberg said Meta will focus on "efficiency" going forward, he said on a call with Wall Street analysts discussing its fourth quarter financial results. He added that last year's layoffs and an ongoing reorganization "surprised" him as they not only cut costs, but also improved communication and progress on future products.

"By reducing layers of management, it's made information flow through the company better, and it will help us make better products and attract and retain better people," Zuckerberg said on the call. "That was honestly a little surprising to me – that as we started digging into this, the company felt better to me."

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Susan Li, Meta's new CFO, said on the call that losses from Reality Labs will "continue" in 2023 because it is a "long duration investment." Still, Reality Labs would be subject to the same push for efficiency as other parts of the company, Zuckerberg said.

Previously, Zuckerberg has said several times over the last year that spending on the metaverse was about fortifying the future of Meta, formerly known as Facebook, as well as the "future of the internet," and that building the metaverse would prove historic.

And in October, Zuckerberg struck a defiant tone on spending while discussing third quarter earnings, particularly that going toward the metaverse. David Wehner, the then-CFO who is now chief strategy officer, said spending on the Reality Labs division would increase "significantly" in 2023.

"I think people are going to look back, decades from now, and talk about the importance of the work that was done here," Zuckerberg said last fall.

Such boasting of the metaverse and the Reality Labs division was nowhere to be found during Wednesday's discussion of the year ahead. Instead, praise went to the growth of business messaging and AI investments that have started to improve Meta's advertising business and user targeting capabilities. Meta's stock rose in after-hours trading by nearly 20%, to its highest level in seven months.

While Zuckerberg fell short of saying outright that the company will pull back spending on the metaverse, which investors have demanded for months, he did say moves toward efficiency are happening, including to Reality Labs.

"We're looking at the signals and learning what makes sense to do going forward," Zuckerberg said. "We're constantly shifting how we execute. Other things like flattening the org structure, those are going to affect the whole company, both in Reality Labs and Family of Apps. We want the work to be more efficient."

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