• Mark Zuckerberg is going all in on the metaverse, but he should re-focus on other things.
  • The Meta CEO should prioritize growing engagement and revenue on the company's core apps.
  • Meta reports Q3 earnings next week and analysts have called it a "make-or-break quarter."

Meta, the company formerly known as Facebook, should start focusing on making Facebook Facebook again.

Over the past year, CEO Mark Zuckerberg has zeroed in on his passion project: the metaverse. It's a squishy concept that can describe a number of things, but in the broadest sense it's the idea that people connect with each other through virtual worlds rather than on a traditional social network.

But as I wrote recently, Meta's big pivot into the metaverse has been a disaster, with little to show for it other than a mediocre experience, increasingly expensive headsets, and its stock plunging over 60% this year.

Zuckerberg should instead dial that down and prioritize bolstering his company's core apps, Facebook, Instagram, and WhatsApp, which have felt largely neglected while Meta poured $15 billion into its metaverse project.

Staring down the barrel of a potential recession, Meta should be growing the engagement and revenue of those apps, which have billions of users worldwide. Meanwhile, Horizon Worlds, Meta's main metaverse app, has just 200,000 monthly active users, The Wall Street Journal recently reported. 

Particularly, even as Instagram has faced headwinds recently, it's still Meta's crown jewel. Keeping users happy on the app and charting a plan for it in the years to come should be the company's No. 1 priority. Meta said in its Q2 earnings that Reels was growing and accounted for 20% of the time people spend on Instagram.

Instead of angering users by trying to make Instagram more of a TikTok clone, Meta should be spending its time and energy on threading the needle to monetize that usage as much as possible without turning people off.

It should also be looking to do the same with WhatsApp, the most popular communications app in the world. The platform doesn't include ads, in an effort to maintain its identity as a user-friendly service first and foremost. But Meta has promised to capitalize on its popularity in other ways to drive revenue, including with paid features.

Yet, instead of focusing on its proven apps, Meta is investing billions of dollars on an idea that will maybe see payoffs five or ten years down the line.

If left unchecked, a bet of this magnitude risks alienating investors — and staff — while facing choppy economic waters.

Zuckerberg will show us his report card later this week

Mark Zuckerberg as an avatar during Facebook or Meta Connect 2022
Mark Zuckerberg as an avatar during Connect 2022
Facebook/Meta

Meta reports its Q3 earnings next week, and Wall Street has already been spooked. Analyst Neil Campling called a recent metaverse presentation by Zuckerberg "desperate" and said "no wonder investors are in despair."

The investment firm Bernstein called it a "make or break quarter" in a recent note, and said that engagement numbers will be "critical" for the company this quarter.

"We believe that if Meta does not provide incremental information on the call suggesting that aggregate engagement across its family of apps are stable, the bear case will only get louder," Bernstein analysts wrote.

The analysts think a turnaround is possible by year's end and into 2023 if Meta, among other things, increases the ad load on its TikTok-like video product, Reels.

Meta's revenue dropped in Q2, the first time it had done so in the company's decade of being publicly traded. Zuckerberg blamed it on an "economic downturn" that was impacting the digital-ad business.

Apple was a key part of the problem. Last year, the tech giant introduced an iOS privacy change that asked users if they wanted to opt out of being tracked across other companies' apps. Meta responded at the time saying that advertisers "may see an overall decrease in ad performance and personalization and an increase in cost per action."

Seeking to escape a future scenario where Apple is a dominant force that can hamstring his business with a single software blow, Zuckerberg is trying to invent the next future platform.

But it's rarely the incumbents who create the next big platform, which is why Zuckerberg's metaverse vision sounds like a better fit for a VC-backed startup than a companywide rallying cry.

Apple has also been exploring future platforms, too, but far more quietly than Meta (its own VR headset is reportedly coming soon). But the company hasn't been punished for it by Wall Street, because it's still laser-focused on growing its core business sectors — unlike Meta.

That hasn't stopped Zuckerberg from making his metaverse push a Meta vs. Apple contest, so it's clearly taking up headspace.

"This is a competition of philosophies and ideas, where they believe that by doing everything themselves and tightly integrating that they build a better consumer experience," Zuckerberg said of Apple's strategy in an all-hands meeting this year with employees, according to The Verge.

But maybe Zuckerberg should take a page out of Apple's book, prioritize the proven cash cows to keep investors happy, and relegate the metaverse stuff to the garage where moonshot projects belong.