Zuckerberg plays with Facebook like a kid and defrauded investors out of tens of billions

ANDFacebook shares have lost ten percent of their value in the past week. At the same time, the economic results of the operator of Facebook, Instagram and WhatsApp led to the opposite assumption. Thanks to intensive advertising sales, the company more than doubled its profits, and turnover grew by 27 percent.

The fluctuations in the value of the company controlled by Mark Zuckerberg have two main reasons. The first is the weaker outlook for the next quarter. The second is Zuckerberg’s obsession with augmented reality and artificial intelligence.

Zuckerberg is convinced that the future of his company and humanity lies precisely at the intersection of these two technologies. The Meta holding invests tens of billions of dollars in both, regardless of the reality of a quick return. That’s an approach that doesn’t bode well for investors.

Zuckerberg began a regular quarterly interview with investors after the results were published by saying that at least one application from the Meta holding portfolio is used by more than three billion people every day and that WhatsApp in particular is starting to do well in the US. However, his attention to the core business of the company faded away. He devoted the rest of the opening monologue to his favorite projects.

Meta has released a new version of its large Llama language model. Llama 3 is Facebook’s most sophisticated and capable text generative artificial intelligence system yet, and the company has started offering it in several English-speaking countries, led by the US, on Meta.ai. According to Zuckerberg, tens of millions of people have tried the “chatbot” and the company’s goal is to make Meta AI the most used and best artificial intelligence system in the world.

Meta AI will be available within a few months in other languages ​​and countries, and integration into all popular applications of the Meta holding company, led by WhatsApp, Messenger and Instagram, should help the spread.

But after promising a dominant position in the market, Zuckerberg said that he expects significantly higher investments in the coming years. These will fall on the development of even more advanced language models and the building of AI infrastructure. While investment in AI will grow, Zuckerberg wants to cut costs for the rest of the company and run it with an emphasis on efficiency.

At the same time, Zuckerberg reminded that the volatility of the stock price during the introduction of new products is nothing new for the holding Meta, the company experienced it, for example, in connection with the Reels function and the pressure to increase the volume of video content on Facebook. But investors were not happy with the fact that it will take years to turn Meta AI and other projects related to artificial intelligence into a profitable business.

How does Facebook want to make money from artificial intelligence? Zuckerberg sees several possibilities. These include paid communication services for enterprise customers with integrated AI, embedding ads and sponsored content in conversations with artificial intelligence, or introducing paid access to more advanced language models or variants powered by more powerful, faster-responsive hardware.

In addition, according to Zuckerberg, artificial intelligence is already helping to increase the intensity of user interactions with the Meta holding’s applications, which leads to the display of a larger amount of advertising. That is also why he wants to defend the planned investments in building AI infrastructure in the amount of 245 billion dollars.

Thirty percent of displayed posts on Facebook are already based on artificial intelligence recommendations, twice as much as last year. The use of AI on Instagram is even more intensive – more than half of the displayed posts are the result of artificial intelligence recommendations. Zuckerberg also boasted a year-over-year doubling of sales of AI tools for advertisers Advantage+ Shopping and Advantage+ App.

He then moved seamlessly from artificial intelligence to glasses. Thanks to AI, he discovered that glasses for augmented reality do not necessarily have a holographic display – just put a camera, microphones and a smart assistant in them that gets context thanks to sensors. The company has already started selling such glasses equipped with Meta AI functions in cooperation with the Ray Ban brand for $299 – and delivery times are currently around one month. He also wants to produce them in cooperation with other brands.

Meta also wants to build on the cooperation in the field of VR headsets. It has already announced the release of Meta Horizon OS, which powers the Meta Quest headsets. Own VR/AR devices are already planned by Lenovo and Asus, Meta is also preparing a special version of Quest 3 with an Xbox controller for playing classic games via the Xbox Cloud service on a large virtual screen.

Facebook’s capital spending is set to rise 42 percent compared to 2023, according to published plans — primarily due to investments in artificial intelligence, but virtual and augmented reality will also play a large part in spending. The Reality Labs division, into which Meta has allocated the development and sale of headsets, has recorded a cumulative loss of $45 billion since the end of 2020. The division’s turnover for the last quarter reached $440 million with a loss of $3.85 billion. For every dollar taken in, the company spent ten dollars in costs. Just for comparison – according to Bloomberg sources, Apple spent ten billion dollars on the development of its intelligent electric car – four times less than Facebook on the virtual and augmented reality project.

In any normal corporation, such a CEO would have been removed by the board long ago. But Meta Holdings is no ordinary corporation. Mark Zuckerberg showed foresight when he took Facebook public. Facebook and later Meta have two types of shares. Type B has one vote per share. A shares carry ten votes each, and Mark Zuckerberg retained 99.8 percent of those shares. He thus controls 66.1 percent of the votes. A supermajority vote is needed for any change initiated by shareholders, so it is not surprising that Mark Zuckerberg easily repels any attempt at change that does not suit him personally. Shareholders have been trying to change the voting structure regularly since 2014, in vain.

However, it is possible to look at the fact that Zuckerberg alone decides on projects with ten billion costs. They strive for innovations that would never pass in most large companies. Large investments in uncertain projects are the domain of start-ups who can find investors, which is not always easy.

Thanks to his stubbornness, Zuckerberg was able to build the largest ecosystem of virtual and augmented reality devices. Likewise, within two years he was able to create the highest quality artificial intelligence system offered under an open license, based on which hundreds and thousands of modified large language models are created, which often go against the censorship and “education” that OpenAI or Anthropic applies to their large language models.