Many critics have labeled Mark Zuckerberg and Meta’ s efforts to develop the Metaverse a disastrous exercise. In fact, the dominant narrative in the media right now is that Meta is wasting its time and making a real blunder of building the Metaverse. Now shareholders are seemingly up in arms, and Brad Gerstner , the CEO of Altimeter Capital , has written an open letter to Zuckerberg and Meta’s board of directors imploring them to “focus its path” and “get its mojo back.” However, unlike other media outlets, we’ve taken the time to review this open letter and, as it turns out, it may not be as damning and jarring as traditional media outlets claim. Let’s take a look!
What Does the Open Letter Actually Call For?
So if you don’t want to read the open letter yourself (and I recommend you do), the gist of it can be summarized into the three main points Gerstner has provided:
- Reduce headcount expense by at least 20%;
- Reduce annual capex by at least $5 B from $30B to $25B; and
- Limit investment in metaverse / Reality Labs to no more than $5B per year
The hope in employing this strategy is that it will double free cash flow (FCF) to $40 billion USD per year and focus the company’s teams and investments. Now I could of course focus on the fact that Meta has, at least according to Gerstner, way too many employees and that “Meta is investing more in capex than Apple , Tesla , Twitter , Snap , and Uber combined,” but the real focus here is on Meta’s metaverse investments. Naturally just about every other mainstream report leaves out these two very important (and arguably more problematic) financial factors mentioned in the open letter, but it’s OK. It’s to be expected since “journalism” these days is more about sensationalism and skewing the facts than actual objective reporting. Par for the course.
What Shareholders Actually Think About the Metaverse
Judging by what the letter says, it looks like Gerstner is simply pointing out that the world at large seems to think Meta is devoting 100% of its time and resources to the Metaverse, most likely due to the company renaming itself “Meta” last year. This makes perfect sense, and to the average man on the street, this is essentially the message that’s being sent and why many critics are making the conclusions they’re making. The main issue here is that Meta has dedicated $10-15 billion USD per year towards metaverse research, and to shareholders and the world at large, this is, at least right now, entirely too aggressive.
That said, the letter also has this paragraph that everyone should take into consideration before making any premature conclusions:
“With all of this said, we truly believe that the company should be making some of these important investments. Dave Baszucki of Roblox describes the metaverse as the natural evolution of communication — a multi-device world, including the phone, that is best thought of as a better version of text, video, and voice that will make us feel more connected. Of course, a company that connects nearly three billion users on phone and text must be investing in the next generation of communication.”
Clearly shareholders are not against Meta investing in the Metaverse, but with that said, they are recommending that they cap their annual investment to $5 billion USD, and as ROI becomes more tangible, it’s very likely that shareholders will be more than happy to scale up funding for the Metaverse. So yes, Gerstner has called for Meta to reduce its spend on the Metaverse for the foreseeable future. Oh, and it’s also important that you check out this last paragraph before going any further:
“We don’t have any demands. We simply wanted to further engage and continue sharing our thoughts as an interested shareholder. We believe in this team. We know Meta has more reach, more relevance, and more incredible opportunities for growth than almost any platform on the planet. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward.”
Faith in Meta Isn’t Waning At All
The conclusion here is that, as usual, what the media claims about Meta’s operations, products and shareholders is almost entirely sensationalist and doesn’t actually reveal the full story. I find this disingenuous to say the very least as it fuels negative sentiment when there’s really no need for it. Unless you want to manipulate markets in order to serve your agenda? No, of course that’s just crazy talk…
The open letter isn’t a demand. At all. It’s a recommendation from a concerned shareholder that Meta should take into account so that they can potentially stabilize their operations, cut down on unnecessary expenses and become a more efficient, leaner entity. These kinds of conversations are absolutely important, and it’s food for thought for all of us as well as Mark Zuckerberg and Meta. I will say though that Zuckerberg, however odd or ethically questionable he may be, has an incredible track record and seems to know very much what he’s doing. He is fully invested in developing AI and metaverse technology, and I think he’s more than willing to stake his reputation and company in order to achieve it. Like it or not, that takes some major balls, so kudos to Zuck for sticking to his guns.
So what do you think of Gerstner’s open letter? Is it a smart and sensible way for Meta to make their operations more efficient and profitable? Or is cutting back on metaverse development a bad move in the long run? Let us know your thoughts!
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