Meta (FB) may be too early on investing so much to build the metaverse, says early Facebook investor Reid Hoffman.
"Metaverse is one of the [technologies] where it's inevitable it happens, but when and how is a very big question," the LinkedIn founder and "The Startup of You" author said on a new episode of Yahoo Finance Presents (video above), later adding: "I don't see the signs yet that tell me that the metaverse is going to happen."
Hoffman explained that "the signs I look for are: Which application really starts taking off? ... I think entertainment is the first thing that you're going to really see. And obviously, the proponents of the metaverse will say: 'No, no... the pandemic has accelerated into it. We're doing, you know, video interviews in it. We're doing, you know, work in it. We're doing our shopping in it, we're doing our dating, and we're doing all this stuff.' And I think that's still a fair ways away."
After shocking investors in early February by outlining $90-$95 billion in expense spending this year as the social media giant builds out Zuckerberg's futuristic metaverse, the company is pulling back on that target amid slowing top line growth.
The new goal, which reflects more of an effort to protect profit margins, is now $87-$92 billion.
"These investments are going to be important for our success and growth over time," Zuckerberg told Wall Street analysts on a recent earnings call. "I continue to believe that we should see them through. But with our current business growth levels, we are now planning to slow the pace of some of our investments."
The pullback on spending comes after a mixed quarter for Meta, one where it rebounded from a terrible fourth quarter but was still not showing the same growth rates as in the past.
Meta's stock is down 41.6% so far in 2022 amid the larger rout in risk assets.
Hoffman said that he has confidence in Facebook getting its investment spending right given its track record.
"Facebook is an extremely capable company," Hoffman said. "They have done a lot of smart investing and building of things."
That said, the tech investor then expanded on his initial question: "If you're building the technology because you think the scale go to market with is three-to-five years from now, you have to be building really hard right now. ... if it's not five years from now, maybe seven, then it's technology that you should be building four years from now."
Asked if Facebook was early on building so rapidly for the metaverse today, Hoffman replied: "They might be. That's the primary question."