• While Meta lauds its AI play, the part of the company responsible for developing the tech is bleeding money.
• The company says that Reality Labs incurred an operating loss of $4.4 billion after achieving income of an lacklustre $270 million.
• Despite the fervour around AI, the company doesn’t disclose how exactly it plans to achieve critical mass usage of the technology.

Remember when Mark Zuckerberg was so confident that the metaverse would be a success that he renamed Facebook to Meta? Well that play is now well and truly dead with Reality Labs now tasked with making AI happen.

“This was a good quarter with strong product and business momentum, and with parts of our long-term vision around AI and the future of computing coming into sharper focus. We estimate that there are now more than 3.2 billion people using at least one of our apps each day – and we’re seeing rapid adoption of Meta AI and Llama, which is quickly becoming a standard across the industry,” Zuckerberg told investors during an earnings call about Meta’s third quarter results.

The chief executive officer reports that 500 million people are now using Meta AI in some way every month. Given that Meta has squeezed its AI solution into most of its products, we figured this number would be higher especially with 3.2 billion people using Meta apps every day. The company says that Meta AI continues to scale as it becomes available in more countries and it adds features to the tech.

Circling back to Reality Labs, things are not great. Revenue for the third quarter of the financial year from this division sat at $270 million, a 29 percent increase that was largely driven by hardware such as the Ray-Ban Meta glasses.

“They’re great-looking glasses that let you take photos and videos, listen to music and take calls. But what makes them really special is the Meta AI integration. With our new updates it’ll be able to not only answer your questions throughout the day, but also help you remember things, give you suggestions as you’re doing things using realtime multimodal AI, and even translate other languages right in your ear for you. I continue to think that glasses are the ideal form factor for AI because you can let your AI see what you see, hear what you hear, and talk to you,” said Zuckerberg.

Unfortunately, expenses were 19 percent higher amounting to $4.7 billion leaving the segment with a $4.4 billion operating loss. Zooming out and looking at the last nine months from September back, losses climb to $12.7 billion. Thankfully, Meta’s other apps bring up the slack and kept total income from its products at an agreeable $17.3 billion for the quarter.

Meta doesn’t expect Reality Labs to turnaround any time soon as it continues to plough money into developing its AI play. It seems that Reality Labs is now focused on AI rather than the metaverse. Hell, the term metaverse isn’t even mentioned in the company’s earning call.

There has to be more than free AI right?

One of the big questions hanging over Meta’s head is how it monetises its AI in a meaningful way. Sure, licensing Llama is one way to do it but we don’t see that alone pulling Reality Labs out of the mud.

So what’s the plan? Well, as with all things, advertising is at the core of what Meta does as it pays the bills.

“Our focus has been to start to support shopping use cases such as responding to people who are asking for more information about a product or about its availability. We’re also expanding to support (lead gen) to help businesses generate high-quality leads. But we’re very, very early. This is a place where I would say we are really focused on learning from these tests, in terms of what makes the business AI agents most effective and what makes them — how the businesses who deploy them are measuring success and how we can drive the most value with this use case,” explained chief financial officer, Susan Li.

The company appears confident that if it continues expanding its AI to include more regions and more languages, it will catch on.

The good news here is that Meta AI just needs to be good. Unlike the metaverse, users don’t need to invest in specialised hardware but the question that many AI company’s have yet to answer is whether the tech can reach a critical mass.

Until now AI has been used to write text and create images and while there is money to be made here, it isn’t much. Anecdotally, we know less than a handful of regular people that are using AI in a way that warrants paying for the tech, others simply play around with it and the majority just aren’t bothered.

Meta, and other AI firms, have had a hard time convincing users that AI is actually good and that you should use it for everything. There is also the looming cloud of legal challenges that could upend the entire sector if it’s found that AI is just a copyright infringement machine.

Reading between the lines then, Meta AI is being pursued with the same sort of fervour that the company chased the Metaverse with which isn’t a great sign.

How the company turns this around and makes Reality Labs profitable is unclear, but eventually it’s going to have to give investors answers.