Meta Under Pressure: Shareholder Altimeter Capital Calls for Zuckerberg to Slash Metaverse Spending and Re-focus

In a move that has sent ripples through the tech world, Brad Gerstner, a prominent voice in the investment community and chairman of Altimeter Capital, has publicly urged Meta CEO Mark Zuckerberg to take decisive action to steer the tech giant back to firmer ground. Altimeter Capital, holding a significant stake in Meta Platforms Inc., has penned an open letter advocating for a leaner, more focused Meta, primarily by significantly reducing its ambitious Metaverse investments and workforce.

Why is a Meta Shareholder Calling for Change?

Gerstner’s letter, addressed directly to Zuckerberg and the Meta board, paints a picture of a company that has, in his view, lost its way. He argues that Meta has become bloated, suffering from “too many people, too many ideas, too little urgency.” This critique comes at a critical time for Meta, formerly known as Facebook, as the company navigates a challenging economic landscape and a shifting technological paradigm.

“Meta has drifted into the land of excess — too many people, too many ideas, too little urgency. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes,” Gerstner wrote in his letter.

The core message is clear: Altimeter believes Meta needs to get “fit” – to streamline its operations, sharpen its focus, and become more disciplined in its spending. This call for austerity is not just about cutting costs; it’s about ensuring Meta’s long-term health and relevance in an increasingly competitive and uncertain market.

What are Altimeter’s Key Demands for Meta?

Gerstner’s letter outlines specific recommendations for Meta to regain its footing. These are not gentle suggestions; they are firm directives from a significant shareholder:

• Reduce Headcount by 20%: Altimeter is advocating for a substantial reduction in Meta’s workforce. This reflects a belief that Meta has become overstaffed and needs to operate with a leaner team to improve efficiency and agility.
• Cap Metaverse Investment at $5 Billion Annually: This is perhaps the most striking demand. Gerstner urges Meta to drastically scale back its investment in the Metaverse and virtual reality (VR). He proposes a hard cap of $5 billion per year, suggesting a significant re-evaluation of Meta’s commitment to this futuristic vision.
• Cut Capital Expenditures by at Least $5 Billion: Beyond Metaverse spending, Altimeter calls for a broad reduction in Meta’s capital expenditures. This signals a desire for Meta to become more fiscally conservative across its operations.

Let’s break down the potential impact of these demands:

Why the Focus on the Metaverse?

Meta’s ambitious pivot to the Metaverse, marked by its name change from Facebook, has been a defining strategic move by Mark Zuckerberg. However, it’s also been a costly one. While Zuckerberg envisions the Metaverse as the next major computing platform, Altimeter’s letter suggests a growing skepticism, at least in the short term, about the return on investment.

Recent internal data seems to support these concerns. Meta’s flagship Metaverse platform, Horizon Worlds, is reportedly struggling to gain traction.

According to reports citing internal documents, Horizon Worlds is far from meeting its own user targets:

• Original Goal: 500,000 monthly active users (MAU).
• Current Reality: MAU below 200,000.

These figures, highlighted by outlets like the Wall Street Journal, raise serious questions about the near-term viability of Meta’s Metaverse strategy. Is the user interest simply not there yet? Is the technology not compelling enough? Or is Meta’s approach missing the mark?

Is the Metaverse Dream Fading, or Just on Hold?

It’s crucial to understand that Altimeter’s letter isn’t necessarily a complete rejection of the Metaverse concept. Instead, it appears to be a call for a more pragmatic and financially responsible approach. The letter suggests a need to balance the long-term vision of the Metaverse with the immediate realities of Meta’s financial performance.

It’s worth remembering that Altimeter Capital is a significant shareholder, owning over 2.4 million shares of Meta as of the second quarter of 2022. While this is a substantial holding, it’s important to note the context of Meta’s overall shareholder base. And despite this stake, Altimeter is clearly voicing concerns shared by potentially wider investor circles, especially given Meta’s stock’s 60% decline over the past year.

What’s Next for Meta and the Metaverse?

The open letter from Altimeter Capital throws down a gauntlet for Mark Zuckerberg and Meta’s leadership. It remains to be seen how Meta will respond. Will Zuckerberg heed the call for austerity and re-evaluation? Or will he double down on his Metaverse vision, arguing that short-term setbacks are simply part of a long-term transformative journey?

The coming months will be critical for Meta. The company faces pressure to demonstrate that it can both manage its costs effectively and deliver on its ambitious Metaverse promises. The balance between these two objectives will likely determine Meta’s trajectory in the years to come. The tech world, and indeed anyone interested in the future of the internet, will be watching closely to see how this unfolds.

In Conclusion: A Crossroads for Meta

Altimeter Capital’s open letter is more than just a shareholder complaint; it’s a symptom of broader anxieties about Meta’s direction and the viability of its Metaverse bet in the current economic climate. It serves as a stark reminder that even tech giants are not immune to market pressures and investor scrutiny. For Meta, this moment represents a critical juncture – a time to reassess, refocus, and potentially redefine its path forward in the ever-evolving landscape of technology and the digital world.