Mark Zuckerberg, CEO of Meta, sees fitness as the key to reverse growth

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SAN JOSE, CALIFORNIA — Meta CEO Mark Zuckerberg told a federal court Tuesday that he does not view fitness apps as key to his plan to build the metaverse.

Asked by his lawyer during a court hearing whether the possibility of Meta not having a virtual reality fitness app kept him up at night, Zuckerberg answered no.

“Fitness was probably the fourth or fifth use case that I thought would be important,” he said of building the metaverse. Categories like gaming, social, and productivity will rank higher, he said, adding that Meta will likely prioritize building social apps.

“We’re going to try to build the basic social experiences,” Zuckerberg said. “This is our DNA.”

The Federal Trade Commission sued in July to block Meta from buying Inside, which led to the creation of the popular VR training game “Supernatural.” The FTC argued that Meta might have created its own VR fitness app if it had not made the acquisition. Buying within means later depriving consumers of that competition and choice, the agency said.

Zuckerberg, who was called as a witness by the Federal Trade Commission, defended Meta’s reliance on acquisitions to build its virtual and augmented reality services. He said that given the current economic conditions, Meta is unlikely to develop a fitness app of its own.

When Meta was exploring expanding into the VR fitness market in 2021, the company was trying to figure out how to monetize higher-than-expected revenue. Now that Meta is facing an economic downturn, the company is cutting back on expenses and “not building new projects.” The company recently laid off nearly 13,000 people.

The FTC case shows just how badly Mark Zuckerberg wants a VR fitness app

Zuckerberg added that he remains excited about the potential of The Insider and The Outsider. He testified that Meta funding could “give them a multi-year runway” to continue building their app.

Meta executives envision that in the future, people will want to work, play, and spend time with loved ones in metaverse experiences powered by virtual and augmented reality. Meta has channeled billions of dollars into making this vision a reality, helping the VR app market grow from a niche audience of gamers to one with some mainstream recognition.

But that investment is unlikely to have a short-term payoff, and Meta’s core social media companies face a long list of challenges. The company’s stock is down more than 65 percent this year, and its social media business faces competition from users and advertising dollars from new rivals like TikTok.

Meta has also been hit hard by Apple’s new privacy restrictions that have forced app makers like Facebook to explicitly ask users if they can collect data about their online activity.

Zuckerberg also said he overestimated the continued strength of the pandemic’s e-commerce boom, driving Meta revenue — a turnaround that the CEO said he expected to be permanent but wasn’t.

About 80 percent of Meta’s total spending supports its core business while the other 20 percent goes to Reality Labs, the division that oversees the company’s metaverse ambitions, said in a recent blog post Andrew Bosworth, Meta’s chief technology officer, who also testified in the case. .

“It’s a level of investment we think makes sense for a company committed to staying ahead of the curve in one of the most competitive and innovative industries on Earth,” he wrote.

Virtual reality developers accuse Facebook of withholding the keys to success

Meanwhile, Mita experienced a leadership change during the course of the trial. John Carmack, a senior developer and executive advisor to VR at Meta, announced earlier this month that he was severing ties with the company over a row over its direction.

“We have a huge number of people and resources, but we constantly sabotage ourselves and waste efforts,” he wrote in a Facebook message. “There is no way to sugar coat this; I think our organization works half as effectively as it makes me happy.”

The FTC case arrives at a time when the commission’s chair, Lena Khan, and the Biden administration have promised to initiate tougher antitrust enforcement against big tech companies, including Meta, Google, Apple and Amazon. Earlier this month, the Federal Trade Commission sued to block Microsoft’s $69 billion acquisition of video game publisher Activision Blizzard, charging that the deal would allow the Redmond, Washington, tech giant to crack down on its gaming competitors.

The dual complaints point to a new FTC strategy to rein in the tech industry

In courtroom testimony in San Jose, Meta executives said the company — specifically Zuckerberg — had for years been interested in investing in the fitness market to expand the audience for virtual reality, which was predominantly young and male. They said the fitness apps also have the potential to make the Meta Quest VR headset part of users’ routines.

FTC attorneys trying to prove that Meta is interested in the fitness app have pointed to testimonials and internal correspondence that show employees discussing how to get into the fitness app business. There has even been some discussion of forming a relationship with Peloton — an idea that Zuckerberg endorsed at one point, according to Michael Verdoux, former vice president of augmented and virtual reality for the social media giant.

“I am optimistic about fitness. Partnering with Peloton for Pete Saber looks great,” Zuckerberg wrote, according to court testimony. “I’d like to see that happen. Let me know how I can help.”

But Zuckerberg testified on Tuesday that he did not recall having any follow-up conversations with Verdu about the subject.

In closing remarks, FTC attorney Abby Dennis argued that Meta had the resources, ability, and interest in building its own fitness app.

But Meta attorney Mark Hansen has argued that the FTC’s claims that the company may have entered the VR fitness market with its own app are “nothing more than speculation and wishful thinking.”

Since buying small VR startup Oculus eight years ago, Meta has become the dominant player in the space, taking 78 percent of all VR headset sales in 2021, the FTC alleged in its lawsuit.

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