“Fitness was probably the 4th or 5th use case that I thought would be important,” he said about the building of the metaverse. Categories such as gaming, social communication and productivity would rank higher, he said, adding that Meta most likely would prioritize building out the social apps.
“We are going to try to build the core social experiences,” Zuckerberg said. “That’s our DNA.”
The FTC sued in July to block Meta from buying Within, which created the popular VR workout game “Supernatural.” The FTC argued that Meta probably would have created its own VR fitness app if it hadn’t made the acquisition. Buying Within subsequently meant that consumers were deprived of that competition and choice, the agency said.
Zuckerberg, who was called by the FTC as a witness, defended Meta’s reliance on acquisitions to build out virtual and augmented reality services. He said that under current economic conditions, Meta would be unlikely to take on developing 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 invest higher-than-expected revenue. Now that Meta is experiencing an economic downturn, the company is cutting back on expenses and “not spinning up new projects.” The company recently laid off approximately 13,000 people.
Zuckerberg added that he was still excited about the potential for Within and “Supernatural.” He testified that Meta’s funding can “give them a multiyear runway” to keep on building their app.
Meta executives envision that in the future, people will want to work, play and spend time with their loved ones in the metaverse, experiences powered by virtual and augmented reality. Meta has funneled billions of dollars into making that vision a reality, which has helped the VR app market grow from a niche audience of gamers to one with some mainstream recognition.
But the investment is unlikely to have a short-term payoff, and Meta’s core social media businesses are facing a laundry list of challenges. The company’s stock has tumbled more than 65 percent this year, and its social media business is facing competition for users and advertising dollars from new rivals such as TikTok.
Meta also was hit hard by new Apple privacy restrictions that forced app makers such as Facebook to explicitly ask users whether they could collect data about their online activity.
Zuckerberg also has said he overestimated the staying power of the pandemic’s e-commerce boom, which increased Meta’s revenue — a shift that the CEO said he expected to be permanent but didn’t turn out to be.
Meta Chief Technology Officer Andrew Bosworth, who has also testified in the case, said in a recent blog post that about 80 percent of Meta’s overall spending supports its core businesses while the other 20 percent goes toward Reality Labs, the division that oversees the company’s metaverse ambitions.
“It’s a level of investment we believe makes sense for a company committed to staying at the leading edge of one of the most competitive and innovative industries on earth,” he wrote.
Meanwhile, Meta has experienced a leadership shake-up while the trial has proceeded. John Carmack, a prominent developer and executive consultant for VR at Meta, announced earlier this month that he was cutting ties with the company over disagreement over its direction.
“We have a ridiculous amount of people and resources, but we constantly self-sabotage and squander effort,” he wrote in a Facebook message. “There is no way to sugar coat this; I think our organization is operating at half the effectiveness that would make me happy.”
The FTC’s case arrives at a time when FTC chair Lina Khan and the Biden administration have promised to usher in tougher antitrust enforcement against the major technology companies, including Meta, Google, Apple and Amazon. Earlier this month, the FTC sued to block Microsoft’s $69 billion acquisition of the video game publisher Activision Blizzard, charging that the deal would allow the Redmond, Wash., tech giant to suppress its competitors in gaming.
In testimony in the San Jose courtroom, Meta executives said that for years, the company — specifically Zuckerberg — has been interested in investing in the fitness market to expand the audience of virtual reality, which had been overwhelmingly young and male. Fitness apps, they said, also have the potential of making Meta’s Quest VR headsets part of users’ routines.
FTC lawyers trying to make the case that Meta was interested in a fitness app have pointed to testimony and internal correspondence that show employees debating how to get into the fitness app business. There was even some discussion about forming a relationship with Peloton — an idea that Zuckerberg supported at one point, according to Michael Verdu, the social media giant’s former vice president of augmented reality and virtual reality.
“I am bullish on fitness. A partnership with Peloton for Beat Saber sounds awesome,” Zuckerberg wrote, according to court testimony. “I’d love to see that happen. Let me know how I can help.”
But on Tuesday, Zuckerberg testified that he didn’t remember having any follow-up conversations with Verdu about it.
Since buying the small VR start-up Oculus eight years ago, Meta has become the dominant player in the space, claiming 78 percent of all VR headset sales in 2021, the FTC claimed in its lawsuit.