Have you heard that Facebook is about to develop a ‘’metaverse’’? That this metaverse will allow Facebook users to interact in a virtual world that runs 24/7? Also, apparently holograms are coming? Let’s get started…
What is a ‘’metaverse’’?
Red pill, blue pill analogy from ‘’The Matrix’’
A metaverse is like an alternate digital reality, a reality much like our own, but digitally enhanced. It’s enhanced in a way that enables users to re-define their world, their identity, and the very way in which they conduct their activities. It is also the physical embodiment of internet, the matrix so to speak.
It could just be the next stage of human existence, or more simply put, Facebook wants to make their 2D platform 3D, and use Oculus VR headsets to make it as interactive as possible, and ideally make some cash in the process—why not?
This project is the Goliath of VR projects though because Facebook will rely on others to develop the metaverse. Because of this, there are many roadblocks ahead making this project’s success both (1) dubious at best, but also (2) extremely exciting from an innovation standpoint.
Who knew Facebook would start innovating again?
Venture Capitalist Matthew Ball, who wrote extensively about metaverses, points to some factors that would make it quite difficult for Facebook to succeed in this endeavor. He suggests that a metaverse must span the physical and virtual worlds, have an economy, and offer complete ‘’interoperability’’—this last word means that user avatar data must be easily transferred from one server (or world) to the next. The next diagram shows you what he thinks a metaverse should be built around.
Matthew Ball’s ‘’Core Enablers of the Metaverse’’
A use case: World of Warcraft
World of Warcraft logo
World of Warcraft (WoW) has existed for more than a decade in what was deemed one of the largest MMORPGs or Massive Multiplayer Online Role-Playing Games, to ever be played. But after years of upgrades and updates, nobody talks about this game anymore... In fact, Activision Blizzard, the developer of WoW has taken a dive late last month.
Is it wise for Facebook to follow suit? I’m asking this question because building a metaverse is even more challenging than building an interactive game. It takes loads of ramp up time, bandwidth, engineering talent, powerful engines, and maybe most importantly, community consent like a Rousseau social contract weaved in digitally. The second the community is disappointed about managerial choices, or hungry for more content, more stimulation, or more rights, is the second things like a 10% Activision Blizzard stock crash happens.
Graphic showing Blizzard’s recent fall from grace.
Teleporting and a ‘’sense of presence’’
A doctor analyzes a brain aneurysms hologram via VR headset
So why go through with all these hurdles?
Because Holograms are coming! Well, this is what Mark Zuckerberg would like us to believe. In a podcast hosted by theverge.com, the Facebook CEO makes the case for VR (virtual reality) being much more crucial to the future than we expect. We all use mobile phones, but are not really made, as humans, to operate in a 2-dimensional 5 by 2 field.
We crave a sense of space and use more than just visual cues to learn, communicate, and feel things. In this regard, Zuckerberg makes a good point. Could you imagine your next meetings not over Teams or Zoom, but over a hologram on your kitchen table? How cool would that be?
This virtual world has long been coming—in 2014, Facebook acquired Oculus for $2B in what CEO Mark Zuckerberg said would lead to an immersive experience between virtual parties. Some questions arise around this project, however. Does Oculus work? I mean, have you heard about the Quest 2? Its latest VR headset? I did not. Furthermore, they sold a bunch, and then there was a recall. Ouch.
A woman wearing an Oculus headset
But the future is not really about VR alone, it’s about VR + AR (AR being Artificial Reality). There’s a ton of effort being put in to make glasses that look cool, that are socially accepted outside of the house, and that can fit in a supercomputer for advanced optics. Magic Leap is one of those leading companies that has been trying, for years, to make this reality come to life. But have you seen their products on the market? Not really...
This is where the world of work can also become an interesting pivot point for Facebook to make money. What if you’re working on a presentation or a model, or some art or building a house and need a supervisor or colleague to chime in? This could enable workers be in more places at once, and it could massively increase productivity and efficiency. We skip the list, but there are actually quite a lot of use cases, we just haven’t been able to seen them all just yet a the tech gets developed.
Why Facebook’s metaverse could fail
In a sense, Facebook’s metaverse would attempt to create something like that famous game Fortnite, a multiplier video game turned social platform. But Facebook would be more complex and hopefully for, more widely utilized for things not just game related.
But this will be a hard project to complete as the firm does not specialize in semiconductors, or the engine needed to run such types of projects efficiently. Some argue that Facebook’s use of Qualcomm chips isn’t going to help it scale its VR products especially considering the threat from an inhouse made Apple VR headset, and that on the software side, Facebook’s Reality Labs does not yet have the sort of Engine Epic Games has (the Unreal engine). Nvidia also launched a software-development platform that is being used to create virtual world simulations using its graphics technology, but how could one expect this level of expertise from Facebook in the short run? It will take much time.
It’s not clear if Facebook is better positioned than say, an Apple or an Nvidia to develop a grand scale metaverse quickly. Facebook has the users and the resources to make this project seem like a reachable goal, but the devil’s in the detail, and becoming the master of the metaverse will be a difficult mountain to climb.
Metaverse as a moat for Facebook?
Investors seem quite excited as Facebook is investing heavily in its Reality Labs and looking for new hires (just go check out their career section for more detail). Regarding the project's outlook, Facebook talked about three top metaverse opportunities:
- Creators will be put in first place, as Facebook continues to build tools to create and consume content (like virtual concert halls);
- Commerce could see further momentum with things like virtual shopping and marketplaces, and business messaging;
- There’s Quest 2 doing well on paper, and VR computing platform development underway.
In their latest Q2, Facebook management spoke about the metaverse in several ways:
- The ecosystem is forming which could be value creating in 5 years times;
- There is a ton of money going into the metaverse;
- There already was multiple billions poured into the project up to this point.
The positive case is that the metaverse investment has long term profit potential like Google Cloud. However, there are also risks involved as broadly illustrated above. In H2, Facebook will have many ways to increase monetization through growth opportunities: this year could be a year where Facebook capitalizes on yet more shopping via its messaging tools (Messenger, WhatsApp, Watch, Reels and its AR/VR). Ad revenue grew in the last quarter by 51% YoY and total monthly active users grew only slightly (by 7%, still) reflecting the reopening and US/Europe penetration limits but overall, they keep logging on!
Learn more:
Listen to The Vergecast’s interview with Mark Zuckerberg
https://www.theverge.com/22588022/mark-zuckerberg-facebook-ceo-metaverse-interview
Learn more about metaverse philosophy and management from Matthew Ball
https://www.matthewball.vc/all/themetaverse
https://www.matthewball.vc/all/forwardtothemetaverseprimer
Why World of Warcraft is crashing and Blizzard too:
https://www.youtube.com/watch?v=zvkBupNo9kI&ab_channel=MedievalMarty
