“Metaverse” may sound like some hackneyed term from a William Gibson novel, but Facebook Inc. Chief Executive Mark Zuckerberg sounded serious last week about its potential to transform the company he co-founded — and the internet itself.
“I wanted to discuss this now so that you can see the future that we’re working toward and how our major initiatives across the company are going to map to that,” Zuckerberg said on a conference call with analysts following Facebook’s FB second-quarter earnings report. “What is the metaverse? It’s a virtual environment where you can be present with people in digital spaces. You can kind of think of this as an embodied internet that you’re inside of rather than just looking at.”
Facebook FB is not alone. Increasingly, tech companies are hailing the importance of building a “metaverse” as a technological bridge from smartphones and mobile devices to virtual worlds where large numbers of people congregate to play, work and socialize. Microsoft Corp. MSFT, -1.63% CEO Satya Nadella, even spoke of an “enterprise metaverse” during his company’s earnings call last week.
Since “Snow Crash,” Neal Stephenson’s 1992 novel about a convergence of physical, augmented and virtual reality in a shared online space, the concept has picked up steam. Venture capitalist Matthew Ball further advanced the idea in an influential 2000 essay about the inevitability of intertwined physical and virtual worlds to form a fully fledged economy with unprecedented interoperability.
It all sounds rather futuristic and utopian, but Zuckerberg’s vision of a maximalist Facebook is equally rooted in a deft corporate play to sidestep Apple Inc.’s AAPL, -1.94% onerous commission fees for app developers.
Facebook, like other app developers such as Epic Games Inc. and Roblox Inc. RBLX, -0.66%, see the metaverse as a strategic lever that could bypass Apple Store fees and present an “existential threat,” said Benjamin Bertram Goldman, head of films at design company InVision, where he runs a documentary film unit that explores the future of design and technology.
“Metaverse forces the impracticality of Apple’s position into the spotlight,” Goldman told MarketWatch. “The creation of a virtual shopping world suddenly makes a company demanding a 30% commission fee to be viewed as absurd. It ascribes to an end state that is incompatible with Apple.”
During Epic’s historic antitrust courtroom war with Apple earlier this year, Epic CEO Tim Sweeney invoked the “metaverse” and Stephenson’s novel. The metaverse is “a real-time, computer-powered 3-D entertainment and social medium in which real people would go into a 3-D simulation together and have experiences of all sorts,” he explained in testimony. Sweeney pointedly chose “metaverse” in his testimony as a metaphor for “Fortnite,” the multiplayer game Apple banned from its iOS App Store last year.
“In a world filled with creators, inventors, and innovators, the metaverse simply can’t exist as a walled garden, and the notion that any single company can chase that vision is one filled with hubris,” Unity Software Inc. U, -1.15% CEO John Riccitiello recently wrote in an unpublished article. “For me, the only metaverse of consequence is one that includes everybody who wants to participate. A decentralized approach to the internet is what created the digital world that we’re flourishing in today. You can’t put it back into a box now.”
Zuckerberg has made no secret of his desire for more e-commerce-related business within Facebook apps. He just doesn’t want to help Apple — its privacy-baiting nemesis — by paying fees of up to 30% on transactions within its app.
A metaverse could also allow other tech companies to take advantage of their augmented- and virtual-reality assets before Apple launches whatever comes from its longtime ambitions in augmented reality.
“It’s a logical progression for Facebook to invest meaningfully in technology that deepens user connection and creates more ubiquity between our physical and digital worlds,” Daniel Newman, principal analyst at Futurum, told MarketWatch. “VR, for instance, has advanced but hasn’t fully immersed us due to equipment and cost constraints, plus software is intensive.”
Newman posited that Facebook and Microsoft in particular have accumulated vast AR and VR assets to build virtual platforms with acquisitions of properties such as Oculus (Facebook) and AltspaceVR (Microsoft) and developing mixed-reality smart glasses internally. Microsoft has also aggressively plunged into cloud gaming. So far, however, they have remained niche businesses despite billions of dollars in investments and plenty of buzz.
More importantly, the establishment of a virtual platform for Facebook or Microsoft provides the opportunity for an end run around Apple’s toll, Newman said.
“Data is still king, and Facebook has a meaningful grasp on it, but how do you get even more data when your members are not on the phone?” he added.
Whether Facebook is able to essentially mash together its disparate properties like a Frankenstein monster in metaverse form is far from certain. The U.S. government is attempting to cleave Instagram and WhatsApp from Facebook, as well as limit the company’s ability to make future acquisitions or offer services linked to its hardware products.
“The more our offline and online universes become one, the more Facebook will understand its users, and that makes for a promising revenue story — and a somewhat bizarre future where we live our lives in Facebook’s version of ‘The Truman Show,’” Newman said.
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