When Mark Zuckerberg changed the name of Facebook to Meta, he intended it to signal to everyone that he was going all in on the metaverse. The new name reflected that he was willing to bet Meta’s future on it. Other companies have been quietly working away on building their versions of the metaverse, but Zuckerberg was able to grab the lion’s share of attention. And the name change cleverly made it seem as if Meta was blazing the trail to the metaverse.
Whether Zuckerberg’s all-in approach will be successful has yet to be seen. But Meta’s name change has succeeded in bringing a massive amount of attention to the metaverse with countless articles on it. Some read more as overly enthusiastic investment portfolios highlighting companies pouring billions into the internet’s next frontier. According to those articles, we will all spend most of our time happily eschewing reality with VR goggles strapped to our heads, making the metaverse a cash cow for first movers. Others take the opposite stance, with many in the media taking a decidedly dim view of the metaverse and its potential.
What is the reality beyond the often click-bait headlines and fervid news coverage? As with many things in life, it is more nuanced sitting somewhere between both extremes. This article will try to separate fact from fiction and focus on what we currently know about the metaverse. Will it be the future or a complete flop? Let’s dive in and look at the knowns of what is becoming an increasingly divisive subject.
THE INTERFACE TO THE METAVERSE NEEDS HELP
A flaw in the supposed mass conversion to the metaverse that often gets overlooked is that its interface is not ideal. Proponents of the metaverse like to point out the massive numbers of people online daily and using apps. Converting most of them over to the metaverse would make an enormous profit for any company that could pull it off. But, according to Statista, almost 60% of current internet traffic is from mobile devices (excluding tablets). Mobile phones are highly portable, easy to use, affordable, available at a wide range of price points and packed with features. Even “dumb” and lower-cost smartphones widely used worldwide allow users to hop online and use a variety of apps without breaking the bank.
In stark contrast, VR headsets are bulky, uncomfortable to wear for long periods and increasingly expensive. Meta’s Quest 2 (which currently accounts for 78% of VR google sales) recently had a $100 price increase, which is still a “subsidized” price with Meta not making a profit on their sales. Its next generation of VR and AR headsets will be significantly more expensive than current offerings. They are still large compared to cell phones and not something that easily fits in a pocket or small bag. Some wearers of the headsets also report feeling nauseous and eye strain after prolonged use.
Many might respond to these facts with a collective shrug, but they are significant. People use mobile devices to connect online because it is simple and easy. One can easily connect to the internet or their favorite app at the gym, a coffee shop or an airport. The bulk of a VR headset negates that ease as they are less portable. There is also the safety aspect of being cut off from one’s surroundings in public places. Yes, cell phones started as large bricks too, but it has yet to be seen if VR googles can be made in smaller forms. And, if the pace of price increases keeps up, headsets will be priced out of the reach of the bulk of the planet’s population and only affordable in affluent regions of the world. All of these factors make mass adoption of the metaverse less likely.
THE WORST SELFIE EVER POSTED
Much of the world cringed in horror or broke out in laughter when Mark Zuckerberg posted a virtual selfie of himself from Meta’s gateway to the metaverse Horizon Worlds. It wasn’t just bad; it was meme-worthy bad looking like something a cut-rate graphic artist created with an outdated version of MS Paint while waiting for a latte. Many pointed out that the graphics looked similar to the “virtual world” of 2007’s Second Life, with an emotionless and doll-faced Zuckerberg blankly looking into space in front of a poorly rendered version of the Eifel Tower. The selfie inspired countless articles blasting Meta like PC Gamer’s article “Mark Zuckerberg spent $10B on the metaverse and all he got was this stupid selfie.” Like a kid caught turning in incomplete homework, Zuckerberg released a slightly upgraded selfie a short time later.
Beyond Zuckerberg’s substandard selfie and Meta, the incident brings up a much larger issue with the current metaverse. Like the constant media hype surrounding artificial intelligence, most people have been led to believe that the metaverse will be life-changing. Stepping into it will be akin to a scene from “Ready Player One,” where people can be whomever they want and do whatever they want in an ultra-realistic alternative world. But the hype isn’t real, and currently, it is more like stepping into an early “The Simpsons” episode with poor graphics and user experiences. All of it begs the question will people stick around if the reality of the metaverse doesn’t match their expectations? Or will they abandon it for the better graphics of the real world?
INVESTOR PATIENCE AND CASH BURN
Investors probably reacted differently to Zuckerberg’s selfie incident, and we doubt it involved laughter. Most likely want to see a better ROI than a Windows Vista-inspired selfie for the staggering amounts of money the race to the metaverse is consuming. Zuckerberg and Meta are burning through cash quicker than a Saudi prince on a Las Vegas vacation in their quest to dominate the new virtual world. According to an article on CNBC, Meta’s Reality Labs division responsible for building the metaverse lost $2.8 billion in the second quarter of 2022 alone. If a cash burn rate of roughly $1 billion a month isn’t large enough, it is projected to increase in the third quarter. Meta has also increased its headcount by 32% from a year earlier, with many new Metamates focused on the metaverse. Investors are questioning if all of this is wise or even sustainable. And Meta’s stock price tanking 52% year-to-year, and its continuous downward slide reflect this.
Zuckerberg and Meta are the most visible faces of the metaverse by design. But other companies are quietly working away on their versions of the metaverse at a slower (some would say saner) pace. Meta’s massive expenditures show that serious ventures into the metaverse will require significant capital. And Meta’s stock price woes show investors only have so much patience. As the economy fizzles and the Fed raises interest rates, most investors have lost patience with tech stocks (especially those working on money-hungry long-term projects that might not work out) and are looking for safer options. According to another article on CNBC, the world’s largest tech companies lost $1 trillion in value over three days of trading in May. The metaverse requires lots of cash to get off the ground, and it is becoming increasingly harder to come by as investors pursue strategies more grounded in reality.
WHAT’S THE CATCH?
The vast amounts of money poured into the metaverse have some wondering what the catch is. Most companies don’t spend huge sums of money on a project out of kindness or to elevate humanity. It is becoming increasingly apparent to most that Meta and others see the metaverse as a giant source of revenue. It is yet another place to serve ads, create subscription-based models and even paywalls. And they also intend those that wander through the metaverse to be a source of profit. Visiting a virtual nightclub might cost as much as visiting a real one. Or, like in some gaming platforms, parts of the metaverse could be inaccessible until “unlocked” with a purchase. Perhaps even the clothes the virtual you wear will cost money. That might seem ridiculous, but some are already paying millions for virtual land in the metaverse, as this article from CNET explains.
Partially in response to blatant advertising and capitalism, people have become increasingly concerned about their data and online privacy. And those concerns have eventually led to laws such as the EU’s General Data Protection Regulation and the California Consumer Privacy Act. Apple’s App Tracking Transparency feature and Google’s winding down of cookie-based trackers were also the result. Part of Meta’s “enthusiasm” for the metaverse is that it is a workaround for Apple’s pesky privacy feature, as Meta owns both the hardware (Oculus headsets) and the software (Horizon Worlds) to access its version of the metaverse. Currently, the metaverse is the Wild West, with no privacy laws explicitly targeting it. But that could all change as lawmakers pay more attention to it. And if those laws affect companies’ profit margins like Apple’s app tracking feature, their enthusiasm for building the metaverse could suddenly wane.
THE SAGA OF SECOND LIFE
Launched in 2003, Second Life lets people create an avatar of themselves, interact with others and live in a virtual world created with user-generated content. Unlike virtual gaming platforms, Second Life isn’t intended to be a game, as there is nothing to win or a plot. Its sole purpose is to offer users a “second life” in an alternative reality. Like the metaverse, Second Life launched with lots of media hype, promising to be the next big thing. Many comparisons have been drawn between the metaverse and Second Life, and most are not intended to be a compliment framing the metaverse as merely Second Life 2.0.
An interesting article on Slate titled “What Comparisons Between Second Life and the Metaverse Miss” attempts to correct this negative slant. It correctly points out that Second Life was only meant to be a form of escapism, while the metaverse intends to be the next form of the internet. But the more the article points out the differences between the two, the more they sound alike. It states, “What had been a space premised on self-actualization and escape rapidly became a place with ownership rights and an in-world currency, called the linden. As Au’s book chronicles, the period from 2004–07 saw an increase in speculators enclosing virtual space and selling virtual goods in hopes of realizing a profit. As early as 2006, Second Life saw an influx of real-world companies pushing promotions and advertising into the virtual space. You could exchange linden for dollars, leading to fluctuations in value, as well as other virtual currencies. By the early 2010s, it was being used to exchange for Bitcoin and other burgeoning cryptocurrencies, a scheme some charged could facilitate money laundering.” Sound familiar? This is already starting to happen in the metaverse, and it has barely begun.
Second Life enjoyed a bit of renaissance during the pandemic but is ultimately seen as a flop. While it can claim 70 million registered users, only 200,000 of those are active daily. Second Life ultimately failed because it was seen more as a novelty than something useful. And its over-commercialization and the headaches it created caused many to abandon it. Most of us already have sizeable mortgages or rent payments and hectic lives. Creating another equally hectic second life or paying a virtual mortgage isn’t that appealing. For the metaverse to be the all-encompassing and mass-adopted entity that CEOs like Zuckerberg envision, it can’t just be a novelty or another way to make a buck. It has to offer real benefits and value to a wide variety of users on a global scale. Whether or not it can do that remains to be seen.
THE INFRASTRUCTURE DOESN’T EXIST
Media coverage of the metaverse tends to focus on the more grandiose and glamorous ideas of what people can do in it. But very few have focused on the actual infrastructure of building the metaverse out. Looking at the computing power it will take to make it is eye-opening. In the company’s first editorial on the metaverse, Intel’s Senior Vice President and General Manager of the Accelerated Computing Systems and Graphics Group Raja Koduri stated, “Consider what is required to put two individuals in a social setting in an entirely virtual environment: convincing and detailed avatars with realistic clothing, hair and skin tones – all rendered in real-time and based on sensor data capturing real-world 3D objects, gestures, audio and much more; data transfer at super high bandwidths and extremely low latencies; and a persistent model of the environment, which may contain both real and simulated elements. Now, imagine solving this problem at scale – for hundreds of millions of users simultaneously – and you will quickly realize that our computing, storage and networking infrastructure today is simply not enough to enable this vision.” Koduri estimates it would take a 1,000-fold increase in computing power over the state-of-the-art processors available today to make the metaverse happen.
Intel knows a thing or two about processors and computing power, so we will take Koduri’s expertise on the subject over some overly enthusiastic tech writers that espouse the metaverse is right around the corner. He notes that the internet’s “ plumbing “ (bandwidth, networks, servers, etc.) will also need serious upgrading. We can’t imagine what our local internet provider will charge for their metaverse-friendly bandwidth packages. While he is overall bullish on the future of the metaverse, it is easy to see from Koduri’s comments that it is still a long way off.
THE UNKNOWN X FACTOR
San Francisco’s Eatsa was supposed to be the robot-run eatery of the future. Millennials could order quinoa bowls without ever interacting with a human. A team of robots and a few humans process the order, cook it and then deliver it via a futuristic pickup window. In CafeX, a robotic arm replaced baristas making coffee. The pizza-making robots of Zume whipped up pies without the need for humans. With only a few non-robotic employees and minimal or zero human interaction, they should have been a pandemic-proof formula for success. But all of them failed, and some before the pandemic even started. The closures aren’t just limited to the Bay Area but are happening across Japan and South Korea as robots cafes and restaurants slowly close their doors.
While this might be surprising to their financial backers, it turns out most of us like human interaction, even on smaller scales. Once the novelty of being served by a robot wore off, there was no point in returning to any of these establishments. The smile of a barista who knows your name and order will always be better than being served by a cold and emotionless robot arm. The pandemic, with its endless Zoom calls, virtual meetings and soul-crushing isolation, reinforced that we are social creatures that need human interaction, not just through a screen or virtually. It is hard to measure or quantify how significant that need is, but it is an x factor that will play a role in determining whether all or a few adopt the metaverse.
SOMETHING IS COMING BUT PREPARE FOR THE NOW
Some may mistake this article for being overly pessimistic. But it is taking a realistic look at the significant obstacles that the metaverse currently faces. Make no mistake, though. Technology marches on, and what seems almost impossible now could seem trivial in the future. The Wright Brothers first took to the sky in 1903, and only 44 years later, Chuck Yeager broke the sound barrier. Some form of Web3 is coming, but it might not be the all-encompassing metaverse that some envision. And whatever form it takes, the reality is that it is still far away.
Yes, it makes sense to keep tabs on the developments surrounding the metaverse. But for most business leaders, there are more pressing matters on hand. Chief among them is the imminent demise of third-party data and the subsequent shift to first-party data. Unlike the farther-off metaverse, it will significantly impact your bottom line in the near future. To better understand what is rapidly heading your brand’s way, read Dan Kahn’s editorial and the companion blog post.
Not having a full grasp of what is happening or moving too slow can be seriously determinantal for your brand. At Kahn Media, we understand the importance of the upcoming revolution in data and already working with clients to prepare for it. We are also a fully-integrated marketing agency specializing in public relations, photography, video and content creation, influencer relations, strategy development and social media management. Reach out to us to develop a plan to ready your business for the transition from third- to first-party data or to handle any of your marketing needs.