Facebook Can't Innovate

Can Facebook become a Metaverse Company?

Abhishek Maran

Aug 11, 2021

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If you’ve visited Facebook from your computer recently, you’ll know how unusable the platform has become. Gone are the days of an easy-to-scroll-through news feed. Now you just get bombarded with e-commerce ads from stores that you scrolled through when you couldn’t sleep.

Even Instagram hasn’t really been innovative, with its latest hit feature ‘Reels’ - a blatant copy of TikTok. Before that, they rolled out Stories which was also a shameless copy of Snapchat.

Facebook recently announced that it wanted to become a Metaverse company. Unfortunately for Zuckerberg, this isn’t something that can be copied from an existing competitor.

What is the Metaverse?

While it seems to be a recent phenomenon, the term 'Metaverse' was actually coined in 1992 by Neal Stephenson in his science fiction novel ‘Snow Crash’, which chronicled a 3D VR space as a successor to the internet. In some ways, Stephenson’s version of the Metaverse holds true even now - however the Metaverse is emerging to be so much more.

The Metaverse is the next logical evolution of the internet that brings immersive and rich experiences to the masses.

Matthew Ball, who wrote a ten-part Metaverse Primer a few months ago, broke down the attributes of the Metaverse to include:

Be persistent – which is to say, it never “resets” or “pauses” or “ends”, it just continues indefinitely
Be synchronous and live – even though pre-scheduled and self-contained events will happen, just as they do in “real life”, the Metaverse will be a living experience that exists consistently for everyone and in real-time
Be without any cap to concurrent users, while also providing each user with an individual sense of “presence” – everyone can be a part of the Metaverse and participate in a specific event/place/activity together, at the same time and with individual agency
Be a fully functioning economy – individuals and businesses will be able to create, own, invest, sell, and be rewarded for an incredibly wide range of “work” that produces “value” that is recognized by others
Be an experience that spans both the digital and physical worlds, private and public networks/experiences, and open and closed platforms
Offer unprecedented interoperability of data, digital items/assets, content, and so on across each of these experiences – your “Counter-Strike” gun skin, for example, could also be used to decorate a gun in Fortnite, or be gifted to a friend on/through Facebook. Today, the digital world basically acts as though it were a mall where every store used its own currency, required proprietary ID cards, had proprietary units of measurement for things like shoes or calories, and different dress codes, etc.
Be populated by “content” and “experiences” created and operated by an incredibly wide range of contributors, some of whom are independent individuals, while others might be informally organized groups or commercially-focused enterprises

To date, there aren't any platforms that fulfil every single attribute listed above, but there are a few that come pretty close.

Pioneering social discovery

Historically, Facebook has been the king of social media and interaction online. In the Metaverse, that probably won’t be the case. Leading the way in the Metaverse is Fortnite, and from the outside it looks like nothing more than a kids’ game popular for viral dance moves or funky costumes. Dig a little deeper and you'll quickly realise that Fortnite is a full-blown virtual world. Players can meet up with friends, attend virtual concerts or engage in quick battle royale games. Most importantly, Fortnite doesn't have a primary story mode like other popular games - its story is created by its users in a synchronous manner. It allows users to uniquely express themselves by partnering with large brands to create assets that players can use to personalise their in-game characters. Interoperability of digital items or content is key to making the Metaverse more 'real-world' like, and for now, Fortnite is the only place on the internet where you can dress up as Marvel's Deadpool and walk around inside DC's Gotham City.

Facebook isn’t actually that far behind from creating something similar with its Horizon product. Still in closed beta, Horizon was announced in 2019 with features akin to a first-person Sims. Facebook sees Horizon as the ultimate community building product, with Ari Grant, Director at Horizon, framing "Facebook and Instagram as a ‘share’ social network, and ... Horizon as a ‘do’ social network." In 2021, it seems that Facebook is still tinkering away with making a virtual VR community real, but early reports suggest that the hype is real. If Facebook is able to capitalise on this hype then they could overtake Fortnite in creating an immersive social discovery platform. However, given the barrier to entry of accessing a VR platform is pretty pricey (a decent VR headset retails at ~$900) the growth of Facebook Horizon is likely to be constrained in the near term.

However, in April 2021 Epic Games announced that it had raised $1 billion to further its long-term vision of building the Metaverse. Whilst a large portion of this is likely to be pumped into Fortnite to develop new features and in-game experiences, they also own Unreal Engine, the second most popular game engine for building VR content. By owning the underlying architecture, Epic Games have positioned itself to offer unprecedented interoperability. Whilst this is something that Zuckerberg has acknowledged, stating that Facebook is “going to be contributing to trying to build a more open and interoperable one”. For Facebook to be innovative and break out from their gated model, they’ll need to get comfortable with not owning all the data that passes through their platform.

Creating a self-sustaining economy

Be a fully functioning economy – individuals and businesses will be able to create, own, invest, sell, and be rewarded for an incredibly wide range of “work” that produces “value” that is recognized by others

This attribute is probably best embodied by Roblox. Similar to Fortnite, what started off as a simple kids game, Roblox is now a burgeoning economy where developers can not only monetise their games, but also the assets, plugins, videos and more. Self-defined as "Shepherds of the Metaverse" Roblox allows anyone to be a game creator and monetise their creations.

Curiously, Roblox breaks all rules of interoperability on its platform. Whilst players control a persistent avatar, having such a robust in-game economy has led to the virtual fashion market almost resembling StockX. For example, Gucci ran its own "Gucci Garden Experience" event on Roblox to allow players to drip out their avatars with high fashion accessories. One Gucci bag successfully sold for $4,115 whilst the same purse IRL costs $3,400. Keep in mind that the virtual purse can't be transferred outside the Roblox world and has no other value besides being a huge flex within Roblox.

Facebook does have the pieces to build a fully-fledged economy that would be more comprehensive compared to Roblox. By combining Facebook Pay and Marketplace, they could effectively create a more social buying experience whilst managing the payments infrastructure as well as creating a proper economy within its platform. Logically, this is probably one of the first integrations they might make with their Horizon platform once it’s opened up to the public. In doing so, Facebook would be able to provide its users with an experience that spans both the digital and physical worlds. What remains to be seen is if Facebook allows other platforms to integrate with its Marketplace to allow a true cross-platform experience.

The future of work

For Facebook to achieve their goal of becoming a Metaverse company, it'll need to address the issue of working within a borderless physical and virtual environment. As of May 2021, Facebook Workplace had 7 million paid subscribers, significantly lower than Microsoft’s claim of 145 million active users for Teams. Facebook is already building out VR office capabilities through its Infinite Office product, but the more interesting question is if ‘work’ in the Metaverse will resemble what we perceive as work today.

One example of what work could look like in the Metaverse is Axie Infinity. A deceptively cute, Pokemon-like game built on the Ethereum blockchain in which people buy digital pets (NFTs) to breed, battle and trade them. And it's just done over $190M in revenue in July and is on track to hit over $200M in August.

How?

By pioneering a new gaming model: Play-to-Earn

With many games adopting a freemium model, they invariably turn into pay-to-win games with game developers pocketing exorbitant sums from their players - I'm looking at you EA Sports. Conversely, the Play-to-earn model "rewards players for the time and effort they spend both playing the game and growing the ecosystem." Axie players make money by breeding new Axies, or selling their own Axies to new and existing players. Additionally, Axie players battle against other players and complete Daily Quests to earn Smooth Love Potions which can be redeemed for fiat or used to breed more Axies.

Being paid to play games is probably something that most people can get behind, but it's harder to see where the value creation lies. In the case of Axie, the value creation comes from players providing 'liquidity' in the form of Axies that other players can battle against. This in turn creates joy and excitement for both players and they both profit in the process. It should be noted that earnings from Axie are obviously reliant on the crypto markets remaining stable which is easier said than done.

Is this a durable style of working? This remains to be seen, but Axie Infinity has given us a good glimpse of what work could look like within the Metaverse. Will Facebook adapt its platforms to foster this style of work? It’s unclear where they land on this issue, but there’s hardly a precedent set here so this will require some real innovation from Mr Zuckerberg.

Where to next?

Facebook’s goal is certainly audacious and it definitely has the user base to go out and create an experience that resembles a Metaverse for its users. Whether it can actually innovate and create an interoperable platform to integrate with other players in the space is a little harder to get conviction on. They’ve taken the first step towards innovating through ambitious signalling - will they be able to execute?

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Thanks for reading and see you soon!

Abhi