The metaverse revolution may yet devour Meta

One of the snarkiest fights raging among our digital overlords is over a technology that does not yet exist: the metaverse. So in love is Facebook’s founder Mark Zuckerberg with its promise that he rebranded the company as Meta and bet his business on the idea. In spite of widespread scepticism, he has kept the faith, running up more than $27bn of operating losses in the company’s metaverse division over the past three years. This week, Meta launched a new Quest Pro headset priced at $1,500 and announced a partnership with Microsoft.

Yet, as Apple’s chief executive Tim Cook has acidly pointed out, it is still not clear that ordinary people know what the metaverse means. Meta’s conception remains “ambiguous and hypothetical”, says Snap’s founder Evan Spiegel. The company’s rivals are always going to be detractors, but they have a point. Meta’s investors are growing restless too: the company’s share price has dropped 62 per cent this year.

The irony is that Zuckerberg is right that there are fortunes to be made in the metaverse, a network of immersive 3D digital worlds that he believes will one day become the primary way we live our lives and spend our time. The trouble is that Meta seems unlikely to be the main beneficiary. Call it first mover disadvantage.

There are three good reasons for doubting that Meta will ever “own” the metaverse. The first is that the company has mostly bet on consumer-facing VR hardware when the early profits are more likely to come from enterprise-focused software. Its latest Quest Pro headset may be a marked improvement on earlier models but it remains clunky, battery-sapping and expensive. Its VR offering still lacks a killer app to stimulate mass adoption.

An internal memo in September from the vice-president of Meta’s metaverse arm acknowledged that Horizon Worlds, the company’s social VR experience, was still struggling to achieve product-market fit. “The simple truth is, if we don’t love it, how can we expect our users to love it?” For the moment, Microsoft’s focus on incorporating mixed reality with its existing range of business software tools, seems a cannier play. Meta’s latest tie-up with Microsoft appears to be recognition of that fact.

Second, Meta’s metaverse ambitions arouse deep suspicions among others in the industry, who are pressing for a far more decentralised and democratised virtual future. One of the company’s fiercest critics is Herman Narula, co-founder of the British start-up Improbable and author of a new book Virtual Society. Narula argues that the metaverse must be far broader than rebranded VR and far bigger than Meta. “We’re in this bizarre world where the disaster that is Facebook’s influence on our culture is seen by many people as a vision of the metaverse,” he told a tech conference last week. “I think what we learn is that Facebook probably shouldn’t build the metaverse.”

Third, government regulators are no fans of Zuckerberg’s company either and appear determined to avoid the mistakes made with the internet, which allowed several dominant gatekeepers to emerge. It is still an open question what governance structures will evolve in the metaverse to resolve disputes over intellectual property rights, taxation, cyberbullying and disinformation. Some argue that self-governing virtual communities should set their own rules or help create a not-for-profit supervisory entity. But it is certain that regulators will be paying closer attention. “The age of self-regulation is definitively at an end,” says Conan D’Arcy, a director at the advisory firm Global Counsel, which has been collating regulators’ views.

Amid all the doubts swirling around Meta’s strategic bet, the commercial opportunities in the future metaverse are becoming clearer. Last year, Microsoft won an order to deliver 120,000 augmented reality headsets to the US army, while the consulting firm Accenture bought 60,000 VR headsets to train its latest recruits. In education, New York University has just launched a Metaverse Collaborative, responding to demands from students, city mayors and industry partners to prepare for a virtual future. The metaverse is “incredibly important for the creative economy,” says Angie Kamath, dean of NYU’s school of professional studies.

In spite of the metaverse’s exciting potential, we are still at the “throw money at a wall and see what sticks” stage of its development, essential for the evolution of most new technologies. That, though, is a strategy better suited to high-risk venture capital firms than publicly listed companies, such as Meta.

john.thornhill@ft.com