Facebook went under a major brand overhaul to project its focus on the Metaverse and rebranded to Meta in late 2021. The major shift for the social media giant surprised many, but looking at Facebook’s record with emerging tech trends, it was only a matter of time before it jumped into Web3.
Meta’s crypto aspirations first came to light in 2019 after a failed experience in the digital payment sector with a Messenger-integrated payment option. The tech giant subsequently revealed its plans to launch a universal stablecoin backed by a basket of fiat currencies from different nations. The plan was to introduce a global digital payment network with the help of its social media reach of more than two billion active users on Facebook, Whatsapp and Instagram.
However, with the uncertain nature of the asset and Facebook’s tainted record in managing private user information, regulators around the globe were suspicious at best. Lawmakers in the United States compared it to scrip while others vowed to never let it see the light of day.
A rebranding from Libra to Diem did not help the nascent payments project, and the stablecoin officially shut down in February this year.
Meta has since shifted its focus toward Web3 and aims to become a leader in the Metaverse. Meta has spent billions of dollars on specialized hardware and virtual reality tools. However, with the advent of the bear market, Meta’s metaverse bet has started to look shaky as well.
Richard Gardner, CEO of global software and hardware solution provider Modulus, told Cointelegraph that Meta hasn’t found its core competence yet, stating:
“Great companies know their strengths and exploit them. Facebook is now in the unenviable position of attempting to compete within the metaverse economy. Unfortunately, that’s not where the company’s core competencies are.”
“Worse, they’re competing against dozens, and maybe hundreds, of smaller companies that are more nimble and agile to adjust to the ever-changing landscape. These companies were specifically built to develop and exist within the metaverse ecosystem. Facebook was not. Shareholders won’t allow this dalliance to continue,” he added.
Meta’s biggest challenge is decentralization
Meta — which boasts the lion’s share of the world’s social media user base — is currently struggling to transition from its Web2-based origins toward a decentralized Web3 ecosystem. Meta has already experienced a multitude of failures with its stablecoin foray and many experts believe that its metaverse aspirations look misguided at this point as well.
John Payne, CEO of metaverse operating system developer Croquet.io, explained to Cointelegraph that the consensus is that big tech firms like Meta making a foray into Web3 must first understand the ethics of it. He explained:
“The biggest competitor to Meta’s view of the Metaverse is the open, interoperable standards-based Web. Open technologies usually win. The web is everywhere, on every device with a screen. It has the largest community of developers in the world. And, portals based upon open web standards will make the Metaverse truly independent and interoperable. The web will be the foundation for the Open Metaverse and that is where the vast majority of people will thrive.”
Meta’s metaverse aspiration, unlike its stablecoin projects, doesn’t have any regulatory setbacks, but despite that, the company is struggling to keep up in the Web3 race. This is primarily because, unlike the last decade when Meta could copycat their competitors’ new features (e.g., Stories from Snapchat, Dating from Tinder, Live Video from Periscope, etc.), or simply acquire their competitors (e.g., Instagram, WhatsApp, Beluga, etc.), they have to build out this entire platform themselves from the ground-up.
Additionally, there aren’t many mature acquisition targets in the industry right now, and the U.S. government has signaled its distaste for Big Tech’s continued acquisitions of competitors in what it considers possible violations of antitrust laws.
Some in the Web3 space believe that the sector’s open and decentralized nature goes against the Web2 company’s main aim of establishing a monopoly. Rick Porter, CEO at decentralized social media platform DSCVR, told Cointelegraph:
“The Metaverse has to be open, integratable and unowned by any single entity. Meta’s push to own the Metaverse is antithetical to this concept. Further, Facebook’s historical failure to maintain the open integrations that it first envisioned with Open Graph does not bode well for its Metaverse aspirations. With the advent of Web3 and open ecosystems, it’s hard to see the Metaverse inside Facebook’s walled garden.”
Meta’s past conduct continues to haunt its present
Being the first in a new market gives opportunities, but experts believe Web3 is all about digital data ownership and Meta has to prove that it can be trusted despite a tainted past.
In July, The Federal Trade Commission filed a lawsuit against Meta’s acquisition of VR application creator in a bid to restrict the tech giant’s growing monopoly. Later in September, the social media giant was slapped with a $402 million fine by the Irish Data Protection Commission for its handling of children’s privacy settings on Instagram.
To become a reliable point of interaction for the masses in the Metaverse, the tech giant must get its act in order and regain the trust of the main public before it goes on exploring the Metaverse.
Some have noted Meta’s focus on the hardware aspect of virtual reality — spending $10 billion on its Reality Labs augmented reality and virtual reality division — rather than improving and building a safe metaverse experience for users. There have been social issues within its metaverse platform, Horizon Worlds, where people have complained about facing various types of harassment.
While Meta has enjoyed successful sales of its popular VR headsets, Horizon Worlds’ daily active users — which numbered 300,000 as of February 2022 — are dwarfed by the billions of active users across Meta’s other platforms.
The firm is also facing market headwinds. This year’s bear market has been tough on a lot of firms, and Meta has particularly suffered. Since August 2021, the firm’s stock has fallen from an all-time high to lows not seen since 2018.
Arthur Sabintsev, chief information officer at Web3 infrastructure provider Pocket Network, told Cointelegraph that Meta’s inexperience in Web3 has forced the firm to find its path by burning a large chunk of investments on untested products such as VR technology. He explained:
“This big bet they’re taking is better than trying to compete in an ever-crowded field of social media apps, like YouTube and TikTok, to which they have been perpetually losing market share and mindshare. The hope here with this bet is that over the next decade, as virtual reality technology progresses, just as mobile technology evolved, people will naturally change how they spend their time with the technology online. If this unfolds, Meta will have a massive first-mover advantage at their scale.”
The firm has already lost $2.8 billion on Reality Labs and has quietly reduced its workforce by 10% amid growing concerns. With early losses in its heavily invested VR hardware division, a worsening market condition, and Facebook’s failed track record at managing users’ private data, the company’s metaverse endeavor could face more turbulence ahead.