Long Take: Why Facebook is domain squatting on the Metaverse
Gm Fintech Architects —
Today we are diving into the following topics:
Summary: We discuss the Facebook pivot into the metaverse and its rebrand into Meta. Our analysis touches on the competitive pressures faced by the company from big tech players, other ecosystem builders, and limits to growth for a $1 trillion business that likely motivated this refocus. We further dive into network effects around platforms, and why super apps and financial features are attractive, and how owning the hardware is a required defensive strategy. Lastly, we discuss these development through the crypto and Web3 lens, deeply disappointed with Facebook trying to domain park a generational opportunity with a centralized solution.
Topics: metaverse, DeFi, NFTs, social media, big tech
Tags: Facebook, Meta, Apple, Amazon, Google, Cryptovoxels, The Sandbox, Libra/Diem
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Long Take
Setting the Scene
The artist enters his digital fiefdom, a polis of friends.
His mind flickers with the electricity of John Galt’s creative industry. A command issued from a motion of the fingers instantiates life, rendered in bits and projected onto the retinas of billions, each plugged into seamless hardware connecting thought and vision. With a flick of his hand, flesh and bones mend together. One avatar, another, yet another zip by.
Today we choose the grilling of the meats of animals, and the having of the human fun. Today we choose a battle for the hearts and minds of hedge fund investors looking at Bloomberg transcripts on the institutional capital markets.
The crowd sees the autarch through the machine fog.
Its timeless shape shifts and glistens before our eyes. Will it be beneficent, showering us with airdrops of advertised value? Will it gift us with Amazon gift cards, and Netflix subscriptions, and other points that we collect for sustenance? Or perhaps, will it assume the maximal posture, face recognizing and ranking us into silence. Will the autarch remember us, the way it remembers all, as it incorporates us into its neural network machinery, hallucinating forward our memories.
Will it make us feel good, or make us feel at all?
Is there fight yet from the rebels? The crypto anarchist lot — what have they got, but a bunch of voxel apes and hooded Mario aspirants? What have they got but cartoon tribes and social pyramid money? What does a farm yield in the Metaverse?
And you, financial bank, or old world government steward? What sword of yours do you bring in the coming platform shift? Because whether you believe it and whether you act on it, it doesn’t really matter. Our children have already chosen the new frontier, one where you are both deeply clueless and defanged, where currency is meme and ridicule. Who then holds power there?
The Basics
Facebook announced a deep commitment to the concept of the Metaverse at a keynote last week. We recommend you review Mark Zuckerberg’s video transcript here, which we will use as reference in this analysis. Further, the company is being rebranded from Facebook, which is a single application, to Meta, which like Google’s Alphabet, will house a number of component brands and projects. For further reference, our deep coverage on what a Metaverse world looks like is here.
There is a lot of analysis going on of these developments. We don’t want to repeat this, but rather, we want to contextualize it from the perspective of the financial, Fintech, and DeFi industries. It feels that much of the reaction to Facebook’s announcement is one-sided and reactionary to their damaged brand, and in particular undervalues the efforts Facebook has been investing into the space for years. The 2014 Oculus acquisition alone cost $2 billion, which may be a pittance for a $1 trillion company, but was regardless a large investment into a particular vision of the world.
Further, we think there is meaningful context to gain from understanding (1) how hard it actually is to grow a $1 trillion company, (2) the paths to doing so and therefore the competitive dynamics relative to other mega tech firms, and (3) tactics to achieve such strategies. Facebook was an attention company that has succeeded in capturing maximal attention in a world where the primary path to accessing attention is Apple’s and Google’s phone operating systems. It is nearly impossible to shove more digital media consumption time into our current consumption patterns.
So by understanding the dynamics of attention supply/demand and the commercial levers around it, we can better understand why Facebook pushes out of information into payments and commerce (e.g., Instagram social commerce, WhatsApp Payments). And by seeing the weak position the company has relative to the hardware manufacturers, and their pricing power over Facebook, we can see why it would try to *cause* a platform shift to occur, which for all intents and purposes is not yet ready for prime time.
Last, we should not shy away from yelling into the wind. It is ugly, callous, and irresponsible for Facebook to choose *Meta* as its new brand while virtue-signaling openness to the world. For a massive social media incumbent, one which has caused much of the problems with the recent Internet, to try and domain-park a generational value shift for its own benefit is appalling and tone deaf.
Zuckerberg says:
Yet here we are in 2021 and our devices are still designed around apps, not people. The experiences we’re allowed to build and use are more tightly controlled than ever. And high taxes on creative new ideas are stifling. This is not the way that we are meant to use technology. The metaverse gives us an opportunity to change that, if we build it well, but it’s going to take all of us; creators, developers, companies of all sizes. Together, we can finally put people at the center of our technology and deliver an experience where we are present with each other. Together, we can create a more open platform with more ways to discover experiences and more interoperability between them. And together, we can unlock a massively bigger creative economyThe substance is true, but don’t believe him about whose opportunity this is to fix.