Meta’s quarter missed across the board. This is its second quarter of issues, and its stock has been declining steadily, to the point where it’s lost about half its value. Obviously this isn’t a good thing for Meta, but the big question is what it might mean to the OTT space, the metaverse, and the tech markets overall.
One essential truth here is that social media may be social, but society is fickle. The whole social media thing is about being in touch with pop culture, which changes rapidly. Not only are the users gadflies, any successful social platform has a community of users who are happy to complain about things they don’t like, which serves as the source for new platforms that fix those issues. We’ve had social-media failures before (remember Second Life?) and we’ll continue to have them, because that’s the nature of social media.
Regulators have no love for social media either. Meta’s efforts to use its market capital to buy up players has met with regulatory scorn; the FTC has just sued to block Meta’s acquisition of the maker of the Supernatural fitness app. So think about it; your own space is doomed to social death, you can’t use your current gains to buy into adjacent areas…not a happy picture.
Meta was smart in that it realized this, which is why it jumped so aggressively on the metaverse concept. The problem for Meta there is that it’s essentially an all-or-nothing bet on a concept that’s going to take considerable time, investment, and luck to bring to maturity. Meanwhile, to avoid Street condemnation, they have to tell the world what they intend, which means that others (like Microsoft) are free to jump out and to their own thing in competition. Meanwhile, social media is changing as it always does, and not to Meta’s benefit.
How did Meta let things come to this? I think that like most companies, they’ve had their eyes on their feet instead of the horizon. To be fair, the regulatory shift that Sarbanes-Oxley represented shifted companies’ focus from longer-term to this-quarter, which sure makes watching your feet look smart. The problem is that this view not only disguised the risk something like COVID represented, it disguised what a recovery from that risk would mean.
Facebook is a more immersive form of social media, compared to something like TikTok, which Meta admits is a major threat to it in the near term. Meta introduced Reels in Instagram to shift its focus to compete better, but if you think about it, they should have been planning an evolution as soon as COVID hit. People sitting at home under quarantine conditions use social media one way, but those same people use it another way when they’re back out in the world in what’s been called “relief” behavior.
This too shall pass away, as the old saying goes. Facebook succeeded largely because it created a trend, and now it’s in a position where responding to others’ initiatives is critical. By the time Facebook makes Reels a successful TikTok competitor, what will social media look like? Just a quarter ago, we might have said “the metaverse”, and that still might be true, but the problem is that short-term Wall Street pressure is now causing Meta to short-change its metaverse.
The current Meta advertising on the metaverse is focusing not on a social experience but on a personal one. Their vision of the metaverse has always depended on virtual reality, which means that their Reality unit (where the metaverse lives) has necessarily been looking at how to make a metaverse look better. A social metaverse needs to look compelling, but it also has to be realistic in the way that avatars that represent people can interact. That, as I’ve noted in past blogs, demands lower latency in processing a collective vision of reality in which the collected users (via their avatars) can live and move. Otherwise, avatars will “lag” and any interaction will be jarring rather than representative of real personal interactions. The problem, obviously, is that improving latency to make interaction realistic means things like edge computing, meshing of edge sites, low-latency access, and so forth. All of these things are possible, and many might be within Meta’s ability to drive forward, but not when their profits are under near-term pressure.
A metaverse where kids can learn about dinosaurs, the rain forest, or endangered species is surely helpful from an educational perspective. Another one where surgeons can train in virtual reality to hone their skills is helpful in improving surgical outcomes. Are either big money-makers? That’s the challenge here, and to face it Meta is making the metaverse into a kind of super video game platform with evolutionary capability.
Many, if not most, of the metaverse applications Meta now seems to be promoting could be delivered via a gaming platform, if it were augmented with high-quality virtual-reality capability. Microsoft’s vaunted counter to Meta’s metaverse move was the acquisition of Activision Blizzard, which of course is a gaming platform. That raises the question of whether Meta can meet any short-term metaverse goals without having a gaming franchise of its own to leverage. If not, then the questions are how fast the “evolutionary” capability could be delivered, and what form it could take. The two are clearly related.
To evolve the metaverse to the vision that was first laid out, the “social metaverse” that Meta implied with its announced restrictions on the personal space of avatars, would require edge computing and low-latency meshing of the edge locations, or confining the users to locales that were able to assure low latency within them. This would be not only an evolution of the metaverse as it seems to be constituted today, but an evolution in social media, to favor the creation of virtual communities that mirrored the ability to regularly interact.
Among young people, most social-media interactions are with others they know in the real world, and usually see regularly. The obvious question then is whether a “metaverse” for those people is even interesting. Remember, this is the group that’s made TikTok a success, and they tend to use it for short interactions when they’re either physically apart or want to establish a kind of private back-channel to a shared real-world activity. Think people at a party chatting about another attendee.
This raises two critical questions about Meta’s future. First, is its current challenge due to the fact that social media is evolving away from the longer-term immersion that Facebook represented. If it is, then the metaverse is the wrong answer. Second, does Meta already know this, and is now trying to repurpose its metaverse initiative to fit a different market niche?
It also raises a question for the metaverse community, especially the startups. If the metaverse is just a super-game, then what real opportunities does it open? Startups, because of their VC financing, are notorious for wanting a quick buck, and how many VCs who backed the metaverse model will believe that can be achieved now? Worse yet, how many of those VCs would have backed a startup whose payoff depended on cracking the gaming space? Add to this the fact that some reports are saying that the current situation with tech VCs is similar to a stock market crash, and you have some funding risks to consider.
The biggest risk, of course, is that a big shift from Meta will be broadly interpreted as an indicator that the metaverse is failing as a concept. The truth is that we’ve not moved far enough along in laying out the ecosystem it will necessarily become to understand even what makes it up. We don’t know what technologies will be critical, or what the ROI in various metaverse applications will be. The real danger is that we may delay answering those questions, and thus delay the realization of what I think will prove to be an important, even critical, concept.