Rumors of the metaverse’s death have been greatly exaggerated

When Meta recently laid off more than 11,000 employees in Nov 2022, then another 10,000 in March 2023, some tech industry watchers concluded it was a nail in the coffin for the metaverse.

But before we lower the metaverse coffin into the ground, let’s remember why Meta CEO Mark Zuckerberg pivoted to the metaverse in the first place. It provides vital context for recent events and casts them in a different light.

Contrary to popular belief, the decline of Meta (the parent of Facebook, Instagram and WhatsApp) did not stem from its investment in Zuckerberg’s vision for the future. Meta’s plummeting stock was tied to its legacy investment in social media platforms whose lifeblood — the ability to track users and their data — was being choked off by market forces beyond their control.

One choke point took effect in April 2021 when Apple introduced changes to its ad-tracking policy. In a nutshell, Apple’s “App Tracking Transparency” feature gave users a clear choice whether to allow a company to track them or their data across different apps and websites.

If a user did not grant that permission, Facebook effectively lost the ability to both target and measure the impact of an ad. The new rules bit a $10 billion chunk out of Meta’s advertising business. This represents nearly 25% of Meta’s net profit in 2021.

Facebook was aware of its vulnerability to such policy shifts. As an ad-based business, Facebook didn’t own the hardware platform its products lived on. Nor did it own the operating systems and app stores its apps ran on. That placed it at the whim of companies such as Apple and Google.

Long before 2021, in an effort to resolve the issue, Facebook spent several years in discussions with Apple about an ad-free, subscription-based version of Facebook. The deal would have netted Apple a 30% slice of Facebook’s revenue on Apple’s platform, but negotiations failed.

The pivot

Six months after Apple’s privacy change, Zuckerberg steered Facebook hard left, rebranded it as Meta and went full speed ahead toward the metaverse, fueled by a multibillion-dollar spend on R&D and product development.

The company had already been positioning itself for this self-reinvention for years. In 2012, Facebook rolled out its own open app store. In 2014, to own the hardware platform, it purchased VR headset maker Oculus. The moves gave Facebook more power to control the fate of its own apps and to benefit from the sales of other apps, in a similar fashion to Apple.

The wisdom of self-disrupting in anticipation of market inflection points is well-established in the tech industry. Equally well established are the dangers of failing to do so. Look no further than the likes of Blockbuster, Kodak, MySpace and Palm Pilot — once household names that became cautionary tales due to their failure to innovate. Meta did what it had to.

In all the speculation about the demise of the metaverse, two important points tend to get lost. First and most obviously, Meta and the metaverse are not the same. Even if Meta were to ultimately sink, the metaverse — a shared, persistent, and open experience characterized by virtual and augmented 3D worlds — is far bigger than any one company.

Second, inflection points can take a long time to unfold, and we humans often get the timing wrong. Roy Amara, a Stanford University computer scientist and longtime head of the Institute for the Future, coined a “law” for this tendency. Amara’s Law states that we tend to overestimate the impact of a new technology in the short run, but we underestimate it in the long run. The law has much in common with Gartner’s hype cycle for emerging technologies.

Examples of Amara’s Law abound. Consider self-driving vehicles and VR/AR, both of which have been criticized as overhyped and unlikely to deliver on their promise. This tendency is nothing new. There were even those who believed the Internet was no more than a passing fad.

Going by Amara’s Law, one could argue that those who insisted the metaverse would change our daily lives in the near future were overestimating its impact in the short term.

There’s also evidence that those declaring the metaverse is dead are underestimating its impact in the long run. To use Gartner’s terms, the naysayers have simply slipped from the “peak of inflated expectations” to the “trough of disillusionment.” But that trough is just that — a temporary dip until the metaverse climbs its way up to the “plateau of productivity.”

Numerous technology trends point to the inevitable opportunity for the metaverse. For instance:

• Two out of every three people on the planet will be on the internet.
• Mobile devices are exploding in number, averaging 3.6 per person.
• GPUs, which didn’t exist 25 years ago, are dramatically transforming rendering capabilities in these devices.

The metaverse isn’t limited to wearable technology. GPU-driven smart devices can render beautiful 3D images and connect to cloud-enabled virtual content, putting the metaverse both in front of our eyes and at our fingertips. The question will be less about technology or access and more about our willingness to participate. 

Will we participate in virtual worlds?

The pandemic turbocharged the creation and normalization of virtual worlds and virtual economies. Online gaming, for instance, is now among the world’s fastest-growing industries, with revenue estimated to exceed $196 billion. Gartner predicts that by 2026, one in four people will spend one hour a day working, studying, shopping and socializing in a shared virtual environment. And some estimate that the industrial metaverse — how we virtually design, manufacture and interact with physical objects — could be a $100 billion market by 2030.

So will we participate? The answer appears to be a resounding and eventual yes.

All of this suggests that the rumors of the metaverse’s death have been greatly exaggerated. Like the previous iterations of computing and networking — the mainframe era, personal computing and the internet and the mobile and cloud era — this next paradigm shift to the metaverse will take time. And that’s good news for investors, as the best time to invest in future technology is before it exists. 

Doug Griffin is managing partner at Spatial.

Originally appeared on: TheSpuzz