The metaverse hype cycle continues to face challenges (speaking more on the consumer side) as the first quarter of 2023 comes to a close. Meta, having assumed the position of metaverse champion has stumbled into this role, leading some companies to invest too early based on misperceptions or unreasonable expectations, especially within a challenging economic environment. Meta and other metaverse champions need to focus on the foundational building blocks of the metaverse (e.g., standards and best practices) and present clearer roadmaps to set better expectations.
Meta to End Its Foray into NFTs and Mark Zuckerberg Espouses the Virtues of In-Person Work
March 2023 continued to see tech and media companies making strategic market adjustments; some of these activities impacted metaverse markets. The Walt Disney Company, for example, announced plans to cut 7,000 jobs and among the first round of layoffs was its next-generation storytelling and consumer experiences division, which was created to explore metaverse opportunities (the team size was estimated to be around 50 employees). Meta announced its plans to lay off an additional 10,000 employees (in November 2022, Meta cut 11,000 positions) and close roughly 5,000 open job postings that had not yet been filled. Also in March, Meta announced it would end support for Non-Fungible Tokens (NFTs) on Facebook and Instagram (after less than a year in the market), and following analyses of internal performance data, Mark Zuckerberg revealed that younger engineers (those earlier in their career) perform better when they work in-person with colleagues at least 3 days each week, versus remotely—further stating that “in-person time helps build relationships and get more done.”
Meta, which was the company that launched this metaverse hype cycle, is now, at least by appearances, taking a big step back from its metaverse ambitions and, among other things, is also hyping Artificial Intelligence (AI) like other tech companies. What does this all mean for the metaverse?
Metaverse Adjustments Speak More to Meta than the Metaverse
With regard to the restructuring and workforce reductions, it is important to keep in mind that these activities are occurring far more broadly within the tech industry than metaverse and immersive alone. The elimination of early metaverse efforts, even those that are comparatively nascent and small (e.g., 50 employees at The Walt Disney Company, which employs more than 220,000) speaks to the long road ahead for the buildup to this future. Many of the larger tech and media firms are publicly-traded companies, meaning they are beholden to the shareholders to maximize the value of their stake within the company, which conflicts with a longer-term play (that requires significant investment) like the metaverse when expectations point to a downturn in the economy (and/or other challenges in core businesses like advertising). So, while these decisions negatively impact metaverse market progressions, and certainly carry weight for those affected by these adjustments, these announcements and market shifts are not surprising and, in many cases, make pragmatic business sense.
In a similar vein, Meta’s decision to end its efforts on the NFT front makes sense from the perspective of a company looking to cut costs and adjust its strategy to better meet investors’ demands. The NFT market lacks key ingredients like interoperability of assets, avatars/digital identities, and a general lack of consumer education, which again point to a longer time horizon before these activities prove profitable for a company like Meta. Mark Zuckerberg’s statements about in-person work with respect to junior hires sounds perfectly valid, but Zuckerberg’s recommendation for employees to work increasingly in-person, coupled with the company removing (or “temporarily pausing”) remote work job applications run at least somewhat contrary to Meta’s continued claim to support distributed/remote work, which is a key element of a future metaverse. Taken individually, all of those actions and statements are understandable, but this is Meta, not Facebook.
Taken in that context, Meta’s actions begin to do more to call into question the buildup to the metaverse than serving as its champion. Few would claim that today’s breadth of Communication and Collaboration (C&C) technologies are perfect substitutes for in-person work, but when the company that changed its name to push its metaverse initiatives begins to tout the virtues of in-person work, it sends mixed signals. Again this criticism is not meant to call into question the validity of those claims or the appropriateness of Meta’s actions, Meta certainly isn’t alone in recent calls to a return to offices, but the way Meta has handled these issues represents a lack of market leadership and stewardship for the nascent metaverse; a “position” the company assumed when it changed its name. Unconfirmed reports also suggested that many Meta employees have not embraced Horizon or other immersive tools for work, which, if true, when grouped with these other announcements, points to Facebook’s calculated risk to change its name as poorly timed. Meta was upfront, stating its vision of the metaverse will take years to come to fruition, but outside of Oculus Quest devices, the company has yet to publicly show or demonstrate it has developed solutions that lead the market. To bring so much attention to the metaverse when the tech, services, and market environments (regulation, user behavior, business models, etc.) were not ready, including its own solutions, does a disservice to the market.
Much of the metaverse is rooted in trends that existed well before Facebook changed its name—Web3 companies and the “industrial metaverse” all predate the creation of Meta and the hype around the metaverse. The metaverse, or something like it, is likely coming (at least something different and more advanced than where we are today); therefore, Meta won’t make or break this future, but given its size and influence, the company can accelerate or slow its progression and this is where it comes up short.
The impact of Meta’s metaverse struggles is, for the time being, is creating more waves within the press and media than with companies currently targeting the space. Standards groups, Web3 companies, “Metaverse” games, and industrial/enterprise markets are still forging ahead. The negative reception in the press, however, does portend some difficulties for the consumer space if end users internalize these issues as reasons to avoid metaverse services and content. If Meta does abandon the leadership position of driving this metaverse hype cycle, expect the gaming industry to fill in this void for consumers and the industrial market to continue leading the non-consumer-oriented markets.
Focus on the Process Rather than the End Game
It is, however, likely too late for Meta to turn back the clock and return to its Facebook roots—the metaverse box has been opened. Meta, however, can do a better job with its framing of where it stands today and where it intends to be in the near term. For example, with regard to its work solutions, Meta should frame any shortcomings as a call to action for its employees and work toward bringing better parity to remote and in-person work, rather than saying in an uncommitted fashion that the company supports distributed work, but employees should make an effort to be in the office more.
Companies like Meta cannot show products and solutions that are metaverse ready today simply because they do not (and cannot) exist yet, but this does not eliminate the prospects for thought leadership and champions of this future. Companies like Meta also need to provide more relatable and clearer roadmaps to better set expectations, which would go a long way in settling confusion even in lieu of universally accepted definitions that have yet to be drafted. The topic of AI, for example, has come to “replace” the metaverse; this perception is again fueled by Meta. Some example headlines from March 2023 are listed below:
- Meta moves away from metaverse as AI dominates (Washington Times)
- What metaverse? Meta says its single largest investment is now in “advancing AI” (CNN)
- Meta is pushing the metaverse aside for AI (Yahoo Finance)
- Meta’s metaverse is on the back burner (Axios)
- Mark Zuckerberg Quietly Buries the Metaverse (TheStreet)
- Meta to cut more jobs as it ditches the metaverse for AI (Quartz)
- Zuckerberg Pivots to AI After Pivoting to the Metaverse (Gizmodo)
- Meta CEO Mark Zuckerberg moves away from the metaverse in favor of AI (Business Insider)
- Meta Stock: How Does Shift From Metaverse To AI Impact Its Outlook? (Seeking Alpha)
The problem, however, is that AI and metaverse are not opposing forces. In fact, the future metaverse is reliant on the development of AI (e.g., generative AI to bring accessibility to Three-Dimensional (3D) content generation, intelligent networks, etc.). Meta should be framing AI as a key step toward this future, rather than projecting these investments as a pivot away from its metaverse plans. Again, Meta has already opened the metaverse box and doesn’t appear committed to trying to put things back, so it needs to do a better job of framing these changes.
Meta should take a page from companies like NVIDIA, which has been espousing both AI and metaverse longer than Facebook’s name change. Other companies like Intel have also walked a better line between the larger impacts and potential of AI in the coming years versus longer-term visions like the metaverse. While Intel hasn’t been as vocal on the metaverse, the company has properly highlighted the upcoming demands on computational resources that are not yet ready to accommodate this future. Meta should focus more resources on pushing forward standards and best practices, rather than showing current-generation tech as a window to the future—most consumers are not early adopters who are willing to make that leap of faith and appreciate its potential. Meta and other companies can also find ways to ease consumers into some of the more radical ideas and departures of the status quo like digital asset ownership. Instead of framing this as NFTs, companies could open up marketplaces where users could sell their digital assets to other users, even if this is locked into that space—not too dissimilar to some gaming companies. This allows users to dip their toes into these new business models and realize the value of digital assets. Yes, these recommendations are overly critical of Meta, but again, no other massive tech company like Facebook changed its name to claim the title of metaverse champion.