Bloomberg Opinion — In a previous column, I allowed myself to daydream about Mark Zuckerberg announcing the end of Facebook Inc.’s main app. It may have sounded implausible at the time, but now Zuckerberg appears to share my dream at a certain level: He’s working on a wholesale solution to Facebook’s endless public relations and regulatory issues — a pivot.
It’s the kind of pivot American Express Co. performed when it moved from the express delivery business to charge cards; or, to use a more recent example, the kind the company now known as Slack Technologies Inc. executed by dropping the unsuccessful game it was developing, and turning the game’s messaging feature into its main blockbuster product.
Zuckerberg is not talking about his metaverse project as a potential sideline. He appears to see it as something that will eventually supersede Facebook’s current line of business. “We basically believe that the metaverse is going to be the successor of the mobile internet,” he said on Facebook’s third quarter earnings call on Oct. 26.
It is to the metaverse that Zuckerberg hitches his hopes of luring younger people — probably lost irretrievably to the main Facebook app — back to his products. His plan is to get a billion people using avatars to travel between virtual and augmented reality worlds for work, shopping and leisure by the end of the current decade. As Facebook executives said on the call, the drive is costing the company $10 billion of net income this year — that’s 19% of what Facebook’s expected net income would have been without the outlay. Put differently, Facebook is giving up close to one quarter’s profit toward the project.
Facebook’s resources give it a good shot at the pivot. Its business continues to prosper despite all the negative publicity; its third-quarter revenue and profit increases would have been the envy of pretty much any other large company. There is, of course, some danger of regulatory fallout from the media gang-up. But even if Facebook is required to divest some of its properties, hire more people to do moderation (read: censorship) or give up collecting certain types of data, it can still afford to build out the necessary infrastructure by the end of the 2020s. Facebook management is confident enough of that to offer hefty stock buybacks. The internet’s advertising duopoly isn’t easy to dismantle: There aren’t all that many alternatives for advertisers.
If the metaverse play succeeds, there may not be any lasting need to respond to challenges such as filtering out fake news and hate speech, limiting data collection, making ad targeting more transparent — all these nasty, intractable, nagging nuisances that the recent release of the “Facebook Papers” has confirmed. New challenges will replace these, and before the media and regulators get their heads around them, Mark Zuckerberg may be able to enjoy a run even more lucrative than in the social media era.
For starters, most interactions in the metaverse — both in virtual and augmented reality — likely will not leave a permanent record, just as they don’t in the physical world. Applying highly imperfect AI to obscure dialects of Arabic to remove terrorist content? Forget about it. If people are using virtual space to arrange a terrorist attack or recruit suicide bombers, they might as well be sitting in a cafe; it would be unreasonable to demand that the platform record all encounters.On the other hand, getting into the Facebook metaverse anonymously is unlikely to be as easy as it has been on “traditional” Facebook. The inflation of user numbers via lax identity checks only paid off in the early days, when audience growth was all that mattered; it turned problematic afterward, complicating ad targeting and enabling all sorts of nefarious activity. Facebook doesn’t need to do it (or even tolerate it) for the metaverse. On the contrary, strong identity checks would make sure brands will reach their audiences more effectively.
The Facebook metaverse may well also be far more commercial from the outset. With Zuckerberg’s company making the massive infrastructure investments, workplaces hoping to cut down on travel and office rentals by using virtual reality will need to pay Facebook for the virtual “real estate.” The same with vendors and creators peddling their wares. With companies, not people, setting the tone, and with the cost of entry non-trivial for an ordinary person, Facebook’s policing job can be that much easier; companies are less prone to take risks than individuals, and a lot of the rule-keeping can be delegated to the owners of “worlds” in the metaverse.
All of this, of course, is far removed from the starry-eyed dreams of an Open Metaverse in which big corporations don’t set the rules — a kind of second coming of the pre-commercial internet. But it’s a lot more like the offline world than even the current version of the Web. Out in the real world, most people have some form of identification and are required to show it when authorities demand. Venues where people congregate are mostly owned by firms, governments and other entities. At the same time, it’s relatively easy to do things unobserved, even at many of these venues.
Dozens of firms are trying to get in on the ground floor of metaverse creation. The extended reality space is getting crowded, but Facebook is the player to watch, not only because of its enormous wealth, but also because Zuckerberg is especially motivated to leave his errors — some of which were probably unavoidable while Facebook was an ambitious start-up and then a contender for a share of the digital advertising pie — in the past. Zuckerberg needs to build a competitive metaverse infrastructure and try to set some much-needed interoperability standards for smaller players. That would make his company even more impervious than the current version of Facebook to attacks from media and regulators.
Given Facebook’s weakness with younger users, it’s also a race against the clock.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is a member of the Bloomberg News Automation team based in Berlin. He was previously Bloomberg Opinion’s Europe columnist. He recently authored a Russian translation of George Orwell’s “1984.”