How Meta (Facebook) wants to siphon revenue from the metaverse

Is the metaverse really the future of the Internet and the advent of a new “open and decentralized” world where the real and the virtual will intertwine in perfect fluidity? Or is it simply a brilliant marketing move to make the use of virtual and augmented reality desirable, technologies which will finally reach maturity in the coming years, to transform them into cash machines and in the process consolidate the dominant positions of certain giants? current digital? The question deserves to be asked in view of the strategy displayed by the most enterprising players on the subject, starting with the aptly named Meta, the parent company of Facebook, Instagram, Messenger and WhatsApp since the end of the year. 2021.

More than a darling, the metaverse has become Meta’s new raison d’être, and the obsession of its general manager, Mark Zuckerberg. The entire business of the company pivots in this universe and its new “revolutionary” applications. Long convinced that virtual and augmented reality will reshape social interactions and open up new advertising opportunities for brands, Mark Zuckerberg wants Meta to become the reference platform for this web3. Meta’s chief executive has pledged to invest $10 billion a year over the next decade to shape this virtual, immersive avatar-filled world.

In other words, Zuckerberg wants to avoid the outdatedness and gradual erasure of his social networks, which currently dominate the web2. The idea is to take advantage of their power – each one has between 2 and 3 billion active users per month worldwide – so that new uses of the metaverse are also democratized thanks to and with them. The objective is in fact to reproduce for web3 the web2 model which has been so successful for Gafam (Google, Apple, Facebook, Amazon, Microsoft): concentrating digital uses around a few dominant, structuring and essential platforms. And too bad for the enormous contradiction between the open and decentralized ideal of web3 and the metaverse platformization strategy that Mark Zuckerberg wishes to impose…

Trillions of dollars in revenue in sight

Because in theory, the metaverse could become a real goose with golden eggs for those who manage to reach the general public. Studies by consulting and analysis firms are multiplying and all promise mountains and wonders: from 31 billion dollars today, the turnover of metaverse applications should jump to 5,000 billion dollars in 2030 according to McKinsey ! The Grand View Research Institute is more modest: 678.8 billion dollars expected in 2030. Unless it is rather 1,500 billion dollars in 2029, as estimated by Fortune Business Insights?

No one knows, especially since the public’s appetite for spending in a virtual environment in addition to the very expensive real world remains to be proven. But the prospects seem enticing for those who believe in them. On the consumer side, we expect the metaverse to revolutionize the way we play online, to socialize -with the advent of avatars and the creation of ultra-realistic virtual environments-, to do fitness, to buy on the Internet, learn online, and interact with remote co-workers. The potential of the metaverse in the fields of culture, consumption (especially luxury and ready-to-wear), retail, media, telecommunications and health would thus open up major growth prospects for the most innovative.

Thus, many leaders in these markets, like the LVMH group in luxury, are already rushing to announce a line of clothing for avatars, an NFT that guarantees ownership of a pair of shoes, in order to position themselves and to create the desire to consume in this new world. Even real estate is in motion: a few lucky ones have already bought virtual goods, sometimes at crazy prices (over a million dollars), and received in exchange a certifying NFT, thanks to the unforgeable technology of the blockchain. , their title deed.

Meta wants to create the App Store of the metaverse… and pocket 30% commission on all its applications

The main thing remains: to create the platforms hosting the future applications of the metaverse. And the technological standards that go with it. This is where Meta wants to play a role, via hardware – virtual reality headsets – and software. In terms of hardware, Meta already dominates the VR headset market with its Oculus Quest brand, which accounts for 78% of headset sales in 2021, according to IDC.

Same thing for software. Facebook’s parent company is taking advantage of its lead to try to lock developers into its ecosystem. To launch an application compatible with Oculus Quest headsets, you must go through the Quest Store, Meta’s application store in VR. The logic is exactly the same as that of the application stores of Apple and Google, which together control the entire mobile market. To access the market, you have to submit to the law of the application store, which also charges a high commission on all purchases made via the applications it hosts.

The irony is that Mark Zuckerberg has no shortage of harsh words to express his outrage at the predatory system of the App Store and Google Play Store. Perhaps he especially regretted being a victim of it? Because Meta has decided to do exactly the same thing with its Quest Store: the group grants itself an automatic 30% commission on all purchases, and takes between 15% and 30% commission on subscriptions. Which triggers, unsurprisingly, the anger of the developers. But the stakes are enormous for Meta: if web3 becomes the reality of billions of Internet users around the world, then Meta will generate colossal additional profits, quantifiable in billions of dollars, exactly like Google and Apple today in mobile .

Finally an opportunity to break into payment with NFTs

For years, Mark Zuckerberg has been trying to insert his social media empire into the payment world. In 2019, Facebook launched Libra, its own decentralized blockchain-based virtual currency. The idea: bypass the international monetary system by popularizing a new cryptocurrency based on a reserve of financial assets (stablecoins). Zuckerberg, via the Diem association which piloted the project, had managed to bring on board 28 prestigious partners: the indispensable Visa, Mastercard and Paypal for the technique, as well as NGOs and online sales giants such as eBay or Uber. Except that the scale of the project frightened regulators, determined to ban this virtual currency spiraling out of control.

To return to the payment game, Meta is now changing gears. Since the metaverse and its abundance of virtual universes will be so many opportunities for brands, Mark Zuckerberg wants to control the financial exchanges that will take place via his platform by creating NFTs or digital tokens, nicknamed “Zuck Bucks” (dollars de Zuck) by employees according to the Financial Times. These NFTs will make it possible to trace and make tamper-proof any purchase made in the company’s metaverse.

A breath of fresh air for advertising?

Finally, the other business challenge for Facebook’s parent company in the metaverse is obviously advertising, the heart of my current economic model. As a reminder, Meta generated a turnover of 27.9 billion dollars (26.6 billion euros) in the first quarter of 2022, of which 97% comes from online advertising.

But the advertising model is not sustainable in the long term for Meta, because it is based on the massive exploitation of the personal data of users of its services. However, the regulation is less and less permissive on the exploitation of data. The GDPR and its equivalents around the world force players like Meta to ask for explicit consent to use personal data for advertising purposes. And now, regulators are pushing for web services to be very clear about the use of data, which is garnering more and more refusals.

The biggest blow to Meta’s advertising business came from Apple. Since April 2021, the Apple firm has allowed iPhone users to refuse targeted advertising from applications on their smartphones. It’s a revolution: now, iPhones require user consent before activating advertising tracking by applications. The message is so clear that 80% of users refuse, which generates a colossal shortfall estimated at 10 billion dollars for platforms that live off advertising like Facebook, YouTube, Twitter or Snap, i.e. 12% of their revenue from last two quarters of 2021 according to the FT.

If Meta succeeds in becoming one of the main gateways into the metaverse with its VR headsets and its own application store, then this new internet will escape the ” mobile dictatorship from Apple and its privacy rules that hurt the entire online advertising industry.