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Mark Zuckerberg is not happy just going to space he is heading to the metaverse

3 August 2022 7:15 PM
Tags:
Digital technology
BusinessUnusual

The question is how much it will cost and who will join.

The standard plan these days is become a billionaire and then set your sights on going to space.

It has been the play for Jeff Bezos, Richard Branson and of course Elon Musk, but Mark Zuckerberg the richest billionaire by age (38 and $67 billion) is looking to go further into cyberspace rather than outer space. He has both the time and the money to do it, but it will not be easy.

In the last year his fortune swelled to $219 billion and then shrunk back down to $67 billion, he has faced intense scrutiny from regulators, being called out as not doing enough to protect those from harmful content and being blocked by millions of users on Apple devices and being called out by the Kardashians for ruining Instagram.

Here is a summary of the issues that are making his launch into the metaverse more difficult.

Apple

It is incredible that just three companies that do not regard themselves as media or publishing companies receive over 70% of global ad spend.

Meta, the renamed version of Facebook itself commands over 20%, which for a company that was only founded in 2004 is nothing short of incredible. As a company it is worth $450 billion about half its high of over $1 trillion in 2021.

The other two mega ad companies are Google and Amazon. Amazon might not seem like an ad company, but retailers pay to market their products on Amazon’s massive retail platform.

Google not only provides ads on its search site and on YouTube, but it is the principal distributor of ads that appears on any website on the planet.

Here is where Apple comes in. It has made some of the most innovative and robust phones and has a good chunk of the market share especially in the US where most Americans would assume you own an iPhone.

Apple though can only sell so many and given the reliability and lifespan, users will replace them less often. To compensate for the slowing sales of new phones, Apple is looking to earn more from services and advertising is a service. The US market is one of the most lucrative and so for Apple to manage the access to its users would allow it to become an ad server themselves.

One step towards that was creating an ad platform in the app store for creators to pay to showcase their apps.

The next step was shifting who and how much access current app creators could track and target users. The most affected was Facebook as their app was very reliant on being able to track users as they travelled across the web and even across their cities to better target ads.

As users opted to turn that off, Facebook found that they were not able to offer their highly targeted and lucrative ads.

While it may have accounted for a $10 billion chunk of the decline, it was not the only headwind the social network had to deal with.

It saw ad revenue drop overall which it ascribed to advertisers reacting to increased inflation and it also saw lower revenues as the dollar strengthened. Nevertheless it did make about $27 billion of which $6,7 billion was profit.

You could forgive a company that generates almost $30 billion a quarter from not growing revenue every quarter, but investors not so much.

Facebook has long used a stat that compared its daily users to a country. Despite all the issues, 1,97 billion users use the platform daily. If it were a country it would be the largest on the planet.

Instagram

A big part of the daily users have come from Instagram itself, an incredible success story from a basic photo sharing site just a decade ago. It is still one of the most popular places on the internet with a reported 1 100 photos uploaded every second.

It struggled to find a way to generate revenue but is now a major income generator for the platform and those that sell directly from it and the massive crowd of influencers that made a career of posting pictures.

SnapChat is a major challenger especially with younger users, but Instagram basically recreated the same functionality with Stories - content that expires after a period of time.

The latest challenge is from TikTok and Instagram responded with Reels, a short video with music and effects also popular among younger users.

The shift to prioritising these videos resulted in many threatening to leave the platform and for celebrities like the Kardashians to make Instagram like Instagram again. Trevor Noah reflected on it too.

It worked, even if temporarily, with the Head of Instagram Adam Mosseri ending the “test” and promising to do better.

He did mention something else though which is true of most social networks. Users are more likely to follow than post and if they do, they prefer to do it privately or in smaller groups while publishers and creators have become the principal groups that have the largest following.

Most media probably followed a similar evolution with social media offering the most initial participation because there was effectively no barrier to take part.

The metaverse

Facebook may have hoped that its investment in the potentially transformative metaverse would be subsidised by the ongoing steller ad performance but the latest results have brought them back to earth.

Meta has the funds but investors will punish the company if it looks like it is wasting its time.

It is a bold move by Meta and in time, the metaverse will be a significant if not dominant way to engage online, but the original internet took time and regulators were far less able to slow or stop innovation.

Regulators will struggle to catch up, but much as the long term development of maritime law helped define what was acceptable for commercial airlines when they first launched, the evolution of the internet and its improving regulation will be able to be applied to the metaverse.

Meta is spending billions and may have to spend billions more to become a significant player and it may be that the actual winner will be some other business or some unknown start-up.

And if there was any doubt if before things get good they will first be unimpressive, then when they do become popular the users will make it terrible until finally it is just another mall to try separate you from your money or a step closer to building the Matrix to avoid living in the real world.

More regulation

The EU is growing some teeth to make platforms more accountable. The Digital Services Act covers all internet companies but given its size it will have a potentially big impact on Meta.

Meta’s President of Global Affairs, Nick Clegg will make the most of being back in the UK to engage with EU regulators and try limit the impact or deal with the cases that may relate to them. The aim of the bill is to do more about scams and misinformation and so Meta will need to take more responsibility to limit those that will try to use their platforms for scams and spreading falsehoods.

There is also a risk for Meta and other US businesses that may be blocked from storing EU member’s citizens details on US servers as the US does not provide the level of privacy that the EU does.

In the US the regulators are looking to block its offer to buy VR fitness company Supernatural. The Federal Trade Commission does not want Meta to buy the company but rather look to build its own version. Meta certainly could but like its acquisition of WhatsApp when it had built Messenger and its purchase of Instagram because it would be much easier to buy it than build it even though it did allow it to scale. Meta knows that the faced pace of growth will come from acquisitions not development. It has noted that it wants to get more from its significant staff of over 50 000.

It also still has a major headache finding the right balance in its moderation. A South African moderator went public about the contract with one of Meta’s chosen moderation companies. It looks to have been addressed but suggests that there is still more to do. The test for improvements will be seen as Kenya goes to the polls on the 9th of August and how well info shared on Facebook will be managed to limit misinformation.

You may think that should things get too bad, shareholders will force Zuckerberg to step aside, but his shareholding in the company and the type of shares he holds effectively means shareholders will not be able to fire him. So come 2050, we will either be reflecting on the 66 year-olds impressive management of his company or refer to it as a footnote about the early efforts to build our digital future.




3 August 2022 7:15 PM
Tags:
Digital technology
BusinessUnusual

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