Meta reported a massive, $2.8B Q2 operating loss for its metaverse division in the latest earning call. They're not the only ones in pain: the Metaverse housing market also just crashed.
For all the hype surrounding the metaverse concept in the past few months, this sure seems like a rude awakening. While Meta acknowledges that the project is a moon shot, which requires a lot of money to burn before it can get off the ground, but at least that is a proven business model.
With the cost of capital rising, the perceived risk of such investments however goes up, which explains the NFT housing market crashes.
It's tough to say what comes next, but this is a good opportunity to take the long view of the entire idea of the metaverse, because hype aside VR technology truly is revolutionary. But at the present, it's in a weird space: on one end you have technological innovation happening - this is the moonshot project - and on the other, you have the speculative madness of NFTs and web3, which increasingy looks less like a safe investment environment and more like the ruthless world of EVE online.
So at this point in time, when we talk about the metaverse, we're talking about actually very distinct things. The aim I believe is to blend these two things together, with blockchain based services operating in a world of VR - but it doesn't have to be this way. In fact, if we look at the big technological shifts that have occured since the dawn of the commercial internet, they were not driven by software.
They were driven by hardware. Whatever is the dominant device in consumer hands will demand that software and services fit the paradigms and limits of those devices.
Broadly speaking, we can talk of a desktop based internet that was succeeded by a mobile based internet, and now the big dream is to have a VR headset based internet.
And VR right now feels very similar to the early desktop internet. It's pretty expensive for the average consumer, so it's mostly a "one per household" item. The games are immersive and amazing, so VR cafés and theme parks are popping up left and right, similar to how we use to have internet cafés for LAN parties.
One of the first killer apps on the internet were chatrooms - and VR chat is booming. Second Life is still a thing, and I think much of the fantasizing about the metaverse is in fact limited fantasy: as many have noted, it sounds a lot like Second Life, but more immersive.
Business wise, the big idea seems to be VR meetings - an upgrade over Zoom - and there's some really cool things like VR workspaces being developed. So while I would certainly prefer meeting in person if permitted, and thus wouldn't ditch Zoom because I love its simplicity, I can see how headsets and apps can replace the workplace monitor for a more immersive and productive work experience.
And that's only the beginning. Once we start seeing interfaces between VR and actual robots, that's when the big disruption will happen.
(In this sense, the way I think about the NFT landlord question is this: the internet has it's own real estate markets, whether it's domain buying or being on an app store. Dominant apps then have their own "real estate" markets within them. If VR will have anything of the sort, it sure looks like it will be owned by Meta and competing headset manufacturers.)
So that's the good part. But I keep remembering this quote from Marc Andreessen, when he mentioned that people are resistant to the metaverse because they have 'reality privilige':
"A small percent of people live in a real-world environment that is rich, even overflowing, with glorious substance, beautiful settings, plentiful stimulation, and many fascinating people to talk to, and to work with, and to date. These are also all of the people who get to ask probing questions like yours. Everyone else, the vast majority of humanity, lacks Reality Privilege—their online world is, or will be, immeasurably richer and more fulfilling than most of the physical and social environment around them in the quote-unquote real world.
The Reality Privileged, of course, call this conclusion dystopian, and demand that we prioritize improvements in reality over improvements in virtuality. To which I say: reality has had 5,000 years to get good, and is clearly still woefully lacking for most people; I don't think we should wait another 5,000 years to see if it eventually closes the gap. We should build—and we are building—online worlds that make life and work and love wonderful for everyone, no matter what level of reality deprivation they find themselves in."
Source: Niccolo Soldo
Talk about statements with shock value and a vibe of megalomania.
By the above, you can guess my problem with this: people who are "reality deprived" so to speak tend to be poor. VR and the metaverse at the time of writing is expensive not just as a consumer good, but expensive in terms of manufacturing and technology. It will continue be prohibitively expensive for quite some time. And sure, there is a small segment of the population who doesn't really enjoy real life, and prefers to stay home playing video games or watching videos or whatnot, it doesn't necessarily overlap with poor people.
This reminds me of that quote by Netflix CEO Reed Hastings, when he mentioned that their biggest competitor is not another streaming service, but sleep. If this is the same logic, then Andreessen is saying that the biggest competitor of the Metaverse will be reality.
And that kind of sounds threatening.
VR can and should become a cool niche with it's own ecosystem, displacing some earlier solutions where it will prove clearly superior to our existing devices. Some companies will win big, others will lose out as usual.
But I think what we're beggining to learn is that going 100% digital with everything is perhaps not the best solution for everyone, and that people should have a choice, and that technology was better when it was designed with the idea that there are problems that it can solve.
If tech is heading into the direction on where can we put more and more digital gizmos around an average persons life no matter the human cost and maximizing engagement, then it has lost it's claim on bettering the world. It's just another big industry with it's own predatory and exploitative practices, except the natural resource being exploited here are human beings.
And that kind of sucks worse than whatever NFT based pyramid scheme is collapsing on a given day.