Metaverse: the secret battle for the new marketplaces…or why you won’t make money from it.

Avatars flying in virtual environments. Blended meetings, with holograms and live people. Virtual reality glasses. Impossibility to distinguish what is real and what is virtual…

Forget all that. It is a smokescreen around the metaverse, to hide the real battle that is being fought. The more I see people talking about what the world will be like after the metaverse arrives, the more I’m sure the real discussion isn’t being addressed. My point is: the metaverse has already arrived, we live in a digital world, with a digital economy and with digital interactions for a long time. Actually, debates on the metaverse hides an intense battle for consumers by the tech giants.

(Old?) Players and business models

To understand this battle, it is first necessary to understand the prevailing business models in the digital world to date. These models consist of three main variants: One is the ad market, led primarily by Google and Meta (formerly Facebook). Companies that operate this model deliver very precise cuts of the targets desired by advertisers. This model was the main cause of the disturb of traditional media companies, such as TV, magazines and newspapers, which lost a substantial part of their revenues, due to their inability to segment the advertisers’ target audience. The specific target individual cost became very expensive. For players in this market, as it was for traditional media, the audience is key. The more users in the platforms, the more attractive the ads are. Also, the more information can be collected from the users, the more accurate the targeting will be and the more value it will bring to the advertiser.

The second model is the direct sales market, led by Amazon, Ali Baba, eBay and Mercado Libre. In this model, audience and segmentation are also crucial. The more users, the more sales. Again, the more information the platform has about its users, the greater the chances of conversion into ads, offers and promotions, which become individualized. This model can also include service (not products) platforms, such as Uber, Airbnb and Tinder. But the logic is the same: the more users and the more knowledge about them, the greater the sales.

The third model is the entertainment market, where it is common for companies to charge for access, even in the “freemium” model (free part, paid part). This model has video streaming companies (Netflix, Disney+, HBOmax, PrimeVideo) and music (Spotify). In addition to these, there are also game companies (Sony, Microsoft, Nintendo, Epic)[1]. After all, people who spend a lot of time in games watch less movies and series and listen to less music.

Below list shows that almost all these companies, in the 3 variants presented, are not young:

·     1994 Amazon

·     1998 Google

·     1999 Free Market

·     2004 Facebook

·     2005 Youtube

·     2006 Twitter

·     2008 Airbnb

·     2008 Spotify

·     2009 Uber

·     2009 Whatsapp

·     2010 Netflix

·     2010 Instagram

·     2011 Snapchat

·     2011 iFood

·     2012 Tinder

These companies emerged in a “window of opportunity” created with the advent of the internet and the window closed. Companies like Apple, Microsoft, Sony and Nintendo are even older. Except for one or another company (such as Tiktok, 2016), no relevant player has emerged in the last 10 years.

The silent threat

Meanwhile, a silent revolution is taking place, which is the world of games. This is a $200 billion market, half of that in Asia, with strong annual growth[2]. There are 3 billion game users in the world, almost half of the global population. If you don’t play or don’t know anyone who does, believe me, you are an endangered species. It is obvious that all this mass of users has been attracting the attention of the players listed above, after all, the user base is the most valuable asset in their business models.

However, games are spreading their wings and invading other areas. Ariana Grande’s concert at Fortnite, for example, reached the incredible mark of 1 million simultaneous viewers[3]. Worldwide, various artists are now performing in games, such as Mohamed Hamaki (Egypt), Tones and I (Australia), Gen Hoshino (Japan) and Emicida (Brazil)[4]. Games already started and could become the predominant form of digital interaction and social media[5], capturing the major piece of advertisers and direct sales, including digital assets.

In other words: the absolute reign built by the western companies created in the years 1990-2000 is at risk.

It is obvious that these companies have already seen this risk and are not standing still. In October 2021, Zuckerberg gave an apotheotic presentation of his metaverse[6] and said the company is heavily investing to develop the presented resources. Other companies like Amazon, Microsoft, Apple and Nvidia are also betting big[7]. The $70 billion check that Microsoft recently signed to purchase Blizzard (Candy Crush, Warcraft) shows just how big is the appetite for this market. Elon Musk paid $ 40 billion for Twitter, almost half of Blizzard transaction.

More of the same?

Yes, there will be another internet user interface. After all, with so much investment being made by tech giants, it’s going to change the way we browse the internet right now. For example, the day will come when users judge Instagram’s 2D interface as outdated. However, even if the metaverse provides a more immersive experience, at the end of the day, companies will continue to do what they do today: advertising and selling. All this movement is nothing more than the reaction of established companies to the advancement of games. The reaction of the game companies themselves, which will certainly continue their onslaught, must also be considered. It will be curious to see who will win this battle.

On a more technical note, we don’t know yet is whether there will be a standard metaverse protocol, as HTML is for the web today. Or if HTML itself will evolve components like <CANVAS> to create more graphical assets. In this scenario, each company would create its own immersive experience, but would publish with same standard and users would use new versions of current browsers to access the different metaverses.

On the other hand, on mobile devices the web is dying, few people use browsers on cell phones and access is done through proprietary applications. In this scenario, there would be no standard and each company would offer its immersive experience in its own app.

Another possibility is platforms to offer “SDKs” (Software Development Kits), allowing independent developers to develop their immersive applications to run in their metaverses. This happens, for example, in WordPress plugins, VS Code extensions and Node.js npm packages. Of course, for this to work, a company would need to take the lead and get its metaverse to become a reference, which is not a simple task.

Second Life (SL) 15 years ago tried this with their LSL (Linden Script Language). I had an interesting personal experience with Second Life back then and set up a business there. I made some (real) money that time, and it was a very valuable learning experience. But SL was ahead of its time and didn’t make it for a few reasons. SL still exists, I still have my avatar, but it was niched to a more restricted segment.

Usability

One of the main causes of SL’s failure was usability. Only trained users, with dexterity in keyboard and mouse commands, were able to extract what it provided from the environment. In the end, only gamers could move around easily, which scared off a lot of common users. In addition, more sophisticated hardware features, including more robust graphics cards, were needed to ensure a more impactful immersion in the environment.

This will continue to be a barrier in the new metaverses. VR glasses are still heavy, uncomfortable and, for some, dizzying. In addition, if for the user to have a rich immersive experience he/she needs to carry glasses, gloves and other gadgets, it will be hard to imagine that we will reach something as simple as manipulating a cell phone with just one finger. Not to mention technical limitations, especially batteries, to keep all this paraphernalia running.

Regarding the dexterity to move within the metaverse, this may no longer be a barrier, after all 3 billion people in the world are gamers and don’t complain about it. It may be that, in the future, dexterity in games will be something to be developed by everyone, as typing on keyboards was in the past.

Conclusion

Utopia or dystopia, it doesn’t matter. For most people, the metaverse will be an opportunity to spend money, not to earn. New desires will be created, people will feel like buying, for example, a new model of Nike sneakers, for their avatar, in digital format and maybe certified with some NFT. Metaverse platforms will be more intimate with their users’ private data and will be able to more effectively persuade them in their marketing and sales campaigns.

The largest part of the metaverse’s business will remain in the hands of a few big companies. Here and there, though, there will be opportunities for those who move fast and develop immersive experiences in their digital products before their competitors. After all, to survive in the savannah it is not necessary to outrun the lion, it is just enough to outrun the other prey.

[1] https://www.alltopeverything.com/top-10-biggest-video-game-companies

[2] https://newzoo.com/insights/articles/games-market-revenues-will-pass-200-billion-for-the -first-time-in-2022-as-the-u-s-overtakes-china/

[3] https://streamscharts.com/news/fortnite-x-ariana-grande-rift-tour-viewership-stats

[4] https://www.epicgames.com/fortnite /en-US/news/the-fortnite-soundwave-series-continues-with-tones-and-i-in-an-interactive-madhouse

[5] https://www.forbes.com/sites/forbesbusinesscouncil/2021/03/16/why-the-gaming-industry-could-be- the-new-social-media/).

[6] https://www.youtube.com/watch?v=gElfIo6uw4g

[7] https://www.analyticsinsight.net/top-10-companies-working-on-metaverse-and-its-developments-in-2022/

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