Deep Dive - Facebook Metaverse
This week I want to do a deep dive into the Metaverse after Facebook (FB) announced its plan to hire 10,000 people for their Metaverse project. It’s a theme that will run through many future editions of WIRE and is something I’ve also dived into a little here and here with Future Sandwich’s Tommy McCubbin.
In CEO Mark Zuckerberg’s own words, a metaverse is “an internet that you’re inside of, rather than just looking at. This means, a digital environment (think of Sim City) where individual blocks of land can be bought/sold (i.e. The Sandbox / Upland), assets traded (i.e. NFTs) and people can move around freely (as an avatar) engaging with a range of experiences, be it gaming, social engagement, entertainment (i.e. Snoop Dog) or work (which may look something Facebook’s VR work app below).
But, purists would argue (as I would) that a true metaverse experience (below) is dependent on interoperability (seamless movement between digital ‘realms’), standardisation (i.e. same language/protocols/engine) and presence (i.e. VR).
This would allow us to take our ‘digital self’ from a centralised metaverse, like VR Microsoft Teams meeting, to a decentralised metaverse, like a Snoop Dog Sandbox gig, whilst retaining our avatar and all digital assets (NFTs, Fiat, identity)!
This is where it gets complicated for Facebook! They generate revenue by owning our data (centralised)....so, a concert in a Facebook Metaverse would likely look different (different advertisements/product placements) for the different end-user based on what FB know about us (which is everything). Conversely, in a decentralised metaverse, nobody really ‘owns’ the environment - rather, participants, land and token owners make the rules and own their data (so the metaverse environment would likely be the same for all).
So, for Facebook, they face a number of issues and questions. Firstly, what will it take for us to trust them, will they play fair with other metaverse providers like Microsoft, The Sandbox and Decentraland? What infrastructure will be used (i.e. Diem coin, Novi wallet) and will that be recognised across various platforms? What will privacy/security policies look like etc (who owns the data!)?
On the regulatory side, the issues are huge.
Facebook won’t have the freedom of decentralised platforms because every key regulator around the world is scrutinising their every step. In fact, Democratic senators called on Zuckerberg to stop the launch of their Novi crypto wallet this week saying “Facebook cannot be trusted to manage a payments system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient”.
But it doesn’t stop there! Zuckerberg has also just been added as a defendant in a lawsuit relating to the Cambridge Analytica scandal, with Washington D.C. Attorney General Karl Racine saying “our continued investigation revealed that he [Zuck] was personally involved in decisions related to Cambridge Analytica and Facebook’s failure to protect user data”.
The regulatory pile-on for Facebook (and public mistrust) remain the biggest hurdles towards the organisation’s Metaverse ambitions (not to mention their interoperability with ‘true’ decentralised metaverses).
This concept is quite a bit to take in so please feel free to reach out if you have any questions/comments /disagreements!
Other Developments
Now for the rest of the week’s developments:
Facebook (FB) is planning to rebrand according to reports in The Verge. This comes off the back of a massive repositioning towards the Metaverse, with Zuckerberg possibly announcing the name change as early as next week. At a guess, it would likely see them rebrand the parent company (i.e. “Face Inc.”) with the Facebook app being one of the pillars under the parent umbrella (similar to what Google did with Alphabet). It’s also an opportunity to refresh what has become quite a polarising brand of late! Popular names doing the rounds on social media include Virtuel, Connect, Horizon, Ecoverse, Metabook (and FacePlant!).
Coinbase (COIN), who are spending plenty of time with the SEC of late, has submitted a proposal to Congress for the creation of a special regulator just for crypto markets. This proposal is premised on three core pillars. Firstly, the regulation of digital assets under a different framework, secondly, the designation of one regulator for digital asset markets; and thirdly, the protection and empowerment of digital asset holders.
Microsoft (MS) has announced that they will be shutting down LinkedIn in China, predominantly due to the complications faced with satisfying local compliance regulations. The company will however continue its China presence but purely for their jobs platform InJobs (excluding the social feed).
Square (SQ) CEO Jack Dorsey said late last week that they’re considering jumping into the bitcoin mining business, saying “mining isn’t accessible to everyone” and that “square is considering building a Bitcoin mining system based on custom silicon and open source for individuals and businesses worldwide”.
Apple (AAPL) launched a bunch of new products at the Unleashed event during the week, with new processors (M1 Pro and M1 Max) powering the next generation Macbook Pros (iPhone style notch, a new cooling system, an HDMI port and…..no TouchBar). The event also saw the release of some HomePod minis (below, bottom) and new AirPods (bottom, left).
Google (GOOG) has released their new line of Pixel phones, which come in ~30% cheaper than their closest comparable - the iPhone 13. It has a higher resolution (although the jury is out on brightness) and possibly an iPhone beating camera thanks to a 1.31 inch 50MP wide sensor, a 12MP ultra-wide and 48MP 0.5-inch telephoto sensor (the iPhone 13 Pro Max has a trio of 12MP sensors and a slightly better aperture of f/1.5 vs Pixel’s f/1.85). Lastly, the Pixel has, like Apple, a few nifty features like Magic Eraser (to remove photobombers from photos) and the most advanced Android UI which, for example, creates a phone colour pallet based on the background image.
The first bitcoin-linked ETF, ProShares Bitcoin Strategy ETF (BITO), has begun trading, jumping 4% on debut this week. The fund, which tracks Chicago Merchantile Exchange’s (CME) bitcoin futures contracts, had $700m in volume on its first day of trading - surpassing the debuts of the Social Sentiment ETF (BUZZ) and the Ark Space Exploration ETF (ARKX) which both launched earlier in the year. Being a ‘futures’ exposure means the price of the ETF will not necessarily reflect the live price of bitcoin though (i.e. in a bull market it will likely trade at a premium and, in a bear market, at a discount). However, the ETF does offer a viable alternative to current equity exposures like Grayscale Bitcoin Trust (GBTC) and Microstrategy (MSTR); the latter transforming itself from a SaaS company to a bitcoin proxy over the past year. This also kicks off what will be a bit of a bitcoin ETF bombardment, with VanEck’s Bitcoin Strategy ETF (XBTF) next off the blocks on 25th October.
A digital UK pound (or Britcoin) is a step closer to reality thanks to the establishment of the Digital Pound Foundation which will initially include Ripple (XRP-t), Avalanche (AVAX-t), Accenture (ACN) and Billon Group (private). The foundation will undertake research and policy work and act as a hub to collate and share resources about the progress towards a digital pound and other central bank digital currencies (CBDC). According to this CBDC tracker, of 83 countries tracked, 5 countries (mostly through the Caribbean) have launched a CBDC, 14 (including China, UAE, Sweden and South Korea) are piloting, 16 (Canada, Brazil, Russia, France) are developing and 32 (Australia, USA, India, UK, Germany, Spain) are researching.
Foxconn (2354.TW) have released three electric vehicle prototypes as it sets a path to expand beyond being a pure contract manufacturer for large brands like Apple. The EVs, an SUV, sedan and bus, were released under the name Foxtron (a JV between Foxconn and local car manufacturer Yulon Motors). The SUV is expected to hit the road next year (under a Yulon brand), with the sedan arriving in the “coming years” and the bus (carrying the Foxtron badge) rolling out next year.
Snapchat (Snap) have released new augmented reality (AR) tools to help more brands launch campaigns with the technology. The creative studio, called Arcadia, provides a direct connection between brands and AR experts to create new campaigns to help them stand out on the Snap platform. Particularly when paired with Snap Maps, this sort of technology unlocks an uncredible monetisation opportunity for brands as users navigate through localities unlocking AR content (it’ll be even more impressive with future iterations of AR glasses!).
Lastly, now that you’ve had somewhat of a mental break from the Metaverse, Roblox (RBLX) held their annual developer conference late last week, announcing plans to evolve the avatars into what they call a ‘digital you’ with more realistic facial expressions and styling, shifting the company substantially away from their traditional (lego-esque) roots. Those avatars will also capture your expressions on webcam which will then (one day) be represented live on your avatar (much like Apple’s Memoji). The company are also amplifying monetisation opportunities for its users (this year they say 1.5m users will earn $500m!) and expanding the Roblox Open Cloud, to deliver more tools to Roblox creators.
M&A | Capital Raise | Earnings
Huge news, with rumours circling that PayPal (PYPL) is looking to launch a $45bn bid ($70/share) for Pinterest (PINS). If true, this would give PayPal continued exposure to e-commerce growth and get them on the ground at Pinterest just as they’re starting to monetise e-commerce capabilities on the platform. For Pinterest, e-commerce unlocks huge potential BUT unlocking that organically (i.e. sales, customer acquisition etc) means slower rollout/scalability (which can be alleviated by joining forces with a firm like PayPal with its phenomenal reach across e-commerce businesses). GIven Pinterest’s recent slump though, an argument could be made that this offer is opportunistic.
Grocery delivery platform Instacart (private) is expanding into brick and mortar retail, with the acquisition of Caper AI (private) - a developer of ‘smart’ shopping trollies for $350m. This puts Instacart in a position to compete more effectively against an ever-expanding list of check-out innovators, led by Amazon, as well as a growing list of startups like Tigo, Standard Cognition, Shopic, Imagr and Tiliter.
Have a great week.
Charlie
LinkedIn or E-Mail (cnave@granitebaycap.com)
Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity. Any views expressed in this article are those of the author(s) and do not constitute financial advice.