MMost people probably never heard of the Metaverse before Mark Zuckerberg decided to change Facebook’s name to Metaplatforms (NASDAQ: META) and head for the alternate reality. Even among tech-savvy people, a definitive explanation of what the Metaverse is remains elusive, though it’s loosely described as a world in which we virtually socialize, work, and play.
That hasn’t stopped companies from pledging tens of millions of shareholder dollars to participate and for analysts to proclaim this is a multi-trillion dollar opportunity over the next decade or so.
Still, everyone may be a little ahead of the metaverse’s potential, as companies are already reining in their participation in this AI-powered virtual space. It could be that the metaverse is shutting down before it even begins.
A sea of unexplored islands
For all the hype surrounding the metaverseit doesn’t really exist yet – at least not the much-vaunted universe we’ve been told will be the place where we can live a second life free from the constraints of reality.
Like other game companies, Roblox has created virtual worlds on its platform where its 40 million users, about half of whom are 13 or younger, can interact with each other. Shopify has its own artificial world, Shopify Party, for virtual hangouts where people can socialize and play games, and, of course, Meta’s Oculus Quest lets people visit the metaverse through Venues on its Horizon Worlds platform.
And while many companies create virtual worlds, others seek to populate them. Nike, for example, acquired RTFKT (pronounced “artifact”), a company that creates shoes, collectibles and digital accessories, last December. Nike has also teamed up with Roblox to creating the Nikeland virtual world.
Big plans fail
Despite the money spent on space, others are beginning to have doubts. Matching groupit is (NASDAQ:MTCH) Tinder had thought the metaverse would be the next big avenue for online dating and help it reach the next generation of people looking for love.
Last year he acquired Hyperconnect for $1.7 billion and then considered creating Single Town, a virtual world where people can meet through avatars, but now he’s cutting his investment.
CEO Bernard Kim told shareholders that Hyperconnect was not working as expected, and “given the uncertainty around the ultimate contours of the metaverse and what will or will not work…I asked the Hyperconnect team to iterate but not invest heavily in the metaverse at this time.” Match will have to assess the space more closely.
Earlier this year, Instantaneous CEO Evan Spiegel has disparaged Meta’s metaverse plans as “ambiguous and hypothetical”, and so far it hasn’t been a good investment either.
late is worse than never
Meta lost $10 billion last year on its Reality Labs division responsible for building the Metaverse, and it lost another $5.7 billion in the first six months of 2022, a 35% increase. Zuckerberg also said he doesn’t think the Metaverse will have any consequences in this decade at all, but it “lays the groundwork for what I expect to be a very exciting 2030s.”
It also cuts Reality Labs’ budget as it scraps some projects and delays investment in others.
Ten years in the future is a very long time in the tech world, and while executives focusing on future returns rather than what happens in the next quarter is laudable, Meta investment in the metaverse may never pay.
As economic conditions tighten and consumers tighten their belts, companies may find that spending money on extravagances like Metaverse Dreams is simply too expensive for uncertain gain in years to come.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Rich Duprey has no position in the stocks mentioned. The Motley Fool holds posts and recommends Match Group, Meta Platforms, Inc., Nike, Roblox Corporation, and Shopify. The Motley Fool recommends the following options: $1140 January 2023 Long Calls on Shopify and $1160 January 2023 Short Calls on Shopify. The Motley Fool has a disclosure policy.
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