There Is More Than One Metaverse

In October 2021, Facebook (FB) announced what was arguably the largest corporate change in its 20-year history.

Mark Zuckerberg and his executive team had decided to go all in on “the metaverse.” So much so that the company decided to change its name to Meta (META) and rebrand entirely.

Here’s what the company’s announcement stated…

The metaverse will feel like a hybrid of today’s online social experiences, sometimes expanded into three dimensions or projected into the physical world. It will let you share immersive experiences with other people even when you can’t be together – and do things together you couldn’t do in the physical world.

Meta was referring to the combined technologies of virtual reality, augmented reality, and the immersive, socially driven online worlds it intended to define as the world’s most widely used social media company.

This shift in corporate strategy was so important at the time that Facebook announced that it would even change how it would report its financials.

According to Zuckerberg, there would be two operating segments: the “Family of Apps” which would include revenue from Facebook, What’s App, and Instagram… and “Reality Labs” which would focus on all things metaverse.

What happened in the months that followed the announcement was not at all what the newly named Meta expected.

Bad Timing

Take a look at what followed Meta’s announcement in October 2021…

Meta’s share price collapsed 73% from the time of the announcement through November 2022. The stock then languished there for several months into the new year.

Meta’s timing to focus on “the” metaverse – one it hadn’t created yet – was awful. It meant that there was no immediate way to monetize this massive multibillion-dollar investment it was making.

And the worst part? It diverted its entire corporate focus to its metaverse initiatives at precisely the same time as when the world of artificial intelligence was absolutely booming with breakthroughs.

As a remarkably symbolic event, Meta’s share price hit its lowest level in nearly a decade in November 2022, exactly the same month that OpenAI released its large language model (LLM), ChatGPT.

Meta knew it had made a mistake.

It went all in too early on a technology that was not ready to be monetized… and it paid the price. That November (2022), Meta cut its workforce by 11,000 (13%) to reel in costs.

And by March 2023, it announced more job cuts – another 10,000 positions – and that it would be shifting its focus away from the metaverse and heavily into large language models and generative AI.

I have to give credit to Meta for reversing course after a horrible decision. It’s hard to do with a company that large. And the shift to focus on artificial intelligence technologies clearly worked. Meta’s share price is up about 462% since those November 2022 lows.

Given the sheer scale and power of Meta and its family of apps, the company received the most attention from the media when it came to discussions around “the” metaverse.

That was always something I found quite funny about all the coverage… It suggested that there is only one metaverse we’ll all be hanging out in.

I get it. After all, if a company is going to spend tens of billions of dollars on a project, it will be followed closely. Meta has already spent $46.5 billion on its Reality Labs group since 2019.

But ironically, this framework was/is entirely wrong.

Many Thriving Metaverses

There were already several prominent metaverses thriving with activity, growing exponentially and wildly profitable… it’s just that Meta wasn’t one of them.

Fortnite, a massive multiplayer online social game, is a perfect example.

Source: Fortnite

Fortnite has grown into a metaverse with more than 500 million registered players and about 220 million monthly active players.

The Fortnite metaverse has already generated more than $26 billion in revenue through March of this year and is one of the most popular games in history.

Fortnite has its own currency, V-bucks, and its own developer ecosystem that allows creators to build new games and metaverses within the Fortnite ecosystem. Fortnite is owned by private tech company Epic Games which was last valued at $31.5 billion in 2022.

Equally as impressive as Fortnite, if not more so, is publicly traded Roblox (RBLX) which now has 380 million monthly active users.

While Roblox graphics may not be as flashy as Fortnite’s, it is impressive in the scale of its universe with 79.5 million daily active players.

And where Roblox excels over Fortnite is in its remarkably vibrant developer community that builds different games and new worlds within the Roblox metaverse. Images of just a tiny fraction of them are shown below.

Source: Roblox

Roblox has about 2.5 million developers working with its metaverse. Those community developers made more than $410 million in the first half of this year alone.

The Roblox metaverse is a fully functioning online world with branding, advertising, e-commerce, gaming, and its own currency of course – Robux.

Last week was an exciting week for the company as it had its annual developers conference which gave us a view on the future of metaverse technology…

The AI-Powered Metaverse

I doubt anyone will be surprised to learn that the future of the Metaverse is all about artificial intelligence and generative AI.

A simple example is shown below of how Roblox gives its users and developers the ability to apply generative AI in designing a character for the game using simple text prompts.

Source: Roblox

But this is just scratching the surface of what Roblox will be enabling. The company is leaning into multimodal AI that will enable not just image generation, but animation, work in 3D, software programming, and eventually video generation.

This technology enables developers and creators with little to no software programming skills to do amazing things in the Roblox metaverse.

Roblox even announced the introduction of what it calls 4D generative AI, with the 4^th dimension being “interaction.” It’s a big marketing spin. It’s not really a 4^th dimension, but the functionality is important, nonetheless.

Using generative AI to program interactions between online characters and objects in the Roblox metaverse is extremely useful. That will make developer contributions even more valuable to create a thriving metaverse with even more transactions.

Roblox’s AI-powered metaverse strategy has been working extremely well. The company is now valued at $27 billion and will generate about $4.2 billion in revenue this year and more than $500 million in free cash flow. Compare that to Meta’s Reality Labs division which generated only $1.9 billion in revenue last year at a massive multibillion-dollar loss.

Maybe Meta would have been better off acquiring Roblox and its AI-powered metaverse from the start instead of spending at least $46.5 billion starting from scratch.

Either way, the employment of generative AI is going to be a boom for gaming and metaverse development that will empower not only companies to accelerate development… but also developers and creators to take part in filling these metaverses with interactions, transactions, commerce, and social interactions for the world to enjoy.