Facebook announced its rebrand as Meta to the world last week. Photo / Getty Images
Mark Zuckerberg wants to be at the forefront of what he sees as the next internet, but can users trust the social network?
As he renames Facebook as Meta, Mark Zuckerberg is placing a bold bet on his vision of the future: a techno-utopia where people are connected and live in a virtual universe.
While this vision of the "metaverse" seems far off in the future, if achievable at all, Zuckerberg is convinced that his 3bn-strong social network, now arguably the world's most controversial tech company, must move decisively to capture what he thinks will be the next evolution of the internet.
"By the end of this decade, or even by the middle of the decade, I would guess that we're going to reach a point where our VR (virtual reality) devices will start to be clearly better for almost every use case than our laptops and computers are," he said in an interview with the tech newsletter Stratechery.
On Thursday, Zuckerberg signalled his intent by renaming and restructuring Facebook. The core social networking businesses will become one half of Meta, while Reality Labs, the division dedicated to the metaverse, will be a second unit, with $10bn of investment to come in 2022 and a doubling of its workforce to 20,000 engineers.
The announcement gave Facebook, now Meta, a decisive early lead in the race to build an enriched online world, but it also raises significant questions about the future of its business model, as well as concerns about whether, given its record, its users can be sure of their privacy and security.
Facebook is not the only tech giant to stake its claim to the metaverse. Apple, in particular, is also thought to be working on augmented and virtual reality devices. But for Zuckerberg, a failure to be at the heart of the world's move to smartphones has incentivised him to be at the forefront of what he thinks will be the next big shift.
Critics have complained that the move is a timely attempt by Zuckerberg to distance Facebook from its latest wave of scandals, after whistleblower Frances Haugen leaked troves of internal documents to regulators and journalists, highlighting its struggle to self-regulate.
But in interviews, Zuckerberg said the shift had been carefully planned, for at least six months, and was not an attempt to move away from what critics claim is an increasingly toxic brand.
Instead, a strategically executed media operation saw Zuckerberg repeatedly discussing the metaverse earlier this year, introducing the concept beyond gaming circles before firmly staking his claim on the space by adopting Meta as the name of his company.
"Right now our brand is so tightly linked to one product [Facebook] that it can't possibly represent everything we're doing today, let alone in the future," he said in an open letter. "The metaverse is the next frontier."
On a call with analysts on Monday, the company said it would spend $10bn on the metaverse in 2022, and that this operating cost would rise in future years. Facebook already has 10,000 people working on the project and is looking to recruit another 10,000 in Europe.
Andrew 'Boz' Bosworth, one of Facebook's early employees, is in charge of the plans, and has also recently become chief technology officer of the whole group. Vishal Shah, Instagram's former product chief, is also working on the metaverse, but it is not clear how many other senior executives will move over.
Neil Campling, technology analyst at Mirabaud Securities, said the new segment would lose an estimated $7bn this year, and that losses were "likely to move higher next year". But by splitting out the unit in its earnings, Facebook was also showing "that the sheer scale of these investments is significantly higher than any other company in this area," he added.
He pointed out that while some companies focused exclusively on the hardware segment of the metaverse, and others like Epic Games and Roblox on software, Facebook's "all-encompassing platform approach" was designed to be a place where users could "spend their entire digital lives".
Investors also welcomed splitting out the Reality Labs revenues from the rest of the social media businesses, which also include WhatsApp and Instagram. "[It] gives investors more clarity on how the initiative is trending. Google did this with YouTube and helped investors better understand the story," said Brent Thill, software and internet analyst with Jefferies.
If Zuckerberg's grand plans are successful, the potential gains are not simply billions of dollars in advertising revenue, but also a burgeoning online shopping business. He has said he intends to support an alternate digital economy — where users can buy digital items, such as art or clothes, to take with them as they teleport from space to space — as non-fungible tokens increasingly gain in popularity. Inevitably, cryptocurrencies and NFTs would play a role in this shared world, he confirmed on Thursday.
But getting there will be fraught with challenges.
Zuckerberg has found that Oculus, the virtual reality headset business that he bought for $2bn in 2014, was a tougher sell than expected, as virtual reality has only incrementally gained traction among non-gamers. Key to Meta's future will be persuading users of the value of its social, non-gaming experiences, but also wooing marketers to the platform despite Facebook's scarred reputation, said Brian Wieser, global president of business intelligence at GroupM.
Earlier this year, Facebook's first partner for advertising in its Oculus headset, shooting game Blaston, pulled out of the initiative after less than a week following a backlash from the gaming community over injecting advertisements into the headset experience.
"Realistically, you will need retail partnerships — companies that feel OK working with Facebook," said Wieser, adding that the company could also struggle to attract top talent on the same basis.
So far, the initiative has garnered mixed reactions from developers, particularly those involved in the crypto and NFT space. "Be less cynical and realise that today, the world shifted on its axis. The metaverse is an entire new layer of GDP and has endless possibilities, whichever metaverse experience you choose," Raoul Pal, former hedge fund manager, crypto enthusiast and co-founder and chief executive of Real Vision Group said on Twitter.
But Evan Greer, director of Fight for the Future, warned that Zuckerberg was "co-opting" the metaverse and "attempting to solidify his stranglehold on the future of human attention and interaction".
The project is also already attracting criticism from academics and experts concerned that it will throw up major privacy and safety issues, at a time when Facebook is perceived to be struggling to police its existing platform.
While Facebook pledged that "privacy and safety need to be built into the metaverse from day one", it remains unclear how the company will moderate an open and interoperable system and whether users will be able to have one, or multiple virtual identities.
Either way, it will be under pressure to be able to guarantee online safety, particularly for younger users, from predators, harassment and other harmful content.
There are also unanswered questions about the new types of user data this will generate, how it will be plugged into Meta's advertising machine, and how it will be secured. This might include information gathered from tracking the eyes and hands of users, as well as the biometric data to create convincing avatars.
"Virtual reality is about creating and owning identities that transcend devices and spaces," said Gus Hosein, executive director of Privacy International." If your identity, brought to you by a single company, is the one you use to navigate the internet of the future, that company will hold all the cards."
Ellyse Dick, a policy analyst at the Information Technology and Innovation Foundation, a think-tank, said regulators needed to start considering rules for the metaverse now, after taking decades to react to problems on the internet.
Among the thorny questions to be ironed out, she named how to properly moderate virtual spaces, and how to ensure that augmented and virtual reality empower people, rather than exacerbate inequities.
"Meta treats the world as free digital real estate, a resource for corporate extraction, surveillance and commercialisation," added Julia Powles, associate professor of law and technology at Western Australia university. "We are advocating that this speculation must be preceded: by state permit, licence, fee, or tax."
Written by: Hannah Murphy in San Francisco and Madhumita Murgia in London
© Financial Times
'This decision has not been made lightly'.