From Bad to Metaverse

Meta Platforms should be glad that February is the shortest month of the year. 

Since Feb. 2, shares of the former Facebook have slid an astonishing 33%.  The company began the month with quarterly earnings and guidance that starkly highlighted the many challenges facing its apps. Chief among them was the impact of Apple's adoption last year of new rules that restrict the amount of consumer behavior that can be tracked on iPhones.  Those curbs will cost Meta $10 billion in lost advertising revenue, the company has warned. 

Today, Meta braced for another body blow as Alphabet’s Google announced its own measures to make it more difficult for advertisers to track consumers on mobile phones and devices that use Google’s Android operating system.  

Shares of Meta fell 2% on the day. Meta has now lost $488.65 billion in market cap since the stock's peak in September, according to our friends at Dow Jones Markets Data. That is greater than the market cap of all but the eight largest publicly traded companies in the U.S. (which still includes Meta itself.)

Google’s initiative, which will be rolled out over two years, seeks to reduce cross-site and cross-app tracking. In that respect, it aims to be less restrictive than Apple, which requires users to opt in to any tracking, Barron’s Eric Savitz noted today. 

Nonetheless, as Eric wrote: 

There’s no dancing around the fact that Google’s plans will make it tougher for Facebook and others to target advertising based on consumer activity on other apps and websites. Like Apple, Google is making the move in the spirit of consumer privacy, while no doubt taking into consideration pressure from legislators, regulators and activists who think current online privacy standards aren’t sufficient.

Well, there’s always the metaverse. That is the enormous opportunity that Meta and its employees -- now to be called Metamates -- see. The company has said it will devote some $10 billion this year toward a transition to the metaverse.  

How big is this opportunity?

"Whether it’s large tech players such as Microsoft planning to create realistic workspaces, or Ariana Grande holding a concert in Fortnite, the opportunities presented by interactive, digital worlds seem limitless," says a new report by J.P. Morgan’s blockchain business, Onyx.  “The metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenues.” (The report cites  a November paper  from Grayscale Research for the $1T figure.)

The J.P. Morgan report, by the way,  provides a link to a download where you can create an avatar and have a virtual experience in the metaverse. Among other things, you can walk into a virtual Onyx by J.P. Morgan lobby, where a Bengal tiger randomly strolls among visitors – the bank equivalent, no doubt, of the bodega cat. 

The road to the metaverse is sure to have its bumps and obstacles. Today, shares of Roblox tumbled 26.5% after its quarterly results disappointed investors. The games platform has been seen as a play on the metaverse because its technology offers “the convergence of content and social, two ‘viral loops’ that provide a mutually reinforcing network effect,” according to Drew Crum of Stifel. 

Yet it may still be too early to understand the economics and the technology of the metaverse. Perhaps way too early. Benedict Evans, an independent tech analyst, made this point on Twitter today: 

Asking for the killer apps for metaverse today is no different to asking for the killer apps for mobile in 2000 (tip - we didn't know).
That's not to say that this will be as big as mobile, but you can't make useful, specific predictions for a new UX [user experience] 5-10 years in advance.