Big-tech & Metaverse Part1 - Will tech giants be the gatekeepers of Metaverse?

‘Snow Crash’, the now-famous 1993 science-fiction novel that coined the term ‘Metaverse’, talks about the domination of a single enterprise named the Global Multimedia Protocols Group. In real life will we see such an entity (or entities) dominating the metaverse? Will big tech players like Google and Meta become gatekeepers of metaverse? Or can we expect a collaborative space with interoperability at its core? In this three-part series, Adgully attempts to find out the answers to these questions and more.

One may think that it may be too early to pose such questions about a concept that is still in its infancy. But, recently, the European Commission (EC), in its latest consultation on virtual worlds, expressed its concern that these tech giants could dominate the metaverse, leaving small-time players to fend for themselves.
The EU consultation paper raised the concern that there is a “risk of having a small number of big players becoming future gatekeepers of virtual worlds, creating market entry barriers and shutting out EU startups and SMEs [small and medium-sized enterprises] from this emerging market”.

Is the concern genuine or a misplaced worry? 

This worry was also shared by Friedrich Wenzel Bulst and Sophie De Vinck, both from the Directorate-General for Competition at the EC, who wrote about the potential pitfalls of competition or dominance in the metaverse.

“A metaverse gatekeeper could, for example, push users to adopt certain services or products by bundling them with “must-have” metaverse hardware or software. They could impose exorbitant prices for accessing the metaverse or some of their metaverse-based offerings. They could engage in exclusive deals with certain third-party providers of metaverse services, reducing consumer choice and limiting competitors’ access to their platform. They could also use their unique insights into user behaviour (on the basis of access to certain data) to reinforce their market power inside and outside the metaverse market(s),” they wrote.

A genuine concern?

Most of the experts Adgully spoke to agree that the EU concern is genuine.

The European Commission’s concern about online giants like Meta and Google dominating the metaverse raises eyebrows and invites scrutiny, says Aahan Dogra, Founder, NoCap Meta. These tech colossi, says Dogra, have a history of cornering markets, so the Commission’s apprehensions hold water. However, he adds, the metaverse is still a nascent domain, presenting opportunities for scrappy start-ups and innovative local companies to challenge the Goliaths. As Zuckerberg mentioned, “The metaverse is the next frontier, just like social networking was when we got started” (Zuckerberg, 2021). In this digital odyssey, “where there’s a (digital) will, there’s a (virtual) way!”

There is a risk of having big players becoming future gatekeepers of virtual worlds, creating market entry barriers and shutting out EU startups and SMEs from this emerging market, said Sameer Dhanrajani, President, 3AI. With the EU’s recent passing of the Digital Markets Act, internet companies like Google, Amazon, and Meta will be under greater scrutiny to prevent potential anti-competitive behaviour. Nevertheless, there is a growing concern that such trends could emerge in future incarnations of the digital economy. The commission had earlier passed a bill approving additional data controls that may call for smart contacts to have a kill switch to stop any activity. The bill didn’t specifically target the crypto industry, rather its focus is on Internet of Things devices.”

The possibility of large tech companies like Meta and Google dominating the metaverse and acting as gatekeepers is real, says Sumit Ghosh, CEO and Co-Founder, Chingari. These companies already have a sizable virtual presence, with their respective platforms Facebook and Google offering a wide range of services such as social networking, advertising, and search.
Overall, Ghosh says, the EC concern is genuine, and it demands attention from policymakers and regulators in order to ensure a level playing field for all players in the ever growing and evolving metaverse.

According to Ghosh, as the metaverse witnesses growing popularity and importance around the world, we will require some strong decentralized organisations to fight these companies and prevent them from exploiting their market power. “They may also use their dominance to control access to users and their data, raising privacy and antitrust concerns. This is where decentralised companies/ startups like Chingari powered by GARI could be game changers, providing an alternative to the centralized gatekeepers,” he says.

Agreeing with Ghosh, Anantha Krishnan, Founder, MOI, a context-aware P2P protocol, says that the concern voiced by the EC is greatly valid. “As mega-firms with a plethora of resources and credible backing, Meta, Google, Microsoft, Amazon, and the like have the scales titled towards them and have the capability to grab considerable market shares, leaving a few percentages for small-scale enterprises and startups. But being metaverse gatekeepers would not be completely possible though they could become the major players in this market,” he says.

The level of innovation in metaverse tech is getting impressive by the day, owing to open source projects paving the way for new projects and the sheer passion and business-mindedness of developers and entrepreneurs. Any threat to this momentum is a point of concern to the overall ecosystem, opines Kaavya Prasad, Founder, Lumos Labs. According to her, big-tech companies like the MANGA (Meta, Amazon, Netflix, Google, Amazon) power bloc pose a significant blocker to the growth of indie projects and smaller-scale companies. “With their financial resources and technological capabilities, larger tech companies hold an unfair advantage over indie projects and companies. Any internal policies within these organisations that only serve their own interests will definitely impact the overall innovation index of metaverse technology,” she adds.

The responsibility, according to Kaavya Prasad, lies in the hands of regulators and policymakers, who can neutralise such inequitable actions by promoting fair competition and innovation. “It all comes down to focussing on protecting the interests of all stakeholders in the metaverse. Additionally, the web3 sector has been a major player within the metaverse space and has been a promoter of openness and transparency. Given the large market share of web3 metaverse, dominance of web3 tech giants can be prevented as the adoption of web3 products and technology keeps expanding. The development of the metaverse is not an isolated activity but one that requires the participation of multiple stakeholders, including governments, businesses, and individuals,” she points out.

“However, we are hopeful that ethical practices will prevail among MANGA companies without the intervention of regulators and policy makers." Optimistically, if the tech giants are open to providing an inclusive platform to metaverse startups and solutions in the near future then we can hope for open platforms like AppStore and Playstore for individuals to participate equally in the metaverse sector."” she adds.

When we talk about the metaverse, big-tech companies like Meta and Google without doubt have a leg up on the competition, opines Samir Asher, Founder and COO, Tonic Worldwide. “They have infinite resources and a strong presence online and offline, which means they could potentially control access to the metaverse and set the rules for how things work. However, it is important to keep in mind that the metaverse notion is still in its early stages, and we don’t really know how it will work in the future. In this brand-new digital landscape, there is plenty of room for new businesses to flourish and carve out their own niche. Only time will tell!”

Role of regulatory bodies

With concerns about the potential dominance of big tech, regulatory bodies have a role to play in ensuring an open and accessible virtual economy and community development. The Web3 sector, restricted mainly to gaming, has led to the rapid expansion and adoption of metaverse and web3 technologies.

Anantha Krishnan points out that Metaverse as a technology has existed before and its growth has been primarily spearheaded by the innovators and startup sector. “The gaming industry already has an immense head-start over these big-tech giants and has firms that are far more advanced and sophisticated. Gaming platforms such as Fortnite, Roblox, Decentraland, Sandbox, etc., have a vast user base, and these firms are in a comparatively early stage of their entry and experiments. Yet, the intervention of regulatory bodies could be the key to preventing an oligopoly,” Krishnan adds.

“Through standardised rules and procedures to ensure an open, accessible virtual economy and community development, entry into the metaverse should be easy. Another catalyst is the web3 sector which is currently thriving within the metaverse. The Web3 metaverse, majorly restricted to the gaming industry, has led to the rapid expansion and adoption of the metaverse and Web3 technologies. Digital assets and NFTs have been the stimulants to its increased popularity and growth through in-game digital rewards, assets, tokenized collectibles, exclusive NFTs, etc. They were also one of the chief tools used by the fashion industry to solidify their entry into the virtual world, full of youngsters, through NFT-ized products and virtual clothes, shoes, retail outlets, and so forth,” he explains.

Since the metaverse presents an unparalleled opportunity for innovation and economic growth (until the next iteration) the European Commission has expressed concerns that current big tech will strengthen its hold as gatekeepers to these opportunities, says ReelStar Co-founder Navdeep Sharma. “This parochial view is mirrored, around the world, by other perceived ‘Digital Sovereignty’ holders. The fact is that the digital revolution, as currently epitomised by the metaverse, is truly global and only (begrudgingly) recognises current sovereign states when forced. The Big Tech company revenues are greater than the GDP of most countries. However, their reach, their pervasive presence in the world’s social and digital fabric, as well as economic strength is even greater,” says Sharma.

According to him, the tech giants, by their very nature, are driving innovation, and their size and influence is a major factor enabling this innovation.

“The EC, like other sovereign state bodies, has cause to be concerned that these tech giants will act as gatekeepers to these opportunities, not only at a cost to their ability to control the digital revolution but to their nation state’s market diversity and economic functioning and health. However, this concern is more of perspective than reality. The tech powerhouses have demonstrated monopolistic propensities; they wield significant power over digital markets that has and is often obtained through aggressive market strategies and acquisitions and inevitably, and such dominance can have damaging repercussions on other companies. In many ways, they simply mirror the past and present behaviour of nation states,” he adds.

History, as has been shown far too often, repeats itself. Nations that were once powerhouses fell from that position. Companies that dominated a particular sector no longer exist or are a shadow of their former selves. The digital revolution, in its relatively short time, has also clearly followed this pattern.

Sharma feels that regulatory frameworks will, if approached from a perspective of restriction, have, in the longer term, little lasting effect. He stressed that the EC’s focus should be on policies and guidelines that foster fair and inclusive virtual spaces, protection of individual rights and privacy in an environment of broad-based support not only for resources but also for international, entrepreneurial and collaborative culture and information sharing. An empowered, educated consumer is the best strategy for a metaverse that serves all, not just big tech, he says.

(Tomorrow - Part 2: Should there be country-specific laws to address the potential threat of big-tech monopoly?)