Indepth: Will Meta turn the Metaverse into a profitable ecosystem?

“If one central company gains control of [the Metaverse], they will become more powerful than any government and be a god on Earth.” – Sweeney Epic Games

“It’s going to be important to create a truly creator-focused economy in the open Metaverse, where creators can realise the value of their creations and not just be at the mercy of a gatekeeper that takes all the profit off the top because they are at the gate and they can do it.” – Marc Petit, VP, Epic Games’ Unreal Engine Ecosystem

When Facebook changed its parent company name to ‘Meta’, little did the world at large have a clue about Metaverse. The name change, indeed, was a palpable bid to emerge a clear market leader in the Metaverse space. And it is spending top dollar (more than $10 billion annually) on the Metaverse front, including in its VR division. But, Meta is not alone in the race. Apple, Microsoft, Google, Tencent, Amazon, Nvidia are also out there, eyeing a larger share of the Metaverse cake. While acquiring gaming behemoth Activision Blizzard for $75 billion, Microsoft had said that the acquisition “will accelerate the growth in our gaming business across mobile, PC, console, and cloud and will provide building blocks for the Metaverse”.

Still, the question emerges – will Meta turn the Metaverse into a profitable ecosystem by monetising its offerings until native formats will emerge and become more affordable for the masses?

Madhusmita Panda, Chief Marketing Officer, KredX, is certain that Meta will play an important role in Metaverse adoption as they have a large captive audience within their ecosystem of social networks, which is going to be one of the key applications of Metaverse. So, Panda says, along with Facebook, Instagram, and the other social applications that Meta owns, it is poised to leverage the whole trend more than others.”

“However, it is completely dependent on Meta, and the idea of Metaverse and Metaverse tied to BIM three, which is an open system, a decentralised system, on which one can build the Metaverse experiences, which is also tied to crypto and blockchain networks. This ultimately creates immense opportunities. This is becoming a large open ecosystem, and a decentralised ecosystem, where anybody can build infrastructure in the Metaverse. And that’s the real power of the Metaverse as an experience. Hence, when these technologies come together, it creates a powerful ecosystem. Since the Metaverse is like an experience, it will make all experiences profitable. Meta makes experiences that make profit for them and it will sort of leverage that trend and would want to take the market leadership position,” she says.

Panda further adds, “The Metaverse is at a very growth adoption phase of Artificial Intelligence; there is no individual company that might make AI as a concept profitable right away. But quite possibly, it would be the technology that is leveraged by enterprises for their own good and how each one of them uses it to their benefit will completely depend on how they want to look at it. While, of course, for Meta, it’s about creating this next generation of a digital twin where one can spend significant time in this virtual reality world rather than in their own physical world, which means one can be  sharing so much more data and what one can do with that data are all questionable subjects.”

Some experts feel that Meta won’t be able to monopolise because of the peculiarity of Web3.

Meta is investing heavily in the Metaverse and it’s no surprise after its several public snafus on data privacy and the new privacy features rolled out by Apple on its OS, notes Amer Ahmad, Director of Technology at Blink Digital. It can no longer hoard and sell customer data as wantonly and needs to find new avenues for revenue, he says. “The principles of Web3 are focused on decentralisation and user empowerment. Monetisation in the Metaverse will follow these principles. It won’t just be a situation where brands are selling their goods and services and paying large sums to platforms to advertise. It will be digital economies where users are rewarded for their time and attention and brands can build loyal and engaged communities,” Ahmad adds.

GOQii Founder-CEO Vishal Gondal points out that the Metaverse relies on the Web3 framework, which is all about blockchain and creating benefits such as rewards systems for community members that are using the Metaverse. The way traditional companies are working is not the model that the Metaverse will adopt. Gamification and personalisation will be keys in the Metaverse to connect and bring all stakeholders from the media and entertainment industry and consumers together. Currently, people are not motivated as much to do anything. The Open Metaverse can change that. It can empower people in the virtual as well as physical world to do things they like and get incentives in the form of tokens or rewards. Delivering unique user experiences through gamification and rewards will have an advantage in the Metaverse. People who have more control and ownership of their data will be able to use that data to power their NFTs (Non-Fungible Tokens) and also using this tokenisation, people can exchange values.

Monetisation possibilities

How will the monetisation possibilities of the Metaverse evolve in the days to come?

There is still a lot of uncertainty around the commercial framework, although the business models of more established Metaverse-esque platforms like Roblox are well-known, says Louise Shorthouse, Senior Analyst, Ampere Games.

“VR,” according to him, “is certainly one aspect of the broader Metaverse and again something that will only become accessible to the mass market in the future. Not only are VR headsets fairly costly, they are also quite cumbersome still, and I think for VR to become more mainstream we need to ultimately shrink the form factor along with the price tag.”

Sooner or later, Metaverse will be a paid affair, conjectures says iCubesWire Fonder-CEO Sahil Chopra. “A handful of companies control the VR technology, and with Metaverse coming into the picture, more and more people will be paying for VR technology. The Metaverse will change consumer behaviour and patterns, and we are yet to see how willing people are to switch to a newer format. Once the platform gains momentum, profit will follow,” he says.

Ultimately, commerce on the Metaverse will emerge just as it did over time on the internet, states Brett Sappington, Vice President at Interpret Research. “Companies will be able to sell products and services to businesses and consumers. Users will pay for access to content and experiences. Advertising and branding will play a role, but not an overwhelming one early on. If the early Metaverse is bathed in ads, consumers are unlikely to spend much time there.”

According to James Brightman, Senior Strategist at Interpret Research, monetising the Metaverse can be done in myriad ways, whether through selling digital wearables, tickets to virtual concerts, or other major entertainment events, advertising (including branded virtual spaces to explore), e-commerce for real-world products in virtual stores, and selling NFTs that can be utilized to provide access, membership, rewards, or other unique experiences. Importantly, Meta’s vision for the Metaverse is one of many.

Several different companies exist in the Metaverse platform space, each with their own concept of the Metaverse and their own approach to monetisation, says  Brightman. “A segment of those involved in the early stages of the Metaverse believe that no single company should control and profit from the Metaverse alone. They argue for a more open metaverse, one that offers wider monetization possibilities and that fosters a large creator economy. Roblox is an example of a currently existing Metaverse that has a vibrant community of people that create worlds that they can monetize (or not) and that users can enjoy,” he concludes.

“The technology is now moving from its development stages to increasing accessibility, affordability and interoperability, which had been a secondary focus previously where development of a functional and easy-to-navigate digital sphere was primary,” says Kaavya Prasad, Founder, Lumos Labs.

“Now that we have increased attention, collaborations, and involvement of tech giants of the Web2 and Web3 spaces, we can further move to mass adoption, which might require driving down the cost of associating with the Metaverse. The monetisation possibilities in the Metaverse for companies and creators are immense. Currently, we see real estate, gaming, advertising, and marketing being the key earners in the space. But we can also foresee trading, virtual buying and selling, private and public housing, and more real-world possibilities emulating themselves in the Metaverse within the next few years. Interoperability between different Metaverses that will again expand revenue and earning opportunities for all residents can be expected too,” she explains.

According to Prasad, Meta has been a pivotal development in the Metaverse ecosystem, but the development of the space was well underway before it, too. The Metaverse, she adds, has been an active sector leading multiple innovations since the recent rise of digital technologies. And with Meta, affordability and accessibility is bound to increase further.

Metaverse as a concept is powerful when it is decentralised, maintains DaveAI Co-founder-CEO Sriram PH. “While today we see closed Metaverses emerge, eventually we will need interoperability for this ecosystem to be fundamentally different from the Web2 world. This is the reason why Web3 and Metaverse are often spoken of together. Despite the numerous benefits of Web3 in its current form, there are still many limitations that the ecosystem must address for it to flourish and during this period there will be individual players who would enable these experiences as a new channel to promote their products and services. This will create monetization opportunities. For example, at DaveAI, while our vision is to democratise AI, we do enable large enterprises to create sales experiences and build their Metaverse using our platform. This will help large captive audiences adopt this technology broadly creating new monetization possibilities. But we see this evolving as a creators’ economy, where these experiences are built, operated, and owned by our creators. Enterprises will also have their virtual brand ambassadors in these spaces who can evangelise adoption of their products and services, thereby creating monetization opportunities,” explains Sriram.

(Tomorrow: Does Metaverse need policing?)