‘The metaverse will be our slow death!’ Is Facebook losing its $100bn gamble on virtual reality?

The company now known as Meta has spent staggering amounts on creating an immersive successor to the traditional 2D internet. But what has it got to show for it, apart from 11,000 job losses?

What a difference a year makes. Last October, Facebook supremo Mark Zuckerberg could barely wait to show the world what he was up to. “Today, we’re going to talk about the metaverse,” he enthused in a slick video presentation. “I want to share what we imagine is possible.” Transitioning almost seamlessly from his real self into a computer-generated avatar, Zuckerberg guided us through his vision for the virtual-reality future: playing poker in space with your buddies; sharing cool stuff; having work meetings and birthday parties with people on the other side of the world; customising your avatar (the avatars had no legs, which was weird). Zuckerberg was so all-in on the metaverse, he even rechristened his company Meta.

This month, we saw a more subdued Zuckerberg on display: “I wanna say upfront that I take full responsibility for this decision,” he told employees morosely. “This was ultimately my call and it was one of the hardest calls that I’ve had to make in the 18 years of running the company.” Meta was laying off 11,000 people – 13% of its workforce. Poor third-quarter results had seen Meta’s share price drop by 25%, wiping $80bn off the company’s value. Reality Labs, Meta’s metaverse division, had lost $3.7bn in the past three months, with worse expected to come. It wasn’t all bad news, though: Zuckerberg announced last month that Meta avatars would at last be getting legs.

Mark Zuckerberg speaking to his digital self.
Mark Zuckerberg speaking to his digital self. Photograph: Facebook/Reuters

After decades of spectacular “move fast and break things” growth, Zuckerberg’s empire is now looking a little fragile. Meta’s share price has fallen by more than 70% this year. Moneyspinners Facebook and Instagram are losing market share and Gen Z users to fresher rivals like TikTok and Snapchat. Apple’s changes to data privacy last year also decimated revenues – its introduction of an “ask not to track” option on iPhones has effectively starved Facebook of the lucrative data it uses to target ads.

Meanwhile, Meta has invested a staggering $100bn on metaverse research and development to date, $15bn in the past year alone – with apparently little to show for it. Zuckerberg’s newfound metaverse obsession could be seen as a preemptive virtual land grab for what is generally agreed to be the future of the internet.

It could also represent an attempted second act, for both the 38-year-old and his somewhat tarnished Facebook brand. But the markets seem to be saying “count us out”, and according to reports, just 58% of Meta’s own employees said they understood the company’s metaverse vision. Comments on the latest lay-offs in an anonymous employee survey included, “the metaverse will be our slow death” and “Mark Zuckerberg will single-handedly kill a company with the metaverse”.

Zuckerberg and pals playing poker in the metaverse.
Zuckerberg and pals playing poker in the metaverse. Photograph: Meta

If nothing else, Zuckerberg has popularised the term “metaverse”, even if he didn’t invent it, and definitions of what it means vary. Zuckerberg explained it as “an embodied internet where you’re in the experience, not just looking at it”. Rather than our current 2D, screen-based internet, in other words, the metaverse will be a 3D virtual space, accessed by either a VR headset or AR (augmented reality) glasses, which superimpose a layer of digital information on top of the visible world.

Matthew Ball, tech investor and author of The Metaverse: How It Will Revolutionise Everything, defines the metaverse as “a massively scaled and interoperable network of real-time rendered 3D virtual worlds”, with individual presence and continuity of data. He has to explain it less and less, he says: “A year ago, it was mostly ‘what is the metaverse?’ Questions now are a lot more practical: what will be here? When? For whom? How, and why?”

The “why” is a particularly good question when it comes to Meta. “You’re going to be able to do almost anything you can imagine,” said Zuckerberg in his intro video last year. “Get together with friends and family, work, learn, play, shop, create …”

At the time we were just coming out of the pandemic. Remote working, video calling and e-commerce had suddenly become the norm. “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended,” Zuckerberg said in a recent staff email. “I did, too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.” Post-pandemic, it turned out people still preferred meeting face to face or on a video call to donning a clunky VR headset and dragging your legless avatar into a virtual meeting room.

It has been a similar story on the leisure side. Meta’s Quest VR headsets are the market leader, but most buyers are not using them to flock to Meta’s principal app, Horizon Worlds – which the company describes as “a synchronous social network where creators can build engaging worlds”. Meta set a target of 500,000 Horizon Worlds users by the end of 2022; the current figure is nearer 200,000 – down from 300,000 in February, which suggests many first-time visitors are not returning. It has been criticised for programming bugs, instability, rudimentary graphics and a general sense of boredom.

From my own visits to Horizon Worlds, the 3D motion and audio were fine but the graphics were basic, often garish and textureless: a good two decades behind today’s best video games. The feeling is of a sparsely attended trade fair.

‘A good two decades behind today’s best video games’ … Steve Rose’s avatar on Meta’s Horizon Worlds.
‘A good two decades behind today’s best video games’ … Steve Rose’s avatar on Meta’s Horizon Worlds. Photograph: Screengrab

Many of Horizon Worlds’ activities felt more like demonstrations: in a perfunctory wild west town, you can shoot a virtual bottle in a virtual saloon with your virtual pistol (with unsatisfyingly lo-fi results) and ride a hobby horse (literally a virtual horse’s head on a broomstick). At the Marvel superheroes world, you can try on various costumes that enable you to fly or shoot lightning bolts, and that’s about it. There were few people in either the social “hangout” areas or the “games” section, and most of the strangers I encountered seemed to be American children. One had the avatar and voice of a 10-year-old girl.

Not even the people making Horizon Worlds have embraced it. Memos leaked in October appeared to show the Meta vice-president, Vishal Shah, urging staff to use their own products more. “If we don’t love it, how can we expect our users to love it?” Shah wrote. “Everyone in this organisation should make it their mission to fall in love with Horizon Worlds. You can’t do that without using it. Get in there.”

Meanwhile, direct competitors such as VRChat and Rec Room are thriving. “It’s pretty clear they are offering something that Meta doesn’t,” says veteran games designer Raph Koster, namely better avatars, a wider choices of games and, critically, bigger crowds (Rec Room has an estimated three million monthly users). “Next to those, Meta looks relatively sterile and empty. There’s just a lack of sufficient entertainment in there.”

‘Thriving’ … Meta rival VRChat.
‘Thriving’ … Meta rival VRChat. Photograph: Publicity image

Horizon World’s numbers are dwarfed by those of online games (most of which are accessible with and without VR headsets). Fortnite attracts 250 million active players a month. Gaming platform Roblox has more 200 million visitors a month and Minecraft 170 million (two-thirds of whom are under 16 – the exact demographic that is turning away from Facebook and other social media).

“Historically, we’ve seen that game worlds generally don’t have any trouble attracting an audience,” says Koster. This is not a revelation. “Bars with a jukebox or a pool table tend to do better than bars without anything. It doesn’t change because you digitise the experience.”

Unlike Meta, the games industry began with the “why?” It was building complex, sophisticated, popular virtual worlds – proto-metaverses – long before the idea caught Zuckerberg’s eye. As such, it is well positioned for a slice of the metaverse pie. Epic Games, for example, whose Unreal game engine (think of it as the “brain” of the game; the software framework that builds the reality in real time) powers not only its bestselling Fortnite but hundreds of other games and applications, making it attractive to independent metaverse-builders.

In April, Sony and Lego invested $2bn in Epic’s metaverse vision. In January, Microsoft moved to acquire another games giant, Activision Blizzard, makers of World of Warcraft, Overwatch, Call of Duty and Candy Crush, for nearly $70bn (the deal is currently under antitrust review).

A visitor to this year’s Mobile World Congress Barcelona wearing a VR headset to take part in a virtual concert.
A visitor to this year’s Mobile World Congress Barcelona wearing a VR headset to take part in a virtual concert. Photograph: Bloomberg/Getty Images

Having sprung out of social networks like Facebook, Meta’s model is based on “an attention economy, not a fulfilment economy”, says Herman Narula, head of the British tech company Improbable. Social media prioritises keeping users passively engaged for as long as possible, whereas gaming seeks to provide fulfilling, active experiences.

“There’s a difference between watching an experience and having an experience,” he says. “If you look at games like Fortnite and Minecraft … what matters is presence; how many things can you do? In Minecraft, you can move anything about it, you can modify the laws, you can be creative. So what matters is creating a highly creative environment, which allows the normal self-expression.”

Improbable’s website claims “we are the metaverse technology company”. Among other things (it works with military as well as gaming companies), the company, which Narula co-founded in 2012, is working on connecting various metaverses together, and hosting large numbers of people in virtual worlds. Whereas most multiplayer online games, like Fortnite, never really put more than 100 people together on one server, Improbable has hosted events bringing together 30,000 people in the same virtual space.

Unsurprisingly, Narula is optimistic about the metaverse. In his recent book Virtual Society, he writes: “Like the development of writing, or the advent of the computer age, the dawn of the metaverse will be a grand pivot point in the history of humanity.”

Fortnite, which attracts more than 250m players a month.
Fortnite, which attracts more than 250m players a month. Photograph: Epic Games

The metaverse was valued at nearly $23bn last year and is expected to grow nearly 40% a year for the rest of the decade. As the Epic co-founder and CEO Tim Sweeney put it last year: “The next three years are going to be critical for all of the metaverse-aspiring companies like Epic, Roblox, Microsoft, Facebook [Meta]. It’s kind of a race to get to a billion users. Whoever brings on a billion users first would be the presumed leader in setting the standards.”

The building blocks of the metaverse are coming together, and Meta is working on many of them: hardware like VR and AR devices, data and network infrastructure, social platforms and interfaces, developer and creator ecosystems – all of which require skilled people (in Meta’s recent 11,000-person cull, Reality Labs was relatively unscathed).

“We are creating a new category that requires significantly and abundantly more resources than it takes to create a single product or collection of products,” says a Meta spokesperson. “It’s misguided to categorise our long-term investment as a loss while we are within our initial phases of development.” So no more “move fast and break things”; now it’s more of a “move slowly and build things” vibe.

From the outset, Zuckerberg said the metaverse would take five to 10 years to arrive, though some, such as Microsoft CEO Satya Nadella, are saying it is here already. Matthew Ball agrees: “We have hundreds of millions interacting in 3D virtual worlds each day,” he says, pointing to the likes of Roblox and Minecraft.

A child playing with her character on Roblox.
A child playing with her character on Roblox. Photograph: Phil Noble/Reuters

But it goes beyond gaming: “Johns Hopkins University hospital is now performing surgery with XR [as in “extended reality” – VR and AR] devices and game engines, while Vancouver airport runs a 3D simulation [a “digital twin” of the airport, incorporating real-time information which can be used for training, optimisation, future planning, simulation and testing] and similarly Tesla cars are building a live simulation of San Francisco using Unreal. The pieces are more mature than many give credit, but we’ve yet to develop the standards and systems to integrate them in the ways the internet is developed today.”

It is unlikely that Meta, or any other big tech company, will “own” the metaverse, says Ball. “We often misrepresent the control of big tech,” he says, pointing out that the “Big Five” – Google, Apple, Meta, Amazon and Microsoft – together collect less than 10% of digital revenues, “although they exert disproportionate influence over the rest of the internet … It is likely that a similar outcome happens with the metaverse: a handful of vertically and horizontally integrated software and hardware giants amass the substantial share of users, data, revenue, devices, etc, and exert even greater influence. The metaverse is likely to grow big tech’s reach, not shrink it.”

If Meta does succeed in controlling a substantial slice of the metaverse, though, there are further, deeper concerns. The charge sheet against social media in general, and Facebook/Meta in particular, is extensive: disseminating and amplifying online disinformation and hate speech, unseen and undisclosed political influence, its impact on mental health, the collection and misuse of personal data.

Facebook/Meta’s HQ in Menlo Park, California.
Facebook/Meta’s HQ in Menlo Park, California. Photograph: Noah Berger/AFP/Getty Images

“Whatever company owns the metaverse will have better information about crime, better surveillance, better everything than the government will,” says Koster. He points out how much of our lives is already online: our personal records, our résumés, our bank accounts, our friendships, our online movements and behaviours. The metaverse will enable access to even more layers of data: “A lot of the folks who work on the hardware for AR glasses, for example, are concerned about the fact that the glasses can read biometrics off your iris, and that tells them an enormous amount about your medical state, your emotions moment to moment. Virtual worlds are panopticons. The more we digitise the world, that’s the power we’re handing over to whoever runs that metaverse.”

Meta is taking pains to assuage such fears. “The metaverse is a collective project,” says a spokesperson, “and how to responsibly manage the new types of data that companies may collect is exactly the kind of challenge that needs collaboration and discussion. It’s not up to any one company to set the rules on this.”

All are in agreement that regulation is needed, but judging by how well the internet has been governed so far, the outlook is complicated – potentially liberating; potentially downright dystopian.


Steve Rose

The GuardianTramp

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