As of now, a handful of companies are being vocal about the Metaverse and the role they want to play in bringing it about. But, like all early trends, there are more questions than answers related to the Metaverse. So, while presenting early vision casting as companies like Microsoft, Nvidia, and Meta (formerly Facebook) have been doing, we need to keep our excitement in check by realizing whatever Metaverse comes about is still a long way off.
As I mentioned in this article on Metaverse and Reality, we don’t know if the Metaverse becomes more like the web, which is relatively open and built on open standards, or if it is more like an operating system like macOS, Windows, iOS, Android, etc. I argued, in that article, that the ideal scenario is the Metaverse is more like the internet as we know it today, built on open standards, creating a relatively unified platform. But as history has proven, more often than not, competition drives companies to close their platform more than open them due to the positive economics involved. The other point I would make here is the market conditions that allowed for a more open internet to emerging are vastly different than the market conditions we have today. With several substantial and very powerful platform competitors that highly influence what gets into the hands of consumers.
Understanding that it is essential for platforms to create value for others to be successful at a foundational level. The degree of this success can vary, but to use an investor term, the best platforms consistently create unicorns. Unicorns here simply mean very large economic opportunities for a business. Windows has done this, and Apple has done this, to a degree, the Internet as a platform has done this. Meta (Facebook) largely has not, and ultimately that is why this is a make or break for Meta, in my opinion. Facebook was facing a slow decline to irrelevance. Hence, the brand change to Meta signals the attempt to capture a new greenfield market growth opportunity. Along with many others, I have stated that Oculus was the future for not Facebook, Instagram, or WhatsApp. Ultimately, whatever the Metaverse evolves into, and whoever is the main platform players within it, value needs to extend to a broad marketplace of players, and economic opportunity must abound for it to succeed.
Lastly, as great as the vision casting and attempt to set some Metaverse trends are, there is a generally inherent risk with being too early to a market. It’s often said that being too early can sometimes be the same as being wrong. A core observation here is that by being early, companies may learn the wrong market lessons as they go to market and observe customer behavior. Thus, building a strategy or betting a company on the potentially incorrect early market observations can be dangerous.
The Metaverse is still many years away from being any even small market reality. There are too many pure technological breakthroughs that still have to happen, and many of them revolve around semiconductors, material and physical science, optics, miniaturization, and more. This is where the early investment must come into play, which many companies looking and planning decades out are working on today. But that doesn’t mean the Metaverse will come any sooner. This category will require a great deal of patience, and patient capital, which is something only the largest tech companies in the world have.