The Companies Beating Meta to

After years of suffering from a steep “brand tax” as customers became increasingly wary of its user policies and treatment of information, Facebook has decided to rebrand itself as Meta Platforms Inc. (FB, Financial). While it still trades under the FB ticker for now, it plans to change its ticker to MVRS on Dec. 1, making its facelift complete, at least on the surface.

The company’s new name is in honor of its strategic shift from focusing on social media to focusing on the development of the metaverse. Meta, the company formerly known as Facebook, plans to build an interconnected set of digital experiences that serve as an alternative to many aspects of life in the real world.

A concept explored heavily in sci-fi stories such as “The Matrix,” “Ready Player One” and many more, the metaverse actually already exists in many forms today. In essence, the metaverse is a shared virtual reality that people go to for entertainment, social interaction, training and more. While it hasn’t yet developed to the point that we can put on a headset and walk around between virtual worlds, it seems like it’s only a matter of time before we reach that step given the increasing number of companies focused on developing their own digital realities.

While CEO Mark Zuckerberg is touting the metaverse as some sort of digital alternative to the real world, though, his company is far from the first to explore the concept. If we’re talking putting on goggles and seeing a 3-D online reality, there are others that have the same technology. When it comes to interacting with a digital world instead of the real world, gaming companies have had that market cornered for decades.

The term “metaverse” may have recently gained a spike in popularity as a buzzword, but it has been in development for decades, and though it is the first to brand itself as a pure metaverse company, Facebook is late to the party. Can it really find its niche in the digital world, or is it doomed to fall behind as its goals flirt with dystopian versions of the metaverse concept?

Existing metaverse companies

Following the buzz caused by Facebook changing its name to Meta, several gaming companies have reiterated that their games already offer a sort of miniature metaverse.

Even though you can’t put on a set of VR goggles and walk from a video game to a virtual clothing store before retiring to your separate digital house that you paid for in bitcoin, many games include some elements of a metaverse, such as the ability to eat food, keep pets and decorate your own house (all confined within the structure of the game, of course).

In a Thursday interview with CNBC, the CEO of Take-Two Interactive Software (TTWO, Financial), Strauss Zelnick, said that if you define the metaverse as an “online digital world where people can interact using avatars in real time on multiple devices,” then his company is already miles ahead of Meta.

Going a step further, Zelnick was openly doubtful that Meta’s vision of the metaverse would truly align with what customers want. “I’m skeptical that we’re going to wake up in the morning and intentionally sit at home, strap on our headsets and conduct all of our daily activities that way,” he said.

To a lesser extent, social media also shares some metaverse characteristics, though it’s not immersive in a different world like games are. Instead, social media serves as a digital component of the real world.

For those envisioning a more sci-fi metaverse, an essential component will be the virtual reality headsets meant to immerse the user in a 3-D virtual world that they can interact with. This kind of VR has been used for years to provide certain types of training without the use of real-world materials. VR headsets are also becoming more popular in gaming as their costs have fallen to a level where more people are willing to buy them.

Meta sells VR headsets thanks to its 2014 acquisition of Oculus Rift. Other companies with VR arms include Sony (SONY, Financial), which currently stands alone in terms of VR console tie-ups, as well as Microsoft (MSFT, Financial), which focuses its VR efforts on military applications.

Online world

While gaming companies can make an argument that they are already closer to the metaverse than Meta – and in a way, they are – an interconnected digital world has yet to become a reality for one big reason: it would require too much cooperation.

Zelnick may or may not be correct in his prediction that Meta’s metaverse won’t become popular, but history has already proven that the metaverse concept in and of itself isn’t popular with companies.

The term “metaverse” itself comes from Neal Stephenson’s 1992 dystopian novel “Snow Crash.” At the time the novel was written, the internet was nowhere near as connected as it is now. Websites existed like little isolated planets, connected loosely and distantly in a galaxy pulled together by the gravity of server technology. Web browsers like Mosaic and Netscape were just beginning to solve the problem of sorting and aggregating information.

In Stephenson’s book, the metaverse is a 3-D world built up around a virtual street and virtual real estate. Users interact with each other and digital assets to form a metaverse economy. In the 1990s, the blossoming world of internet users took this idea and ran with it, trying to connect cyberspaces in order to make a true interconnected digital economy.

However, in order to form an interconnected digital world, companies would have to give up a certain level of control over their own digital creations. Thus, early attempts to create a metaverse fell flat because websites wanted to keep their users confined enough to reap enormous profits. After all, could your company really survive if you actively made it easier for customers to find competitors? What if they took the digital currency earned on one site and spent it on another site?

When we consider this, it’s entirely possible that existing metaverses will continue their isolated development without forming some giant conglomerate where we can travel from one digital place to another.

Meta’s game plan

This brings us to the fact that unlike the joint-effort metaverse that some early internet users tried to create, Stephenson’s metaverse was run by one company, Global Multimedia Protocol Group. If cooperation can’t build a metaverse, then perhaps one company could build a single metaverse that’s big enough for other companies to establish themselves in much the same way as sellers open shop in Facebook’s Marketplace.

According to the company’s presentations, Meta seems to be gearing up to seize just such a position by emphasizing cutting the price tags of VR headsets, which should result in more people buying them. The more people there are that access Meta’s metaverse through its headsets, the higher the chance that the company will be able to achieve this goal.

In a Monday interview, the Wall Street Journal’s Joanna Stern said that “the future of Meta is all about controlling that hardware and operating system combo, because we are seeing the results right now of them not being able to do that,” referring to how Zuckerberg has often complained about Apple (AAPL, Financial) being able to set its own rules for apps on its operating system, which has cost Facebook in terms of ad revenue.

The company has some serious ground to cover, though, if it wants to attract people to its metaverse over existing metaverses. Not only will it need to attract consumers, it will need to attract businesses as well, and convince both groups to give up a high degree of control over both their privacy and their metaverse experiences.

The same company

Despite changing its name and making a dramatic public reveal of its new strategy, Meta is still the same company that was called Facebook just a few weeks ago. The metaverse as Meta envisions it is probably still at least five to 10 years away from becoming a reality, so the majority of its revenue will continue coming from its social media platforms for years to come.

Investors face a tough question when it comes to this company. Even though its business hasn’t undergone much change yet, it will in the future, and that change will cost billions. It’s also unclear whether that investment will pay off. Meta is far from the first company in the metaverse, and it’s not yet clear how popular its version will become. In the meantime, companies such as Sony, Microsoft and Take-Two are already monetizing digital worlds.

If Meta can pull off the same kind of monopoly in its metaverse as Apple has in its app store, the company could be rolling in cash in a decade’s time as creators rush to join its platform to sell games, real estate and other digital assets. The question is, what can Meta offer that will be attractive enough for the digital economy to move in?