Stale Vision Led to Crisis
The parent company of Facebook, Meta, cutting 11,000 jobs, or 13 per cent of its workforce, did not come as a surprise to the global techie world watchers, since it was waiting to happen. Though the tech giant has termed the retrenchment as an attempt to become “leaner and more efficient,” it is a well-known fact that American tech companies are in the throes of an unprecedented crisis. The “American dream” is falling into a dark abyss.
The Meta crisis is the beginning of a turbulent era in Silicon Valley, which so far stood as a gigantic bastion of economic power. The United States has always boasted that this bastion is recession-proof, but now the Fort has been breached; according to Crunchbase, 50,000 U.S. techies have been laid off this year alone. Elon Musk gave marching orders to half of Twitter’s workforce; Peloton, a maker of internet-connected exercise bikes, has more than halved its workforce, Robinhood, a popular stock-trading app, also has cut its labour force by 30 per cent, and fin-tech platform Stripe has announced layoffs. Google and Amazon have decided to lay off 10,000 employees, each.
The crisis of Meta
In the case of Meta, apart from inflation, rising interest rates, and recession, aggressive COVID-era expansion is partly to blame. Meta increased its workforce by nearly 60 percent during 2020- 2021. Facebook grew its staff by 28 per cent, to 87,314, in the 12 months ending in September.
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| My article in China-India Dialogue |
He got it wrong, because, he was not pursuing realistic dreams. The social-media platforms of Meta, such as Facebook, Instagram and WhatsApp, have a traditional business model that relies on advertising. It was hit hard by the recession. Several digital advertisers pulled back in the face of inflation and the instability caused by the Russia-Ukraine conflict, and customers scaled back spending. As the tech companies tightened their belts, the labour force became the first casualty.
In October, Meta posted its second-quarter revenue decline and its profit was cut in half from the prior year. Valued at more than $1 trillion in 2021, Meta's market value has since plunged to around $250 billion. It ceased to be the behemoth, once it was. Meta's stock lost more than 71 per cent of its value this year, and it became the worst performer in the S&P 500.
The gamble of the metaverse
Once a niche concept contained in the cyberpunk novel, Snow Crash (1992), the metaverse became a buzzword when Facebook rebranded itself as Meta on October 28, 2021.
The metaverse is a virtual world that exists parallel to the physical world. In the metaverse, our digital and physical lives are overlapping, in the domains of work, socialization, productivity, shopping, and entertainment. It is enabled by advanced technologies, such as VR, AR, and MR. It is the next-generation internet for businesses, investors, and developers.
The entry point for the metaverse is, Extended reality (XR), which is a combination of augmented, virtual and mixed-reality environments that are accessible and interactive in real time. It is the pioneer of inventive applications in fields such as gaming, entertainment, enterprise solutions and simulations, as well as in military and defence.
Also, blockchain technology will play a major role in building the metaverse. While the proponents o this aspirational technology are western, the global metaverse discourse is influenced by economic giants such as China and South Korea. An array of positive factors suggests that India has a prime role to play.
The Zuckerberg company, Meta's crisis came as it is taking a gamble on building the metaverse. The hiring boom at Meta has focused on building immersive digital realms accessed through virtual reality. Zuckerberg has maintained that it will be the next great computing platform after mobile phones. He expects metaverse to replace some in-person communication. Since it is a gamble based on a stale vision, the crisis was inevitable.
There seems to be little hope for Meta’s technology which Zuckerberg claims is his company’s and our future. But, none of us or the world at large has so far viewed him as the Messiah. Also, the multipolar world has ceased to view the U.S. as the saviour, anymore.
Renowned technologists, who study designing use behaviour in virtual worlds, had always felt that Zuckerberg’s vision is stale and the future of Meta is on the rocks. So, the stale vision is to be blamed for the current crisis, rather than the global recession.
There are 3D multiperson chat environments that were popularized by online games, Second Life, and now Horizon Worlds. Microsoft’s V-Chat, Comic Chat and V-worlds and the tools for creating and customizing digital avatars were the initial forays into Zuckerberg’s dream world. But it was evident to Microsoft in the 1990s itself that trying to harness the potential of the metaverse amid dramatic shifts in our digital lives, was not worth the extravaganza.
The dreams seem endless, and it is like kids create and then abandon, as in Minecraft. The magical architecture of virtual worlds is possibly a critical ingredient in the user experience and hence Meta is keen on creating 3D environments for people to hang out. But techies at Microsoft had found that these “stage sets” did not play a particularly critical role in shaping user behaviour. Instead of roaming in the virtual space, one has to work one’s way into the social structure to figure out how are things happening. People don’t encounter any sense of real life while wandering around for hours in virtual life. The virtual gathering space then becomes boring and ultimately they become empty and abandoned. This is termed a “cold state problem” by former Microsoft technology expert, Robert Fabricant.
Meta's metaverse division posted a loss of $ 9.4 billion in the first nine months of 2022, but Zuckerberg pumped in $ 36 billion between January 2019 and September 2022 to prop it up in the hopes that, at some point, people will be fools to show up at the party. When the party was about to begin, the world was pushed into penury, and no one turned up!
A decade ago, when Facebook was at a critical inflexion point as a desktop web platform with a very limited HTML 5 browser-based mobile offering, the leadership failed to recognize the smartphone revolution. They didn’t shift their focus to a mobile-first product offering in time. By pursuing the metaverse, Zuckerberg is imagining that Meta is defining the next paradigm. But in doing so, Meta has forgotten the fundamental lesson of mobile computing: Only the computing experience that is with people all the time wins. Computing that accompanies people in the world will always win over computing that takes them out of the world.
Hence, nobody is really playing Horizon Worlds, Meta's free-to-play virtual reality metaverse that lets users create and visit “worlds” with friends or strangers. WSJ reports that of all the user-created worlds in the game, only about nine per cent are visited by more than 50 players. The rest are never visited by anyone, except Zuckerberg. The end result is empty, barren digital lands.
So, Zuckerberg’s metaverse vision is just a nostalgia trip to escape a world of complex, multilateral reality and hence his metaverse has progressed very little, scripting an American tragedy. The creative imagination of a brilliant student can any time overtake Meta’s flimsy vision and invent a compelling digital world. And it is beginning to happen.
China and metaverse
China’s Fintech Development Plan for 2022-2025 mentions metaverse while discussing reshaping financial services with intelligence, as a key task. The plan proposes that “relying on the features of 5G with high bandwidth and low delay, visual technologies such as virtual reality (VR), augmented reality (AR), and mixed reality (MR) will be deeply integrated with banking scenes to promote physical branches to upgrade to multi-horizontal, immersive, and interactive smart branches.”
In a paper on metaverse in October 2021, the China Institute of Contemporary International Relations (CICIR), linked to the Ministry of State Security, warned of the need for lawmakers to deal with virtual crimes. Similarly, in November 2021, the government of Zhejiang province organized a “metaverse industry development symposium.”
On November 1, China's Ministry of Industry and Information Technology unveiled a five-year plan for 2022 to 2026, for the development of the VR industry, aiming to achieve a target exceeding 350 billion yuan ($48.1 billion) in 2026.
This action plan is China’s first national-level policy that supports metaverse development. The document bats for creating fundamental technologies that support immersive AR, VR, and mixed-reality experiences. The policy calls for innovation in fields like full-body motion capture, gesture, eye, expression tracking, and technologies for rendering graphics.
In China, so far over 16,000 metaverse-related trademark applications have been filed. Six of China’s tech giants – including Baidu Inc, Alibaba Group Holding Ltd, and Tencent Holdings Ltd (collectively known as BAT) – made it to the top 10 firms globally, that filed the most VR/AR patent applications in the past two years. In 2019, most of these developments happened in the fields of retail shopping, education, gaming, marketing, information display, and industrial manufacturing.
China’s VR industry accounted for about 44 per cent or US$8 billion of the global market, by the end of 2020. Big Chinese firms lack the expertise to develop VR devices, and they are investing in startups. China has over 900 million smartphone users, making VR accessible through smartphones, a priority. AR generates less revenue than VR, and AR revenues reached RMB 21.3 billion (US$3.09 billion) in 2021. Virtual reality and virtual idols are booming, comprising an industry that is worth RMB 51 billion (US$8 billion) and RMB 3.5 billion (US$548 million) respectively.
Deloitte-China estimates that the metaverse market in China will hit 40 trillion yuan ($5.79 trillion) by 2030, equivalent to 20 per cent of China's GDP, and the electronic products and wearable devices in the metaverse will be worth $100 billion.
According to a report by Morgan Stanley, leading Chinese tech firms have already begun to invest in a metaverse market that may be worth up to US$8 trillion in the future. J P Morgan, in a September report, suggested that the metaverse could triple China’s online-gaming market to $131 billion from $44 billion. The Bank estimates a $4 trillion total addressable market (TAM) for the metaverse in China from “converting offline consumption across physical goods and services.”
The metaverse development will have a notable impact on the entire technology, media and telecom (TMT) ecosystem. Tencent, NetEase, Bilibili, Sea, Krafton and Bandai Namco stocks could benefit from the metaverse.
Software and service vendors, such as Sight Plus, Hisense, and Mayitegong, have entered the AR market. Baidu launched a metaverse app on Chinese history, in December 2021, called “Land of Hope.” Tencent, the creator of WeChat, launched on the QQ platform, a new feature called Super QQ Show, which introduced a 3D interactive space where users can interact and play games together.
A new app called Jelly, launched this year and developed and owned by Beijing Yidian Entertainment Technology, allows users to create online avatars of themselves and engage with up to 50 pals. It surpassed WeChat to become the most downloaded app in China’s iOS store. Byte Dance, the parent firm of TikTok, has designed two metaverse apps: Party Island for the Chinese market, and Pixsoul for the Southeast Asian one.
Metaverse was a key theme of the 5th World Artificial Intelligence Conference (WAIC2022), in Shanghai in September. Chinese internet platforms offered a "metaverse-like" viewing experience enabled by 5G and virtual reality (VR), during the Qatar World Cup soccer carnival.
Metaverse in India
China’s neighbour India is in the vanguard to build the metaverse. With the Government trying to foster a digital economy worth up to $1 trillion, the market of video streaming and gaming is seeing fresh heights. Reports project that the Indian gaming market will more than triple to $7 billion by 2026.
India released its National Blockchain Strategy in December 2021. The pilot of the blockchain-backed Digital Rupee will be issued by the Reserve Bank of India, in December. The spectrum auctions to the rollout of 5G mobile services, would accelerate demand for cloud applications – including those for gaming and the metaverse.
The operational challenge of building the metaverse remains, and if India is to take a leading role, investments in the private sector need to accelerate. The 18 months to August 2021 saw over $1bn of capital infused into the local video games ecosystem – more than the preceding five years combined.
Deloitte has predicted that the metaverse industry in India could have an economic impact worth between $79 billion and $148 billion by 2035.
The report notes that India is among the pacesetters in the industry and that India was one of the first jurisdictions to include the metaverse in its policy considerations on cyberbullying and sexual abuse. With the country inching toward unveiling the Digital India Act, it is expected that a proper framework will be established to prevent the crimes of inciting violence and spreading misinformation on the metaverse.
India has stated that it will provide an enabling environment for Web 3 firms to experiment with new offerings for consumers in the industry. Union Minister of State for Skill Development and Entrepreneurship Rajeev Chandrasekhar announced that nothing prevents firms from exploring metaverse or non-fungible tokens (NFTs).
However, the country has signalled to use its G20 presidency to push for global digital asset regulations. The government has been relying on distributed ledger technologies (DLT) in recent months, using them for its central bank digital currency (CBDC) and streamlining local land registries’ operations.
The future of the metaverse can likewise be a big contributing factor to the development of the virtual economy.
The ethical questions on meta-governance
India is debating the regulation of the technologies that will underpin the metaverse. The budget levies a 30% tax on income from transfers of Virtual Digital Assets (VDAs). Owning and trading non-fungible tokens (NFTs) is a pathway towards a new digital economy and this will impact the development of the metaverse.
The European Commission has suggested that plans to create an all-encompassing virtual reality environment would pose new challenges for antitrust regulators in the EU and has demanded further scrutiny of the development of the economic models of the metaverse.
South Korea recently created a ‘metaverse alliance’ to facilitate the development of virtual and augmented reality platforms. In China, a metaverse industry group, the Metaverse Industry Committee, formed under the state-supervised China Mobile Communications Association in December 2021, has the stated objectives of strengthening innovation and integration among metaverse builders, organizing the training of professionals, and promoting new thinking.
India always has espoused the doctrine, of Vasudhaiva Kutumbakam, a Sanskrit phrase found in ancient texts such as Maha Upanishad, which means “The world is one family”. This expression is a constant refrain in Prime Minister Narendra Modi’s speeches. During his speech at the Davos Agenda 2022, he indicated that a collective and synchronized, global approach is needed towards addressing challenges with cryptocurrencies.
This policy of oneness should be applicable, in the case of the metaverse, too. All the Indian scriptures expound on the victory of good over evil, and in a war between reality and virtual reality, in a conflict between reality and metaverse, reality has to be victorious and spread its wings even in the mythical and mysterious horizons.
© Ramachandran
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