Facebook Stumbles Into the Metaverse
What brand marketers need to know about Facebook’s corporate rebranding as Meta
Last Thursday, Facebook held its annual Facebook Connect event, in which CEO Mark Zuckerberg announced that the company will change its corporate name to Meta, in reference to the metaverse concept that has been quickly catching on in the tech and media industries. The announcement came at the end of a lengthy keynote where Zuckerberg, along with some other Facebook executives, cheerfully reiterated the work it has been doing in virtual reality and augmented reality, mostly through its Reality Labs division, and showcased some fancifully rendered Facebook Horizon demos, but made very few concrete product announcements.
Following the recent release of the Facebook Papers, the social media giant is facing a turning point in terms of both its reputation and the regulatory pressure it faces. The rapidly changing competitive landscape of social media, where all major platforms are both endlessly copying each other in formats and carving out their own business models and development focuses, Facebook’s big public pivot towards the metaverse, at this particular moment in time, is both a genuine attempt at getting ahead of its competitors and a diversion tactic intended to distract attention from its ongoing reputational crisis.
There is a lot to unpack in this landmark rebranding, both in terms of what it means for Facebook and social media companies in general, and also for the development of the metaverse. For the most part, Facebook’s bullish move is pushing the nascent concept into the mainstream spotlight far before the company is ready to deliver any use cases of true value. In doing so, its rushed stumble into the metaverse has inflated the hype and expectations around the metaverse, possibly setting up everyone for disappointment.
Facebook In Search of a New Narrative
Facebook is no stranger to controversies, but the most recent wave brought on by the Facebook Papers, which were leaked by a former Facebook employee, offered an unprecedented amount of ammunition to critics and policy-makers that have been looking to rein in the company’s outsized influence on politics, communications, and society through regulatory actions. Differing from the previous rounds of anti-Facebook crusades, the Facebook Papers provide concrete evidence that the company’s management team has willfully ignored or downplayed the negative impact of its products on vulnerable demographics and populations, such as teens and users in non-Western countries, in spite of the results from the company’s own internal research.
Ironically, what actually seemed to have alarmed Facebook is the findings from its internal research that indicate the company is quickly losing its grip on the younger generations. Teenage users on Facebook in the U.S. are projected to drop 45% over the next two years, driving an overall decline in daily users in the company’s most lucrative ad market, reports The Verge. Even young adults between the ages of 20 and 30 were expected to decline by 4% during the same timeframe. Posting by teens had dropped 13% from 2020 and “remains the most concerning trend,” the report noted, quoting Facebook’s internal research.
Facebook’s reputational crisis and its declining popularity among young people form a vicious feedback loop: the more the company is exposed and criticized for its negligence and incompetence, the more uncool it seems to continue using Facebook products; and the more unpopular Facebook becomes in the court of public opinion, the easier it gets for regulators to apply pressure, including blocking the company from making critical M&A moves that perhaps could have allowed it to buy back the attention of younger users.
For a dominant market leader, Facebook has not actually led the innovations in the social media space for years. Competitors like Snapchat, TikTok, and even Twitter all have been exploring and executing new, exciting ideas of what social media could evolve into, and Facebook is simply left to endlessly copy the next breakout format and feature, be it AR lenses, short-form videos, or live social audio.
All in all, Facebook is in need of a new narrative that it can deploy both as a diversion for the negative attention and as a grand vision for its future development. Enter: the metaverse.
Zuckerberg Stumbles into the Metaverse
Every time I write about Facebook, inevitably Zuckerberg’s long-held obsession of turning Facebook into a platform company comes up. Even since it missed the boat on the evolution from desktop to mobile and ended up as “a family of apps” that run on mobile platforms controlled by Apple and Google, the company has been searching for the post-mobile platform that would allow it to wrestle back control and gain access to a larger share of the digital economy. This “Facebook platform” vision guided Zuckerberg’s decision to acquire Oculus in 2014, which eventually led to the Reality Labs, a division that now reportedly has nearly 10,000 employees working on augmented reality and virtual reality devices.
To Zuckerberg’s credit, his commitment to virtual reality never wavered even though the VR market has gone through a full round of the hype cycle since Facebook bought Oculus. He continued to dump a good portion of the profits from Facebook’s advertising business into Oculus, and ended up outlasting many competitors in the VR space. Encouraging sales numbers of the latest Oculus headset from the 2020 holiday season seemed to have vindicated Zuckerberg’s bet on consumer-facing VR, despite VR’s limited, gaming-centric use cases.
The problem is, however, that all the things the Reality Labs division were developing, including the AR glasses projects, were not new or shiny enough to be sold to Wall Street investors and Silicon Valley talent as Facebook’s grand vision for the future. Zuckerberg needed a more compelling concept to hang his platform dream on, and the emerging concept of the metaverse fits the bill perfectly.
We here at the Lab have been tracking the emergence of the metaverse concept since Epic Games worked with Disney to create an immersive Star Wars-themed event in Fortnite in December 2019. This term, which originated from Neal Stephenson’s 1992 sci-fi novel, Snow Crash, proposes a future of physical reality converging with our digital world into a shared, persistent hybrid reality. At the beginning of 2020, the term gained further traction among the tech community following the publication of an influential essay by venture capitalist Matthew Ball that laid out the key characteristics of a metaverse. Then the Covid-19 pandemic accelerated the digitalization of just about every aspect of our daily lives, and led us one step closer to the metaverse, as our U.S. Head of Innovation Adam Simon dissected in his two-part analysis.
Facebook certainly was not the first company people associated with the rise of the metaverse. Rather, most of the metaverse developments have been coming out of the video game industry, especially those that are developing massively multiplayer online (MMO) games. As we explored in our 2021 Outlook trend report, games like Fortnite (owned by Epic Games), Roblox, Minecraft (owned by Microsoft), and Animal Crossing: New Horizons increasingly exhibited metaverse-like elements. Epic Games CEO Tim Sweeney has been openly discussing his plan to build a metaverse for many months now. Advocates have been touting the concept as the next iteration of the internet where we will all work, play, and socialize in the coming decades.
That last part of socializing in the metaverse must be what caught Zuckerberg’s attention in his quest for a new narrative for Facebook. If the metaverse prophets are right, and people will be increasingly shifting their social life into a metaverse-like environment, as many young people already do in video games, then it is mission critical for Facebook to jump on the bandwagon. After all, Zuckerberg would rather think about the meta future rather than live in the unpleasant now. Forget his grand promise of a privacy-oriented pivot in 2019 — the metaverse provides a much better concept for him to unite Facebook’s social apps and VR businesses, and the buzz surrounding the term means that it will be perfect for setting a new narrative for the company, hence the rebranding to Meta. Yet, because the motivations behind this rebranding appear to be largely reactionary to its precarious circumstances rather than stemming from an authentic vision for the company’s future, it also comes with a lot of strategic issues.
The Problems with the “Zuckerverse”
Facebook’s rebranding as Meta came with little concrete proof that Facebook could actually pull off its metaverse vision as Zuckerberg laid out in the keynote. For starters, the company is years behind competitors like Apple and Microsoft on developing AR headsets and other wearable technologies, and has no mobile platforms that it could leverage to onboard users into its metaverse environment. Oculus sales may have enjoyed a good quarter during the last holiday season, but it is still far from Zuckerberg’s own goal of 10 million active units of scaling its VR operation into a self-sustaining business. The lack of a new Quest headset this year is not going to help in that regard.
More importantly, the lack of real consumer use cases, as demonstrated by the keynote on Thursday, was a strong indication that Facebook has no original idea of how to build a metaverse. Reiterating on the gaming and work-oriented use cases already being explored by the likes of Epic Games and Microsoft, the only new-ish metaverse use case that Facebook proposed during the keynote was for fitness exercises in immersive virtual environments. Considering the level of motion sickness and fatigue that many VR users still experience, one has to wonder how many users would take to exercise in the metaverse, and what value the metaverse would really add to the fitness category.
Therefore, it is perhaps no surprise that most consumers have shown little interest in Facebook’s splashy rebranding. According to a recent Morning Consult survey, 68% of U.S. adults say they have no interest in Facebook’s metaverse products, based on what they know now, and 51% of them believe that this rebranding is simply a PR move to distance itself from negative press. Interestingly, Mark Zuckerberg received a net favorability rating of negative 32 points, with more than half (54%) of adults saying they have an unfavorable opinion of him.
Even more problematic is Facebook’s insistence on envisioning VR as the primary interface for the metaverse, especially when VR is still years, if not a decade, away from the kind of technical maturity and consumer adoption that can fulfill Facebook’s vision as showcased in the keynote. Zuckerberg has described it as a “3D virtual environment” you can go inside of, instead of just looking at on a screen, but the vast majority of our digital interfaces are still developing on 2D screens.
Therein lies Facebook’s biggest error in its metaverse strategy — the company is so desperate for a new narrative that unites its social media business with its VR ventures that it is blindly jumping years ahead to the ideal end-point where AR and VR eventually become the primary metaverse portals, without taking the necessary steps to build the other interfaces that would ladder up to that future. And it cannot deliver any real use cases at the moment precisely because it is trying to directly jump to the VR phase of the metaverse. “We shape our interfaces; thereafter, they shape us,” wrote Packy McCorrnick at Not Boring. Facebook wants to shape the next interface of the internet without putting in the work.
This mistake is especially egregious when compared to how the other companies in this space are building towards the metaverse future. Epic Games has been buying companies like 3D asset platform Sketchfab and AirStation, a creator platform for video game artists, that help it round out a set of necessary creator tools to improve the 3D environments and interactive experiences it is building in games like Fortnite. Roblox is following a similar strategy as it recently upgraded the creative tools and avatars in the creator-driven game to be more realistic and customizable. Both Fortnite and Roblox already have millions of active players who access the 3D game environments across various gaming consoles and mobile devices, and Facebook’s rudimentary VR games are not winning them over to the Horizon spaces any time soon.
Then there is Microsoft, which, besides owning the Minecraft game that will likely follow the Roblox playbook to become a proto-metaverse environment, also has big bets on developing workplace-oriented metaverse products. The virtual work environment exemplified by the Horizon Workplace is by far the most realized VR use case that Facebook has come up with. But it has a very slim shot at wide adoption going against Microsoft’s Mesh, a collaborative platform for virtual experiences that will be directly integrated into Microsoft Teams, a productivity tool that over 145 million desk workers already use every day, starting next year. Unlike the Horizon Workplace, you will not need to strap on a VR headset in order to appear in a 3D conference room as a digital avatar. All you need to do is to open the Teams app.
Compared to Facebook’s VR-centric approach, Microsoft plans to use Mesh to connect people across all types of devices (smartphones, laptops, HoloLens headsets, etc.) into shared spaces where they can all interact, no matter how they may have dialed in. In other words, Microsoft is ready to deploy a 3D metaverse experience on a 2D screen at a scale far greater than what Facebook can manage at the moment. So, as things stand today, it seems unlikely that Meta would be winning either the entertainment or the enterprise sector of the burgeoning metaverse market.
By all accounts, it looks like Facebook has stumbled into the metaverse before it is ready, and the consequences will be quite severe. In the process of pinning the company’s future to the metaverse as a desperate effort to change its narrative, Facebook has effectively overhyped the concept for the mainstream audience in the process, which will likely end up undermining the entire development of metaverse.
What Meta and the Metaverse Mean for Advertisers
Reminiscent of how Google reorganized its corporate structure in 2015 and renamed its holding company Alphabet, this rebranding effort from Facebook does not fundamentally change the business that Facebook is in. Instead of a genuine pivot, this move feels more like a new coat of paint: Facebook is still Facebook, and most Facebook users won’t be trading the news feed for a Horizon Home environment any time soon. What this move really accomplishes beyond having a grand new pitch to sell to investors is that, moving forward, Facebook will split its financials into two sectors: the “family of apps” that includes all its money-makers like Facebook, Instagram, and WhatsApp, and the metaverse-related projects that will require heavy investment into their R&D and marketing operations, thus allowing it to show just how profitable its core business is. Like it or not, it is mostly the advertisers’ dollars that will end up funding Zuckerberg’s metaverse ambition.
There is a fraction of investors who still worship Zuckerberg’s founder vision and believe in his ability to guide Facebook out of the troubled waters it is currently in. Time will tell if Facebook can recover from this premature entry into the metaverse, and harness a genuine symbiosis between its social media apps and its AR and VR projects. Towards the end of the keynote and right before announcing the new company name, Zuckerberg made sure to slip in a bit of reassurance to the advertisers and brands by claiming that this rebranding won’t affect Facebook’s existing business model. In fact, the company will continue to build out its metaverse products under its existing business model that will ensure that the Facebook metaverse will be open to brands and businesses. In turn, Facebook would get to monetize the attention theoretically flocking into the metaverse via ads and other forms of marketing to make its metaverse available for free to everyone.
This is great news for brand marketers, if only Facebook had not tried to jump directly to the VR phase with zero build-up. That being said, for brands curious about exploring the metaverse, there is an early-mover advantage that applies to all emerging media channels — get in while the space is still forming and not crowded with competitors, and connect with the early-adopter audience. Perhaps it is better to think about what virtual experiences your brand can build and test out in the existing proto-verse environment today, and deliver them at scale in tandem with all other media channels.
Also, a change of perspective may help brands develop a more fluid metaverse strategy. While it is important to develop 3D branded assets in preparation, it is just as important to understand what the metaverse concept really means for consumer behavior. Instead of following the dominant idea of thinking of a 3D virtual space in which your brand needs to establish a presence, try to think of it more as an inflection point in the trend towards digitalization, where people start to value their digital lives as much as, if not more so than, their offline lives. Throughout the last 16 months or so, a larger part of our collective existence has moved online. For those who are extremely online, the metaverse is already partly here. Therefore, brands should be thinking about their role in a society led by digital culture and understand the direction audience attention is flowing.
Lastly, it is important to note that advertisers should not let this flashy Meta rebranding distract them from some of the very real issues that Facebook is facing, especially the Facebook Papers that revealed some troubling information about the company’s practices pertaining to its media responsibility. Brands should work with agency partners to learn the latest updates and insights, and take necessary actions based on recommendations from the media responsibility and brand safety leaders in your organizations.
