The Facebook metaverse, also known as Horizon, is the company's ambitious plan to create a virtual reality (VR) world where users can interact with each other and digital objects in a social setting. However, despite the hype and investment, the metaverse has yet to take off in a significant way. In fact, internal documents reveal that the metaverse has incurred £18 billion in total losses and is currently seeing minimal user engagement and quality issues.
One reason for this is that VR technology is still relatively expensive and requires specialised hardware, which limits the potential audience. Additionally, there are concerns about the privacy and security of user data in the metaverse, which could deter potential users. Furthermore, while the Meta Quest is currently the market leader, competition is set to heat up with Apple joining the race and Sony beefing up its VR offering in 2023.
Mark Zuckerberg, Facebook CEO, has previously complained about Apple's extraordinarily high app store fee, yet the metaverse could charge developers as much as 47.5%. This high fee could make it difficult for developers to make a profit, further limiting the potential audience.
As much as investors may view the metaverse as a deep value play at 12x 2023 earnings, I continue to see more downside risks than upside. The minimal user engagement, quality issues, and high developer fees are just a few of the factors that make the future of the metaverse uncertain.
To make VR more successful for a wider audience, companies should focus on making the technology more accessible and affordable. This could include the development of more affordable VR hardware and the creation of VR experiences that are compatible with smartphones and other existing devices. Additionally, companies should prioritise user privacy and security by implementing robust data protection measures and being transparent about how user data is collected and used. Lastly, companies should charge a reasonable fee to developers and create content that appeals to a wide range of users.
While the Facebook metaverse may be struggling to gain traction, there is still potential for VR to become more successful for a wider audience. However, it's important for companies to address the issues that the metaverse currently faces, such as minimal user engagement, quality issues, and high developer fees, to make VR more mainstream and successful.
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