This analysis was first published in SvD Näringsliv, in Swedish, on February 1st, 2022.
Mark Zuckerberg is spending hundreds of billions of kronor to build the next generation of Facebook — what is now called the metaverse. A set of new patents reveals how it is meant to pay itself back.
On a trade-show floor in Barcelona, a confident Mark Zuckerberg walks through the crowd in a gray t-shirt and jeans. He looks relaxed for the CEO of a company whose market cap, even then, in 2016, was around $300 billion (today the number is roughly three times higher). Right there, in that moment, the seed of what would become the next generation of Facebook was arguably planted. Nobody quite noticed.
The moment was captured on camera and got plenty of attention, but not because of Zuckerberg’s light step. What made the image interesting — or dystopian, depending on how you see it — is the background.
Facebook’s partner Samsung was holding a launch event for a new phone, and anyone who preordered it got free VR goggles. So as Zuckerberg walks toward the stage to talk about the future of virtual reality — and indirectly about his own company’s future — he passes a sea of seated people, each wearing a VR screen in front of their face. It looks strange, to say the least. Is this the future?
Looking at Meta, formerly Facebook, and its investments today, it at least appears to be. Ahead of the quarterly report out on Wednesday, the company has for the first time broken out this new segment in terms of revenue and costs. The business area is called “Reality Labs” and includes both hardware and software related to virtual reality and augmented reality (AR).
The difference — which may not be obvious to everyone — is that virtual reality is a fully virtual world you step into. Augmented reality is a digital layer on top of the real world, where digital objects are placed in a view seen through a camera, phone, or pair of glasses.
This is what is supposed to create the much-talked-about metaverse. No launch date has been announced yet, and so far the area consists mainly of Oculus, Meta’s VR division, which came from an acquisition back in 2014. But more is on the way. And the business model will likely look different from how Oculus makes money today, which is through the sale of hardware and software.
The shift became clear when the Financial Times recently went through hundreds of Meta patent applications and found both systems for reading facial expressions and new ways of presenting ads. Judging from the patents, the company wants to build the metaverse as an animated 3D environment for socializing, working, and gaming — but one that still revolves around serving ads in time and space. One of the patents is a system for personalized ads in augmented reality based on how users interact in social networks.
Meta’s policy chief — and former UK deputy prime minister — Nick Clegg has described the company’s metaverse business model as “commerce-driven”, which another patent fleshes out, since it describes something resembling a virtual store. But what is on the shelves and available for purchase is essentially sponsored — in a simplified way, much like in real-world grocery stores. It is no accident which ketchup gets the best placement. The difference in the metaverse is that each person only sees the specific virtual goods the companies want them to see — in real time.
Taken together, the patents show that Zuckerberg’s vision is mostly an extension of the company he already runs today. Connect people digitally, make sure they spend as much time there as possible, and serve them ads. The more data you can collect, the more accurate the ads. The more people on the platform, the more money you make. That the metaverse is in 3D and looks like a game is almost beside the point. The underlying idea is the same one that drives Facebook, WhatsApp, and Instagram today.
What the 3D world does enable, though, is more data — and data of a different kind. VR goggles can capture facial expressions, and therefore pick up a type of emotional signal that is otherwise hard to measure. If you wrinkle your nose in front of your phone screen today, nobody notices. In a VR headset, that becomes a data point. And data — that is what sells ads, in Zuckerberg’s metaverse.