Picking Up the Pieces after the Meta Crisis

Meta, the parent company of Facebook, cutting over 11,000 jobs, or 13 percent of its workforce, did not come as a surprise to global tech watchers. Although the tech giant spun the reorganization as a move to become “leaner and more efficient,” it is well-known that American tech companies are in the throes of an unprecedented crisis. Will Facebook’s belt-tightening dampen the enthusiasm of the tech companies in China as they increase experimentation in the metaverse?

Betting on the Metaverse

The Meta crisis is the beginning of a turbulent era in Silicon Valley, which had long represented solidified and growing economic power. The United States had always boasted this sector as recession-proof, but the fort has been breached. According to the prospecting platform Crunchbase, 50,000 U.S. tech workers were laid off in 2022 alone. Elon Musk has given 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, has cut its labor force by 23 percent, and fin-tech platform Stripe has also announced layoffs.

High inflation, rising interest rates, recession, and aggressive pandemic-era expansion all played roles in the Meta crisis. Meta increased its workforce by nearly 60 percent from 2020 to 2021. Facebook grew its staff by 28 percent to more than 87,000 in the 12 months ending in September 2022. “At the start of COVID-19, the world rapidly moved online, and the surge of e-commerce led to outsized revenue growth,” wrote Mark Zuckerberg, founder of Meta and Facebook, announcing the layoffs. “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I decided to significantly increase our investments. Unfortunately, this did not play out the way I expected. I got this wrong.”

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 Ukraine crisis, and customers scaled back spending. As the tech companies tightened their belts, the labor force became the first casualty.

Meta’s crisis came as it took a gamble on building the metaverse. The hiring boom at Meta focused on building immersive digital realms accessed through virtual reality (VR). Zuckerberg has maintained that it will be the next great computing platform after mobile phones. He expects the metaverse to replace some in-person communication. Since it is a gamble based on a stale vision, the crisis was inevitable. Renowned technologists studying usage behavior in virtual worlds have long considered Zuckerberg’s vision stale and the future of Meta questionable. Analysts blame the stale vision for the current crisis more than the global recession.

Some 3D multi-person chat environments were popularized by online games such as Second Life and more recently Horizon Worlds. Microsoft’s chat tools for creating and customizing digital avatars were the early forays into Zuckerberg’s dream world. But it became evident to Microsoft way back in the 1990s 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, like kids creating and abandoning worlds 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 in which people would hang out. But employees at Microsoft found that these “stage sets” did not play a particularly critical role in shaping user behavior. Instead of roaming the virtual space, one must work one’s way into the social structure to figure out how things happen. People don’t encounter any sense of real life while wandering around for hours in virtual life. The virtual gathering space becomes boring, and ultimately, empty and abandoned.

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: The computing experience that is with people all the time wins; Computing that accompanies people into the real world will always win over computing that takes them out of the world.

Thus, Zuckerberg’s metaverse vision is just a nostalgia trip to escape a world of complex, multilateral reality, and his metaverse has progressed very little.

Prospects for Metaverse in China

China’s Fintech Development Plan (2022-2025) announced by the People’s Bank of China in January 2022 mentioned the 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 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 November 2022, several Chinese ministries and administrations including the 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 (US$48.1 billion) by 2026. The document seeks the creation of fundamental technologies that support immersive AR, VR, and MR experiences and calls for innovation in fields like full-body motion capture, gesture, eye and expression tracking, and technologies for rendering graphics.

Over 16,000 metaverse-related trademark applications had been filed in China by February 21, 2022, according to China National Intellectual Property Administration. Six of China’s tech giants including Tencent and Baidu ranked among the top 10 firms globally in filing VR/AR patent applications in 2020 and 2021. In 2019, most of these developments happened in the fields of retail shopping, education, gaming, marketing, information display, and industrial manufacturing. 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.

Deloitte China estimated that the metaverse market in China will hit 40 trillion yuan (US$5.79 trillion) by 2030, equivalent to 20 percent of China’s GDP, and that electronic products and wearable devices related to the metaverse will be worth US$100 billion. Metaverse development will exert a notable impact on the entire technology, media and telecom ecosystem.

The metaverse was a key theme of the 5th World Artificial Intelligence Conference in Shanghai in September 2022. Chinese internet platforms offered a “metaverse-like” viewing experience enabled by 5G and VR during the Qatar World Cup carnival.

China’s neighbor India is also among the leaders on building the metaverse. Deloitte has predicted that the metaverse industry in India could have an economic impact worth between US$79 billion and US$148 billion by 2035.

However, the metaverse raises ethical questions on privacy and security. Online risks may worsen if the metaverse allows pervasive, intrusive, and unwanted contact. Pioneering efforts to find governance mechanisms for virtual worlds must be in place and should be supported with digital literacy, safety, security, and privacy to guarantee meaningful participation in online communities and minimize harmful content and behavior. It will not be possible for a single metaverse to exist if laws for monetizing and moderating the metaverse are enacted and enforced differently around the world.

India has always 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 policy of oneness should be applicable to the metaverse too. In a war between the reality and the metaverse, reality must be victorious and spread its wings even behind mythical and mysterious horizons.