By Parmy Olson / Bloomberg review
Despite all the fanfare around Mark Zuckerberg’s plans to create a cryptocurrency that was to bring “billions” in new revenue, the project died down with barely a whimper. Meta Platforms, the company formerly known as Facebook, has agreed to sell assets related to the project born in 2019 as Libra and now known as Diem to Silvergate Capital for around $200 million.
As Diem’s director jumped ship last November and his ambitions were scaled back amid a fierce pushback from regulators and central banks, the project’s death was anticipated by some. But a post mortem tells us something more troubling: Facebook continues to struggle to develop new services without buying them, and in a tougher regulatory environment, that doesn’t bode well for Zuckerberg’s metaverse plans, a pivot on which he bet the whole company.
Among Facebook’s history of innovation misfires: a home screen for Android phones that crashed shortly after its launch in 2013; Snapchat competitors Poke and Slingshot (2014 and 2015); and the Parse mobile development platform. The company has also failed in its efforts to create its own versions of Amazon’s Alexa.
Facebook’s workforce excels at execution and scale, but software developers who want to create innovative products tend to look elsewhere. At Facebook, many find themselves under pressure to make sure a new prototype or feature contributes ad money.
It helps that the right acquisition can open the door to new markets. For example, the upcoming iPhone payment feature for merchants is possible largely because Apple paid $100 million for Canadian startup Mobeewave, which makes payment technology for smartphones.
And though Zuckerberg spearheaded Facebook’s rapid pivot to mobile in 2012, his $1 billion purchase of Instagram the same year was key to the change. Instagram now contributes more than a quarter of Facebook’s revenue.
The metaverse represents an even more radical pivot. There’s far less consensus that VR will be adopted by the mainstream, and building software for VR is harder for engineering teams to scale than it was from the office. to mobile.
The obvious answer is that Zuckerberg is buying a company that is already making inroads into the metaverse, like Roblox. The company’s hugely popular virtual world sees nearly 50 million daily visitors playing games, attending concerts or just chatting with friends, exactly the kind of activities Zuckerberg has talked about hosting in the future. Roblox is even headquartered in Menlo Park, California, the same city as Meta, and with its recent stock plunge, must look like an increasingly attractive takeover target; except Zuckerberg’s hands are tied.
Regulators, appalled at having approved so many Big Tech deals in the past, have signaled they will scrutinize future acquisitions more carefully, if not block them. For example, the Federal Trade Commission has opened a formal investigation into Meta’s $400 million purchase of virtual reality company Within, according to a December report in The Information, which said that at a minimum, Meta will not would not be able to finalize this agreement for another year. UK competition regulators have also blocked Meta from buying a GIF search company.
Zuckerberg clearly wants to buy his way into the metaverse. It’s acquired a string of smaller VR companies over the past couple of years, mostly in the games space, including Big Box VR, Unit 2 Games and Beat Games, the studio behind Beat Saber. But it didn’t buy Instagram-like game-changers like Fortnight publisher Epic Games or game developer Unity Software. Zuckerberg tried to buy Unity several years ago when its valuation was in the single-digit billions, according to “The Story of the Future,” a book about the founding history of Oculus. Unity has since gone public and has a market capitalization of $28 billion.
Zuckerberg has to blame himself for not pursuing these acquisitions when regulators were a bit more lenient. Now, with its little-used $62 billion war chest, it must focus on the more daunting task of creating new services that consumers want to use.
This is a difficult transition for any large company to make. Microsoft managed to do this, but unfortunately for Zuckerberg, it took a whole new CEO to make that success happen.
Parmy Olson is a Bloomberg Opinion columnist covering technology. She has previously reported for The Wall Street Journal and Forbes and is the author of “We Are Anonymous”.