Debating the Metaverse opportunity
And also: Cyber security and online safety as growing risks; Twitter exploring new business models; Netflix expanding to mobile screens; Rivian as a "Government Unicorn"; The Tech Cold War
The business world has started to debate about the Metaverse
After Facebook’s (Meta Platforms’) announcements, people are debating the “Metaverse” future. The consensus is that this as a (potential / ”aspirational”) opportunity for the usual suspects (Big Tech companies). Business models are not clear yet, but there could be a lot of money at stake. Not everyone agrees on timings: a leading Gartner executive claims this won’t happen (in the business space) before the 2030s…
What seems clear is that Facebook / Meta are working hard to build on the vision. They have been (silently) making acquisitions of Virtual Reality assets. And, according to a (leaked) internal memo, they’re also discussing how to address the potential “digital safety” challenges from Metaverse environments, which could be (even) more difficult to solve than in current social networks
Finally, a debate has also started about what segment will be the driver. Ben Thompson (Stratechery) is skeptical about the consumer space and believes that the current shift to remote work could accelerate adoption in enterprise use cases. Other analysts agree and see plenty of opportunities there. On the other side of the spectrum, we learned about “consumer Metaverse” visions from both Roblox (which presented great quarterly results this week) and Niantic (which expect the disruption to come from AR rather than VR)
The week
1. Consumers and businesses, after COVID
What is happening
Consumer trends
This week, transatlantic flight routes were re-opened, and the travel industry is full of hope about a (still remote) recovery (FT)
Emerging consumer risks
New hacks: this time Robinhood (the successful retail investment app) was the target, and sensitive data from millions of customers has been affected (WSJ)(Bloomberg)
TikTok’s algorithms seem to have amplified the audience of “horrifying” videos of a human tragedy in a pop music concert in Texas (Slate)
Supply issues remain at the center of the economic debate
Alibaba’s big e-commerce event in China suffered a significant impact from the supply chain crisis (WSJ)
An optimistic view is that the crisis is triggering a new wave of innovation, and that companies that are able to adapt will be in a much better position after COVID (FT)
Indeed, automation is accelerating across industries, given the current work shortages (WSJ)
What it means
The uncertainty of the pandemic recovery, with many countries starting to suffer a new wave of infections is affecting businesses. Particularly those that have suffered more during the crisis, like airlines and hotels
Simultaneously, the massive adoption of digital tools has highlighted the emerging challenges linked to them, including cyber security / privacy (see Robinhood this week) and online safety (see the case of TikTok). This week we also heard concerns about these problems potentially becoming worse in a future “Metaverse”
The supply chain crisis is forcing many businesses to reinvent themselves, and there might be a healthy “creative destruction” aspect in this. But there will be suffering, too
2. Platforms and digital enablers
What is happening
Twitter explores a business model shift towards subscriptions., with ”Blue”, a premium subscription service at $3/month (TechCrunch)
For the FT, Big Tech has a large opportunity in (data-intensive) Wall St. The recent Alphabet acquisition of a stake in CME (a financial exchange) would be a first step in this direction (FT)
Netflix keeps moving to attract the younger generations. Massive success of an anime show based on the “League of Legends” game (Bloomberg)
They’re also testing “TikTok-like” short videos (Bloomberg)
Tencent may have started to feel TikTok’s competitive threat, too (FT)
Paypal’s reduced its guidance, and investors are questioning the company’s ambitions to build a ”super-app” (FT)
Connectivity:
Satellite company Telesat files for IPO, looking for funding for their Lightspeed broadband connectivity plans (Bloomberg)
Semiconductors:
Memory chips could be the exception, with excess production capacity expected soon (Bloomberg)
Cryptocurrencies:
Many companies are moving to launch consumer crypto wallets (WSJ)
What it means
Twitter’s moves confirm the trend towards new internet business models, less dependent of advertising revenues (as these typically involve more privacy trade-offs). Twitter can probably take more risks with this than Facebook or Google
Wall St is clearly a massive opportunity for Big Tech, but there are strong financial data incumbents (e.g.: Bloomberg) and it won’t be easy to disrupt them. Google’s CME deal looks (for now) small and more linked to cloud infrastructure
TikTok confirms its role as a global threat to social app incumbents globally (Facebook in the West, Tencent in China)
Netflix moves towards the mobile internet, following young customers that spend more time with smartphone screens than with traditional “family” TVs
3. Financing digital innovation
What is happening
General Electric made a historic announcement: they’re splitting the company in three different units (WSJ)(WSJ2)
For some people, this proves the end of conglomerates (WSJ)
For others, it is a consequence of bad management decisions (WSJ)
Softbank’s results were hurt by bad performance of some of the Vision Fund investments (Chinese Didi and Korean Coupang) (Bloomberg)
Emerging themes for investors:
Next computing platform: Debates about the Metaverse have started, including potential target segment (consumer vs. enterprise) (Stratechery)(FT)(Wired) and potential safety challenges (FT)
Electric Vehicles: Rivian’s IPO is a massive success, with the valuation now close to $90bn, and higher than Ford’s or GM’s (WSJ). Some see this as Wall St embracing “VC-risks” (FT). Others, as a “collateral effect” of Government “green” subsidies (WSJ). Meanwhile, hydrogen engines are seen as an alternative to electric (but no one in Wall St seems to care, for now) (WSJ)
Space: One more successful mission by SpaceX (WSJ)
Brain-computer interfaces: several startups work to develop a computer interface that reads human minds (Wired)
What it means
Traditional conglomerates are disappearing (there were more announcements this week, after GE). But some people claim that Big Tech firms have become the newconglomerates. A key question is if digital platforms justify a higher degree of diversification (they probably do)
The WSJ may have a point when they link the huge valuation of Rivian, after its IPO, and still with tiny sales, with expectations of massive government subsidies for electric vehicles. This could be an alert signal to governments globally, of a risk that well-meant measures lead to speculation and money moving in unexpected ways…
Activity grows in brain-computer interfaces. Looks like a future nightmare for privacy / safety regulators
4. Building new rules for the (digital) game
What is happening
Customer protection: privacy & safety:
Facebook tries to take the initiative and limits ad targeting for sensitive issues (including politics). But Haugen (the “whistleblower”) is asking regulators to do more to control online harm (Bloomberg)(WSJ)(FT)
Demand grows for actions against the spyware threat, including control of trade and use of surveillance tools (FT)
A government-sponsored digital ID system in India has started to create privacy concerns, showing the trade-offs between convenience and privacy (and in some cases, even democracy…) (FT)
Antitrust:
The Judge has rejected Apple’s request to delay the execution of the order to open the App Store to alternative payment methods (WSJ)(FT)
Google has lost its own appeal against an EU fine for bias in shopping ads (WSJ)
The “Tech Cold War”:
Several news highlight the trade-offs between private commercial interests in the US and government’s strategic priorities with respect to China. These affect biotechnology (Neo.Life), cyber surveillance tools (MITTechReview), and even chip technologies (WSJ)