It seems to be a rite of passage that as technology billionaires get older, they spend more time chasing dreams they might have fantasized about as kids. There’s Elon Musk and Jeff Bezos with their rockets, and now Mark Zuckerberg, aged 37, with his plans to build an alternate digital reality known as the metaverse.
Last week, Zuckerberg announced that Facebook Inc. was changing its name to Meta Platforms Inc., to reflect its focus on a new virtual- and augmented-reality platform “for connecting people.” It looked at first like the CEO was distancing himself from the company’s problems, but that is only part of the story. He also seems to be following in Musk’s footsteps, attempting, in his own way, to become a tech futurist with grandiose plans to change humanity. That may ultimately make Zuckerberg the clearest winner from Facebook’s pivot.
I am skeptical about the metaverse, and not just because of Facebook’s negligence of user safety.
History is littered with tech companies that, despite their roots in innovation, couldn’t pivot to new platforms. Take Nokia Corporation. Back in 2007 it had the lion’s share of global revenue from mobile phones. Then it tried building a new platform for apps and failed to compete with Apple Inc.’s iPhones and Google’s Android operating system. Within six years it went from a market valuation of $150 billion to being bought by Microsoft Corp., in 2013, for $7.2 billion.
Arm Holdings is another example. Its mobile chip designs indirectly power nearly all of the world’s smartphones, giving it a lucrative passive income in license fees. Several years ago Arm steered into the more futuristic world of the Internet of Things, building software to connect cars, doorbells, washing machines and more. Believing that goal would pay off, SoftBank Group Corp. bought Arm for $32 billion in 2016. But the IoT business stagnated, and in 2020 Arm said it would spin the unit off and refocus on chip licensing.
Even Google’s restructuring as Alphabet Inc. has faltered in new territory, with some of the conglomerate’s “bets” mostly draining money, even in promising areas like pharmaceuticals. A project with Novartis International AG to track diabetes through contact lenses was shut down in 2018, while a similar partnership with Sanofi fizzled in 2019. Six years on from seeking new directions, Alphabet still makes more than 80% of its revenue from advertising.
Meta Platforms will also struggle to make money from anything other than selling ads on Facebook and Instagram. So successful and entrenched is that core business that Facebook has yet to make money from another platform it has already owned for seven years: WhatsApp. The chat app, which Zuckerberg bought for $19 billion in 2014, has approximately 2 billion monthly users …….