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A Meta View of Facebook’s Meta Rebranding and the Metaverse: What to Expect Today and Tomorrow – Futurum Tech Webcast
by Fred McClimans | November 2, 2021

In this edition of the Futurum Tech Webcast I’m joined by my colleagues and fellow analysts Olivier Blanchard, Ron Westfall, and Steven Dickens for a dive into the rebranding and restructuring of Facebook into Meta, a social technology company. That’s right, the Facebook’s Meta rebranding is official and the Metaverse is, well, in the works.

Facebook CEO Mark Zuckerberg, speaking at the Oculus Connect 2021 event, announced the rebranding and restructuring of Facebook into a new parent company, Meta. Much like Google’s Alphabet, Meta is intended to operate above its current brands Facebook, Messenger, Instagram, WhatsApp, Oculus (itself to be rebranded as Meta Quest in early 2022), Workplace, Portal, and Novi (its digital currency former known as Libre).

According to Zuckerberg and Meta, this effort is all about transforming the company to better support the Metaverse, a blending of augmented and virtual reality that will be, according to Meta, the place where we all engage for work, play, and just about everything else it can imagine.

Per Meta: “The metaverse is the next evolution of social connection. Our company’s vision is to help bring the metaverse to life, so we are changing our name to reflect our commitment to this future.” As Zuckerberg stated during the announcement: “We are a company that builds technology to connect… we can finally put people at the center of our technology… (and) we can unlock a massively bigger creator economy.”

This announcement was considered by many to be a PR move and a well-timed strategic play based on the reputational hits Facebook has been taking lately, especially with a whistleblower Frances Haugen’s recent testimony on Capitol Hill, bad news about the impact of Facebook’s Instagram on teens and tweens (and Facebook knowing about that but choosing to ignore it), and many lawmakers having Facebook squarely in their sites for a wide variety of other reasons.

Zuckerberg has claimed that “Our mission remains the same.… (we’re) still about bringing people together… our apps and their brands, they’re not changing either… we’re still the company that designs technology around people.”

So, Meta and the Metaverse — How Much is Really changing?

So, what’s really going on with Meta and the Metaverse, and how much is really changing? Is this truly some sort of metaphysical metamorphosis? Or is it a clever PR move designed to insulate the company from the negative press that continues to dog Zuckerberg and Facebook from data privacy to harmful effects on its users, political stability, and trust?

Personally, I believe it’s a bit of both. While Facebook’s Metaverse itself has been in development for several years, as shown in a 2018 email from Oculus exec Jason Rubin to Facebook board member Marc Andreessen (of the venture capital firm Andreessen Horowitz), it’s hard to argue that separating Zuckerberg and Meta from Facebook is a smart and badly needed move as the firm hopes to avoid increased government scrutiny and regulation.

How the Futurum Team Views the Meta News

As Olivier, Ron, Steven, and I worked through the announcement, we looked at a number of different aspects to understand both the short-term and long-term impact. Our conversation in this webcast covered the following:

  • The fact that the rebranding move, as mentioned earlier, is not too dissimilar from Google’s shift to Alphabet a few years ago, and it gives Zuckerberg a greater chance to remain as CEO of the firm.
  • This has all the earmarks of a classic PR 101 move and allows the company to step back from building brands and services as satellites of Facebook.
  • The problematic bet: The Metaverse technology isn’t there today and will require an enormous financial investment across the entire ecosystem to even make it viable on a latency or connectivity level.
  • Data privacy and infrastructure are big challenges, and the company’s ability to separate itself from the individual product brands could be complicated.
  • Integration between social sites will also likely be challenging.
  • Future plans and expansion opportunities for Meta and the Metaverse.
  • The opportunity for Meta to leverage the Metaverse into business applications and/or a payments provider and/or gaming/entertainment brand.
  • Opportunities will rely on partnership building and monetization – will that happen?

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Disclaimer: The Futurum Tech Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Other insights from Futurum Research:

Amazon and Facebook Seek Recusal of FTC Chair Lina Khan 

Breaking Down NVIDIA’s Omniverse Enterprise: Digital Twins, Virtual Reality, and Collaboration, Oh My – Futurum Tech Webcast

Transcript:

Fred McClimans: Welcome to this edition of the Futurum Tech Webcast. I’m your host today, Fred McClimans, and I’m joined by my colleagues at Futurum research, Steven Dickens, Olivier Blanchard, and Ron Westfall. Gentlemen, today our topic is all about Facebook, or should I say, the Meta Facebook. We’re going to be diving deep into the new name Meta and the implications for Zuckerberg’s company, what it means today and what it means longterm down the road. Now, before we get into it, I do want to remind everybody here that we are going to talk about a publicly traded company or companies, but what we’re doing here is for informational purposes only. We are not offering any stock advice or recommendations. Please consult a professional for that. And with that gentlemen, Steven, Ron, Olivia, welcome to this edition of the future tech webcast. How are we today?

Ron Westfall: Pretty good. Thank you, Fred.

Fred McClimans: And are we feeling the Metaverse coming through?

Olivier Blanchard: Yes.

Fred McClimans: Can you feel it? Is it creeping in?

Olivier Blanchard: Words cannot describe.

Fred McClimans: Yes. So, as I think the entire Metaverse, or the real world, in this case, is aware, Facebook has changed their name and their corporate structure of it. They have a adopted the proven model that Google, now Alphabet, has been using for years, as well as conglomerates all around the world. They have created a parent holding company called Meta. Meta will now be the company where the brands, Facebook, Instagram, WhatsApp, and Oculus, which is now by the way, broken out from a different reporting structure, for financial numbers, that’s good. These four brands and others will exist underneath Meta. And it’s an interesting name choice, it’s an interesting play. I think the really big issue here is why they’re doing this.

And I’ll be honest, I’ll kind of kick this straight off. I don’t believe that this is something that Facebook has been planning for a while. That Zuckerberg has been saying, look, long-term, I really want to have this holding company and all these sub companies or brands beneath this. I think this is more a reactionary action on the part of the company. Because let’s face it, they have, over the past few years, been hammered from data privacy to a monopolistic behavior, and they just need to do something.

I mean, the whole issue of Facebook, and let’s face it, the name of the company is Facebook, but Facebook as a brand, as an entity, as a social media platform where people can connect or disconnect, where they can come together, where they can argue, where they can post interesting things, and where they can post misinformation, it has dragged the company down.

The company is shedding young users, they’re not growing their young base at all. That’s a huge problem for them. Instagram, still doing well with the youth generation, but Facebook, every attempt they’ve made to kind of create Messenger for kids, and Instagram for kids, it’s just not working well. They’re not pulling in that younger generation.

But that’s probably okay, because Facebook now Meta, is going to grow and expand in a number of different ways. And we’re gonna kind of work through these in a serial fashion here. But first, gentlemen, I just want to get your take. What do you think of the name itself? And I’ll say my take is, Metaphase Palm. Yeah. It’s not resonating much. I get it, but it’s still kind of a challenge. So, Steven what’s your take on Meta?

Steven Dickens: First off, this is PR 101. So, let’s get this topic out of the way first off. So, somebody in, the sort of corporate office of Facebook, what was the company, wanted to distance Facebook the app, from Facebook the company. So, let’s get this first. So, there’s lots to unpack here, but the first piece is, this is a old fashioned, very good PR move. A brand within the company is tarnished, distance the company from the brand. So, I think from a PR perspective, this is a fantastic move. This is Proctor and Gamble of numerous products and brands underneath the parent company. If one of those brands becomes toxic for any reason, that doesn’t pollute over to Procter and Gamble. So, from that perspective, I think it’s a really good move. Second part of the question, I like the name. I’m in the minority. I know, but I like the name and that’s why this discussion is good.

Fred McClimans: Yeah. Well I think it’s a better name than Alphabet. Certainly. Although I get alphabet. Google, now alphabet will do everything from A to Z. Okay, I kind of get that, but I also kinda think of Amazon a bit when I think of that. But it’s not similar to what Snap did. You have Snapchat the app and Snap the company. Okay. Yeah, no big deal there, but Olivia, what’s your take? What’s behind the move, And do you like the name?

Olivier Blanchard: I actually, I do like the name.

Fred McClimans: So, that’s two now. Two likes.

Olivier Blanchard: Okay. Yeah. I mean, it’s not necessarily the best name. Yeah, now we just boosted. We’re just boosted this post. I think there could have been a lot worse. I mean, it could have been Zucker something, it could have been Bookface I mean, there’s so many ways it could’ve gone. And I agree with you in the sense that Meta is already much better than Alphabet. And it makes sense when you start looking at what Facebook’s really doing, or the company formerly known as Facebook, with its consolidation of apps, with its infrastructure plays. It’s not just building satellites to Facebook and expanding that way. It has a much bigger plan, I think, for what the company is going to become.

And all of these layers, essentially this true platform company, needed a name that reflected that. And I think that the Metaverse is a little bit silly and it just kind of makes me think of Marvel, the MCU, and the multi-verse, it’s a little bit too close to that, but at the same time, it makes sense. And it’s not just about virtual reality and XR blending into that. I think it’s a lot more than that.

So, I can’t really think of too many other names or directions for that branding that Facebook could have gone with that would have been more effective than that. And Meta is really simple to remember, it’s catchy, it’s simple, it’s non-threatening. So, everything about it is I think a good PR move, and I think it’s good branding, even if the logo itself looks like a Pringle chip or the upside down mask. I think blend is good though, in the sense.

Fred McClimans: I think you’re right. I think you’re right, but is it to bland?

Olivier Blanchard: I don’t think it matters, because Meta is kind of like the meta discussion also about the company itself. I think that we’re still going to be, by sort of removing itself from having a very strong brand, for having something more passive, it allows discussions about specific apps for specific projects to be in the forefront of those discussions. So, when Facebook, well, when Meta launches some major broadband’s brand or project on the African continent, for instance, or in Asia, it will be able to lead with that and have Meta stay in the background as opposed to have better kind of lead everything. And I think that’s also a good safety mechanism for antitrust troubles that Meta might, and will get into. I think being able to kind of create that separation between Meta and whatever its projects are, is going to pay off in the next 10 years.

Fred McClimans: Yeah. It’s interesting.

Steven Dickens: The Procter and gamble type point, and they can bring in multiple brands of shampoo, or get into industrial products, or do lots of different things. P&G is not a brand that anybody cares about.

Fred McClimans: No, but Steven, it’s a well-known name. Meta is forgettable. And I posted yesterday, Meta is better because it’s not Facebook, it’s a forgettable name that’s out there. And we’re gonna get into some of the antitrust and the regulatory issues here in a moment.

But I do agree that, because the name is forgettable, because it’s kind of bland out there, I can totally see Zuckerberg in front of a congressional hearing going, “Senator, this Facebook thing you’re talking about, that’s just a brand, that’s not us, we’re Meta. Look, we have an infinity loop logo now. We’re Meta, it’s better”.

So, yeah, this is really a misdirection, it’s a branding issue that allows them a lot more flexibility in there. Now, the whole name, Metaverse though, Ron, you and I have had some great discussions about the omniverse from NVIDIA. So, I’m curious your take. Do you think Metaverse is the right name, do you think Meta is the right name, and do you see this actually having some significant impact?

Ron Westfall: Yeah. I mean, what the Zuck! I think this is going the wrong direction. Clearly the Meta brand is aligned with betting on Metaverse as a long-term application that’s going to subsume a lot of other applications. And I think it’s a very problematic bet. I mean, the Metaverse technology isn’t there today obviously. So, this is something that is much more longterm. And looking at the requirements, this is gonna require an intense tech investment across the entire ecosystem to even make it viable on a latency or connectivity level. That is, it really requires, I would say, 90 milliseconds latency only, in terms of ensuring that they’re sinking that is consistent across all the users that are within a Metaverse.

And we already seen, like, when it comes to just basic audio visual, when the audio is not synced up with the visual, people are disoriented, they get upset. They’re not happy with that outcome. And the Metaverse is just multiplying that exponentially. So, the technology is not there today, let alone the business case. I really don’t see the value coming anytime soon. So, this is something that’s really like, okay, you really have to knock on wood, but the Metaverse is something that will actually become viable. I just don’t see any time soon.

The other part of the branding that I’m actually a little disappointed in, it’s my understanding that the Oculus brand name, the one brand name that has actually gotten the VR, I think a positive vibe, will be phased out. It will be replaced by Meta. And I think this is fixing something that’s not broken. I think they should retain the Oculus brand name, at least when it comes to the head gear, the headsets, et cetera, and not try to phase it out and replace it with the Meta brand name, which we already talked about as being potentially vanilla and just not that exciting. So, I think that’s another consideration when it comes to the branding here. It’s like, O for two, from my perspective.

Fred McClimans: Well, I asked about the connection to Omniverse and NVIDIA, because Ron, you and I have had some great conversations about the omniverse, which is a, what’s the right way to think of it? It is a virtual digital twin, it’s an environment that NVIDIA is working on collaborating with their customers that allows an organization to build a digital twin or a virtual world of their operations, their manufacturing facilities and distribution, every aspect of an organization’s operational technology and operations staffing as well.

The idea is that you can create models and simulations inside the omniverse to figure out what’s the best approach for my organization to operate. What’s the most efficient way to build this particular product? What’s the assembly line look like? What does the troubleshooting process look like? You can even extend that all the way back and say, at some point, you start to include everything from all the supply chain first source materials in, to the actual customer experience being modeled within NVIDIA’s omnivorous. And I think that’s a great tool here.

In the Metaverse, what we’re really talking about, and this is kind of a simple approach here, but we’re talking about the creation of a virtual environment, where UI, everybody else can interact through avatars, but in a way that kind of combines the virtual aspects of like the second life and so forth, with augmented reality, that brings in the real world around us. So, for Facebook, now Meta, it’s interesting to kind of break it apart and go, well, what does this do to the business model of the company? Because you’ve got these different divisions that are out there, the different brands of Facebook now, the social platform, which to be honest, I think if they’re going to start breaking things apart, they should take some of the good things in there, like the marketplace functions and split those aside, take the family and friends, community aspect, make that a separate issue, and then just nuke the newsfeed. Because it just does not do any good for anybody.

But they’ve got the components there to kind of create a reworked Facebook that’s less dangerous in the world today. Then you’ve got Instagram, which is the social sharing; here’s what I’m doing, here’s my art, here’s my commentary, in that venue, they’re not political, hopefully most of that. And then you’ve got WhatsApp, the app that they acquired that is, in many parts of the world, the only way people communicate and engage with brands and businesses.

So, three very different components here, then the Oculus technology and project Cambria, which, when I saw that, I thought, do they really mean project Cambria analytics? Because there’s some data privacy issues in there that we’ll talk about in a moment. But from a business model perspective, they now have individual units that are reporting revenue and users, whatnot, independently of each other. Does this make sense from a financial perspective? Olivia, do you think this is a good approach for them? Does it help them?

Olivier Blanchard: Yeah, I think it is. I mean, as much as I wanna just say negative things about Facebook, and Mark Zuckerberg, and the ways that they’ve handled Facebook specifically, I think it’s clever. So, we’ve kind of covered, I think, the PR angle, that sort of separating or fencing in Facebook from the rest of the company makes sense, especially now. I think it’s also a legal strategy. As Facebook becomes the target of legislators, of regulators, as Facebook executives, and Facebook, Facebook, Facebook keeps being the target of attacks and congressional hearings in the next few years, and we talk about regulating Facebook, we’re not talking about regulating the entire company anymore.

We’re talking about regulating Facebook app. So, by creating the separation, of Facebook just being the app, and Meta, being everything else, the rest of the company, the legal strategy with that is that, whatever happens to Facebook won’t affect the rest of the company. It will only affect Facebook app.

So number one, and then two, I think it’s also a play by Mark Zuckerberg to remain CEO of the overall company. It would be very easy if people confused Facebook the app with Facebook the company for people to call for his resignation. As in, Facebook is such a bad, terrible company that Mark Zuckerberg, being the leader, being essentially the creator and shepherd of this toxic culture, cannot continue to be CEO of Facebook.

But now with Meta, he can be CEO of something completely different and remove himself, like step down from Facebook app. And I think it’s also, looking at, just since we’re talking about financial decisions, I think it’s also a signal to investors, that look, we have bigger plans for Facebook, it’s Meta, this is the new plan, this is the new roadmap, it’s going to expand exponentially compared to what we thought the trajectory was.

And so, this only happens with me Mark Zuckerberg at the helm. This is my vision. This is my company. This is me taking the company forward. And I think it gives them ammunition to go to the investors, to go to the board and say, okay, Facebook app, fine, I’ll move out of that. But I’m gonna focus on building the company that I actually wanna build, and I think they’ll buy it.

I think however you may feel about Mark Zuckerberg, and however you may feel about Facebook, it’s the right business strategy, it’s the right PR strategy, it’s the right financial strategy. It’s clever, it’s solid. And we can be cynical about it today, but six months from now, all of the memes will be gone, and what will be left will be this new path with Mark Zuckerberg at the helm.

Fred McClimans: I’m not convinced that mark is the right public face for Meta. I mean, he’s not a good spokesperson, and he’s so associated with Facebook. Nobody really questions mark about Instagram or WhatsApp or Oculus for that matter. As long as we still exist in this world for the foreseeable future, anything he says about Meta will be linked intrinsically to Facebook. So, I think they need to put somebody in charge of Facebook, that is that vocal brand that is the target of the ire of regulators, congressmen, the public, to kind of buffer him a bit from that. But Steven, you had a thought on that.

Steven Dickens: Well, the other piece that we’ve not talked about is, they got dragged in front of Congress, and they’ve played this game with changing the name of something once before, they tried to get into cross border payments and providing a stable coin with Libra, they’ve now renamed that to the DM project. I think for me, that’s a really key theme of where I see, and Ron was talking about this. I see the last 10 years of, I’m gonna use the right name, Meta, about building a social media enterprise. I see the next 10 years of Meta being a lot less to do with social media and a lot more to do with what you were talking about Olivia, before we jumped on the show, around infrastructure projects, it’s about them potentially becoming a cloud provider. I could see that happening, leveraging their infrastructure. I could see them becoming a payments rail provider and competing with the likes of PayPal, and potentially those types of…

I see the next 10 years is very different for Meta the company, than the previous 10 years worth of Facebook, the social media company. And I think Zuckerberg is gonna go and focus there, and build that out, and Facebook the app is gonna becoming an increasingly smaller part of what you hear him talk about. So, I think as he makes a transition as a CEO to what he’s associating himself with and what he talks about, he’s gonna spend a lot less time talking about Facebook the app. And I think it would be good if we saw empowered CEOs take over some of… I could see a CEO for the social media platforms, and that would be a good thing, I think, and provide some distance. When they drag up somebody to sit in front of the Senate, that it’s not the CEO of Meta, it’s the CEO of the social platforms within the Meta group. I can see that. And I think that would be both good for Zuck. I don’t think he enjoys those sessions.

And I think it’d be good for the company, because this has begun. I see Meta becoming a very, very different beast over the next 10 years. And I think that’s what’s interesting for me about the Metaverse. They don’t see it as Oculus and VR, they see it as a way to capture a time we spend doing digital things, whether that’s gaming, whether that’s the apps we interact with, whether that’s the experience we’re having. I think what I see of Zuck’s vision is every minute I’m in front of a screen, he wants that to be with a Meta company.

Fred McClimans: Right. It’s interesting though, because in the announcement, Zuckerberg was very clear. We’re still the same company, we still have the same focus of the customer at the center of what we do. Although they later said, we now have the opportunity to put the customer at the center of what we do, because they really haven’t in the past, in my opinion. But he said, look the brands, they’re the same.

They’re not changing. The services we offer, they’re not changing. So, there’s this line that they’re walking that says, we have to convince people that we’re still here, all the value they get out of Instagram, out of WhatsApp, the other products, that’s not going to change, but we’re kind of evolving behind the scenes.

But here’s where it gets kind of tricky. On the one hand, you’ve got now this structure where you have independent brands that allow them to pretty much insulate them from each other, silo them off if there’s an issue, good or bad. But you also have the last couple of years where Facebook has been very clear about their plans to integrate all of these apps together, to have an underlying platform that binds them as one, that would make it more difficult to divest of an individual brand, of WhatsApp, or Instagram, or Facebook from the others, because they’re so woven together. And there’s some huge data privacy issues that circulate around that. So, I’m kind of concerned about the line they’re trying to walk here. I’m not convinced that they can walk that line.

Data privacy issues and the integration is so tight it’s going to be problematic, I think down the road for them. Ron, when you look at this from an infrastructure perspective though, do you think it’s possible for them to really break apart their infrastructure into these individual units, or are they going to continue to be one monolithic Meta with everything rolling up underneath? And certainly I do agree with what was said earlier. They could offer cloud-based services, cloud hosting. I mean, they’ve got the infrastructure, they’ve got the same skillset that Google and Amazon and others have. It’s not new, but what are your thoughts on that infrastructure side?

Ron Westfall: Yeah, I think you hit the nail on the head earlier, Fred. I think when we’re talking about, for example, the NVIDIA powered digital twin technology, that’s I think a more viable business case in the near term, that is it’s on the industrial side. And obviously for social media, this is very much a consumer play. And I think I already stated like, okay, Metaverse as a viable business case is much further out and it’s going to require just what you’re pointing to. Facebook is going to have to really up its infrastructure game. They’re already making investments in that area, they’re already playing a role in things like the telecom infrastructure project, or the TIP as one example. And what I think is important though, is does Facebook really needs to build out, say, a new public cloud?

I don’t think that’s necessary. I think what they do need to do though, is come up with ways to, one, work better with the Amazons, the Azures, and the Googles to really get that edge hosting pushed out to the further parts of the edge to really make a Metaverse use case more viable, more revenue capable and monetized and ultimately profitable. I don’t think Facebook is going to be able to do it by itself. There’s just no way, and by other regulatory concerns related to the connectivity application being controlled by one entity otherwise.

And so, I think what Facebook can continue doing is working with, for example, communication service providers to enable their capabilities to better support edge hosting, and also serve as a part of that ecosystem that’s required for the cloud capabilities to be more widely distributed, to enable lower latency, et cetera. All the things that come with, for example, the 5G network builds.

And so, I think that’s really all coming together in terms of the ecosystem being better able to support this, but what is gonna be important for Meta is how much of this can they drive, and how much of this can they monetize in terms of capitalizing on a Metaverse type of business case? So, yeah, those I think are some important takeaways, and that means Facebook is going to have to open up a pocket book, I believe, and buy some cloud native capable technologies that will push this along.

Fred McClimans: Good point.

Steven Dickens: Meta Cloud, Fred? Do we think Meta cloud? I mean, you mentioned that they’ve got the capabilities running hyperscale data centers?

Fred McClimans: Oh, yeah.

Steven Dickens: Probably. There’s not many people who know how to do that in Facebook, in that group of people.

Fred McClimans: Right. And like others in that space-

Steven Dickens: The issue would be well, where’s the data. Is it in the Meta cloud or is it in the Facebook app?

Fred McClimans: Well, I think there’s two aspects of that. That sort of split right there, but then also what level of data is shared. I mean, it’s easy to think of Facebook, from an infrastructure perspective, as being very similar to Google, to Microsoft, to Amazon, and that they have all created their own sort of custom proprietary data center or cloud infrastructure that they’re operating on. But what we don’t really know in Facebook’s case is, how much of that underlying infrastructure can be sort of partitioned off, secured in a way so that if you have a business like Libra now called DM, as sort of a financial instrument, is that firewalled off enough from the Oculus system that and the new Cambria?

Is it firewalled off enough from Instagram and WhatsApp, so that payment systems that exist in those apps don’t necessarily have a common underlying infrastructure and a data privacy risk there. Because these are all very different business units that are out there. So, I mean, is that an issue, or am I just kind of like often left field here, because I really think that-

Steven Dickens: That’s exactly where they’ve going. If DM is successful, they won’t build a payment rail in Facebook, and in Instagram, and in Messenger, and in WhatsApp, and in Oculus, they’ll build one payment rail. They’ll build it once, and those apps will take advantage of it.

Fred McClimans: Yeah. So, maybe we see specialization here coming out of Facebook.

Steven Dickens: I think so. Now they need it. I think the apps will specialize.

Fred McClimans: All right. So, let’s kind of pull this together here. Sort of one final question. From a growth perspective, we now have individual units or brands underneath Facebook or underneath Meta, Sorry, this is going to take me a while guys. I apologize. Meta is just so forgettable. With these entities under there, they can exist, they can create their own business models, their own operational environments. What does Facebook need to add? Sorry, I did it again. What does Meta need to add?

So, from an M and A perspective, it’s much easier if they can work out the technical aspects to shed, spinoff something like Instagram or WhatsApp. In fact, I wouldn’t be surprised if at some point they started to divest some of their assets; still maintain a majority holding a position, but leverage the ability to spin these off to an extent to raise additional capital and increase the value of the Metaverse, so to speak. But what components do you think they need to add? Are there particular types of technologies or companies that you would expect Meta to acquire over the next two to three years? Olivia, your thoughts?

Olivier Blanchard: I keep going back to their infrastructure play. I mean, I’m looking at what they’re doing in Africa specifically, as kind of like a testing ground. And I think Meta’s goal of capturing the next billion internet users. We can talk about Facebook and WhatsApp and we can talk about this U.S centric stuff, but I think Facebook is taking a very China like approach to developing economies, and they’re trying to build stuff there, where things haven’t been built yet, and they’re banking on 10, 20, 30 years down the road. And so, what I’m seeing with that is an opportunity for them to experiment with new technologies and new technology tracks, that they can then kind of duplicate in established markets.

And so, this infrastructure play, I mean, they’re building this 37,000 kilometer undersea cable to bring internet to the entire continent of Africa, and they were already in half the countries there. They’re already talking about satellites and drones and all kinds of vehicles to transmit broadband internet in some way to rural areas. And so, I think that the next big thing for Meta, technology-wise, is getting into not the space race specifically, where they’re not going to be competing with Space X, but I think that’s the technology investment, the hardware, that they’re going to be investing in.

And also helps solve a problem, because it brings them into the United States with the capability of bringing broadband to rural areas where 5G deployments are going to be really, really slow to get to. And I think that’s a way that they ingratiate themselves to legislators and say, look, we’re gonna bring this, we’re gonna partner with the government to bring this infrastructure necessity to underserved areas of the United States. Look at Meta, we’re doing this humanitarian thing that’s very valuable that has nothing to do with this negative Facebook stuff. And I think that’s how they start to balance the board a little bit. So, there’s so much upside to it. I think that’s where the main, the biggest investment is.

Fred McClimans: Yeah, that’s an important point there. The whole connectivity issue, now to be fair, Facebook has tried this in the past. They had their fleet of aircraft that they were putting up, they were doing different tests, and they kind of spun that down, and I believe Amazon picked up some of those assets, Amazon and other one that plans on competing directly with Space X, and the Starling program to provide sort of global connectivity there. But Facebook, as Facebook in the past did have issues rolling out connectivity, in fac in some countries, they were actually banned from sort of this free internet giveaway, because it was competing against other providers there when they started to bundle it into the whole Facebook system.

Now that that’s separate, I agree. I think they have a much better chance of saying, we are an infrastructure connectivity division of Meta that provides this separate and insulated from the rest of their businesses. But it’s gonna be a tough one for them. Ron, if you think of this from an M and A perspective, what do you expect them to kind of acquire over the next or need to acquire, whether they acquire it or not is another issue, but what do they need to acquire?

Ron Westfall: Yeah, well, I think we already hit on it. The need to simply by a Metaverse enhancing technologies, they need to own that to really drive this vision, at least have a better chance of making that business case work. And I think we also hit on earlier, what actually Meta should do, and that is expand more into the enterprise space quite simply. Because, when you’re talking about the Metaverse, they can have these business applications, for example, digital twin training capabilities using VR headsets, as people are working from home more, there’s the hybrid workforce model now that digital workforce is expanding further into homes. So, there’s increasingly overlapping with social media et cetera.

And so, I think it’s not just a question of M and A, it’s also taking a new tack into focusing more on enterprise applications, leveraging the Metaverse platform, and being able to diversify revenue channels. And I think pursuing more viable business cases for VR technology, once at least that can be monetized more rapidly over the next five years.

Fred McClimans: Yeah, well there are some issues with that VR technology and monetization. And I know we haven’t really delved into this deeply here, but I do wanna make sure we mentioned sort of the data ingestion of the collection aspect of what the Metaverse represents. Particularly, if you start looking at project Cambria and the new generation of mixed reality, some virtual, some augmented reality, people using those devices in their house, it gives the whole issue of Alexa listening in on conversations, it just makes that look like a stumbling block, small, minor blip in the road compared to what Cambria could potentially mean. When you’re in your home, and you’re walking around in an augmented reality mode, your device is capturing everything inside that home; the devices, the furniture, the people, what they’re doing, what they’re wearing.

I mean, there’s a huge e-commerce play potentially in here, but quite frankly, that’s kind of freaking me out a bit, when you start thinking about the access to our personal lives that Meta is trying to get through the Metaverse.

Steven Dickens: Meta promises to be more transparent and respectful.

Fred McClimans: Oh, yes, of course. But Stephen, when we start talking about that aspect of, what we’re thinking about from a commerce perspective, what Facebook could potentially sell and the market opportunities they have, oh I’m sorry Facebook, Meta, through this Metaverse. I keep coming back to, now rebranded attempt at a digital currency. Do you think that’s a place where they expand?

Steven Dickens: Let me blow your mind, Fred, with two things I think that should do from an M and A perspective, and I’ll throw some names out. Imagine if Facebook goes and buys PayPal.

Fred McClimans: I’m trying not to. I love PayPal.

Steven Dickens: Imagine if Meta goes and buys PayPal and all of their entities, and then provides that solid financial framework. Imagine then they go and buy Nintendo and get a real games business.

Fred McClimans: Yeah, I’m not sure PayPal makes sense, but I think that the Nintendo and the gaming play, that makes a lot of sense.

Steven Dickens: And I picked two names to illustrate a point. It could be other companies, I’m not saying it would be only those two. Go and add an epic games, somebody with a big games footprint, where the youth that they’re not catching with Facebook the app, they catch via the gaming platforms. Then go and take the in-game money that those kids are exchanging for avatars or for a shield, or using those in-game money and monetize that with a PayPal type payment rail process that underpins all the other apps. So, I’m now shopping on Instagram and I’m leveraging that backend financial infrastructure that’s the same as kid is using to buy in-game.

Those two, and I picked them to illustrate the point is, I’m not saying it has to be those two organizations, but if they were to buy a gaming company and to buy a payments company, I think that would round out their Metaverse play. And I think that’s what we’re gonna see from meta. Those types of strategic acquisitions. “Meta announces acquisition of PayPal” has a very different headline context to “Facebook acquires PayPal”, because it doesn’t bring the baggage with it from a branding point of view, and it allows them to bring out their Metaverse.

Ron Westfall: Counterpoint, counterpoint on that. And you’re a hundred percent right about everything. I think that it’s going to be harder, even harder for Meta than when it was still just Facebook to complete significant M and As in the future. I think the scrutiny on Meta, because now it’s Meta, not just Facebook, is going to be a very difficult hurdle, I think, whatever they acquire. If they acquire a small AI company, which they will probably quite often, not a big deal, but a big acquisition like that. Good luck, Good luck.

Steven Dickens: I’m not saying they will get regulatory approval to acquire PayPal and Epic games or Nintendo. And I picked those names because they illustrate the point. I agree with you. I mean, if Meta announced that we’re going to require a PayPal, I think Washington would end up with a twitch and the world would implode.

Ron Westfall: You look at AT&T, look at Time Warner. So, Meta can go to any federal courthouse and say, look, what’s the difference? We’re trying to be like that. We’re trying to compete with them.

Steven Dickens: I’m in a different country.

Fred McClimans: Yeah, exactly Ron.

Steven Dickens: You don’t have to buy it in the U.S.

Ron Westfall: We don’t have a regulatory system that truly takes into account platform type companies. We’re still like, even antitrust in the U.S is still stuck on like big steel. It’s still like 1920s stuff. Platform companies that need to acquire companies and other companies and build out these stacks, these entire ecosystems that are dynamic, are very different from the types of companies that we built our antitrust framework for a hundred years ago. And so, I think that’s where we’re at this really weird intersection of, yeah, we think of monopolies in one way, but monopolies are not necessarily bad, nor are they necessarily evil.

But we need to completely rethink how we approach mergers and acquisitions in the modern era for these technology companies. Because otherwise we’re always gonna have this friction of, either we do nothing, or we do the wrong thing. And ultimately, we have to allow these companies to grow in order to be able to create the technology infrastructure of future. But I don’t know. I guess it’s a topic for another day.

Steven Dickens: Well, it’s an interesting one. If Meta buys PayPal, there’s not an antitrust case there, there’s a, “We don’t like PayPal being bought by the company known as Facebook case”, but there’s not an antitrust case, because they’re not getting into a monopolistic position by Meta. It’s not Chase or JP Morgan or another financial organization buying another financial and we have less choice as consumers, and therefore they own more market share. PayPal’s market share of the payment space gets added to zero from Meta, and therefore it doesn’t change the competitive landscape.

Fred McClimans: Yeah. But it’s not an issue of anti-trust. It’s just simply an issue of trust. Do you trust the management of Meta?

Ron Westfall: It’s interesting that antitrust keeps coming up to break up these companies. If there’s no harm to consumers can be shown, and no harm to competition can be shown, then it doesn’t matter if you’re a monopolistic company. It’s not about your position, it’s about your behavior. And if the acquisition of, hypothetical acquisition of PayPal, by Meta were to occur, the acquisition itself isn’t the problem. The problem is if Meta takes PayPal and just kind of brings it into its stack and uses that acquisition to hinder competition or to hurt consumers, that’s the threshold.

So, the acquisition or hypothetical acquisition to be blocked based on a regulatory bodies expectation or fear that the move would be anti-competitive. But the acquisition itself is not necessarily an issue, which is how all these other companies have been able to acquire these companies, including Facebook acquiring WhatsApp. It’s what they do after that gets them in trouble, not the acquisition itself. Sorry, we’ll see.

Fred McClimans: From my perspective here, and we’ll kind of wrap this Meta discussion up, no pun intended, I think the areas that Meta the needs to invest in, that for me make a lot of sense, would be obviously in AI and in application development. Because if you think about Meta as a new opportunity for the Facebook crew here, they really need to, in order to keep this going, in my opinion, start to think of this as the ultimate platform play.

And when you think about platform play, you think about app development, and we think about app development, those apps, can’t all be meta apps. They have to build the capability for others to build applications that feed into the Metaverse, that feed into the other applications out there; the Facebooks, and the Instagrams, and the WhatsApps, and so forth.

So, I see a really big possibility or a big opportunity for them, if they can sort of create that next generation of app store that shed some of the issues that apple and Google and others have had in the past, and really starts to think about this in terms of how do we bring in collaborators into this new Metaverse to make it a platform? Because if it’s a platform, a lot of these issues that they’ve had in the past kind of drift away. So I think there’s a good opportunity for them to do that there. So, one final quick thought here from each of you guys, in 10 years, is Meta still Meta or has it become something else? Ron.

Ron Westfall: Excellent question. Something else. I’ll just call it post Meta.

Fred McClimans: Excellent. All right. Steven, Meta in 10 years, are we still calling it meta?

Steven Dickens: I think we’re still calling it Meta. I think it means a completely different conglomeration of businesses and Facebook is a lot smaller parts of what we talk about.

Fred McClimans: Olivia, and I’ll even make this one a little bit different for you. Do you think it’ll still be Meta? And do you think Facebook will still be that anchor within the Meta brand?

Olivier Blanchard: Well, yeah, so I think it will still be Meta. I just think the logo is going to change colors in 10 years. That’s about the extent of it. I think we’ll get more color in it. I think what’s gonna be interesting though, is there has to be, to your point just now about the app store, I think that if Meta is really to create this Metaverse, there has to be a single point of entry. There has to be a portal, whether that’s a browser or something else. Currently, it seems to be based around Facebook. I think that’s going to have to change. And so, I think there’s going to be a new product, at some point, that’s going to be this entry point. That could be an app store, that could be a menu, it could be a browser, it could be like the next generation of browsers.

And I think, I don’t know what that will be called, something stupid like portal or whatever. But yeah, I don’t think Facebook will be the anchor anymore. I think Facebook will just be one tiny little corner, especially since Facebook doesn’t seem to be attracting or retaining any young users. The Facebook ecosystem is going to shrink, shrink, and shrink some more. And I think Facebook is gonna focus on some other parts of its whole universe.

Fred McClimans: Yes, Facebook is the hot potato right now. It’s not attracting next generation of users, and the ad revenue business that they have is being eaten up by regulatory issues and companies like Apple that are getting around to actually giving users some choice in how ads are tracked, or how they are tracked and how ads are displayed for them. So, in my mind, 10 years down the road, we’re still calling it Meta, but I expect Facebook to be split into a couple of smaller entities and a deemphasized by that point in time. I think Facebook will be not quite a MySpace, but they need to break that apart.

So, with that, I wanna thank you guys tremendously for being part of this discussion. It’s always fun to get together when something like this happens, and we all have our side channel conversations, and here’s an opportunity for us to kind of get it out there into the public discourse. So, thank you very much for that.

For our viewers and listeners, please, if you like the Futurum Tech Webcast, please share it, like it, comment, subscribe, let us know what you’d like to have us talk about in the future. We’re always willing to listen and we always want to give you good information and good advice. So, with that have a great week. We will see you on the next edition of the Futurum Tech Webcast. I’m Fred McClimans, on behalf of Steven, Olivier, and Ron, be safe.

 

About the Author

Fred is an experienced analyst and advisor, with over 30 years of experience in the digital and technology markets. Fred launched the equity research team at Samadhi Partners and provides marketing strategy through the Wasabi Rabbit digital agency. He previously served as an EVP and Research Vice President at HfS Research, launching its Digital Trust practice and coverage of emerging “trust-enabling” technologies. Read Full Bio.