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Antitrust Is Responsible for "the Metaverse"
Why is Zuckerberg is spending $10 billion a year trying to innovate? Because he can no longer buy his way to dominance. That's a policy victory.
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Last week, Facebook announced earnings that were significantly below analyst expectations. There were a number of reasons for that, but one of them is that Facebook is now spending $10 billion a year on virtual reality technology. As Adam Conover notes, the technology of virtual works, but it is in its infancy. Users get nausea and the games aren’t very good. It may not ever pan out.
That said, Facebook has to spend this money, because of antitrust enforcers and competition policy regulators. Traditionally, Zuckerberg has responded to threats and pivots in the business environment by purchasing rivals, like he did with Instagram and WhatsApp. He also tried to leverage his dominance in social networking by creating a currency regime, which would enable more data collection and advertising dominance.
Neither of these strategies work anymore. Facebook is being sued for monopolization, the FTC is examining their purchase of the relatively small firm Kustomer, and the UK Competition Authority is actually reversing its purchase of Giphy. Everyone knows that big acquisitions are now off the table. The same problem is true for building out its new currency, Libra/Diem. Regulators basically took that one off the table, largely for the same reasons.
“The combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power,” U.S. regulators wrote, citing “advantages in accessing credit or using data to market or restrict access to products.” Facebook is now selling off its Diem subsidiary. In addition, Facebook’s surveillance model of advertising is becoming more and more difficult, as it’s clear regulators are going to act. (And indeed, Apple has already kneecapped Facebook on iPhones).
The only path forward is internal investment in new ventures, like virtual reality. A few years ago, Facebook bought Oculus, a VR headset maker, but that was early technology. Zuckerberg is dumping money into the industry segment, in hopes that he can create a new computing platform. And they are selling a bunch of headsets, though they are nowhere near rivaling standard gaming platforms, let alone revolutionizing the economy or commerce.
I find Zuckerberg’s vision for virtual reality tedious, and Facebook should be broken up so that a lot of actually creative people can tinker with social networking. But at least Facebook has to invest in trying something new that doesn’t involve financialization or advertising. And for that we can thank government enforcers.