San Francisco The vision that Mark Zuckerberg has developed for his company could hardly be bigger. The Facebook boss wants to build a “metaverse” – a virtual reality that users can enter and experience over the Internet using devices such as VR glasses and special gloves. During the week, Facebook wants to announce more details about the new strategy.
The founder has to deliver, because the pressure is enormous. Facebook wants to present figures on Monday. Analysts expect further growth, but there are also indications that the ongoing crisis is gradually leaving its mark on the figures. Zuckerberg counters with high expectations and a firework of plans
Facebook not only wants to develop further technologically. The name of the group, which in addition to the social network and smaller subsidiaries also includes the photo platform Instagram, the news service WhatsApp and the VR glasses manufacturer Oculus, is to change.
Behind the term “metaverse” hides the rough idea of a digital universe in which avatars move and meet through virtual spaces. The aim is to create a global network in which shops could offer goods, for example. Payment is made in a digital currency – whereby money, objects and avatars should be universally applicable.
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The message from Zuckerberg: If in the future people use video glasses to meet for virtual conferences, to shop together digitally or to play games, they should do so via Zuckerberg’s platform. It would be an evolutionary step for the group: from a social media group to an integral part of the digital infrastructure. In Europe alone, this should create 10,000 new jobs in the long term.
Experts are skeptical
But what at first may sound like a big hit is, from the point of view of industry experts such as Eric Schmitt, Research Director at Gartner, a “defensive step”. Because the group is currently under attack like never before. Hardly a week goes by in Washington without former company employees being summoned by a committee for one of the many compliance scandals.
“Social trust in Facebook is at a low point,” says Schmitt, summarizing the situation of the Menlo Park group. The bad image is increasingly affecting the mood of the large advertising customers. “Customers are already wondering whether Facebook is a reliable and trustworthy business partner in the long term.”
Because the allegations against the group, most recently made by the whistleblower Frances Haugen, are substantial. For example, management should know in detail that the Facebook algorithm often displays incorrect information to users because this extends the service life. The company is said not to have done anything about this – probably also in order not to jeopardize the achievement of certain key figures.
The revelations paint the picture of a company for which its own profit takes precedence over social welfare. In Washington, comparisons with the tobacco industry are making the rounds, which also knew early on that their products were harmful, but kept the relevant research results secret for a long time. Haugen, on the other hand, declared her ex-employer to be “morally bankrupt” – and called for stricter supervision in order to limit the social damage caused by the company’s practices.
The statements of the former employee of Facebook have violently shaken confidence in the group.
(Photo: AP)
Facebook, however, does not see itself in the wrong. The allegation that the social network puts profits above the safety and well-being of society is untrue, is the company’s answer.
It is true that the scandals and subsequent protests such as the Facebook boycott of some large advertising customers a few months ago have mostly had little effect on the group in the past. But the renewed resistance from politics has the potential to block the corporation’s path to the metaverse. Because a central component of the idea is a universal currency that is used by all participants and for which Zuckerberg is dependent on political support.
The Novi project, with which Facebook started a few days ago in Guatemala, could pave the way for it. The service provides its users with a digital wallet that currently uses the pax dollar as a trading currency, a so-called “stablecoin” that is linked to the US dollar. Soon the project will also use the stablecoin Diem, which is considered the successor project to Facebook’s Libra currency.
The start of the project was received as an affront among Democratic senators in the USA. Many of them personally signed an open letter to Zuckerberg saying that the company could “not be entrusted with the management of a cryptocurrency”. A few years ago, Facebook tried to establish Libra but failed because of the regulation.
iPhone update causes data source to dry up
For the metaverse, whose idea as the future of the Facebook group is currently only known in outline, the mistrust already means a heavy mortgage. At the same time, the core business is coming under increasing pressure. Because the data sources that Facebook has tapped so far for its target group-specific advertisements are drying up. Individual customers are already complaining about problems.
The reason: A few weeks ago, the iPhone manufacturer Apple released a software update for its devices that made Facebook’s business model partially impossible. Because in order to be able to track user behavior across different apps, the iPhone owner must first give their voluntary consent. However, this only happens in the rarest of cases – which means that Facebook is less able to predict the preferences of the respective user due to a lack of data.
For restaurants and other regionally-oriented businesses that rely primarily on location data that Facebook owns itself for their ads, the changes may not play a major role – they make up the bulk of the advertising business. “For larger brands and companies that want to run nationwide campaigns, however, it is more difficult to meet the right target group,” said Gartner analyst Schmitt. From conversations with advertisers, he reports that many campaigns have not worked noticeably worse since the Apple update.
When Facebook presents the quarterly figures on Monday noon US local time, the financial effects of the update will be reflected in the figures for the first time. Analysts currently expect sales between 29.6 and 30.2 billion US dollars. That would be an increase on both the previous year and the previous quarter.
Big challenges, big wallet
This would mean that Facebook would get over the effect reasonably well. But if, for example, Google catches up with its Android operating system, this could develop into a serious problem. “Without the usage data from the smartphones, Facebook is like an engine without fuel,” said Gartner analyst Schmitt. The only possible answer to this is to redesign the engine, i.e. the algorithms for individualized advertising. Or to develop new data sources with which the engine can be fed.
Both costs money – just like building a global metaverse that deserves its name. Facebook benefits from the fact that the group has made splendid earnings in recent years, despite all the hostility. For example, the group closed the 2020 corona year with record sales of almost 86 billion US dollars – with a margin before taxes, interest and depreciation of 38 percent.
The decisive factor for success will be whether Facebook can carry out the transformation into a company of the metaverse, including the necessary cultural change, quickly enough. And whether enough partners are involved to give the network a critical mass.
If Zuckerberg is expected to present his strategy in more detail on Thursday, it will also have to be about regaining lost trust – among advertisers, users and politicians. The Facebook CEO could start a first attempt on Wednesday. For that day, Zuckerberg was summoned to the same committee that former Facebook data expert Frances Haugen made her testimony to.
Zuckerberg could also offer another opportunity in the proceedings for the transfer of user data to the scandal company Cambridge Analytica: There, the federal prosecutor had recently put Zuckerberg’s name on the indictment list because the manager was involved in the decisions that led to the scandal led, is said to have been complicit.
More: 10,000 new jobs in Europe – Facebook boss Zuckerberg wants to appease regulators