Digital Transformation Agency

At 18, is it time for Facebook to put away the toys?

By Justin Deaville | Managing director

Receptional

|

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February 4, 2022 | 7 min read

Do Facebook users really want to “work out on a volcano”? Justin Deaville, managing director of Receptional, believes Meta’s move to the metaverse is at odds with what its customers want. Here, he argues that Facebook should stick to what it does best.

On this day in 2004, 'The Facebook' launched to a handful of Harvard students. Today, more than 3.6 billion people use it and its apps every month.

Receptional considers whether the role of Facebook will change for its users with the introduction of the Metaverse.

Receptional considers whether the role of Facebook will change for its users with the introduction of the Metaverse.

The growth is impressive considering that, ten years ago, many commentators, including one of my employees at the time, were predicting Facebook’s imminent demise.

At that point, revenue per user was low; mobile usage was a systemic threat; and younger people were switching to newer platforms, particularly Instagram.

Since then, Facebook has made some smart calls.

It overhauled its advertising product, first with improved targeting capabilities, then with machine learning. It successfully introduced mobile-first and video ad formats.

Brands and agencies flocked to the platform. Facebook was able to monetize mobile. Last year, ad revenues reached $84 billion.

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It also thwarted the threat of newer platforms through acquisition. First Instagram, then Whatsapp, alongside a string of smaller firms.

A move to the metaverse

But it’s the acquisition of virtual reality headset Oculus that Facebook is betting its future on, with the re-branding of its parent company as Meta; the re-grouping of Facebook, Messenger, Instagram and Whatsapp as the Meta family of apps; and the re-naming of Oculus as Meta Quest, under a new Reality Labs arm.

Today, Reality Labs is responsible for 3% of Meta’s revenue. But it plans to pump $10bn into it every year, to stake aclaim on the metaverse.

It’s easy to see why the company might pursue this strategy. With one in three people using Meta apps, growth rates have stagnated. And efforts to woo consumers in developing countries with free connectivity have met controversy.

The metaverse offers a way not only to grow, but also to unlock higher-value opportunities in gaming, the workplace and education.

What Facebook users want

There’s a problem with this play, though. It’s at odds with how people use Facebook. A straw poll of the Receptional team suggests a few common use cases: seeing what a friend from school is doing now; wishing a family member happy birthday; buying or selling on Marketplace; or joining a local running group.

None of these use cases translate to the metaverse. The first two are low-touch interactions, which you wouldn’t want to do in a virtual world. The second two can only be done in real life (assuming we’re not talking NFTs or Peloton).

Getting meta with Facebook

A key challenge Meta faces is how to shift its userbase over to the metaverse. The key benefits on the Quest homepage are hardly inspiring:

  • “Battle with friends” (I’ll stick to Fortnite)
  • “Sit front row at live events” (I’ll go IRL)
  • “Work out on a volcano” (Why?)

The glimpses we’ve seen of Quest for workplaces or education aren’t much better – a bad Xerox of office environments and screensharing, rather than a game-changing way to work or learn remotely.

I can’t help thinking Microsoft’s purchase of Activision makes more sense. For $70 billion (the amount Meta will spend over seven years), they get “nearly 400 million monthly active players” now, plus the “building blocks for the metaverse”, to add to their existing strengths in workplaces and education (Teams), gaming (Xbox) and social (LinkedIn).

A new revenue model

The second challenge for Meta will be monetizing the metaverse.

Clearly, Quest enables Facebook to pursue an Apple-like model, with an upfront charge for the hardware, then a revenue share through its app store.

But there’s a long way to go before Meta’s hardware business eclipses its advertising one. Just ten million units were sold in Quest’s first year at $299 each. That’s $3 billion from hardware versus $84 billion from ads.

Herein lies the problem. Facebook has built a loyal customer base of users and advertisers – and developed a highly successful business model.

While we marketers get over-excited by the possibilities of the metaverse (as we do with all shiny, new things), the vast majority of Facebook users are oblivious to it.

That may of course change over the next 18 years. But for now, the greatest opportunity for us as marketers – and for Meta itself – is still Facebook and its apps. After all, where else can you reach nearly half the world’s population with highly targeted and creative ads?

Digital Transformation Agency

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Founded in 1999, just a year after Google, Receptional is an award-winning agency that's remained at the forefront of digital marketing for over 20 years.

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