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When discussing the metaverse in adept circles, you don’t get too far without hearing the i-word: interoperability. The thought is that a prospective metaverse should link disparate domains, just like the web links websites through common standards and protocols (e.g., HTTPS).
But the next breath often invokes the p-word: proprietary. There’s lingering doubt that the big players at the table – which didn’t have a historical counterpart in the web’s founding days – have too many diverging interests (despite consortiums) to play nice and agree on common standards.
That leads to the conclusion that there are too many opposing forces pushing against the dream of an interoperable metaverse. But there’s a counterpoint often missed: an open metaverse makes more business sense for its inhabitants because they need open walls to achieve network effect.
Base Ingredient
To boil all that down to a practical example, think of Facebook (the product, not the company). Its entire model is based on network effect. Rooted in Metcalfe’s Law, there’s exponential value growth for each node that’s added. It’s all about connections and the engagement they ignite.
For example, one person on a network has no one to talk to nor share updates/experiences. Two people on the same network engender dialogue through one connection. Add one more person and you have three connections. Add another and you have 6 connections. And so on.
Those connections are the base ingredient for social networking revenue. They ignite engagement, discussion, and a flywheel effect of self-propelled growth. They also attract brand marketers – at least in today’s social revenue model. Connections come before revenue flows.
So what does that have to do with the Metaverse? Meta knows more than anyone that achieving network effect requires semi-permeable walls. Though Facebook is often deemed a walled garden, it still coexists with the public web in terms of billions of links that point in and out.
For example, you can be drawn into Facebook through links encountered elsewhere on the web. That brings more people into the tent. Similarly, advertisers need to link out: Ads in the News Feed often link to a given company’s website or dedicated landing page to buy something.
Add it all up and Facebook’s growth is amplified by residing in, and feeding off, the larger web – at least in that “semi-permeable” state. If it was a real walled garden – for example, if it created its own insular internet when it launched – it wouldn’t be raking $130 billion in annual revenue today.
Follow the Money
The same calculus guides metaverse positioning. Given the fundamentals of network effect deeply rooted in Meta’s DNA, it would be not only inept but out of character to build an insular metaverse. Though it makes catchy headlines to rail against Zuckerberg for doing so, it’s misguided.
All the above has been bouncing around our heads and in AR Insider and ARtillery Intelligence editorial meetings. But it was recently validated and crystalized by the always-astute Alvin Graylin, HTC’s XR lead. During a panel we moderated at AWE 2022, he summed it up nicely.
“In a closed system, you automatically have fewer nodes, which means less value,” he said. “In the short term, there are huge benefits of having a closed system because you can move quickly. But if you start having more and more open systems that have 10x or 100x more people, you’re going to have 1,000x or 10,000x more value.”
To Graylin’s point, it’s a numbers game. Meta, or anyone else, can benefit more from a massively scaled metaverse (like today’s web) that it can monetize and feed off of. That web-like scale only happens if the metaverse is decentralized with open borders, rather than insular and owned.
Back to those misguided headlines, we continue to roll our eyes every time we see assumptive editorials that rebuke Meta’s metaverse ownership. For one, they miss the company’s many claims in certain terms that it has no interest in such – most recently, Nick Clegg’s manifesto.
But even if you heard all those claims, it’s a question of whether or not you believe them. In fairness, Meta hasn’t exactly inspired waves of public trust. But we believe its intentions for openness, simply because it makes the most business sense. Always follow the money.
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