Despite all the fanfare around Mark Zuckerberg’s plans for a cryptocurrency that was predicted to bring in ‘billions’ in new revenue for the company he runs, the project has petered out with barely a whimper. Meta Platforms Inc, the company formerly known as Facebook, agreed to sell assets tied to the project born in 2019 as Libra and now known as Diem to Silvergate Capital Corp for about $200 million.
With Diem’s director jumping ship last November and its ambitions scaled back amid a fierce push-back from regulators and central banks, the project’s death was anticipated by some. But a post-mortem tells us something more troubling: Facebook continues to struggle to develop new services without buying them, and in a toughening regulatory environment, that doesn’t bode well for Zuckerberg’s grand metaverse plans, a pivot he has bet the entire company on.
Consider the long history of Facebook’s innovation misfires: a home screen for Android phones that flopped soon after its 2013 launch; Snapchat competitors Poke and Slingshot (2014 and 2015); and mobile-development platform Parse. The company also floundered on efforts to build its own versions of Amazon’s Alexa.
Facebook’s workforce seems to shine at execution and scaling up, but software developers who want to build innovative products tend to go elsewhere. At Facebook, many find themselves under pressure to ensure a new prototype or feature contributes to advertising dollars.
It helps that the right acquisition can open doors to new markets. For instance, the iPhone’s upcoming payment feature for merchants is possible in large part because Apple Inc paid $100 million for Canadian startup Mobeewave, which makes payment technology for smartphones.
And while Zuckerberg did steer Facebook’s rapid pivot to mobile usage in 2012, his $1 billion purchase of Instagram that same year was critical to the shift. Instagram now contributes more than a quarter of Facebook’s revenues.
The metaverse represents an even more radical pivot for the company. There’s much less consensus that virtual reality (VR) will get mainstream adoption, and building software for VR is more difficult for engineering teams to adapt to than it was from desktop to mobile.
The obvious answer is for Zuckerberg to buy a company already making inroads in the metaverse, like Roblox Corp. That company’s wildly popular virtual world sees close to 50 million daily visitors play games, attend concerts or just chat with friends, exactly the kinds of activities Zuckerberg has talked about hosting in the future. Roblox is even headquartered in Menlo Park, California, the same city as Meta, and with its shares tumbling recently, must look like an increasingly attractive takeover target—except that Zuckerberg’s hands are tied.
The regulatory environment has shifted in recent times. Regulators, now aghast at having rubber-stamped so many Big Tech deals in the past, have signalled they will scrutinize future acquisitions more heavily, or even block them. For instance, the US Federal Trade Commission has opened a formal inquiry into Meta’s $400 million purchase of virtual reality company Within, according to a December report in The Information. The report said that at a minimum, Meta wouldn’t be able to finalize that deal for another year. Competition regulators in the UK, in the meantime, have also blocked Meta from buying a GIF search company.
Zuckerberg clearly wants to buy his way into the metaverse. He has acquired a string of small, virtual-reality companies in the past two years, mostly in gaming, including Big Box VR, Unit 2 Games and Beat Games, the studio behind Beat Saber. But he hasn’t purchased Instagram-like game changers such as Fortnight publisher Epic Games or games developer Unity Software. Zuckerberg tried to buy Unity several years ago, when its valuation was in the single-digit billions, according to The History of the Future, a book on virtual reality by Blake J. Harris that’s mostly about the founding story of Oculus. Unity has since gone public and has a market cap of $28 billion.
Zuckerberg must be kicking himself for not chasing those acquisitions when regulators were a little more forgiving. Now with his $62 billion war chest of little use, he needs to focus on the more arduous job of building new services that consumers want to use. That’s a tough transition for any large company to make. Microsoft Corp managed to do it, though regrettably for Zuckerberg, it took a brand new chief executive officer, Satya Nadella, to make that happen.
Parmy Olson is a Bloomberg Opinion columnist covering technology
