Future of Web 3.0 – Metaverse
The global Internet is in the middle to late innings of the innovation curve of Web 2.0 (the shift from desktop to mobile computing & from local to cloud storage) and the “leaders” of this wave of the Internet are now firmly established. In framing the next wave of computing (Web 3.0), we see the potential for dramatic shifts in industry structure (decentralized, more local/niche/targeted) that could impact current investor perceptions of platform moat/strength, industry input costs, possible headwinds to monetization driven by personalization and potential for shifting media & commerce trends. One element of Web 3.0 that has recently captured a lot of media & investor attention is the “Metaverse” (driven by RBLX public listing & FB renaming to Meta Platforms). In the report, we examine how the gaming/media landscape has already shown some key elements as to how the Metaverse might evolve and how themes such as decentralized web activity & virtual experiences could become hallmarks of many of the next wave of computing in Web 3.0.
So what form might “Web 3.0” take?
We lay out a few key principles:
· Likely more control by the user of their data (including data residing on-device);
· Likely a more micro focus - a mean reversion on scale (either in end market being tackled or in relationship between the platform and the user);
· The rise of individual as creator & creator monetizing their content more directly with “fans”; n increasingly decentralized (with the possible breakdown of the mobile operating system/app store distribution model over the next 5-10 years); &
· Flexibility (if not innovation) on payment mechanisms aimed at a mix of themes, including decentralized privacy and anti-establishment.
As with any new wave of computing, in our opinion, the disruption that it causes is likely to be more impactful on current industry dynamics than outside forces (e.g., potential regulation).
What is the Metaverse?
Large tech platforms (which benefited from the rise of mobile computing apps) now look toward augmented reality as the next computing platform shift. Along those lines, repositioning key consumer/enterprise offerings to evolving media consumption applications (gaming, avatars, attending sports/concerts, exercise) seems like the next logical shift in consumption patterns that will likely drive platform unit economic shifts and create new leader/laggard status among industry players.
One interesting aspect of this evolution is the inter-connectivity of such a computing landscape and the possible erosion of the walled garden elements of the mobile computing wave. While there remain key friction points to solve such as hardware form factor (especially cost curve), broadband connectivity and mass appeal use cases, most investors and tech operators (probably most notable is Mark Zuckerberg’s focus at Meta Platforms and the broader gaming industry) are planning and investing toward platform evolution in this direction.
· Elevate physical world experiences
· Be co-created & built responsibly
Looking back at the shift from Web 1.0 to Web 2.0, there were various cost components tied to Web 2.0 that all built on Web 1.0. Similarly, there will be significant costs tied to Web 3.0 that build upon Web 2.0 infrastructure. Given the complexity involved in quantifying the investments needed, we look at Meta Platforms’ recent segment disclosures for Facebook Reality Labs as a way to better understand what level of costs are required to support the build-out of the Metaverse.