Who Governs the Metaverse?

Reading Time: 8 minutes

Hi Everyone. Welcome back to Naavik Digest. It has been inspiring to see the outpouring of support from the gaming community about the recent Supreme Court decision. We stand with the gaming community on this — reproductive freedom is a basic human right.

If you missed last edition, we examined blockchain gaming in context of a recession, putting it in context with traditional gaming. Check it out and let us know what you think on socials.

Roundtable: Meta’s Evolved VR and Gaming Strategy

In this Metacast episode, Joost van Dreunen and Aaron Bush join your host Maria Gillies to discuss:

Did the P2W uproar affect Diablo Immortal's launch results?
Meta is cutting costs and focusing its strategy. What changed?
Can the digital age truly bring new ideas?

You can find us on YouTube, Spotify, Apple Podcasts, Google Podcasts, YouTube, our website, or anywhere else you listen to podcasts. Also, remember to shoot us any questions here.

Check Out The Episode

#1: The New Metaverse Standards Forum

Earlier this week, the who's who of technology companies banded together to announce the Metaverse Standards Forum, a governing body aimed at “fostering the open development of the metaverse.” The organization is free to join and denotes a focus on “pragmatic action based projects” rather than developing standards and rulings itself. “The focus of the Metaverse Standards Forum will be on ‘implementation prototyping, hackathons, plugfests, and open-source tooling,’ in areas including interactive 3D assets, AR, VR, and XR, user-created content, avatars, identity management, privacy, and financial transactions.” The group’s efforts are led by Khronos Group, with participation from anyone and everyone metaverse-related: Epic Games, Adobe, Meta, Microsoft, and even (surprisingly) furniture retailer IKEA.

My favorite response coming out of this news is titled: “I still don’t know what the metaverse is, but it has a ‘Standards Forum’ now”. Indeed, the distinctions for what a Capital ‘M’ Metaverse and Lowercase ‘m’ metaverse, seem to be befuddled and confused by consumers and corporates alike – maybe an NFT, the internet writ large, a Ready Player One-esque digital world, or none of the above? It might be helpful to revisit Matthew (Mr. Metaverse) Ball’s working definition on the subject:

“The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”

For the Metaverse Standards Forum, interoperability is the name of the game – band a bunch of companies together and standardize a set of tools, policies, and experiences so that they can build together, for the consumer. Not doing so risks a siloed “metaverse” approach rather than an idealistic and persistent version of the “Metaverse”. While it’s good to be critical of the approach for the ‘quasi-successor’ version of the internet, the open standards is what makes this Forum such an intriguing, powerful coalition – set the standards for how to build the Metaverse, particularly around open source, and presumably builders will leverage this to build within the Metaverse rather than build their own metaverses.

In my reading on the subject, there are a few untouched areas of conversation:

If we assume metaverses and gaming are the next form of social, it’s good to get ahead of the same problems we faced in the previous generation around content moderation, data privacy, and more (mostly looking at Facebook here). Developing a mutually agreed upon set of rules should benefit the consumer and gamer most of all. Personally, I’m impressed with the forward-thinking nature of these organizations.

There are a few notable companies that didn’t join as founding members, including Roblox, Snap, and Apple, which if we take the loose definition of metaverse, are all building some semblance of it. Roblox has microverses, Apple has built an ecosystem of services, and Snap an AR kit. Is non-participation an intention to build walled gardens as metaverses within a broader Metaverse? A lack of strategy on the company’s part? A sign of earliness or bearishness for the Forum? And what does continued non-participation mean? At any rate, it’s interesting to see which companies have decided to participate: Microsoft, touting an open ecosystem approach through cloud and gaming, Meta, which had so many problems in the past with social and nominally embodies the Metaverse, and IKEA, which will need someone to build the standards so it can furnish the Metaverse with great furniture and in-store cafes, among so many others.

While companies coming together to form a forum in this nascent space might seem out of the blue, it's not the first time something like this has happened in the gaming industry. PC veterans will remember the Multimedia PC standard, focused on creating media consistency across the growing computer space during the early 90s. Even Khronos Group themselves have done this before, with the team launching Forums for industries like AR/VR, Machine Learning.

Gaming often finds itself at the forefront of these standards thanks in part to the rigorous expectations that interactive media provide. While gaming doesn’t define the Metaverse, many of its core characteristics (and problems) like harassment, personalization, and monetization will play a large role in the future of the space. It wouldn’t be unreasonable to expect the Forum to help develop standards on the appropriate way to monetize users, or perhaps a universal standard for bans/moderation regarding hate speech. And while I doubt that any rules will be applied evenly and consistently across platforms and titles, a starting point is much better than where we are today.

The long term success of an industry-wide change will rely on solving a handful of few unsexy yet essential problems. Systems we often take for granted in our everyday lives – financial institutions, governing bodies, and the sort – will need to be redrawn from scratch in the Metaverse. In an ideal world, the Forum will curtail these problems through a focus on metaverse-native solutions, but more importantly a rigorous set of standards to allow people to build it. (Written by Max Lowenthal & Fawzi Itani)

#2: Weekly News Round-Up

Moonbug Entertainment is Reportedly On The Hunt For Gaming Acquisitions: The company behind children IP like Cocomelon is reportedly looking to expand its gaming division through an acquisition. It’s perhaps an unsurprising announcement given Netflix’s similar strategy in expanding its presence through gaming. There are two intersecting forces here: 1) companies with strong IP and brand are looking to diversify revenue through a transmedia approach, and 2) gaming companies are increasingly consolidating. In particular, the IP supply for kids gaming content is limited and there have been a few notable standouts in the space — Spin Master acquired the studio behind Toca Boca, which continues to be successful. Moonbug will likely take the same approach.

Rec Room Hits 75M Lifetime Creators And $1M In Creator Payouts: Celebrating it’s sixth birthday this week, Rec Room announced that the company has amassed 75 million creators since its launch back in 2016, with those creators earning over $1M in just a quarter. While the usage numbers are impressive, comparing the results to its peers paints a mixed picture of success. From a user-base perspective, the company was able to surpass 75M lifetime users much faster than some of the industry’s biggest names, with Roblox and Minecraft taking nearly a decade a piece to find a similar footing. The differences, however, arise when looking at the creator payouts — both Roblox and Minecraft have reportedly paid creators $500M and $350M in one year, respectively. This is a stark difference in engagement. As we wrote a few months back, usage numbers for the platform continue to be impressive, but it will ultimately be engagement UGC-creators that will lead this company to new heights.

Google’s Gamesnacks Hits 35M Users: Google’s bet of emerging markets is paying off. Earlier this week the company announced that Gamesnacks, its HTML5 gaming platform unit built for lower-speed networks, had broken 35M users. Reaching audiences in markets like India, Nigeria and Brazil, much of the platform’s success has been fueled by a new wave of consumers being brought online. With limited computing power, Google has prioritized fast load times, limited data usage, and simple mechanics to make the platform accessible and easy to use for first-time gamers. It’s another reason why I continue to be bullish on the growing presence of instant games from companies like Playco. With the cost of graphics rendering decreasing and the growing dominance of short-form, social experiences taking over mobile, lowering the barrier to entry for global audiences means more gamers, more opportunity, and more innovation.

Supercell and Channel37 Partner to Make PC-Exclusive: We finally have some follow-up to Supercell’s announcement that it will be getting into PC gaming. The company announced it would be partnering with studio Channel37 to launch a new PC-exclusive title. As we had previously written, the move is one that comes on the back of only a 10% increase in valuation since 2016, a metric that is not up to Supercell standards. The move also indicates a desire to prioritize for diversification for the mobile juggernaut, as the company sees the large majority of its revenue from only its top three titles. While I’m supportive of the move from a business perspective, its eventual outcome is very much still up in the air.

🎮 In Other News…

💸 Funding & Acquisitions:

Miniclip acquired Subway Surfer maker, Sybo. Link
Lumi Interactive raised $6.75M, led by a16z. Link
Parallelz raised $3M to distribute and discover mobile games without the app store. Link
CloudFeather Games raised $1.25M in a round led by Lumikai for game dev tools Link

📊 Business:

Epic released free PC crossplay tools. Link
A bunch of companies are forming the Metaverse Standards Forum. Link
Rec Room hit 75M lifetime players and $1M in creator payouts. Link
Moonbug Entertainment, a kids media and IP company, is on the hunt for gaming acquisitions. Link
Meta’s next-gen XR hardware technology. Link

🕹️ Culture & Games:

Blankos Block Party by Mythical Games will debut on EGS. Link
Supercell is partnering with Channel37 to launch a PC-exclusive. Link
Manticore announced NFT support for its games. Link
Steam’s top May 2022 releases. Link
Overwatch 2 won’t monetize via lootboxes but instead through game passes and cosmetics. Link

👾 Miscellaneous Musings:

Supporting early prototyping and core game loops are core to a game’s success. Link
“Manufactured Discontent and Fortnite”. Link
Valve’s Steam Deck makes a brilliant case against walled gardens. Link
PlayStation Plus has a pipeline problem. Link
A retrospective on three years of early access on Steam. Link