By Klaus Wertenbroch
SINGAPORE — Companies sometimes rename themselves following mergers or corporate restructurings. At other times, companies rebrand to insulate a business whose brand image is suffering or if they are subject to increasing regulatory constraints.
So what is behind Facebook’s rebranding as Meta?
Various scandals such as the leak of Facebook data to Cambridge Analytica and recent revelations by whistle blower Frances Haugen have led to increasingly negative publicity and public outcry, damaging the Facebook brand. Perhaps more importantly, they are also creating more regulatory pressure and possible future restrictions on Facebook’s business model which relies on the company’s ability to offer precision-targeted advertising based on user data.
In an annual brand value ranking by Interbrand in October, Facebook’s ranking dropped two places to15th with an estimated brand value of US$36 billion. Meanwhile, Google, Microsoft, Amazon, and Apple have increased their brand values to between US$196.8 billion and US$400 billion, according to Interbrand.
Making the name stick
Whether the name “Meta” will stick as a new brand depends on how the company will use the new name. Meta will be less likely to “stick” if it is not attached to a product or service. It needs to become a brand that is relevant to consumers.
Mark Zuckerberg, founder of Facebook aka Meta, has linked the new brand name to his strategic plan to create a metaverse — a virtual world in which consumers spend increasing parts their lives, based on AI and virtual reality (VR) technology. This is an important new phase in the digital world. An early example of such a virtual world is Second Life, which started in 2003. In this online world with its own economy, users create avatars, or online characters, to interact with others, and earn and spend so-called Linden dollars.
What is Meta’s interest in VR? The commercial potential of VR for Meta will depend on how much time consumers will want to spend in the metaverse. That may well be more alluring than it sounds right now because the technology will improve to make VR and its interaction with the real world ever more realistic.
Compared to Second Life, Meta has a much better chance to attract consumers not only because VR technology is much more advanced now, but also because Meta can also tap on the user base of Facebook, Instagram and WhatsApp, and because it likely has vastly bigger ambitions than Second Life. The size of Meta’s ambition is fuelled by Meta’s/Facebook’s advertising and commercialisation-based business model.
Meta’s potential in the gatekeeper economy
One of the key benefits of a VR-based metaverse is convenience and… realism. If consumers find it attractive to live their lives vicariously from their living rooms instead of immersing themselves in a more exhausting real world, then VR will catch on. The more realistically metaverses allow us to work, learn, socialise, play, consume, and be entertained, the more time we will spend in them.
Meta’s metaverse will be a virtual world easily accessible from multiple “sticky” smart devices to increase and intensify “engagement”, a crucial objective for technology companies whose revenues derive from digital commerce and advertising.
Meta competes with other big tech companies for consumers’ attention and engagement. That is because the most valuable resource for them is user data. Facebook engages us through social networking, Google engages us through search and entertainment on YouTube. Amazon engages us through shopping and entertainment. The key is to gather vast amounts of user data to better personalise and target offers, using complex machine learning tools and AI.
A complete virtual world may engage consumers so effectively that they will spend much more time in it than on any of the main platforms today. Because the metaverse will function as an alternate reality, consumers will never have to leave, nor will they want to.
As such, they will generate much more user data than Facebook or any of the large online platforms can currently gather. Meta can commercially exploit this massive database collected from its captive user base in this alternate reality to target consumers for personalised experiences., including ever more precision-targeted advertising and personalised purchases in the virtual stores.
The metaverse might thus become indispensable real estate, in which companies must interact with their customers, be they consumers or business clients. And Meta can control—and charge for—other companies’ access to customers much more comprehensively than any other big tech company can to date.
As such, there is a good chance that Meta will become a dominant player in this extension of the digital space to draw users in even more, an alternate reality that one might call the “gatekeeper economy.”
In the end, Meta’s dominance as a gatekeeper will depend on two things. First, if its metaverse successfully shifts consumer attention away from their own platforms such as YouTube or Amazon, then other tech companies may have to create their own virtual worlds as well to engage us more fully. These companies will then have to compete for user attention with ever more realistic and enticing metaverses of their own.
Second, which regulatory constraints will Meta face? At this time, I would expect regulators to have a tough time anticipating the regulatory needs of virtual worlds where large tech companies vie to become the gatekeepers of (much) economic activity, to the exclusion of each other and of other companies.
“Two sides of the same coin”
Between a fantastic marketing idea and a dystopian one that is the metaverse, these two ideas are two sides of the same coin. The fantastic marketing idea is to attract consumers to a world that they do not want to leave anymore, to create a fully immersive experience. This lets Meta collect ever more data without having another company control its access to this data. The dystopian aspect is that consumers’ inner lives—that is, their preferences and beliefs—will be ever more transparent to Meta.
Facebook’s rebranding as Meta may just be a key step to get ahead of the competition in the next economy.
Klaus Wertenbroch, is the Novartis Chaired Professor of Management and the Environment and Professor of Marketing at INSEAD
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