✦ Facebook knows what it’s doing

✦ Facebook knows what it’s doing
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Hi Quartz members!

During Facebook’s earnings call this week, Wall Street analysts made no mention of a recent avalanche of criticism. It was as though leaked documents implicating Facebook in the Jan. 6 insurrection and global radicalization don’t even exist. Because for Facebook and its investors, they hardly do.

What seems like an existential threat to the media and Facebook pundits looks very different from the company’s headquarters in Menlo Park, where CEO Mark Zuckeberg is laser-focused on an entirely different existential threat: platform change.

Since the 1970s, Silicon Valley’s giants have succeeded because they figured out you could win by displacing incumbents when the rules of the game evolved. The shift from mainframe computers to desktops, and then to smartphones, opened the door to new rivals to the throne. IBM lost to Microsoft (desktop). Microsoft lost to Apple (mobile). And everyone lost to Facebook (social networking).

Today Facebook is an $890 billion company with more than 3 billion users; its valuation has tripled since 2016. And while the company’s reputation may have soured, Facebook the incumbent has not forgotten the lesson of Facebook the upstart. Zuckerberg’s primary obsession is holding on to 18- to 29-year-olds, whom he calls the “north star.”

In the past, Facebook would have acquired its way out of this conundrum: After all, buying Instagram and WhatsApp cemented its place in the lives of billions of people. But wary regulators are closing that route, leaving Facebook to fend off challengers by dominating the next platform: “the metaverse.” Zuckerberg predicts the metaverse will require digital clothes, digital spaces, and an entirely different—ideally, Facebook-defined—digital experience. The goal, he says, is “1 billion people and hundreds of billions of dollars of digital commerce a day.”

Once the sound and fury of this year passes, Facebook’s long game will not have changed, though its name will have: The parent company is now called Meta. Facebook doesn’t just want to survive the next platform shift; it wants to once again define it. The rest is just noise.

The backstory

That’s so meta

Facebook isn’t the first tech giant to rebrand, but it might be the first to try and front-run a paradigm shift by changing its own name. Here’s what we know about the mega Meta rollout:

📈  The Meta brand grab is underway. Facebook controls @meta on Twitter and meta.com, and will start trading under the stock ticker MVRS in December. Ironically, it doesn’t own @meta on Instagram.

♾️  The new logo is… not a hit. Meta’s infinity symbol has been compared to a pretzel, a Pringle, a thigh master, IBM’s design thinking loop, and inevitably, a phallus.

🥽  This isn’t Silicon Valley’s first Meta. An augmented reality company by the same name launched in 2013, with eyes on the enterprise space. That Meta secured $73 million in funding, but shut down in 2019.

What to watch for next

  1. Tangible technical developments. There’s a world of difference between Zuckerberg’s vision of the metaverse and Facebook’s current virtual reality offering. The company will need to iron out major technical challenges, including VR quality, cloud computing, data security, and privacy.
  2. Better and more affordable hardware. Before anyone can truly dive into the metaverse, they need a headset. Some of the current crop cost thousands of dollars, and even Facebook’s Oculus is $300 and a bit clunky for multiple hours of use.
  3. Online governance, on steroids. What Meta is trying to build—a place to “get together with friends and family, work, learn, play, shop, create”—sounds a lot like a city. And like any city, the metaverse will need rules, boundaries, and infrastructure. Let’s just say this is not one of Facebook’s strengths.
  4. Is there one metaverse, or… Academic and government-funded research largely built the internet, but the metaverse is a product of private companies. Zuckerberg would love Meta to provide the framework, but he also has competition. For now, it’s unclear if there will be one metaverse with shared protocols or many different metaverses (metaversi?) controlled by different entities.
  5. Facebook’s track record with pivots. In 2013, the social network was convinced that within five years its content would all be video. As it turned out, a lot of social networking did pivot to video, but Facebook didn’t crack the format fast enough itself. Just because Meta wants to beat the competition doesn’t mean it will.

One 💡 thing

Why are platform shifts such a hurdle? Depends on which academic you ask. Clay Christensen, the late management guru who coined the term “disruptive innovation,” posits that incumbent companies with tons of resources get beaten by startups because they listen to their current customers too much. That might be why Zuckerberg is so explicit about de-emphasizing the needs of older Facebook users.

But lots of researchers think Christensen’s theory is overrated. Another notion of “disruption,” from Harvard Business School professor Rebecca Henderson, says that incumbents fail when they have to change the entire “architecture” of their product or business. That means Facebook can fend off startups over changes to individual “components”—say, how the algorithm works, or what kinds of content users can post—but when a technology changes how everything fits together, it might struggle. The metaverse could be that kind of architectural shift, in which case just ignoring the Olds might not be enough.

Quartz stories to spark conversation

🧑‍🎓  What Facebook could learn from Walmart

🔌  US bitcoin miners doubled their power consumption in four months

🚢  The supply chain’s seafarers aren’t getting vaccines they need

🇨🇳  China’s Xie Zhenhua is the most critical person at COP26

🏭  Chip makers are threatening to scrap future US factories

📉  Net zero is a booming business for consulting firms

📡  Duh, your cell phone will become a satellite phone

5 great stories from elsewhere

🤯  We’re living through Scenius. On Substack, Packy McCormick looks at why some periods and places in history—including this one—are astonishingly more productive than the rest.

🏛️  The price of stock index membership. A paper in the National Bureau of Economic Research argues that S&P customers have a better chance of ending up in the S&P 500.

🤖  Are algorithms the new alchemy? Quanta Magazine sees room for more systematic advancement as we emerge from the “tinkering” phase of AI.

🇮🇳  How Amazon gamifies gig work. Rest of World examines the 30-day “Delivery Premier League,” an incentive program Amazon uses to boost productivity in India during Diwali.

⬜  Do you even cube, bro? The Wall Street Journal profiles crypto fans who are satisfying their physical totem cravings with small, heavy, and expensive tungsten cubes.

Thanks for reading! And don’t hesitate to reach out with comments, questions, or topics you want to know more about.

Best wishes for an immersive weekend,

—Michael Coren, emerging industries editor (finding a private island and a good book in the metaverse)

—Scott Nover, emerging industries reporter (awaiting the metaverse’s first Wawa)