Microsoft Just KILLED Zuck's Metaverse

Microsoft is about to kill Zuckerberg's Metaverse before it even launches, and they won't even need to build a VR headset to do it. Now, this probably sounds crazy. After all, Zuck is so invested in the Metaverse that he renamed his entire company just to focus on the effort Meta. And he's planning on investing $180 billion over the next 10 years building this thing. But his plan is flawed for a few reasons. At first glance, Zuck looks well positioned here. Billions of people use Facebook, Instagram, and WhatsApp every day to connect with friends and family, and he also owns the biggest virtual reality company. Even though VR is still seen as a toy to most people, the Quest actually outsold the Xbox in 2021. But even though there are plenty of signs that Zuck will be able to deliver, Microsoft isn't just gonna let him win. There are three key reasons why Microsoft will beat Zuckerberg in the war for the Metaverse. So let's go through them one at a time.

We are creating an entirely new platform platform layer, which is the Metaverse. We're bringing people, places, and things together with the digital world.

My two previous videos on the Metaverse got absolutely flooded with comments asking, isn't the Metaverse just a video game? We already have those. These people would point to Second Life, World of Warcraft, and Fortnite to make the point that we kind of already have a Metaverse. And these people aren't wrong. Gaming is a great entry point into the Metaverse, but in the long term, things are going to get a lot crazier. These Metaverse experiences are going to become bigger and more immersive, with the ability to interact with millions of people all in a single shared virtual world. Digital assets and avatars will move between different spaces, and full economies will emerge to support a wide range of contributors. We don't know exactly what platform will be the most dominant yet, but one thing is for sure, gaming is going to play a huge role here. And that's why Microsoft's strategy is so genius. And they've been a massive player in the video game industry for decades now. First with PC games like Doom in the 90s, and later with Xbox games like Gears of War. Facebook, on the other hand, only really gave us farmville, and not many people would call that one a classic. Building a platform for amazing games is one thing, but Microsoft can't do much with them if they don't actually own the studios that create them. So Microsoft has been growing a gaming empire for years, and it's about to get a lot bigger. In 2014, Microsoft bought Minecraft for $2.5 billion. The game has grown to over 140 million monthly active users and is quickly morphing into its own mini metaverse. And now players are building entire simulations like this MrBeast competition with 2,000 simultaneous contestants. Then in 2020, Microsoft bought ZeniMax Media for $7.5 billion, which gave them the rights to Fallout, Doom and the Elder Scrolls.

You're finally awake.

All of these games have communities of modders that are changing and growing the experience. And now, most recently, Microsoft acquired Activision Blizzard for $69 billion. That's an absolutely massive amount of money. But Microsoft has $130 billion in cash laying around, and this is going to be really important for their Metaverse strategy. This acquisition has drawn a lot of attention though, and I think most people are misunderstanding what's really going on here. Activision owns some of the biggest gaming franchises in the world. Games like Call of Duty, Overwatch, and even Tony Hawk. These games are cross platform and widely available on PlayStation and Nintendo consoles. But will they stay that way if.

You spent $69 billion on this game studio? Yeah, I'd say you make some of those a little exclusive to your platform and take advantage of that.

And sure, this sounds like a smart business move for Microsoft. Take Call of duty away from PlayStation and more people will buy Xboxes. But that's actually not their strategy. See, back in 2017, Microsoft launched the Xbox Game Pass, which offered access to a huge library of Microsoft games, all for a single monthly fee. It was basically the Netflix model, but it marked a very significant shift in their business strategy. Before Game Pass, if Microsoft bought a game studio and then made those titles exclusive to Xbox, sales would instantly start dropping. Sure, maybe some gamers would switch from PlayStation to Xbox during the next upgrade cycle, but in general, these acquisitions would be value destructive. But now Microsoft can continue to sell games for full price on other consoles while offering these games as part of the Xbox Game Pass bundle. Buying Activision makes Xbox Game Pass more enticing and sticky, since gamers will now get all that content for free as long as they are subscribed. The second issue people get wrong about the Activision acquisition is the idea that this will create a gaming monopoly. Even though this is a huge acquisition, the game publishing market is still remarkably fragmented. Just look at this chart of game publishers by revenue. Even after combining Microsoft and Activision, Sony and Tencent will still be larger. New breakout successes happen every year in the gaming industry, so no one has complete control. At least not yet. Compare that chart to the market for search engines and you'll see what I mean. Clearly, Google has a monopoly on search. No other companies stand a chance against them. But of all the game publishers that Microsoft is competing against, Facebook and Meta aren't even listed. That's because Zuck has only built out a few small gaming initiatives for VR and has yet to acquire any of the big gaming companies. It could be that he just doesn't believe that the traditional gaming franchises will adapt to the Metaverse. And this is honestly an open question in my mind. Is the Metaverse more likely to grow out of Overwatch or some other familiar game, or will these Metaverse experiences be built around new intellectual property? Either way, if the Metaverse ultimately evolves from the gaming industry, Zuck is going to be in big trouble. People might be using Quest headsets to access the Metaverse and enjoy VR experiences, but Microsoft will have a massive advantage in terms of actually defining how users interact with the Metaverse. There is another path to the Metaverse, though, and it's useful here to look at how Personal Computers wound up in every Household Everyone wants a computer in their house these days, but back when they were first released to the public, most consumers had no interest in them. These big bulky machines were basically glorified calculators, so most people had no use for them in their homes. But pretty quickly they became indispensable at work. Companies bought their employees computers because it increased productivity. All of a sudden employees didn't need to spend hours shuffling paperwork and could instead store information in computers. That meant increased profits, so every company rolled them out. The interesting thing was that once people got used to using computers at work, they wanted to use them at home too. As the number of home computers increased, so did the demand for non work applications like games. You might have bought a home computer to type up letters, but pretty quickly you'd want to game on that thing. It's possible that the Metaverse will follow a similar path. First, your company buys you a virtual reality headset so you can collaborate remotely with everyone working remotely. Spending a few hundred bucks is totally worth it if it can improve productivity even a little bit. Heck, I could even see companies sending everyone a VR headset just for a holiday party. It's not uncommon for tech companies to spend thousands of dollars on corporate events, so a few hundred bucks per employee seems doable. Zuckerberg is clearly bought into this vision and wants to make Horizon Workrooms the default application for virtual work. But can he beat Microsoft here? Fundamentally, it's very difficult for companies to switch their focus from consumers to businesses. For better or worse, people just associate Meta with their crazy uncle who posts unhinged rants on Facebook every day. Now, to be fair, Facebook launched workplace back in 2016, so they aren't completely new to the industry. But Microsoft has been selling software to companies since the 1970s. It's just a completely different level of experience here. And even though Microsoft is still closely associated with the Windows desktop operating system, Satya Nadella has essentially pivoted Microsoft away from a focus on Windows and fully embraced the cloud. Microsoft understands that very few companies will exclusively stick to using PCs with Windows on them. Tons of people want to use Apple products, and many developers insist on running Linux. This device fragmentation was going to limit the success of any Microsoft product that required Windows to run. So they built teams. Most people think of teams as just a slack rip off, and clearly some of the design elements are the same. But Microsoft is planning something much bigger with teams. It starts with document sharing and video chat, basically all the normal business stuff, and then slowly grows into the deeper Metaverse concepts Zuck is always talking about. And I get it, the enterprise collaboration side of things sounds way more boring than the video game side. But it really is critical to Microsoft's Metaverse strategy. If you think about a metaverse as a sort of mirror world where you can interact with data and applications in a more immersive way, Microsoft might honestly get there first. For starters, Microsoft already has a suite of products that let companies create what are called digital twins. These are basically virtual representations of physical objects like manufacturing equipment. But it's not enough to just have a 3D model of a factory. Companies want to know what each piece of equipment is doing, how much energy the plant is using, and when the latest batch of products will come off the line. This is all part of the Internet of Things that was very trendy a few years ago and but never quite found a foothold with the everyday consumer, aside from maybe a smart thermostat here or there. But in a business context, these Metaverse concepts can prove remarkably useful. Once real time factory data is syncing with the digital twin, companies can start analyzing performance metrics and even build automated systems to further increase efficiency. Where this gets interesting is when employees go and actually see the digital twin data while walking around the physical world. This is made possible by augmented reality like Microsoft HoloLens, although interestingly, Microsoft isn't particularly tied to that particular piece of hardware As I mentioned before, Microsoft is moving away from a single computing platform and wants to work everywhere. That's why you can use teams to chat with coworkers on a MacBook, and you can also stream Gears of War to your iPhone. Microsoft isn't interested in locking you into a piece of hardware, and that's going to be a big advantage going forward. So Microsoft is basically attacking Zuckerberg on two fronts. They've got an excellent foothold with business users, and they're building a massive empire over in gaming. Zuck is getting really beat up right now, but he seems to be doubling down anyway, so let's find out why. Predicting the future is hard, really hard. If you can do it well, you'll quickly become massively wealthy. There's a problem, though. Sometimes you can see the future clearly and still not be able to execute a winning strategy. That's what happened to Bill Gates nearly three decades ago. The year was 1995, and Bill Gates was riding high. Everyone was buying PCs, Windows was revolutionizing workplaces, and Microsoft was on track to become the most valuable company in the world. So Bill stood on stage and mapped out what he thought would come next.

This industry will be at the center of all of it with its software innovation, its competitive hardware. We'll be shaping this so called information highway.

He was talking about the Internet. And even though we quickly stopped using the phrase information highway to describe it, Bill nailed a few key predictions.

We call it the Wallet PC because it's capable of really replacing everything that you carry with you, so that getting messages, seeing the latest news, seeing different location, keeping track of your schedule.

That sounds an awful lot like a smartphone to me. And Bill didn't stop there. He also explained how cars would have large displays with real time maps, how customers would purchase things with their phones, and how homes would have smart controls. These predictions basically all came true, but oddly enough, not because of Microsoft. Even though Bill explained exactly how a smartphone should work, Microsoft has never been able to gain market share against Apple and Google. And the same is true for maps, payments, and even the smart home. Google and Apple are dominant in those areas, with Microsoft usually a distant third. So what does this mean for Zuckerberg and his plans to build the Metaverse? Well, that Bill Gates presentation shows that even when your predictions about the future are correct, it doesn't necessarily mean that you'll win. It's entirely possible that everything Zuck has laid out will come true. We'll all be wearing VR headsets and interfacing in virtual worlds. But Meta could wind up having nothing to do with it. Microsoft missed the mobile Internet revolution because they were too focused on the Windows operating system. Once Satya Nadella decoupled Microsoft from Windows, the company could become more agile and could really start competing in new industries. There's still one question, when will the metaverse actually arrive? In order to answer that question, just watch this video next. Thanks a.