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The metaverse bet - MMM #5

Thomas Konings
Thomas Konings
Hi all,
Another busy week full of deadlines later the academic term is getting more structured. I’m particularly enjoying a course on supply chain management that I’m taking at the moment. It is interesting to see how a simple model can explain a complex concept intuitively. I will probably do a write-up of it soon.
So here’s the news that broke the internet this week: Meta (a.k.a. Facebook) saw its share price drop by 26% on Friday.
📃this week’s mashup:
  • ⭐Highlight: Meta/Facebook shares drop 20% in one day
  • 🌐Web: Apple and the “app store tax”
  • 🎓Skills: writing clearly with the Hemingway Editor
  • ✍🏻Blog: 5 secrets to a concise academic summary
Have a great week!

A few controversies later, Facebook (the parent company) got rebranded to Meta and announced the “Metaverse”. Announcing something nobody asked or hoped for can only mean two things: (1) the company is “market driving” and tells people what to want (like Steve Jobs with the iPhone), or (2) the company is desperate to convince investors it is innovating.
With Facebook (the platform) reporting its first-ever drop in active users and a forecasted drop in advertising revenue, the evidence seems to point to the latter. People are abandoning the platform faster than it can acquire new users. Meta cited a few key reasons for this development:
  1. Apple’s iOS privacy changes
  2. Losing the younger generation
  3. And by extension: TikTok
Apple’s privacy changes
Apple has started warning iOS users of apps that track them and crucially also allowing users to stop the app from tracking them. Facebook’s entire business model revolves around tracking people and serving them targeted ads so the impact of this change is massive. Facebook predicts it may lead to a $10bn loss in advertising revenue, as marketeers move to Google for ads instead. Google recorded a 35% increase in ad revenue in Q4, highlighting a significant difference in the business model of the two tech giants.
📄Meta’s earnings miss demonstrates the vulnerability of its ad revenue model compared with Google’s
TikTok & Losing the younger generation
“Facebook is for boomers”. Facebook is rapidly losing “Gen-Z” to TikTok. The issues have become so severe that Zuckerberg even made appealing to younger generations the “north star” of the company. The platform seems to have lost touch with its users through many controversies, hearings, and other distractions. It has lost the “coolness” factor that is so crucial to capturing new users and maintaining network effects.
These developments have introduced a lot of uncertainty and doubt surrounding the sustainability of the social network. The company has put itself in a position where it looks desperate, trying to churn out new “cool” products such as Reels or the Metaverse to appear relevant. But will this help convince Gen-Z to give it another try? Only time will tell.
You have probably heard of the Epic vs. Apple lawsuit. If you haven’t, check out a good summary here. Essentially Epic (the company behind Fortnite) sued Apple over its 30% fee on all in-app purchases through the app store, the so-called “Apple Tax”. The ruling did not mean much in the end, other than that apps are now allowed to “refer users to external payment alternatives”. For example, a newspaper can now direct you towards their website instead where they keep 100% of the proceeds (and could therefore offer you a discount).
After the main ruling, however, legislators intervened, most notably in South Korea and The Netherlands. The Dutch Authority on Consumers and Markets (ACM) ruled that Apple should allow dating apps (I know, strangely specific) to offer alternative in-app payments (next to the Apple one).
Apple’s reaction: it “generously” reduced the Apple Tax by 3% for dating apps that are not using Apple’s payment option. To be clear: Apple takes 27% of a transaction that it has essentially nothing to do with, other than that it offers the hardware and software the app runs on.
Here are my two cents:
  • We need to have a larger discussion about how platforms make money, and if users should be free to install apps outside of the designated app stores (on devices they own).
  • Taking Windows as an example, Microsoft levies a 30% tax on the Microsoft Store as well, but Windows obviously allows you to install applications from anywhere.
  • Android allows the same. Even though it is a bit harder for an average user, you can still install apps from anywhere and these can offer their own payment providers without a “Google Tax”. For Android apps installed through the Play Store, the fee is 15% on the first $1M of earnings.
  • Apple is, in my opinion, abusing its control of the platform to make money from app creators who do not have an outside option (other than to not create the app for iOS). It essentially behaves like a monopolist. Stores with a 30% fee on all other platforms are “convenient” alternatives that can always be bypassed and have at least some competition (Valve’s Steam for video games for example).
📄Apple proposes 27 percent commission in Dutch app store dispute - The Verge
If you are anything like me, you have probably seen a lot of convoluted writing. In business, academia, even in journalism, complex sentences have become the norm. Hemingway Editor forces you to consider a clearer bolder way of writing. Check it out below.
Finally, something new. I wrote my first short article on my new website. It covers one of the skills I have developed over the years: writing concise academic summaries. It covers some of the key ideas behind my Complete & Concise series.
I have set myself the goal of writing one blog post per week so let’s see how that goes. I will focus on market research, case studies, and academic theory.
Talk to you next week!
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Thomas Konings
Thomas Konings @tkon99

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