The company formerly known as Facebook continues to make moves toward its version of the metaverse. And the crypto community remains skeptical.
A Reuters article reported that the recently renamed Meta will be taking a 47.5% cut from sales of digital assets. This is through a combination of a 30% fee on the Meta Quest Store, where users buy games and apps for the Oculus Quest headset, and a 17.5% fee from Horizon Worlds, Meta’s metaverse platform.
The announcement came under immediate fire from the crypto community.
Peter Smith, CEO and co-founder of blockchain.com, thinks Meta may not have the leverage it thinks it does in terms of attracting makers of digital assets — “I don’t think Meta gets how much power creators will have in the Metaverse…” Smith tweeted the day after the fee was announced.
As one of Web3’s celebrated value propositions is that it cuts out middlemen through peer-to-peer and collectively owned systems, Meta’s nearly 50% take rate is an easy target for critics of Web2’s business models, which are commonly critiqued for failing to pass value back to their users.
Chris Dixon, general partner at a16z Crypto, famously tweeted last year that “Web2’s take rate is Web3’s opportunity.” With such a high percentage taken, a marketplace could easily undercut those fees.
Perhaps you could argue that crypto has already cut out the middleman — NFT projects can form easily and sell to the public using social media for marketing. Essentially, no primary sale revenue need be shared with any platform at all. Of course, those NFTs might not end up being useful in the still-nascent “metaverse.”
Indeed, there is no agreed-upon “metaverse” in crypto, and presumably, Meta aims to provide value by hosting a “metaverse” where creators’ digital wares are useful and can be monetized. Still, a 50% cut is a tough sell in the crypto space where OpenSea is criticized for charging a 2.5% fee on NFT sales, and LooksRare has already undercut them by half a percent.
Still, not everyone is convinced that Web3 is the holy grail in terms of pushing down take rates.
Liron Shapira, who was a seed investor in Coinbase, has since soured on the long-term prospect of crypto generally and especially blockchain technology’s ability to sustainably offer lower take rates. “I’m a deconverted believer basically,” he told The Defiant.
Shapira penned an article last year disagreeing with Dixon’s idea that blockchains really enable lower fees. In his article, he points out that people don’t necessarily need Spotify in order to distribute their music. After all, users can simply upload music with an HTML tag and host it on a website.
“When you’re talking very abstractly like Facebook is this greedy player that’s taking 47.5%, man, they should take one and give the rest of the people, that sounds like a great rallying cry,” Shapira said. But when it boils down to the specifics, Shapira necessarily doesn’t see developers turning down 52.5% of pure profit if Meta’s distribution is good enough, given software costs nothing to replicate.
Shapira is also the co-founder and CEO of Y Combinator-backed Relationship Hero, a marketplace that connects users with relationship coaches. His company’s take rate is approximately 47%, but, according to the co-founder, that doesn’t entail massive profit margins after accounting for operational and marketing costs.
Of course, what the word “metaverse” will end up meaning remains to be seen, as centralized and decentralized entities battle it out in the buzzword-laden sector. Meta’s 47.5% isn’t set in stone. “Nobody knows exactly how Facebook’s proprietary platform is going to play out,” Shapira said. “If it does become extremely dominant that might put them in a position where they can have a really great margin and relax their take rate.”