How Meta’s metaverse money grab could backfire

On Monday, Facebook parent Meta revealed its metaverse, Horizon Worlds, would test a new way to let creators sell virtual goods, services, and experiences within the digital universe (such as fashion accessories, or access to exclusive spaces). As CEO Mark Zuckerberg put it in a video, those features represent “a new part of the e-commerce equation overall”—and, according to a blog post from the company, would be a step toward “our long-term vision for the metaverse where creators can earn a living.”

However, it didn’t mention that the platform would take a total 47.5% cut of all sales made in the metaverse—30% as a hardware fee for the Meta Quest Store, and 25% of the rest for Horizon Worlds itself—leaving creators with just over half their revenue, before taxes.

When that fact was reported days later, it met swift and forceful backlash. Such a reaction probably could’ve been expected, given that Meta’s cut dwarfs that of NFT trading platforms, such as OpenSea, which takes a much smaller 2.5%, and rival newcomer LooksRare, which charges just 2% and even pays sellers in cryptocurrency tokens. (According to Meta, its test features do not include NFTs.) In that context, Horizon Worlds’s fees are almost puzzling, as if they were designed to enrage customers. A quick scroll on social media turns up these Twitter posts:

Just because you changed your name to Meta doesn’t mean you understand the value of Web3.

47.5% Creator Fees????

I hate you Facebook.

— TradingFemale.nft (@TradingFemale) April 13, 2022

Meta has entered the arena pic.twitter.com/xVj00AiM3m

— laurence (london variant) (@functi0nZer0) April 13, 2022

It doesn’t even feel like I need to tweet about @Meta

There is no world in which creators choose a platform that takes almost half of their income when they can do the same work elsewhere and capture almost all of its value

end of conversation

— 2070 (@Punk_2070) April 12, 2022

A peek into the Meta boardroom pic.twitter.com/lBlt3Npm6W

— Alan Carroll (@alancarroII) April 12, 2022

Meta declined to comment when reached by Fast Company.

Some have argued the exorbitant fees make it nearly impossible for creators to “earn a living,” much less achieve any profit at all—especially after government taxes. Meanwhile, others are calling the company hypocritical. In the past, Zuckerberg joined Epic Games and others in blasting the Apple App Store’s 30% fees for app developers, and vowed to help creators avoid them. “As we build for the metaverse, we’re focused on unlocking opportunities for creators to make money from their work,” he said in November.

The about-face may have surprised some, but not Aron Beierschmitt, CEO of blockchain-based developer studio Laguna Games, who says Zuckerberg’s plays are flawed. “It’s a perfect example of Web 2.0 versus Web3,” he told Fast Company in an email. “The fact they are charging 25% after a platform fee is just ludicrous. People want ownership and control, which Zuck will never give them as all these assets live in his centralized sandbox. He’s always been good at seeing where the puck is headed (thus the pivot to Meta), but he’s trying to co-opt Web3 concepts that simply won’t satisfy Meta shareholders’s desire for profit.”

Did Meta really need the extra cash? It’s possible the company was betting big on the success of the metaverse, and chose to be upfront about its profit ambitions. But either way, it seems to have shot itself in the foot, and possibly blown what could be a strong frontier for early metaverse pioneers. Although the company holds advantages of massive distribution power, and a friendlier user onramp, “it’s my belief, said Beierschmitt, “that Web3 will ultimately win out, as there is a far better alignment of incentives . . . Zuck is not building the metaverse, just another walled garden.”

While some creators on Horizon Worlds may be left with sour tastes in their mouths, Meta’s move could ultimately be very fruitful for the nascent metaverse industry—which hasn’t been around long enough for one platform to dominate the space. With his enormous reach, Zuckerberg might’ve been poised to do so, but now many competitors are likely to emerge, catalyzed by creator demand for a more lucrative model. And perhaps some that truly capture the decentralized spirit of Web3 will soar.

According to Meta, as it expands to other platforms, its 30% Meta Quest Store fee will be replaced by whatever other companies decide to charge, although the 25% cut for Horizon Worlds will remain. It has reportedly said it believes that’s a “pretty competitive rate in the market.”