written by
Renjit Philip

Cost of building the Metaverse

2 min read , November 25, 2022

How much will it cost to build the Metaverse (the next generation of the Internet or Web4, as I call it, for clarity)?

Ready Player One and other books
Photographer: Hello I'm Nik | Source: Unsplash

This is a question that I was pondering when I chanced upon this Open letter from Altimeter VC's Brad Gerstner to Mark Zuckerberg! While the thrust of the letter is on freeing up cash, the pertinent points on the Metaverse are instructive (you can find the link to the letter here).

Key points extracted from the letter:

1) "The conventional wisdom — press and investor — is that the core business hit a wall last fall. As a result, the team hastily pivoted the company toward the Metaverse — including a surprise re-naming of the company to Meta." The reality is that Meta's core advertising-led business generates around $45BN of profits every year- which is just a tremendous cash-generating machine!

2) "Meta has announced investments of $10–15B per year into a metaverse project that largely includes AR / VR / immersive 3D / Horizon World and that it may take 10 years to yield results." That is $100-150BN of estimated investments.

3)"Dave Baszucki of Roblox describes the metaverse as the natural evolution of communication — a multi-device world, including the phone, that is best thought of as a better version of text, video, and voice that will make us feel more connected." This is another definition f the Metaverse, but I still think @Matthew Balls's description is more comprehensive (see one of my earlier posts on this).

4)"By any normal company or start-up standard, $5 B per year would seem like an extraordinary amount. I have been told that Amazon spent far less in total to build AWS. As such, we think Meta company should cap its metaverse investments to no more than $5B per year with more discrete targets and measures of success."

Do we agree with Mark /Meta's estimate ($15BN annually for ten years) or Altimeter VC's estimate ($5BN annually for the same period )? Mind you, this is the investment to realize just one company's vision of the Metaverse.

One point is apparent; a lot of investment is required for a reasonably long period to realize a fully functional Metaverse!

After the Venture Capital market stabilizes in 2023/24, a large amount of capital will go into building the Metaverse.

As I read more about this topic, one thing is clear: just like the current Internet was not created by one company, and the future Metaverse will require the effort of multiple standard-creating bodies, corporates, start-ups, and governments.