How Businesses Make Money in the Metaverse

Investment JP Morgan Chase recently said that the metaverse will generate $1 trillion in annual revenue for businesses spanning a cross-section of industries. How, exactly? It's a good question. The metaverse is a rapidly evolving phenomenon. It is not always easy to define what the metaverse is, much less how businesses make money from it. That said, companies everywhere are cracking the code for creating revenue from the metaverse. Meta, the parent brand of Facebook, Instagram, and WhatsApp, is one example. Meta recently announced some changes it's making to the company's Horizon Worlds gaming platform, which constitutes one corner of the metaverse, and those changes will result in revenue for Meta.

What is the Metaverse?

Because the metaverse is still evolving, it's always helpful to get grounded in terminology. The metaverse refers to connected virtual worlds where people and businesses exist through avatars. As with the real world, goods are bought and sold for real money. But the goods are virtual, and money is exchanged through digital currencies. In a sense, the metaverse is here already. People play on gaming platforms such as Roblox and Fortnite, where they purchase products such as branded skins for their avatars.

Technically, these virtual worlds have not yet evolved into the metaverse because they remain disconnected.

What is Horizon Worlds?

Meta operates its own corner of the metaverse, the gaming experience Horizon Worlds. Meta launched Horizon Worlds in December 2021 via Meta's virtual reality headset, Oculus. It's an immersive social platform - think Facebook in virtual reality - where anyone with the right VR equipment can explore virtual worlds and create their own. Meta says that more than 10,000 worlds have been created in Horizon Worlds.

What Did Meta Announce about Horizon Worlds?

Meta announced that:

• It is now making Horizon Worlds available even if users do not have virtual reality headsets.
• Meta is testing new tools that allow creators to expand their reach, and create some lucrative opportunities, within the worlds they build on Horizon Worlds. In other words, people creating worlds in Horizon Worlds can generate income by selling virtual products. For example, someone could make and sell attachable accessories for a fashion world or offer paid access to a new part of a world.

A $10 million Horizon Creators Fund, announced last October, is meant to provide resources to Horizon Worlds' creators.

Meta CEO Mark Zuckerberg said, "The ability to sell virtual items and access to things inside the worlds is a new part of [the] e-commerce equation overall. We're starting rolling this out with just a handful of creators and we'll see how it goes but I imagine that overtime we'll get to roll it out more and more."

So, who will make money off Horizon Worlds?

Both creators and Meta stand to generate income. In fact, Meta will get 47.5 percent on the sale of digital assets on Horizon Worlds. As CNBC reported,

A Meta spokesperson confirmed to CNBC Wednesday that Meta will take an overall cut of up to 47.5% on each transaction. That includes a "hardware platform fee" of 30% for sales made through the Meta Quest Store, where it sells apps and games for its virtual reality headsets. On top of that, Horizon Worlds will charge a 17.5% fee.

CNBC also noted that Meta's fees for the sale of virtual assets on Horizon Worlds are significantly more than the 30 percent Apple charges developers on its App Store.

Just how much money Meta will generate remains to be seen. But the development is noteworthy because it demonstrates how the metaverse may grow potentially through a combination of brands, individual creators, and technology platforms coalescing around virtual worlds:

• Brands: businesses such as Disney and Gucci creating virtual goods in virtual worlds.
• Creators: as noted, people selling products in environments such as Horizon Worlds - or content ranging from music to art via non-fungible tokens, or NFTs. For this reason, the metaverse may catalyze the rise of the so-called creator economy.
• Platforms: Horizon Worlds, Fortnite, Roblox, and many other immersive sites where people and businesses live. And as the Meta example shows, those platforms will get their cut.

What Should Businesses Do?

Consider first of all whether it makes sense to start engaging with people on digital platforms such as Fortnite, Minecraft, or Roblox. Or consider also how your brand might want to connect with people through metaverse elements such as NFTs. The metaverse may also create some fascinating ways brands and people connect with each other through content, such as: 

• Virtual events conducted through digital twins. 
• Creating playful content that people unlock through NFTs. 
• Sharing thought leadership such as a discussion of the future of virtual reality or augmented reality through your own avatars on a platform hosted by another company. 

It's important to know what it is and assess your interest. 

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