Virtual reality

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Making money from games: the future of virtual economies

Published March 1, 2020

Fictional portrayals of virtual worlds such as “Ready Player One” and “The Matrix” typically portray the physical and virtual worlds as distinct realms siloed from each other. Characters escape a dystopian, impoverished physical realm and enter a separate, utopian virtual realm in which they are wealthy and important.

Our non-fictional future won’t have that dichotomy. One main reason is money. Any virtual world has a virtual economy, and when that virtual economy gets really big, it integrates with our real-world economy. That is in equal parts due to market forces and government intervention.

This is part six of a seven-part series about “multiverse” virtual worlds. We will explore the dynamics of games’ virtual economies, the exchange of virtual assets for real money, challenges with money laundering and underage gambling, the compliance infrastructure needed for virtual economies, and the challenges in balancing a virtual economy’s monetary supply.

What separates virtual from “real” is the ability to make money

To many people, the idea of spending time in virtual worlds amassing in-game currency and trading goods still sounds like the geeky science fiction hobby of someone who needs to “get a real job.”

Our society gauges the worthiness of pursuits based on their social and economic productivity, and most people don’t view virtual worlds as productive places. As more people find enjoyment in virtual worlds and respect people with accomplishments in them, however, vying for accomplishment with those worlds will increasingly be viewed as socially productive. As more people start earning an income through work in virtual worlds, perception of economic productivity will quickly change, too.

Virtual worlds will be viewed as digital extensions of “the real world” and working a full-time job in a multiverse virtual world will become as normal as someone working in a social media marketing role today.

Multiverse virtual worlds will be healthier for society than our current social networks

Published February 29, 2020

The basis of the classic James Bond film “Tomorrow Never Dies” is an evil media mogul who instigates war between the U.K. and China because it will be great for TV ratings. There’s been a wake-up call recently that our most popular social networks have been indirectly designed to divide populations into enemy camps and reward sensational content, but without the personal responsibility of Bond’s nemesis because they’re algorithmically driven.

(This is part five of a seven-part series about virtual worlds.)

The rise of “multiverse” virtual words as the next social frontier offers hope to one of the biggest crises facing democratic societies right now. Because the dominant social media platforms (in Western countries at least) monetize through advertising, these platforms reward sensational content that results in the most clicks and shares. Oversimplified, exaggerated claims intended to shock users scrolling past are best practices for individuals, media brands and marketing departments alike, and social platforms intentionally steer users toward more extreme content in order to captivate them for longer.

Our impending cultural shift to socializing equally as often through virtual worlds could help rescue us from this constant conflict of interest between what we recognize as healthy interactions with others and how these social apps incentivize us to behave.

Virtual worlds can have advertisements within them, but the dominant monetization strategies in MMOs are upfront purchase of games and in-game transactions. Any virtual world that gains enough adoption to compete as a social hub for mainstream society will need to be free-to-play and will earn more money through in-world transactions than from ads.

What virtual worlds in the coming multiverse era will look like

Published February 27, 2020

Gaming and social media are on a collision course, the result of which will be mainstream popularity of virtual worlds primarily driven by user-generated content (UGC) and anchored in small groups and one-to-one interactions.

Games targeting core gamers will remain a thriving market, and social apps centered on broadcasting content will remain popular for photo sharing and news tracking. However, a lot of our daily online social interaction will shift to multiverse virtual worlds where avatars mark our presence, we own digital goods, earn money from our contributions to the world and gain a deeper sense of community than other types of online interactions.

(This is part three of a seven-part series about virtual worlds.)

Most people will participate in multiple virtual worlds depending on their mood, personality and social circle. A half dozen worlds will be particularly popular but there will be many niche ones. Some may require that you use your real identity (or at least the name on your Facebook account) but most will not.

A multiverse, not the metaverse

These worlds don’t have to remain tied to the norms of our physical world — they can be imaginative realms with different physics. Some worlds may strive to look photorealistic while others will go for artistic distinction. Rules, cultural norms, economic models, and user controls will vary. Some worlds will be oriented around war and conflict, others will be oriented around peaceful commerce and participation in a tranquil society, and still others will take an educational focus looking to simulate areas of Earth for closer study.

Why social networks want even more gaming

Published February 26, 2020

Even if you don’t play games, you have spent years of your life in one or more virtual worlds.

Social media platforms like Facebook, Twitter, Instagram and WeChat are lightweight versions of virtual worlds. They don’t offer terrain for avatars to explore, but they are neighborhoods within cyberspace where we store assets, develop relationships and, in some instances, might even choose to hide behind an alias.

The faces we present on these platforms are different from the ones we show our friends in person. While we usually use real names and photos, our presence on Twitter and Instagram is an avatar of sorts. What we do (and do not) post, how we say what we say, how we portray ourselves through selectively chosen (and often edited) photos — it’s an online persona. The aim — conscious and subconscious — is to build social capital within the particular cultural environment of these virtual spaces.

(This is part two of a seven-part series about virtual worlds.)

A multiverse, not the metaverse

The social capital gained or lost within a virtual space can connect directly to social capital in the physical world. The worlds are separate but intertwined; what percent of news stories these days revolve around what someone posted on Twitter or Instagram?

Social media apps have virtual economies the same way as games like Fortnite do, they’re just smaller and involve fewer users thus far. There is constant trading of goods and services that exist only within the virtual world of a social app. For example, individuals and companies spend real money on trading Twitter handles, buying Instagram followers, purchasing special image filters and on Twitch memberships that put a badge next to their name to signify their status as a financial supporter of a specific streamer.

On this point, CCP Games CEO Hilmar Veigar Pétursson told me, “there’s not much reality in reality anymore,” given how much of our daily lives in “the real world” are about creating, consuming and interacting online, noting that many social media influencers earn more money in these virtual worlds than factory workers can make building physical items.

Facebook acquires the VR game studio behind one of the Rift’s best titles

Published February 25, 2020

Facebook is aiming to build on its VR hardware launches of 2019 with an investment in virtual reality software.

Facebook announced today that it has acquired Bay Area VR studio Sanzaru Games, the developer of “Asgard’s Wrath,” considered by many enthusiasts to be one of the Oculus Rift’s best games. Terms of the deal weren’t disclosed, but the studio will continue to operate its offices in the U.S. and Canada with “the vast majority” of employees coming aboard following the acquisition, Facebook says.

The 13-year-old game studio has created a total of four titles for the Oculus Rift, including “Asgard’s Wrath” and “Marvel Powers United VR,” both of which were at least partially funded by Oculus Studios. Sanzaru has also made a number of titles on console and mobile systems, releasing games structured around their own IP alongside licensed titles for properties like Sonic and Spyro.

Following Facebook’s acquisition of Beat Games in November, the Sanzaru Games purchase showcases Facebook’s continued interest in propping up VR game studios and aligning them around their interests while allowing them to operate independently. While Beat Games’ “Beat Saber” was considered a more mass market title, Sanzaru’s “Asgard’s Wrath” represented a play toward courting serious gamers with a lengthier first-person adventure title.

Facebook has already injected billions of dollars into its VR ambitions and, as the company hopes to build out the content ecosystems of hardware it released last year (including the Oculus Quest and Oculus Rift S), there is little to suggest that their rate of investment will slow in the near future.

Facebook buys VR studio behind Beat Saber

Games already are social networks

Published February 25, 2020

Video games are only getting more popular.

Roughly 2.5 billion people around the world played games last year, double the number of players in 2013. Gaming is a $149 billion industry, growing 7% year over year, with the U.S. as its largest market. In America, the average gamer is 33 years old and 46% of gamers are female, according to the Entertainment Software Association.

(This is part one of a seven-part series about virtual worlds.)

Per Quartz reporter Dan Kopf’s summary of U.S. Department of Labor data:

More people now report playing games on a typical day — 11.4% in 2017 compared to 7.8% in 2003 — and, on days they do play games, they spend more time doing so — about 145 minutes in 2017, compared to 125 in 2003.

Young people are the biggest driver of the trend. From 2003 to 2015, 15-24 year olds spent less than 25 minutes playing games on the average day. From 2015 to 2017, those in that age group dedicated almost 40 minutes a day to games.

Mobile games account for a large part of this dramatic growth, but all major game categories are growing. The console gaming market — the oldest segment and most expensive due to hardware cost — expanded more than 7% last year alone.

A multiverse, not the metaverse

Published February 25, 2020

Following web forums, web platforms and mobile apps, we are entering a new stage of social media — the multiverse era — where the virtual worlds of games expand to become mainstream hubs for social interaction and entertainment. In a seven-part Extra Crunch series, we will explore why that is the case and which challenges and opportunities are making it happen.

In 10 years, we will have undergone a paradigm shift in social media and human-computer interaction, moving away from 2D apps centered on posting content toward shared feeds and an era where mixed reality (viewed with lightweight headsets) mixes virtual and physical worlds. But we’re not technologically or culturally ready for that future yet. The “metaverse” of science fiction is not arriving imminently.

Instead, the virtual worlds of multiplayer games — still accessed from phones, tablets, PCs and consoles — are our stepping stones during this next phase.

Understanding this gradual transition helps us reconcile the futuristic visions of many in tech with the reality of how most humans will participate in virtual worlds and how social media impacts society. This transition centers on the merging of gaming and social media and leads to a new model of virtual worlds that are directly connected with our physical world, instead of isolated from it.

Multiverse virtual worlds will come to function almost like new countries in our society, countries that exist in cyberspace rather than physical locations but have complex economic and political systems that interact with the physical world.

Throughout these posts, I make a distinction between the “physical,” “virtual,” and “real” worlds. Our physical world defines tangible existence like in-person interactions and geographic location. The virtual world is that of digital technology and cyberspace: websites, social media, games. The real world is defined by the norms of what we accept as normal and meaningful in society. Laws and finance aren’t physical, but they are universally accepted as concrete aspects of life. I’ll argue here that social media apps are virtual worlds we have accepted as real — unified with normal life rather than separate from it — and that multiverse virtual worlds will make the same crossover.

In fact, because they incentivize small group interactions and accomplishment of collaborative tasks rather than promotion of viral posts, multiverse virtual worlds will bring a healthier era for social media’s societal impact.

The popularity of massive multiplayer online (MMO) gaming is exploding at the same time that the technology to access persistent virtual worlds with high-quality graphics from nearly any device is hitting the market. The rise of Epic Games’ Fortnite since 2017 accelerated interest in MMO games from both consumers who don’t consider themselves gamers and from journalists and investors who hadn’t paid much attention to gaming before.

In the decade ahead, people will come to socialize as much in virtual worlds that evolved from games as they will on platforms like Instagram, Twitter and TikTok. Building things with friends within virtual worlds will become common, and major events within the most popular virtual worlds will become pop culture news stories.

Right now, three-quarters of U.S.-based Facebook users interact with the site on a daily basis; Instagram (63%), Snapchat (61%), YouTube (51%) and Twitter (41%) have similarly penetrated the daily lives of Americans. By comparison, the percentage of people who play a game on any given day increased from just 8% in 2003 to 11% in 2016. Within the next few years, that number will multiply as the virtual worlds within games become more fulfilling social, entertainment and commercial platforms.

As I mentioned in my 2020 media predictions article, Facebook is readying itself for this future and VCs are funding numerous startups that are building toward it, like Klang Games, Darewise Entertainment and Singularity 6. Epic Games joins Roblox and Mojang (the company behind Minecraft) as among the best-positioned large gaming companies to seize this opportunity. Startups are already popping up to provide the middleware for virtual economies as they become larger and more complex, and a more intense wave of such startups will arrive over the next few years to provide that infrastructure as a service.

What to expect in digital media in 2020

Over the next few years, there will be a trend: new open-world MMO games that emphasize social functionality that engages users, even if they don’t care much about the mission of the game itself. These new products will target casual gamers wanting to enter the world for merely a few minutes at a time since hardcore gamers are already well-served by game publishers.

Some of these more casual, socializing-oriented MMOs will gain widespread popularity, the economy within and around them will soar and the original gaming scenario that provided a focus on what to do will diminish as content created by users becomes the main attraction.

Let’s explore the forces that underpin this transition. Continue reading through the seven articles in this series (which will be linked below as they are published daily over the next six days):

Games already are social networks
Social apps already are lightweight virtual worlds
What virtual worlds in this transition era look like
Why didn’t this already happen?
How virtual worlds could save society
The rise of virtual economies and their merging with our “real” economy
Competitive landscape of the multiverse

HaptX grabs $12 million to build a glove crammed with sensors

Published December 19, 2019

A company building a very high-tech glove has just gotten its hands on some new money.

HaptX is building a sensor-packed glove for VR and robotics applications that simulates haptic and resistance feedback for enterprise users.

The Seattle startup has raised $12 million in new funding from Mason Avenue Investments, Taylor Frigon Capital Partners, Upheaval Investments, Votiv Capital, Keiretsu Forum, Keiretsu Capital, NetEase and Amit Kapur of Dawn Patrol Ventures. HaptX has now raised $19 million to date.

The company says this funding will go toward the company’s next generation of glove hardware.

I got a chance to demo the company’s glove last year and there are certainly some bizarre experiences that are enabled by the product, which uses an external pneumatic box to expand and contract air pockets inside a glove form factor to make it feel like the virtual object you’re holding onto in VR is actually in your hand.

HaptX is bringing touch to VR with a pair of scary-looking gloves and a pneumatic suitcase

Needless to say at this point, the virtual reality industry’s consumer ambitions haven’t quite panned out as expected. The enterprise space has found slightly more enduring success, though much of the enterprise use hasn’t expanded too far beyond “internal innovation hubs” and pilot programs. HaptX seems to have zeroed in on the same enterprise customer base as other VR startups, with a lot of its customers using the gloves in design and visualization processes. HaptX has moved away from marketing itself as a VR-only company and has expanded into robotics, reshaping its offering into a solution framed by real-world input and real-world output.

Alongside the funding announcement, HaptX is sharing that it has partnered with Advanced Input Systems to collaborate on “product development, manufacturing, and go-to-market.”

The company is focused on enterprise and unfortunately doesn’t seem to be building a mech suit for Jeff Bezos, although they sent me a great gif of him demoing the technology earlier this year at a conference.

Facebook is building an operating system so it can ditch Android

Published December 19, 2019

Facebook doesn’t want its hardware like Oculus or its augmented reality glasses to be at the mercy of Google because they rely on its Android operating system. That’s why Facebook has tasked Mark Lucovsky, a co-author of Microsoft’s Windows NT, with building the social network an operating system from scratch, according to The Information’s Alex Heath. To be clear, Facebook’s smartphone apps will remain available on Android.

“We really want to make sure the next generation has space for us,” says Facebook’s VP of Hardware, Andrew ‘Boz’ Bosworth. “We don’t think we can trust the marketplace or competitors to ensure that’s the case. And so we’re gonna do it ourselves.”

Eye OS

By moving to its own OS, Facebook could have more freedom to bake social interaction — and hopefully privacy — deeper into its devices. It could also prevent a disagreement between Google and Facebook from derailing the roadmaps of its gadgets. Facebook tells TechCrunch the focus of this work is on what’s needed for AR glasses. It’s exploring all the options right now, including potentially partnering with other companies or building a custom OS specifically for augmented reality.

One added bonus of moving to a Facebook-owned operating system? It could make it tougher to force Facebook to spin out some of its acquisitions, especially if Facebook goes with Instagram branding for its future augmented reality glasses.

Facebook has always been sore about not owning an operating system and having to depend on the courtesy of some of its biggest rivals. Those include Apple, whose CEO Tim Cook has repeatedly thrown jabs at Facebook and its chief Mark Zuckerberg over privacy and data collection. In a previous hedge against the power of the mobile operating systems, Facebook worked on a secret project codenamed Oxygen circa 2013 that would help it distribute Android apps from outside the Google Play store if necessary, Vox’s Kurt Wagner reported.

That said, its last attempt to wrestle more control of mobile away from the OS giants in 2013 went down in flames. The Facebook phone, built with HTC hardware, ran a forked version of Android and the Facebook Home user interface. But drowning the experience in friends’ photos and Messenger chat bubbles proved wildly unpopular, and both the HTC First and Facebook Home were shelved.

Investing in tomorrow tech

Now Facebook is hoping to learn from past mistakes as it ramps up its hardware efforts with a new office for the AR/VR team in Burlingame, 15 miles north of the company’s headquarters. The 770,000-square-foot space is designed to house roughly 4,000 employees. Facebook tells TechCrunch the team will move there in the second half of 2020 to make use of its labs, prototype space and testing areas. The AR/VR team will still have members at other offices across California, Washington, New York and abroad.

TechCrunch asked for more info about the space, and Facebook revealed that it’s planning to open a public-facing, experiential space — possibly the first Facebook-branded permanent location that anyone can visit. There, people will be able to come play with its augmented reality and virtual reality products. Those could range from the Oculus Quest headsets and Facebook Portal smart displays it currently sells to potential future products like the camera glasses it’s reportedly building with Ray Ban-maker Luxottica and eventually its full-fledged AR eyewear.

A rendering of Facebook’s under-construction new space in Burlingame, Calif.

Facebook says it’s considering building true retail space into the Burlingame office to let people try and then buy its hardware products. This would be a significant first step toward self-branded Facebook retail spaces in the vein of Apple and Microsoft’s stores.

Interested in potentially controlling more of the hardware stack, Facebook held acquisition talks with $4.5 billion market cap semiconductor company Cirrus Logic, which makes audio chips for Apple and more, The Information reports. That deal never happened, and it’s unclear how far the talks went given tech giants constantly keep their M&A teams open to discussions. But it shows how serious Facebook is taking hardware, even if Portal and Oculus sales have been slow to date. Facebook declined to comment on the matter.

That could start to change next year, though, as flagship virtual reality experiences hit the market. I got a press preview of the upcoming Medal of Honor first-person shooter that will launch on the Oculus Quest in 2020. An hour of playing the World War II game flew by, and it was one of the first VR games that felt like you could enjoy it week after week rather than being just a tech demo. Medal of Honor could prove to be the killer app that convinces gamers they have to get a Quest.

Social hardware

Facebook has also been working on hardware experiences for the enterprise. Facebook Workplace video calls can now run on Portal, with its smart camera auto-zooming to keep everyone in the board room in frame or focused on the action. The Information reports Facebook is also prototyping a VR videoconferencing system that Boz has been testing with his team. Facebook tells TechCrunch that Boz hosted two internal events where he videoconferenced through VR to about 100 of his team leaders using virtual Q&A software Facebook is prototyping internally. It’s hoping to learn what would be necessary to consistently hold meetings in VR.

The hardware initiatives, meanwhile, feed back into Facebook’s core ad business. It’s now using some data about what people do on their Oculus or Portal to target them with ads. From playing certain games to accessing kid-focused experiences to virtually teleporting to vacation destinations, there’s plenty of lucrative data for Facebook to potentially mine.

Facebook tells TechCrunch that Portal currently takes data — like if you log in, make calls or use certain features — to inform ad targeting. For example, it could show you ads related to video calling if you do that a lot. With Oculus, if you connect your Facebook account, then data about apps you use or events you join could be used to tune its algorithms or target ads.

Facebook even wants to know what’s on our mind before we act on it. The Information reports that Facebook’s brain-computer interface hardware for controlling interfaces by employing sensors to recognize a word a user is thinking has been shrunk down. It’s gone from the size of a refrigerator to something hand-held, but is still far from ready for integration into a phone. Facebook tells TechCrunch it’s making progress, improving the word error rate significantly up the state-of-the-art research and expanding the dictionary of words that can be recognized. Facebook can now decode brain activity in real time, and it’s working on an intermediary system for identifying single words as it pushes toward 100 words-per-minute brain typing.

Selling Oculus headsets, Portal screens and mind-readers might never generate the billions in profits Facebook earns from its efficient ads business, but they could ensure the social network isn’t locked out of the next waves of computing. Whether those are fully immersive like virtual reality, convenient complements to our phones like smart displays or minimally invasive sensors, Facebook wants them to be social. If it can bring your friends along to your new gadgets, Facebook will find some way to squeeze out revenue while keeping these devices from making us more isolated and less human.

Facebook is building brain-computer interfaces for typing and skin-hearing

Startups Weekly: Chinese investors double down on African startups

Published November 30, 2019

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about Airbnb’s issues. Before that, I noted Uber’s new “money” team.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you’re new, you can subscribe to Startups Weekly here.

China’s pivot to Africa

Three African fintech startups; OPay, PalmPay and East African trucking logistics company Lori Systems, closed large fundraises this year. On their own, the deals aren’t particularly notable, but together, they expose a new trend within the African startup ecosystem.

This year, those three companies brought in a total of $240 million in venture capital funding from 15 different Chinese investors, who’ve become increasingly active in Africa’s tech scene. TechCrunch reporter Jake Bright, who covers African tech, writes that 2019 marks “the year Chinese investors went all in on the continent’s startup scene” — particularly its fintech projects. Why?

“The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector,” Bright notes. “In previous years, the country’s interactions with African startups were relatively light compared to deal-making on infrastructure and commodities. Chinese actors investing heavily in African mobile consumer platforms lends to looking at new data-privacy and security issues for the continent.”

Active Chinese investors in Africa include Hillhouse Capital, Meituan-Dianping, GaoRong, Source Code Capital, SoftBank Ventures Asia, BAI, Redpoint, IDG Capital, Sequoia China, Crystal Stream Capital, GSR Ventures, Chinese mobile-phone maker Transsion and NetEase .

Here’s more of TechCrunch’s recent coverage of Africa startup activity:

VC Deals

It was a short week (Happy Thanksgiving, by the way). But here’s a quick look at the top deals of the last few days.

M&A (VR edition)

Last week, Facebook announced it was buying Beat Games, the game studio behind Beat Saber, a rhythm game that’s equal parts Fruit Ninja and Guitar Hero. Heard of the company? Maybe if you’re a gamer, but if you’re readying this newsletter because of your interest in VC, this company may not have come across your radar.

Why? It’s one of virtual reality’s biggest successes today, but it’s just an eight-person team with no funding.

“I’m really proud that we were able to build the company with this mindset of making decisions based on what is good for the game and not what is the most profitable thing,” Beat Games CEO told TechCrunch earlier this year. Read about Facebook’s acquisition here and an in-depth profile of the small team here.

Equity

If you like this newsletter, you will definitely enjoy Equity, which brings the content of this newsletter to life — in podcast form! Join myself and Equity co-host Alex Wilhelm every Friday for a quick breakdown of the week’s biggest news in venture capital and startups.

This week, we discussed Weekend Fund’s new vehicle, Cocoon’s new friend-tracking app and the unfortunate demise of a startup called Omni. You can listen here.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.