Roblox, Facebook see the ‘Metaverse’ as key to the internet’s next phase

The metaverse concept, rooted in science-fiction novels such as “Snow Crash” and “Ready Player One,” encompasses an extensive online world transcending individual tech platforms, where people exist in immersive, shared virtual spaces. Through avatars, people would be able to try on items available in stores or attend concerts with friends, just as they would offline.

Enthusiasm for the concept has also helped supercharge valuations of companies such as Roblox—which went public in a direct listing in March—and “Fortnite” maker Epic Games Inc. as investors bet the popular videogame worlds will have an early foothold in the nascent online space.

Other major companies are also expressing interest: Facebook’s Mark Zuckerberg, Microsoft Corp.’s Satya Nadella and Match Group Inc.’s Shar Dubey are among chief executive officers who have talked recently about ways their companies are looking to participate in building or supporting elements of shared virtual worlds. But analysts say that one of the biggest challenges is turning that engagement into profits, even as more people embrace the concept.

Roblox CEO Dave Baszucki said Tuesday that the company sees its 15-year-old platform as a hub for virtual and immersive experiences where thousands of people can simultaneously attend concerts, school or staff meetings. He said the company has been investing heavily in technology and growing its workforce to support these experiences, but also in areas such as content moderation.

“It must be a civil and safe platform that welcomes 6-year-olds and at the same time welcomes 30-year-olds who are working together,” Mr. Baszucki told analysts Tuesday on an earnings call when asked about the interest companies such as Facebook are taking in the metaverse.

Roblox more than doubled its second-quarter revenue from a year earlier to $454.1 million—helped by growth in its user base—but posted steeper losses as it recorded higher costs including those tied to fees paid to developers, research and development and its technology infrastructure.

Much of how people will connect to the metaverse is unclear, including how different companies’ virtual realms or platforms will interact. Enthusiasts envision people through their avatars moving seamlessly from one platform to another.

Mr. Zuckerberg said Facebook’s investments in virtual and augmented reality will help support the evolution of the metaverse, which he sees as the successor to the mobile internet. He also described the process as a yearslong march that would require investments in technology protocols and devices, chips and software among other things.

“You’re going to be able to access the metaverse from all different devices in different levels of fidelity—from apps on phones and PCs to immersive virtual and augmented-reality devices,” he told analysts last month on an earnings call. “Within the metaverse, you’re going to be able to hang out, play games with friends, work, create and more.”

Companies such as Roblox and Unity Software Inc., which makes tools for developers to build 3-D content, are concentrating on software to build out the metaverse. Others are focused on the hardware that people may use to connect online and enter virtual worlds.

Matthew Ball, a venture capitalist and former media executive, said companies are studying ways to make money from large virtual audiences via advertising and other means.

Mr. Ball said he isn’t expecting there to be one clear winner in the metaverse. Instead, there is room for multiple companies to become leaders in the category, as was the case with the evolution of the internet through the 1990s and later the mobile internet. “It’s very clear that this is becoming a focal battleground for big tech,” he said.

Roblox’s business model is largely centered on users’ purchases of virtual currency that allows them to acquire in-game perks or items for their avatars. In May, the company hosted an immersive experience to celebrate the designer brand Gucci’s 100th anniversary and users could buy limited-edition items for their avatars. Roblox finance chief Michael Guthrie said the types of content on the company’s platform have broadened over time and, in some cases, developers are still figuring out how to generate revenue from their content.

Roblox was among videogame companies that had massive gains in users and revenue during the pandemic from an increased demand for at-home social entertainment.

The San Mateo, Calif.-based company has said it expects growth this year even as social-distancing guidelines ease, but pledged to continue investments to grow its community of nearly 47 million daily active users as of last month. On Monday, the company said it acquired Guilded Inc., a global chat platform that connects people across videogaming communities, for an undisclosed sum.

This story has been published from a wire agency feed without modifications to the text