In a new format for Startup Europe — the Sifted Podcast, we're taking a break from the news cycle to bring you longer-form interviews, designed to get inside the minds of Europe's big names and the rising stars of the tech and startup scene. This week, Eleanor interviewed Timmu Tõke, cofounder and CEO of Estonian 3D avatar company Ready Player Me.
Ready Player Me started to hit headlines when Facebook rebranded to become Meta and very publicly started to invest in the metaverse. Earlier this year, the startup raised a $56m funding round led by US investor Andreessen Horowitz (a16z), which specifically cited the metaverse as a reason for investing in the company.
But at the time of recording Meta was announcing huge layoffs and crypto markets had hit turbulence, so Tõke took us through his vision, and his perspective on metaverse skepticism.
To listen to the full conversation, and hear why Mark Zuckerberg may or may not be a genius, find the episode here.
What is the metaverse and why do we need it?
The metaverse is a 3D virtual world or collection of worlds, more like a network of 3D virtual worlds you can visit to play games, hang out with your friends, educate yourself and do all kinds of different things. It's kind of a 3D version of the internet in some ways.
Almost 3bn people play games every year, so it's already a massive market — it’s a $200bn industry already. But what's missing from the real metaverse if you ask us is the interoperability or the connections between different worlds. At the moment, every virtual world is a closed platform, a closed experience, a walled garden. And it doesn't feel like one big virtual world. In order to make it a real metaverse, we need to connect those worlds, have some real kind of value transfer across worlds and have some kind of consistency across [them]. So the real Metaverse is more like the internet where you can navigate between different pages and different worlds.
We've seen some headlines recently about Decentraland, which is a metaverse platform that's valued at more than $1bn, having only 39 active users making transactions over a 24 hour period. What do you think of these speed bumps? And what do they tell us about how things are going to turn out for the metaverse?
It'll take a long time for people to figure out [Decentraland] — how to use web technologies in new ways that actually create new consumer use cases and actually use the value that blockchain can provide. It becomes very speculative. People just get excited about the theory of what the technology can provide in the future.
It's worth a billion dollars, because people speculate with the land, and people speculate with assets
The game in Decentraland is not hanging out in a virtual world, it's speculation, and that's fine. Like, I have hundreds of NFTs, I like buying NFTs and collecting them. But that is not a use case for most people in the world, right? So, it's worth $1bn because people speculate with the land, and people speculate with assets. It's a whole kind of a thing.
So I don't think empty virtual worlds without any engaging experiences can really be compelling for the masses. And I think that's what people are learning and figuring out now after it's been tried many times. There is a team in a garage at the moment that is hacking together the next Web3 game or concept and is using NFTs and crypto in a novel way. And that actually unlocks the power and creates a new consumer use case. And then we will see that space kind of blow up. We work with 4,000 companies, and we see a lot of new games coming up, so I'm very bullish on that space generally.
Meta has posted these huge losses in the metaverse section of their company, and now it's also laying off people. What does that signal to you as a founder in this space?
Nothing. They laid off I think 11% of their people. One of the best tech companies ever, Stripe, laid off 17% of its people. It's because what a great company means has changed dramatically over the last 12 months. It used to be all about growth and only about top-line stuff, and now it's about being smart and actually producing cashflow. It's very normal that companies make adjustments, because it's been like free money for decades, especially the last three years. So it's quite predictable.
I think nobody expected them to not make losses, especially them. The question is more like, does it make sense to invest $10bn or $12bn dollars a year on a future technology for a decade, and then hope that works out. I think their perspective is that they know what it feels like to operate on someone else's platform — mobile, Apple, Google — and that hasn't really worked out very well for them. They know what that means and they want to make sure that the next platform, which they believe is VR and AR, is not going to find someone else. And that's where they're willing to invest $100bn+ or even more into the space, because they believe that's the next platform and they want to own it.
We don't believe that the metaverse is going to be filled with the mindset of the centralised big platforms of today
Is that practical or not? I don't know, I'm not the best person to give Mark Zuckerberg strategic advice. I think he's pretty smart. But, the markets don't agree with his strategy at the moment. It could turn out to be genius over the next decade.
But we don't believe that the metaverse is going to be filled with the mindset of the centralised big platforms of today. There's a wave of decentralisation at the moment with the Web3 movement. And Web3 is a set of technologies but it's also a philosophy and a movement essentially towards breaking up the big platforms and being more open and more decentralised.
With Ready Player Me’s product, it's all about having an online identity that stays constant. How big of a deal do you think personal identity is going to be in the future of the internet as you see it?
Your avatar is going to naturally be a very consistent part of your virtual experience. You have it in every app and that's the central part of your metaverse journey. So it makes sense for an avatar to be the starting point. We think that's very important and also that there's two paths for the future. One is a more centralised path, and the other one is more decentralised and open.
For the open metaverse to have a chance, there needs to be standards and protocols and services that link the different virtual worlds together. That really gives the open metaverse a chance, because there needs to be ways for developers to take part in the network or be a part of the network. That's why we need to build avatars to travel across worlds, because that helps break down some of the virtual walls and connect the different exterior experiences together.
We're building our interoperable avatars to help show the world that interoperable experiences are actually great, and they're a better user experience. They also make it easier for you to monetise your game because you can sell sneakers and shoes and NFTs for avatars that travel across thousands of worlds instead of being stuck in one game.
How have you built inclusion and self-expression into your product?
First, we have avatars you can generate from a selfie. So we're trying to do a good job to predict avatars that are diverse, and then you can customise it to your liking using different customisation tools we provide, [but] I wouldn't say we're doing the best job. We don't have body types at the moment, for example, which is a big limitation. And it's very hard to do that, because there's a lot of people creating assets for avatars — shirts, pants and all these things. That's a struggle across 4,000 games. There's different game engines, different kinds of apps. Some of them are VR. So the actual avatars are very different based on the experience.
So when we build body types, we need to build a system that supports assets from anyone in the world that work in any engine in the world, that scale up and down and sideways. It's a lot of things we need to consider when we introduce something like that. You want that to be automatic, you don't want artists to have to create like six assets from scratch themselves. It needs to be fully automatic, or at least look good.
We're going to also add more styles in the future, so that's an extra element. It's basically mind blowing and that's why it's so fun. But overall we cannot possibly provide avatars and avatar accessories and fashion and all this stuff to all the people in the world, because we are a biased company. Every company is biased. We have our own background. We think we know what's cool, but it's only cool for us. So our approach is to open up the platform and have anyone else create avatars, avatar accessories, avatar fashion for their communities that they know and they want to serve.
We've heard stories about people with female avatars going into the metaverse and then being harassed by male avatars. How do you feel about that kind of identity-focused behaviour in the metaverse?
In general when you put a bunch of people into a space — it can be an online forum or it can be a 3D virtual world — they’re anonymous, and they're gonna do some stupid shit. It's guaranteed. There's a lot of research being done on that. Then when you use a real identity of a person, they act very differently.
Actually, when you think about the traditional social media networks, then all of them are based on real identities. Facebook, LinkedIn, Instagram, Twitter are kind of in between. In general, if you have real identities, the network effects of the platform are stronger, because it's naturally persistent, it's connected with your real-life identity. It's not something you created temporarily, like an identity you want to discard.
In general when you put a bunch of people into a space — it can be an online forum or it can be a 3D virtual world — they’re anonymous, and they're gonna do some stupid shit
And that's not the case in the metaverse yet. None of the worlds have real identity. It's interesting to see that if revealing your real-life identity, for example, in some other way, or putting your status on the line, maybe could be a solution for that. Because those things always happen in anonymous worlds, where people have no liability.
Who should police user behaviour in these many different metaverses?
It's something that we don't have first-hand experience with, but if you imagine platforms that are scaled today, like Roblox, and how much effort and how many costs they have involved with policing the worlds and making sure it's safe for kids, that's very significant. It's very hard, much harder to do that in a 3D virtual world where you have a lot of freedom. There's a lot of ways you can be inappropriate. But who's policing us in the real world? We have our identity, we don't want to ruin our status. Other people will judge us and all those things work in some sense in the virtual world as well. But I don't have a great answer to that.
Steph Bailey is head of content at Sifted and coproduces the Sifted podcast. She tweets from @steph_hbailey.
This podcast is brought to you by Zendesk for Startups. Zendesk helps startups build lasting customer experiences from day one. With the Zendesk for Startups Program, startups get Zendesk customer support software and CRM for six months free of charge. You’ll get access to expert advice and a community of likeminded founders and CX leaders to help you build the foundation for long-term growth. Learn more and claim your 6 months free here.