2021-09-20 13:06


How a Foreigner is Aiming to Create a Digital World in China


In April with virtually no prior programming experience, Richard OConnell, based in Chinas tech hub Shenzhen, was amazed to learn that the first game he created for Roblox made him about US$5,000 a month, after just a short time learning.

It was then that the UK expat knew it was time for him to leave his job at the US game-making platform and start a company dedicated to the Metaverse C a shared 3D virtual space linked to a perceived virtual universe and seen by many as the future of the internet.

OConnell spent two years in business operations with Roblox, which allows users to program and play games created by other users, and dedicated a couple of hours of his time every week learning how to create new games.

Just six months after launch, OConnells first game Become Angels was visited nearly 6 million times, taking him by surprise, as he says it is not a big game compared to others on Roblox.

OConnell has now started his own company aimed at bringing the Metaverse from China to the world. He is just one of many internet entrepreneurs who see it as the next gold rush C an always-on virtual world where people create, interact and pay for things they want.

Big Tech is getting in on the scene alongside a host of start-ups. ByteDance, the Beijing-based maker of short video platform TikTok, made a Metaverse move with last months acquisition of virtual reality (VR) start-up Pico Interactive.

Meanwhile Tencent Holdings, the countrys largest gaming company, has registered several trademarks around Yuan Yuzhou, the Chinese translation of Metaverse, for its QQ service and Honour of Kings, its most popular online game.

The Metaverse as a concept can be traced back to the 1992 cyberpunk novel Snow Crash by American writer Neal Stephenson. It was given a recent reworking by Steven Spielbergs hit movie Ready Player One C which depicts a digital virtual world where users can play, trade and simply hang out.

The concept gained traction during the Covid-19 pandemic, as people confined to their homes took to games like Fortnite and Roblox to socialise and create new worlds with digital possessions and tradeable goods. A recent Bloomberg Intelligence report said that the Metaverse industry will be worth US$800 billion by 2024.

Interest reached new heights in China this month after a number of Chinese Metaverse concept stocks took off. In the space of a week, gaming company ZQGame saw its shares more than double on the Shenzhen Stock Exchange after it announced it was getting into the Metaverse business.

Chinas state media has taken notice. Securities Times, a state-owned newspaper, warned in a commentary last Thursday that if people blindly invest in such grand and illusionary concepts as the Metaverse, they will be burnt in the end. However, that has not stopped Metaverse stocks from rallying.

Alex Xu, the former chief executive of Leyou, is another entrepreneur pursuing the Metaverse dream. Xu sold his Hong Kong-listed gaming company Leyou to Tencent in a US$1.3 billion cash deal last year and after leaving the firm in May, Xu founded a new holding company called MultiMetaverse, aimed at bringing the Metaverse to animation.

The truth is, a lot of people dont have a clue what the Metaverse is at its core, Xu said. But many people are now making speculative bets theres a lot of money flooding into what we call the metaverse ecosystem.

However, the Metaverse hype in China comes at a time when the countrys broader gaming industry is under pressure from tougher regulation aimed at preventing gaming addiction among children, and a purge of content deemed unsuitable by state authorities.

Venture capitalist Matthew Ball, one of the most vocal advocates for the Metaverse and manager of the exchange traded fund META which has around US$100 million in assets under management, said that the affinity of Chinese companies for video games gives them a head-start.

The opportunity for China in the Metaverse is profound, particularly given how the country has excelled at interactive product and tech development, and in investments worldwide, said Ball.

Matthew Kanterman, senior analyst at Bloomberg Intelligence, wrote in a recent report that Chinese consumers are among the most positive on development of the Metaverse as they are already used to socialising in games. Live events and brand tie-ins may be the top revenue opportunities while user-generated content and decentralised tech play small roles, Kanterman said.

Meanwhile Hong Kong-based Animoca Brands, one of Asias most successful blockchain gaming companies, recently paid the ultimate price of having to delist from the Australian Stock Exchange last year for its aggressive push into cryptocurrencies and non-fungible tokens (NFT), as part of its journey toward the Metaverse.

Despite this setback, Animocas private valuation has surged tenfold to north of US$1 billion with investments in some of the worlds most popular blockchain games such as CryptoKitties and Axie Infinity. Yat Siu, co-founder and chairman, said that interest around the Metaverse has never been higher, with many venture capitalists trying to get into equity rounds for Metaverse companies.

Theres a lot of VCs trying to enter the Metaverse right now. Theres a lot of people who are trying to explore and understand it. The challenging thing though is how to invest [correctly] in the space, he said.

Xu said that some entrepreneurs and companies are trying too hard to bring everything into the virtual world.

Some things can be moved into the virtual world and some cannot, Xu said. If the real world was moved to the virtual world completely, I dont think it would necessarily be a happy place.

Xu said the Metaverse depicted in Ready Player One may actually be a bad example because there was still class struggle there. If you still have to study, work, deal with office politics and be penalised by the rich and the powerful, this virtual world will not have a whole lot of entertainment value, Xu said.

Animocas Siu said the kind of closed Metaverse that many Big Tech companies now champion C primarily supported by a Big Tech company C has already deviated from what the open Metaverse should be.

In a closed Metaverse you have to charge a higher tax just to support the infrastructure, which means the take rate [of the supporting company] is high, said Siu. Just like the real world, this is not going to be the most desirable place.

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