Why Zuck's Metaverse is Dead
It looks like Mark Zuckerberg's Metaverse is about to collapse before it even launches, China's Taiwan Temptation, and more.
In today’s letter:
Mark Zuckerberg is betting big on the Metaverse, but it looks like his Metaverse is about to collapse before it even launches.
Tidbits: China’s Taiwan Temptation, Buying The Dip, and What Is Good Monthly Churn?
Enjoy.
Why Zuck’s Metaverse is Dead
The Metaverse is a potential trillion-dollar industry and companies worldwide are racing to capitalize on it.
Zuck is betting big on the Metaverse - with plans to invest over $180 billion in the Metaverse over the next 10 years. To put that into context: Apple only spent $150 million on developing the original iPhone.
With billions of users through Facebook, Instagram, Whatsapp, and even their own Virtual Reality company, Oculus, you would think Meta is well-positioned to take on the Metaverse.
But it looks like Zuck’s Metaverse is about to collapse before it even launches.
China’s Taiwan Temptation
What’s the risk of China seizing the opportunity to invade Taiwan when the world is occupied with Russia’s invasion of Ukraine?
China has maintained that Taiwan is a part of the mainland ever since Chiang Kai-shek and his troops fled Mao Zedong's Communist armies to set up a new nation in 1949.
Xi Jinping has stated that “reunification” with Taiwan “must be fulfilled”. China is not ruling out the possible use of force to achieve unification and Taiwan's defence minister has said that tensions with China are at their worst in 40 years.
As noted in last week’s newsletter, Taiwan is a very important player in our already fragile semiconductor supply chain. An invasion of Taiwan would be catastrophic for the world economy.
I don’t think the U.S. is taking this lightly - nearly all of the US’ deployed carrier fleet is in the Pacific Ocean indicating that China is their #1 concern.
These are the approximate positions of the U.S. Navy’s deployed carrier strike groups and amphibious ready groups throughout the world as of Feb. 24, 2022, based on Navy and public data. In cases where a CSG or ARG is conducting disaggregated operations, the chart reflects the location of the capital ship.
Buying The Dip
In troubling times it’s always a good idea to take a look at history and how it has affected the markets. While war is not good for business, it’s even worse for money. Governments plunge into debt to pay for war which debases the currency. This means that selling stocks in exchange for depreciating cash is lunacy.
An excerpt on how legendary investor Philip A. Fisher’s thought about markets in war time:
What Is Good Monthly Churn
What’s accepted as a “good” level of churn? Obviously the lower the better, but at what point should you be concerned?
Lenny’s Newsletter asked industry experts and utilized data from 13 000 SaaS companies to come up with a benchmark.
For B2C SaaS companies like Spotify between 3-5% monthly churn is good, and less than 2% is great.
For B2B SMS + Mid-Market companies like Asana between 2.5-5% is good, and less than 1.5% is great.
For B2B Enterprise companies like Snowflake between 1-2% is good, and less than 0.5% is great.
End
That’s all from me folks. If you enjoyed this letter please share it with your friends. It’s free.
Until next time,
Fabian