"The Empty City" of Xirang Reflects the Anxiety of Big Companies

Author: Kyle, Hive Tech

The Metaverse is seen as the "most dynamic trend" of the next decade, with renowned internet giants both domestically and internationally being the strongest followers. Ambitious Facebook directly rebranded itself as Meta in 2021, while Baidu created the XiRang by the end of the year.

A year has passed since the "first year of the Metaverse" began in 2021. What are the results of the followers?

A recent internal letter from Meta revealed a dilemma: its Metaverse product, Horizon Worlds, is not even preferred by its own employees. If overseas giants are struggling, what about domestic tech companies? Baidu's heavily invested XiRang Metaverse platform also lacks popularity, with its vast virtual district resembling a "ghost town."

The setbacks faced by giants pursuing the Metaverse reflect a collective anxiety in the internet industry, which is eager to find new growth points. After the mobile internet, technologies that can transform human lifestyles are hitting a bottleneck, and the golden era for internet companies has passed. The winds of the Metaverse are blowing at this juncture. However, neither Meta overseas nor Baidu, the leader among domestic BAT companies, has delivered a satisfactory product a year later.

As the internal competition in the internet industry extends to the Metaverse track, the competitors are no longer just the big companies. The Web3.0 "navigators," waving the banner of "decentralization," have come with slogans to disrupt the giants. Metaverse platforms like Decentraland and The Sandbox have emerged on the blockchain, attracting international brands to set up shop.

For internet companies accustomed to the crowding of traffic, the real anxiety is no longer whether they can create a decent Metaverse, but whether in the "next decade," traffic and capital can still cast their votes for them.

XiRang is not "bustling"

"If we don't like the products we create, how can we expect users to like them?" Meta's Vice President of Metaverse, Vishal Shah, expressed his displeasure in an internal letter, stemming from a memo leaked from Meta on October 8, which recorded some effects of the company's VR social network, Horizon Worlds: too many bugs, and even the development team does not use it frequently.

The financial report data is more telling. Meta's Q2 2022 financial report showed that Reality Labs, the business line responsible for realizing the Metaverse vision, generated revenue of $452 million, with a loss of $2.802 billion, marking the worst quarterly performance in the past year. For the entire year of 2021, this business line had a net loss exceeding $10 billion.

The year 2021, marked by losses for Meta's Metaverse business, was dubbed the "first year of the Metaverse." Facebook decided to go all in, even dropping the "Metaverse" prefix and renaming itself Meta. Within a year, the net loss of $10 billion highlights the high costs this company has invested in the Metaverse.

Horizon Worlds is the result of overseas internet giants building Metaverse platforms. What kind of products have China's leading internet giants produced in the mobile internet era?

Upon logging into Baidu's XiRang Metaverse platform, shaped like a Möbius ring, a three-dimensional city with a tech-industrial style takes shape. However, whether in the morning or afternoon, the virtual streets of XiRang or various virtual landmarks are almost deserted. The most populated area is the "spawn point," where new users first enter XiRang. Scattered digital avatars stand on the large terrace, most of them motionless, with microphones open for communication, but no one responds.

There are no vehicles on the roads of XiRang, and the billboards by the roadside display event advertisements from months ago. Users can walk around and observe in XiRang, but they can only walk and observe; the characteristic of "interacting with the real world" included in the concept of the Metaverse is not evident here.

Empty streets of XiRang

On December 27 last year, Baidu held the Create 2021 conference in "XiRang," marking the first time Baidu's Metaverse platform entered the public eye. However, XiRang's debut was less than impressive. Participants recalled that the conference frequently experienced slow loading and lag, and if a close-up shot was chosen, the speech of Baidu's founder, Li Yanhong, appeared quite blurry.

Nearly a year after its completion, XiRang is not bustling. Why are people reluctant to come?

There is almost no threshold to enter XiRang. Typing "XiRang" into Baidu's search leads directly to the download page, and users can experience it once the installation is complete. However, the rough modeling and lack of smooth browsing have become reasons for users to refuse "second logins" to XiRang.

In practical tests, users often encounter "invisible walls" while walking in XiRang with their digital avatars; there is clearly no obstruction ahead, yet passage is impossible. In some scenarios, however, they can walk through walls and vehicles. Walking and running are basic operations for digital avatars in XiRang, but jumping is not allowed.

Bilibili UP master "Gangzi" once made a soul-stirring remark in a video testing XiRang, saying, "With Baidu's technical strength, it shouldn't be like this." He believes that the quality of XiRang's modeling, the smoothness of the visuals, and the interactivity between people and space are significantly below expectations, stating, "Even online games do it better."

XiRang scene

On the Apple App Store, XiRang has a rating of only 2.3; on the Realme software store, XiRang has 175,000 installations but a rating of only 1.6. "XiRang has characters and scenes. But the character customization is not as good as that of online games like The Legend of Sword and Fairy, and the scene modeling quality is inferior to games like PUBG. Moreover, there are no games to play in XiRang; just visiting is too boring," one user commented.

Meta's Horizon Worlds also has a poor reputation, with overseas netizens not holding back their criticism, complaining that this heavily funded Metaverse has overall graphics quality worse than that of Fortnite; everyone's virtual avatars lack lower bodies; and founder Mark Zuckerberg's Metaverse image has been criticized as "lifeless and dull"…

Whether overseas or domestically, the Metaverse spaces created by internet giants have found themselves in the same predicament.

Collective Anxiety

As the authoritative body representing China's approval and publication of scientific and technological terms, the National Committee for the Standardization of Scientific and Technological Terms provided a consensus concept regarding the Metaverse on September 13 this year: a virtual world constructed by humans using digital technology, which mirrors or transcends the real world and can interact with it, possessing a new type of social system and digital living space.

Comparing products to this concept, it appears that the Metaverse platforms created by internet giants merely utilize digital technology, and are still far from constructing a "world."

A month before XiRang's launch, in November 2021, the A-share listed company Tianxiaxiu released the "Rainbow Universe" app, claiming to have launched the "first Metaverse in China." The effect was first reflected in the stock price, with Tianxiaxiu's shares hitting the ceiling repeatedly, and its market value soaring. However, this app, which focused on virtual real estate transactions, was quickly criticized by the media as "hype." A month later, "Rainbow Universe" became a keyword blocked on platforms like Xianyu, and the app removed content related to transactions.

On December 4, shortly after, NetEase showcased its Metaverse muscles at the Innovation Enterprise Conference, announcing a technical architecture for the Metaverse and launching an immersive event system called "YaoTai." In June this year, NetEase moved an ecological photography exhibition into YaoTai, with self-media experiences pointing out that the virtual avatars in YaoTai could only perform a few preset poses, and walking up to others did not allow for conversation or interaction. The operation of moving the avatar by clicking the mouse felt stiff and awkward, and frequently adjusting the perspective with the right mouse button was indeed "mentally exhausting."

The phenomenon of "hanging sheep's head while selling dog meat" and poor experiences has become a common ailment for domestic internet companies creating Metaverse products. In contrast, Baidu's product strength for XiRang is somewhat "measured." When the first version of XiRang was released in March 2021, Baidu internally named it "-7.0 version." Vice President Ma Jie explained that the version number was negative because "we believe it will take at least seven years to deliver it to consumers."

When people thought the Metaverse still needed a long waiting period, nine months later, the "-6.0 version" of XiRang was pushed to the public. Why was the immature XiRang launched so hastily? Baidu did not explain. However, this company, once at the top of the "BAT," is almost a microcosm of the anxiety faced by Chinese internet companies in the face of new trends.

On October 14, Baidu's total market value on the US stock market was $37.025 billion, a drop of 68.06% compared to the peak of $115.935 billion in February last year. The "AT" behind it is also shrinking, but its stock price does not look as bad in comparison. Tencent Holdings has a total market value of HKD 2.39 trillion on the Hong Kong stock market, equivalent to about $304.486 billion, more than eight times that of Baidu; Alibaba's total market value on the US stock market is $198.592 billion, more than five times that of Baidu.

Missing the mobile internet trend has left Baidu lagging in the grand era. In the PC era, Baidu was the dominant player in the search engine field, firmly occupying the traffic entrance of the internet, and Baidu Tieba once became the culmination of China's online communities. However, after entering the mobile internet era, Baidu's newly launched products have failed to make a splash. The anonymous social app "Tingtong," the voice social app "Yinbo," and the video social app "Yiqi Ba" have all failed to become mainstream, and even Baidu Tieba has fallen from grace due to excessive advertising and spam.

In contrast, Tencent has QQ, WeChat, and Honor of Kings, firmly controlling the social and gaming tracks; Alibaba has Taobao, Tmall, and Alipay, occupying positions in e-commerce and mobile payments. The two giants have formed a strong internet sequence through investment layouts, transforming people's daily lives with mobile applications. In the vast array of mobile apps, Baidu's applications have always struggled to stand out.

At the crossroads of transformation, Baidu began to heavily invest in AI, once seen as a company that could compete with Google in the international market. When XiRang held the Create 2021 conference, AI was regarded as the foundation of the Metaverse. Li Yanhong passionately stated, "An era of human-machine symbiosis is coming, and creators will usher in a golden decade of artificial intelligence in China." Baidu Vice President Yuan Foyu also believes that the Metaverse is a perfect combination of powerful AI capabilities and virtual space, and without an underlying framework built on AI, it is impossible to create an attractive Metaverse.

With its accumulation in the AI field, Baidu aims to reclaim the traffic lost in the social and e-commerce tracks from the Metaverse, which is understandable. However, as of now, XiRang has yet to allow Baidu's heavy investment in AI to take effect. Meanwhile, Tencent, having faced setbacks with digital collectibles and removing "Huanhe," no longer emphasizes the Metaverse and has restructured a new concept called "True Connectivity." The new generation of BAT, ByteDance, plans to acquire VR company PICO to secure a "ticket" to the Metaverse.

The internal competition has intensified the anxiety of the internet giants, but the companies that caught the tail end of the "first year of the Metaverse" have yet to meet user expectations.

Web3.0 "Revolutionaries"

Although the internet companies that have entered the Metaverse have yet to produce good products, they have already begun exploring business models.

As of now, the version number of XiRang has reached "-5.4." According to Baidu's standards, XiRang still needs five more years to become a mature consumer product. Although it is difficult to attract C-end users, B-end enterprises are willing to pay. Within XiRang, Geely's Lynk & Co and FAW Bestune have established digital showrooms, Yili's Jindian held a Metaverse launch event, and BlueFocus collaborated with XiRang to create the "first Metaverse brand commercial street," with Intel's technology experience center and Fengyuzhu's digital art museum also landing there. Reportedly, enterprises need to pay for venue rental and other fees to establish their presence in XiRang.

Baidu has clearly targeted the commercialization of XiRang at the B-end, promoting VR education, VR cloud exhibitions, and VR industrial parks to land in the Metaverse. However, the online B-end also relies on C-end traffic to quench its thirst. The "digital living space of a new social system" advocated by the Metaverse is not visible in XiRang, as the internet's business model cannot be broken; it remains that the platform earns money from the B-end, and the B-end earns money from the C-end.

However, when the winds of the Metaverse begin to blow, the threats facing the giants are not only competing products from peers; the Web3.0 entrepreneurial army, which aims to disrupt the giants, has emerged as "indigenous people of the Metaverse," waving the banner of "decentralization."

This group believes that the bottleneck that needs to be broken in the next decade of the internet is the release of user data ownership. Users have the right to decide who to authorize their data to and who can use it; those who use it must pay and share profits. Internet giants can no longer monopolize data dividends, and a Metaverse built on this game rule would have breakthrough significance.

From the perspective of Web3.0 entrepreneurs, the Web2.0 era was driven by internet giants, forcing most people to use services provided by centralized companies, even if it meant giving up personal privacy and user value. But if we view the Metaverse as an application of the next generation of the internet, would you still be willing to let a centralized internet giant dominate this space?

Decentraland, which originated on the Ethereum blockchain network, was the first to say "NO." It is currently a major representative form of the Web3.0 Metaverse, emphasizing openness and not being controlled by any central entity. Users entering Decentraland do not need to register an account; a crypto wallet serves as the main entry point, and the key to this entry is held by the user, with rights and authorization rules written in the smart contracts on the blockchain.

Going a step further than Baidu, Decentraland has already established an economic system through blockchain, allowing users to purchase land using currency-like digital assets and gain ownership. They can then develop the land as they wish, and trading land, digital goods, and digital artworks becomes a channel for users to earn income.

The active data of Decentraland is verifiable on the blockchain. Although the daily active wallet count (DAW) is only 622, the number of smart contracts built in this Metaverse space has reached 3,553, including land trading and construction types, among others.

Samsung virtual store in Decentraland

More notably, Decentraland has attracted numerous international brands to set up shop: Samsung has opened virtual versions of its 837 flagship stores, Sotheby's has launched an online virtual gallery, and well-known brands like Adidas, Netflix, and Estée Lauder have begun their digital construction in this virtual space. In April of this year, Decentraland hosted a Metaverse Fashion Week, with over 60 international fashion brands participating, including Paco Rabanne and Cavalli.

Importantly, B-end enterprises building in Decentraland do not need to pay the platform; like ordinary users, they need to purchase land with digital assets to build a structure in the space, and then they can develop using the modules or brands provided by the platform. This offers brands looking to ride the Metaverse wave a new choice.

Essentially, Decentraland-like Metaverses do not aim to become traffic concentration stations; they are more like underlying platforms that place traffic and those needing traffic in the same space. How to interact with users relies on the brand's operational capabilities, aligning with the business operation logic of the real world. In contrast to the Metaverse's characteristics of "mirroring or transcending the real world," "interacting with the real world," and "possessing a new social system," the Metaverse space under the Web3.0 sequence seems to be closer to this vision.

It can be imagined that in the next decade, internet companies competing in the Metaverse track will not only compete with each other but will also face external "revolutionaries." With technological advancements, the challenges they face will no longer be hard breakthroughs in technologies like 5G, VR, AI, and blockchain, but rather a choice of mindset: whether to use competitive barriers to tile their own Metaverse with "ceramics," or to self-revolutionize and build an open and transparent internet foundation.

Their choices are laid out before them, and so are the users'.