Mark Zuckerberg's Web3 bet is being challenged by Hong Kong's 'Mr. Metaverse.'

• The biggest threat to the growth of new technology worlds based on the Web 3 idea, according to Yat Siu, executive chairman of Animoca Brands, is not regulation but companies such as Facebook and Tencent.
• Over $15 billion in digital asset and token reserves, Animoca turned profitable in 2021 and is currently valued at over $5 billion. The company is also raising another $150 million this month.
• A person who grew up in Vienna as the only child of musicians and dropped out of college discovered an early affinity for computers, which led to a job at Atari, founding an internet service provider at age 20, and selling a previous start-up to IBM.

Yat Siu, founder of a small mobile gaming startup, is gaining recognition as Mr. Metaverse as his Hong Kong-based company Animoca Brands shifts its focus to shape Web3. He aims to provide an alternative to tech giants such as Meta, Microsoft, Tencent, and Snap as consumers enter a new immersive market but are cautious about a technology that could still be tightly controlled by big corporations.

In 2018, the Hong Kong-based startup has been investing, acquiring, and building a new version of the internet with metaverse-like elements in video games.

Siu, Animoca Brands’ executive chairman, stated that they are investing aggressively and broadly to promote the growth of the open metaverse. He explained that they are in a hurry because they believe the biggest threat is not regulation but groups like Facebook or Tencent, who have a business model that contradicts the open metaverse.

Facebook currently owns all the data you provide to them, and we advocate for a shared network that grants digital property rights to everyone and provides creators with equity in the space.

The ownership of digital assets, such as virtual swords used in mobile games, is transferred from a centralized system to a decentralized one, according to Siu, who compared it to "feudal kingdoms."

By being open, content creators can own and trade their data freely across different platforms, rather than being restricted to the closed ecosystems of Web2 leaders.

Making money in Web2, moving to Web3

The ongoing debate within the metaverse community highlights the tension surrounding the allocation of revenue. Early adopters have expressed opposition to the proposed plan to take up to 50% of the fees on virtual asset sales. As the metaverse continues to evolve, revenue models may shift away from traditional advertising, subscriptions, and in-app purchases to sales of digital assets and transaction fees among participants or individual owners.

Siu stated that Zuck is aware of the upcoming change and Meta's reliance on Web2 models for revenue.

Over the past two years, Animoca Brands, now a unicorn, has attracted more than $810 million in funding from metaverse VC specialist Liberty City Ventures in New York, as well as high-profile names including Winkelvoss Capital, Soros Fund Management, and Sequoia China. Additionally, Singapore-based Temasek and China-connected Boyu Capital are adding $150 million this month, bringing the total funding to nearly $360 million at a valuation over $5 billion.

After facing financial difficulties and regulatory pressure as a mobile game maker and cryptocurrency dealer during the dotcom era, Animoca Brands is now thriving in the metaverse. The company is investing in acquisitions, licensing, and internal product development, as well as foundational technologies in cryptocurrencies and non-fungible tokens, which have seen a surge in trading volume to $25.8 billion last year, according to DappRadar.

James Lang, managing director at Liberty City Ventures, stated that Animoca Brands is a leader in adopting new technology that enables ownership in the metaverse of your own identity and transactions in a more trustworthy way. He added that the metaverse economy is happening first in mobile games, and they are in the forefront of this evolution.

Shervin Pishevar, an early Uber investor and tech entrepreneur, stated that Web3 presents both an opportunity and a threat. He explained that the talent, energy, and money being invested in it will create a perfect storm, leading to a cycle of value creation and destruction. Pishevar emphasized that there is potential for companies to stumble as a new lattice of the Net emerges with decentralized distribution and finance, allowing users to break free from digital fiefdoms.

Meta skepticism

The VC community, including Block founder Jack Dorsey, has been criticized by major players in the metaverse, including Andreessen Horowitz, an early Facebook backer and a Web3 advocate.

Pishekar stated that there is no assurance that companies like Meta will succeed in the transition to the open metaverse. He believes that the open metaverse will ultimately triumph over the closed metaverse in terms of scale. He compared this transformation to the competition between Apple and Microsoft in the development of personal computers, stating that nobody predicted IBM's eventual decline.

The $176 billion video games industry has experienced a surge in competition as virtual currencies become increasingly popular among its 3.2 billion gamers. This shift is being driven by new blockchain-based games that offer play-to-earn features and in-game tokens, such as those from Animoca Brands.

According to Kevin Chou, managing partner of Web3 startup incubator SuperLayer in San Francisco, which is backed by a16z VC Marc Andreesssen, Paris Hilton and several other celebrities, Yat and Animoca Brands are setting a trailblazing example in blockchain games. Chou, who is also a founder of blockchain projects Forte and Rally, and mobile game Kabam, which he sold for $800 million in 2017, believes that Facebook will be disrupted by this new technology. He cites the example of Blockbuster and Netflix to illustrate how the business model for new technology can ultimately win out.

Animoca Brands has secured licensing and distribution agreements with Atari, Formula 1 Racing, Warner Music Group, and MGA Entertainment, and has aligned with brands such as Disney through its deal-making. The company has developed 12 original games and made over 200 investments. These investments include stakes in OpenSea, Axie Infinity, and its Pokémon-like creatures, as well as Dapper Labs, which features CryptoKitties virtual felines and the NBA Top Shot fantasy basketball game.

Sandbox, a subsidiary of Animoca that shifted to blockchain after an acquisition, gained popularity when Snoop Dog built a mansion on its virtual land and neighbors purchased online plots for $450,000 in Sand in-game tokens. Its Crazy Kings mobile games franchise introduced a play-to-earn model that allows players to compete and earn crypto tokens. Recently, it collaborated with Bored Ape Yacht Club to create a blockchain game. Over the past nine quarters, Sandbox has inked 24 metaverse venture deals, totaling 139, according to PitchBook, with 10 top investment firms.

Marc Jackson, founder of Seahorn Capital, stated that the successful team from Hong Kong has not been afraid to take risks on unproven business models and teams, and has made a wise investment at the right time.

Jackson stated that Facebook's name change to Meta is viewed as "aspirational" and does not imply that Facebook will necessarily succeed.

In his letter last October, Zuckerberg acknowledged that the metaverse will create a much larger creative economy than the one currently limited by existing platforms and policies. He stated that Meta's role is to speed up the development of fundamental technologies, social platforms, and creative tools to bring the metaverse to life and integrate these technologies into their social media apps. Meta declined to comment on this article.

Tech giants such as Microsoft, Sony, and Tencent are investing heavily in the metaverse, with Microsoft recently acquiring gaming giant Activision Blizzard and Sony investing $1 billion in Fortnite maker Epic Games. With cryptocurrencies currently disallowed in China, Tencent is positioning itself as a leader in the metaverse by investing in U.S.-based metaverse-like platforms and Epic Games, and owning Riot Games.

Tencent declined to comment.

From computer prodigy to metaverse mogul

The founder of Animoca Brands, a successful gaming company, is a college drop-out and an Asian minority who grew up in Vienna as the only child of professional musicians. At a young age, he discovered his talent not only in music but also in computers. He began working in the gaming industry and eventually founded his own internet service provider at the age of 20. Despite facing challenges in the early days of the internet, Siu persevered and learned valuable lessons about business resilience.

In 1998, he founded Outblaze, a leader in cloud computing services, and navigated it through the dotcom bubble. In 2009, he sold Outblaze's messaging division to IBM and shifted focus to consumer digital entertainment as co-founder of mobile game developer Appionics. In 2014, Animoca Brands was spun off to specialize in brand licensing for games and original titles. The new entity, Animoca Brands, listed on the Australian Stock Exchange in 2015 but delisted in 2020 due to regulatory pressure over crypto token usage.

After its inception, Animoca Brands has grown to 600 employees and a presence in 14 international markets, becoming profitable in 2021. In the first nine months of 2021, the company generated $141 million in bookings and $530 million in income, which included gains on digital assets and investments. The reserves of Animoca Brands' digital assets and tokens were worth $15.9 billion in November 2021.

By 2030, the metaverse market is expected to reach $21.7 trillion, a significant increase from its current value of $1.2 trillion in 2022, according to Ray Wang, founder of Constellation Research. This universe encompasses various technologies such as cryptocurrencies, interactive digital experiences, mixed realty technologies, and artificial intelligence.

By 2030, the metaverse is expected to have 5 billion users across various industries and devices, according to a report by Citi GPS. However, the report also highlighted several concerns, including regulatory uncertainty, money laundering, counterfeit NFTs, and trading scams, as well as the high volatility of most cryptocurrencies.

According to George Korizis, a partner at PwC, the metaverse is viewed as a natural progression rather than a radical shift. The larger corporations are taking the initial step. These larger entities possess the resources, R&D, budget, level of trust, and data privacy necessary to make the transition.

According to Dave Droga, CEO of Accenture Interactive, having scale, credibility, and deep pockets can give an advantage, but he noted that startups' speed and influence may cause some unexpected competitors to emerge.

In 2021, global venture capital investments in blockchain startups increased by seven times to $25.2 billion, while NFT investments surged by 130 times to $4.8 billion, as reported by CB Insights.

Alyssa Tsai, founder and CEO of Panony, stated that the crypto and blockchain space is thrilling, rapidly evolving, and captivating. She added that it is a phenomenon unique to our generation, similar to how the previous generation experienced the dotcom boom.