What Microsoft's acquisition of Activision Blizzard means for the metaverse

Microsoft was founded a few months after what may have been the first use of the term “internet.” In some ways the two have grown up together. Now, Microsoft wants to enter its next stage of life in lockstep.

The company announced plans on Tuesday to buy video-game developer and publisher Activision Blizzard in a deal valued at about $75 billion, and framed it as a pricey wager that games will be central to a more immersive iteration of the internet that still largely exists only as a buzzword: the “metaverse.”

The size of the deal points to its potential strategic value. Microsoft’s biggest acquisition to date, LinkedIn, cost less than half of the anticipated price.

“The world’s largest tech companies are placing big bets on owning gamers’ attention and wallets and each step signifies an approach to the future of the metaverse,” said Mike Sepso, CEO of esports infrastructure platform Vindex.

Microsoft’s announcement comes after Facebook rebranded itself Meta as part of an overhaul to focus on the metaverse, Nike bought a company that could help it sell virtual sneakers for avatars, and Epic Games provided a “test drive” of how the auto industry may use this novel digital world.

These firms are driving a land grab. Many have already conquered the existing version of the internet, reaping billions of dollars in revenue and countless data points coveted by advertisers in the process. Now, they want a head start on the next version.

That next version may not yet be a reality. But as it takes shape, games may play a key role.

“There is a stark division in focus among tech and media companies’ view of the assets they need to win the future,” Sepso said. “We now see the incredible stake tech companies hold in the gaming space.”

The Activision Blizzard deal would make Microsoft the third-biggest gaming company in the world by revenue. For a giant that’s occasionally missed out on big trends, at one point making it something of a punchline, now may be the time to move quickly – as games begin to serve as metaverse gateways.

It’s not certain that Microsoft will be able close the acquisition, however.

The deal is expected to face close antitrust scrutiny, at a time when some think governments should do more to restrain the largest and most influential tech companies.

It’s also not entirely clear what kind of land grab Microsoft’s getting into.

Some of the hype pushing this nascent form of internet has the same whiff of absurdity that pervaded its “Web 1.0” predecessor about two decades ago. A story about someone paying $450,000 for a plot in a virtual world being developed by Snoop Dogg fuelled a recent metaverse news cycle, for example.

There are also valid questions about the logic in luring people further into a virtual world at a time when it may be more important than ever to engage in efforts to shore up the real version – in the face of multiple crises that probably merit more attention than an avatar’s outfit.

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