Meta to charge creators up to 47.5% tax
Meta will charge creators fees of up to 47.5% to sell virtual items in its metaverse world, significantly more than Apple charges developers on its App Store and far more than established NFT marketplaces operating in the Web3 space charge. The announcement has been met with massive skepticism in the blockchain space, with most commentators saying that Mark Zuckerberg doesn’t understand Web3.
- Meta will charge creators fees of up to 47.5% to sell virtual items in its metaverse
- No indication if NFTs will represent items
- The average fee on leading NFT marketplaces is between 2.5% and 10%
- Web3 community calls Zuckerberg and Meta clueless and out of touch
In a blog post on Monday 11 April, Meta said it’s testing virtual sales inside its custom metaverse platform Horizon Worlds. Creators will be able to sell things like fashion accessories for users’ avatars and exclusive access to customized virtual worlds. The announcement contradicts Zuckerbergs’ earlier promises to help developers evade the Apple App Store’s 30% fee for developers on in-app purchases.
Meta charges a platform fee of 30% for sales made on Meta Quest, its virtual reality system, formerly known as Oculus. On top of that, Horizon Worlds, Meta’s metaverse system, will charge a 25% sales fee. This means Meta will take a cut of up to 47.5% from the sale price, leaving the seller with 52.5%. To further explain, if a creator sells an item for $1.00, then the Meta Quest Store fee would be $0.30 and the Horizon fee would be $0.17 (25% of the remainder), leaving $0.53 for the creator before any income taxes were applicable. The NFT community was quick to comment.
A further nuance to this is that the items being discussed through the Meta platform may not be NFT items and instead just virtual clothes and game skins, which is more akin to Roblox, where creators can sell on their marketplace. Still, an almost 50% tax seems unfair, especially when we consider that fees on platforms such as Opensea and LooksRare are a fraction of the amount.
What do NFT Marketplaces charge?
The Apple App store charges creators a 30% tax on in-game item sales, which makes up the bulk of revenue for free-to-play app creators. However, established NFT marketplace fees are far lower, ranging from a high of 20% to a low of 2.5% for the marketplaces currently tracked by DappRadar.
It’s important to note here that NFT marketplaces incur gas fees and that most are on Ethereum, which suffers from the highest gas fees of any blockchain. Creators that mint NFTs to the blockchain need to pay gas fees, hence why platforms on alternative networks like Solana and BNB Chain have found footing in 2022 as they offer creators a lower barrier to entry.
The most similar would be Decentraland, where creators are encouraged to participate in the open, decentralized economy by crafting and selling items to other players. The Decentraland marketplace fee is just 2.5%, which is 45% lower than Meta’s expected charge. Below are the fee structures for the leading NFT collectible and art marketplaces. The highest fees are found on NFT marketplaces where creators sell fewer items for higher values, such as the NFT art found on Nifty Gateway or Foundation.
Marketplace Fees on NFT Marketplaces
- Opensea – Gas fee + 2.5% marketplace fee for each sale
- Rarible – Gas fees + 2.5% marketplace fee
- Solanart – 3% marketplace fee on the selling price of every transaction
- Decentraland – 2.5% fee for selling items in the Decentraland Marketplace
- Axie Infinity Marketplace – Recently increased fees to 5.25%
- Foundation – Gas fees + additional 15% marketplace fee
- Known Origin – Gas fees + 15% marketplace fee
NFT Marketplaces still booming
In March, the NFT market excluding suspicious activity on LooksRare generated $12 billion in Q1, decreasing slightly by 2% from the volumes recorded in Q4 2021. Another positive sign for the NFT space is the increase in the number of sales occurring on blockchains other than Ethereum. The number of trades on Avalanche increased 582% from the previous quarter, while the sales count on Solana and Polygon increased 34% quarter-over-quarter (QoQ).
The top Ethereum NFT projects have an established market that might be out of reach for the majority of people. Thus, it is positive to see that NFTs on other networks are picking up the pace too, showing that NFT adoption is only beginning.
PR at its finest
While the announcement of a 47.5% fee will be met with heightened criticism throughout the blockchain world, it did raise awareness across the globe of Meta’s intentions and the platforms it will use to deliver such ideas. Arguably, this is just a fact-finding mission as there is nothing to stop Meta from performing a U-turn on the high fees.
At the same time, the announcement shows those of us entrenched in this industry that Meta is once again placing profit margins over collaboration and community participation, wielding its large database of users like a sword with which to justify such fees to the creator community. Along with eroding ad revenue streams and a lack of new users, this could signal the end for the once-dominant social media platform. Time will tell.