The Metaverse is trending more than ever. Yet despite the ongoing hype, few understand it completely.
In this article, we discuss what the Metaverse is, how this technological innovation is evolving, and the state of the Metaverse space to date.
- In its current form, the Metaverse pertains to persistent blockchain-based digital worlds, accessible by immersive technologies and the Internet.
- All developments we see today are considered ‘pre-Metaverse’. Some expect mainstream adoption and for the technology to fully mature by 2030.
- For brands, businesses, and organisations, now may be the best time to develop a Metaverse strategy.
What Is the Metaverse?
Until recently, the term ‘metaverse’ was only discussed in the science-fiction community. It was first coined by Neal Stephenson in his 1992 sci-fi novel, “Snow Crash.” In the book, the term was used to describe a computer-generated universe accessible through the use of highly specialised goggles (personal pair or public terminal), and experienced from a first-person perspective.
The concept of the Metaverse as a virtual realm is not an entirely novel idea. In 2003, an “immersive 3D online world” called Second Life was launched to the public, making it the first instance of a Metaverse-type world.
Today, it encompasses a lot of things, but what do people really mean when they talk about the Metaverse? Is it just a virtual world? Another facet of the Internet? Is it a game? Read on for the low-down.
Beyond Virtual Reality
The Metaverse we know today does not pertain to a single, specific type of technology. There are six underlying technologies that support the Metaverse. These six areas are popularly referred to as ‘BIGANT’, representing: blockchain, interactivity, game, artificial intelligence, network, and the Internet of Things.
Others have sought to expand this definition. For instance, in its prospectus, online game platform Roblox suggested an expansive meaning demarked by eight key characteristics: identity, friends, immersive, anywhere, low friction, variety of content, economy, and safety.
In its current form, the Metaverse is described as persistent blockchain-based digital worlds, accessible by immersive technologies (such as augmented reality, virtual reality, and extended reality), and the Internet.
An Introduction to Metanomics
Since the rise of cryptocurrencies and non-fungible tokens (NFTs), the term also alludes to its metanomics, or the economy in the Metaverse. In this online virtual world, there is a great sense of ownership for users to have control and claim of their data, identity, assets, and transactions. This type of ecosystem encourages new ways for users to create value, which can be in the form of property, art, or an item. Cryptocurrency is then used in the exchange of these valuable digital assets.
Why Is the Metaverse So Popular?
Through the Lens of Technological Innovation
As with any new technology that has gone to market, the opportunities and challenges around the Metaverse can be better understood by looking through the lens of the innovation lifecycle model. According to “Smart Spenders: The Global Innovation 1000,” there are four key stages that innovators have in common:
- Ideation: Basic research and conception
- Project Selection: Making the decision to invest
- Product Development: Building the product or service
- Commercialisation: Bringing the product or service to the market, adapting it to customer demands
It can be said that the Metaverse is still in its development stage. Everything we see today is all pre-Metaverse, and it’s yet to achieve full mass-market adoption.
A recent report by Gartner supports this, suggesting that the technology won’t mature until 2030. However, institutions and business leaders do not need to wait until then to craft a strategy or take advantage of current opportunities in the space. Gartner suggests assessing the potential around “interaction, content (interoperability), and infrastructure” starting today.
Gartner expects three overlapping phases for the Metaverse: emerging, advanced, and mature.
Why Does the Metaverse Matter?
At the user level, Gartner predicts that by 2026, 25% of people will spend at least an hour a day in the Metaverse. Because there’s no one entity that will monopolise the platform, this opens up tremendous possibilities for enterprises from all industries.
In terms of the market opportunity, the figures are mind-boggling. Grayscale estimates that the Metaverse will grow into a US$1 trillion market. Meanwhile, McKinsey predicts the opportunities in this space will be worth US$5 trillion by 2030, and that 95% of business leaders expect the Metaverse will have a positive impact on their industries. Goldman Sachs and Morgan Stanley even upped the ante, estimating that the Metaverse opportunities could amount to as much as US$8 trillion.
To better understand how it will shape the future, we explore the major developments, projects, and themes in the Metaverse space in 2022.
An Overview of the Metaverse Today
Major Institutions Are Expanding Their Presence into the Metaverse
We saw leading financial institutions jump onto the Metaverse bandwagon this year — such as Standard Chartered and HSBC partnering with The Sandbox, as well as JPMorgan partnering with Decentraland — buying their own virtual land plots to develop brand experiences.
In 2021, The Sandbox team shared that PwC Hong Kong bought LAND (virtual real estate represented as NFTs). KPMG followed suit this year, making its first foray into the Metaverse by opening its first collaboration hub.
Stock exchange Nasdaq held its first opening bell event in the Metaverse in June — a reflection of how Wall Street is taking on this technology.
Microsoft Acquires Activision Blizzard to Boost Its Metaverse Ambitions
Microsoft’s announcement this year to acquire the gaming company Activision Blizzard was considered one of the biggest deals in the gaming and Metaverse space. Activision Blizzard is one of the key players in the gaming industry, with a growing portfolio of AAA video games and nearly 400 million monthly active users. Post-acquisition Activision will be the third-largest gaming company by revenue, and Microsoft CEO Satya Nadella said that gaming “will play a key role in the development of Metaverse platforms.”
The Metaverse Beyond Meta: Other Tech Giants Are Making Big Bets on the Metaverse
While Microsoft thinks gaming will help unlock the doors to the Metaverse, other tech giants are taking a different route. Facebook rebranded to Meta in 2021 and changed its focus to further build the social platform in the Metaverse. Since then, the tech company has become highly associated with the term ‘metaverse’ and been considered as a key player in the space, while still trying to find its footing in 2022.
Google, Apple, and NVIDIA are also following suit, having focused their efforts on building the Metaverse by developing their very own products and platforms.
As for the rest of the industry, the smaller players are trying to catch up: There was an increase in Metaverse-related patent applications by companies during the year, and filings included everything from hardware and software to network security and machine learning capabilities.
Luxury Brands and Fashion Houses Are Doubling Down on the Metaverse
Big brands continuously build their presence in virtual worlds, taking advantage of new market segments that this technology has opened. Just this year, luxury fashion brands like Gucci and Burberry started creating their own virtual spaces, partnering with The Sandbox and Blankos Block Party, respectively. The inaugural Metaverse Fashion Week was also held in Decentraland in March — another milestone for the industry’s growth in the virtual space.
Moving a physical store to the digital world opens up new possibilities, helping retailers to reduce their overhead and operating costs. It also provides access to data analytics from customers based on user interactions in the Metaverse. These benefits allow fashion retailers like The Dematerialised to build a digital luxury department store, and in effect, a vision of the future of retail shopping.
The Virtual Real Estate Market Is Booming
According to a Chainalysis report, blockchain-based virtual land prices have grown by 879% since 2019, surpassing the price growth of physical real estate by a hefty portion. To compare, real estate prices only grew by 39%. Metaverse real estate market share is expected to continue growing, according to global market research firm Technavio, with a projected value of US$5.37 billion by 2026, at a compound annual growth rate of 61.74%.
Renting and leasing out virtual lands became a lucrative business model for early adopters like Admix, which was reportedly raking in profits of up to 70%. Metaverse mortgages also became a reality in 2022, when a company called TerraZero offered the first-of-its-kind financing to buy virtual land in Decentraland.
Entertainment, Events, and Immersive Art Experiences in the Metaverse
The majority of consumers are excited about attending live events, festivals, and concerts in the Metaverse. There is a great demand for this, especially from the digitally savvy Gen Z crowd, and soon we can expect this to become the norm.
The opportunities for museums and galleries abound too. Virtual galleries, exhibits, and art museums are not limited to the physical space and geography anymore, becoming easily accessible to anyone, and can now expand their presence and design new experiences for their audiences in endless ways.
Take, for example, Sotheby’s — one of the largest auction houses in the world — which is expanding its presence in the virtual world in 2022. Even the Vatican has joined in: Humanity 2.0, a Vatican-backed non-profit organisation, has partnered with Sensorium to create a Metaverse art gallery that will showcase some of its priceless art collections and masterpieces.
Redefining Workspace and Corporate Solutions in the Metaverse
Virtual office solutions were already being adopted at the height of the pandemic, where remote work was the only option, but the Metaverse offers additional opportunities. Examples of this are Mesh for Microsoft Teams and Gather, which both allow people working from different physical locations to collaborate and enjoy shared experiences in the virtual realm, letting users personalise their avatars and for organisations to create immersive spaces within their respective web-based platforms.
Other corporate solutions and use cases are also starting to emerge in the market. Just this year, Accenture onboarded its new employees from Australia and New Zealand through the company’s Metaverse, while Deloitte designed a virtual tour of its London office to support its hiring efforts and give its prospective employees a glimpse of what it’s like to work there.
The New Era of Retail and Marketing Is Here
In the next few years, brands are expected to invest 10%-20% of their budget in the Metaverse. In a survey conducted by analytics automation company Unsupervised, it was found that about 61% of marketers encourage brand presence in the Metaverse, while 57% of marketers agreed brands should leverage crypto in their marketing strategies. In addition, 44% of marketers plan to run marketing campaigns in virtual worlds.
E-commerce is expected to be the largest potential driver of the economic impact for the Metaverse. Major influencers and personalities are already transitioning over to the Metaverse, and we see brands themselves creating their own branded avatars — leveraging personalised digital identities to stay ahead of the curve.
The direct-to-avatar economy is on the rise, too, which focuses on brands and retailers that offer digital products intended to enhance someone’s avatar. Customer loyalty programs also found a place in the Metaverse, with brands designing exclusive access to events, mini-games with unique prizes, or even NFT rewards to its loyal fans.
Revolutionising Education and Learning With the Metaverse
Educators are starting to use Metaverse technology to enhance learning experiences and platforms for their students, such as virtual field trips, STEM classes, hybrid and in-person classes, and physical education inside virtual settings.
It’s not just academia that is seeing the opportunity the Metaverse brings: Companies are also looking into building their own versions of virtual learning environments. For example, Brokerage firm Fidelity Investments launched Fidelity Stack, a multi-level learning hub in Decentraland that offers an entirely new way to learn about investing: By exploring the building, users can learn more about investing basics and get rewarded along the way.
The Future of the Metaverse
Going back to the innovation lifecycle reference at the beginning of this article, we will see a progression of the emerging Metaverse we see now to an advanced — and then eventually matured — state.
In the next few years, expect these building blocks to gradually progress and mature, and for technologies to converge. This can be in the form of spatial computing to graph technologies to innovations in the digital content space. Other Metaverse-inspired technologies will also come to life.
Closer to 2030, we should also have a fully formed definition of what the Metaverse really is. While we expect to continue seeing iterations of the trends mentioned above, key characteristics of the Metaverse we know now will also change.
For author Neal Stephenson, what started out as a humble detail in his book has now turned into a real-life venture: He is now working to help build a carbon-negative ‘open Metaverse’ with the team at Lamina1.
The Metaverse industry seems full to the brim with opportunities, yet we are only just seeing the beginning of it. Once barriers to entry have been overcome, and as underlying technologies mature, only then can we expect mainstream adoption to follow.
For brands, businesses, and institutions who are still on the fence as to whether to adopt this technology or not, there is no better time than now to develop a corporate Metaverse strategy.
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