Metaverse
September 18, 2023

If the hype around the Metaverse was anything to go by, the world as we know it – both technological and otherwise, is on the cusp of a transformation from a social network to a virtual reality. The concept is not a new one, the first use of the term being recorded in the sci-fi novel Snow Crash (by Neal Stephenson) in 1992. Today’s millennials, and maybe even Gen-Z, would have first explored the concept when they first played Runescape. Snow Crash’s early vision of a virtual reality merged with the physical is now a billion dollar concept with the finest minds – and the biggest wallets – in the industry looking to discover how the idea can be incorporated into practical use cases. The big bucks are certainly involved, but is the meta a myth?

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What is the metaverse?

The metaverse is a broad concept as well as a work-in-progress: as yet, it does not encompass a single use concept in the industry. As of now, the term refers to a virtual space wherein users can interact in a computer generated environment created by the company you ‘purchase’ the service from. Any company can host the service at present, as the metaverse is yet to become a fully-fledged entity. Due to its novelty and seemingly unending possibilities, it is difficult to predict what the metaverse would be even a decade from now – tomorrow’s metaverse may well be a highly sophisticated replacement for the world as we know it.

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The metaverse in 2022 

By 2022, ‘the metaverse’ had become one of the biggest buzzwords on the internet. Investments in metaverse projects were in the billions of dollars, and were showing no signs of letting up. According to a report from CB Insights, a business data analyst firm based in the US, venture capital investments in the metaverse startups reached $2.5 billion in the first three quarters of 2020. Investments in virtual reality (VR) and augmented reality (AR) startups exceeded $4 billion in 2021. Investment in the space were not limited to startups: Google (invested $39.5 million into a private equity fund for metaverse projects), Meta (has invested close to $10 billion in metaverse acquisition and development), and Microsoft (has so far invested $70 billion in acquiring Activision Blizzard as its stake in metaverse gaming) are just some of the heavyweight players in the industry who have also put their faith in the future of the metaverse.  

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Among all these players, Mark Zuckerberg and Meta, have been the most vocal proponents of the metaverse since the idea first took foothold in the industry, promising to develop the concept into a live digital universe that allows users to ‘live’ and create their social presence within it with total freedom. 

Facebook’s Meta 

Facebook’s commitment and faith in the metaverse was made clear when it changed its name to Meta Platforms in 2021. The company’s plans had apparently been years in the making, as Facebook had acquired Oculus VR in as early as 2014 for $2 billion. Meta’s own VR hardware, the Meta Quest Pro, went on sale in 2022. 

However the hype created by Meta around its metaverse failed to last as long as its PR would have seemed to suggest, much less last well into the future. By the end of the first quarter this year, Meta shares were down by 62%, suggesting dwindling faith in the company’s shareholders about the potential of Zuckerberg’s new venture. One possible answer for the lack of faith could be the Metaverse’s lack of coherence in product marketing. 

Lack of coherence 

Lack of coherence is an issue that has plagued Zuckerberg’s ‘product’ since its initiation. The Metaverse was initially marketed as (and has been marketed since) as an all-encompassing virtual reality that was a substitution for the world we lived in, rather than a product with an easily identifiable single use. A virtual substitution for reality can be too broad a concept to grasp, and especially, too broad a concept for investors to see commercial potential in. Rolling out a product that had its own use first would have proven the commercial viability of the concept in the market’s eyes.

Unfortunately, the several products that Meta did release into the market failed to prove the concept. Reception for the Oculus headset, the Horizon Worlds game, Decentraland have all been less than lukewarm. Decentraland is a cryptocurrency-based, virtual world that users can explore through their avatars, the first real iteration of the metaverse. It was also Meta’s most well funded project, with an estimated $1.3 billion invested into its software and hardware ecosystem. Based on who you ask, its daily number of active users vary between 38 or 8,000 individuals. 8,000 is too low a number – 38 sounds like a bad joke. However, unknown to many, the Oculus Quest 2 headset surpassed the lifetime sales of both the Microsoft Xbox Series X and S by the end of March this year. 

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The emergence of AI technology has also firmly shifted the conversation away from the metaverse. Use-case scenarios for what has emerged: language modelling tools, AI voice generation, and AI generated visuals, are all products that are easily comprehended and quantified. This is why AI use platforms have seen more sustained market attention than the Metaverse, whose user base is still up for debate. While the Metaverse received more market attention, it failed to articulate what problem or use scenario it addressed. 

Despite this glaring lack in identifying utility potential, the Metaverse, as we have already seen, managed to garner enormous investments creating a bubble whose fate was sealed as being destined to burst. And burst the bubble did, as evidenced by falling share prices, and even the owner distancing himself from the idea. Despite some estimates that puts Meta’s/Facebook’s total investments in the idea at a staggering $36 billion, Meta has already pivoted its attention to generative AI. In a statement launched on the same day that ChatGPT was revealed to the world Zuckerberg clarified that:

“About 80% of our investments – a little more — go towards the core business, what we call our family of apps, so that’s Facebook, Instagram, WhatsApp, Messenger, and the ads business associated with that. Then a little less than 20% of our investment goes towards Reality Labs”. 

A far cry from the dedication initially shown for the cause. For those who may not be aware, Reality Labs is the division in Meta that deals with the company’s metaverse projects. By the end of the first quarter this year, the division had recorded a total loss of $24 billion, $13.7 billion of which was recorded last year. 

Is the metaverse dead?

Meta’s strategic naming should not mislead you into thinking that Meta’s loss is the metaverse’s loss. Engagement with the online world is in no way a downward trend and the ways in which we engage with the digital will only continue to increase. Zuckerberg’s Meta might not be entirely done with the technology either – the company will surely continue to explore the ways in which it can build upon what it has already started into the future. Meta has been an expensive lesson to the industry, one that it will surely find ways to profit from. 

(Theruni Liyanage)

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