Metaverse Non-Believers, Beware!

Image credit: iStockphoto/Thinkhubstudio

The so-called metaverse might be a vague and hyped term for something that doesn’t quite exist yet. However, that hasn’t stopped many companies and brands from trying to stake an early claim on the concept.

Analyst house Forrester has probably got closest to describing the current state of the metaverse in their recent reports. The central theme is that the 3D next-generation internet world is more an idea than anything else, but that organizations and consumers need to get ready because it is likely to mature fast and become the next big opportunity.

Anyone who dismisses it as pure hype runs the risk of being left behind. And we can be sure that even in the short term, there will likely be an explosion in startups with new ideas and applications for the next digital world.

In the U.S., even as 34% of online adults express excitement for what the metaverse will offer, 76% of B2C marketing executives plan to invest in metaverse-related activities in 2022. Already, Microsoft has a metaverse “tech stack” for app development. In February, Disney appointed an executive to lead its metaverse strategy.

Often with technology, it’s a case of timing, and there are many failed precursors for ideas that later come to dominate. Before Spotify, there was Napster, and before the Metaverse, there was the geeky world of Second Life, which seems to have a new burst of momentum in parallel with the Metaverse.

The loose definition

Before anyone gets too carried away with the state of the metaverse in 2022, however, a sober reality check comes from Forrester’s Mike Proulx, who led the team which authored the recent State of the Metaverse report.

“In its current state, the metaverse is prime (virtual) real-estate for brands looking to make press headlines, test and learn, and reach a subset of the Gen Z audience,” he said.

“Brands that expect a revenue-based ROI from their metaverse custom media buys will be sorely disappointed.”

His Forrester colleague Keith Johnson is also yet to be convinced.

“Despite consumer skepticism and the fact there isn’t an actual metaverse, companies are still determined to stake their claim in it,” he said.

“Early adopters believe buying virtual property at the moment is akin to having bought real estate in London 80 years ago”

Even Facebook’s Mark Zuckerberg, who likes the idea of the metaverse so much he is rebranding his company, doesn’t quite know what it means yet.

“The reality is that no one knows exactly which models are going to work and make this sustainable, so we’re going to approach this with humility and openness,” he said recently.

These caveats are essential, but then it’s also worth moving on to look at some of the developments and innovations occurring under the expansive — and ill-defined — notion of the metaverse, which at one level is people playing video games on virtual reality headsets but will ultimately be so much more all-encompassing.

Hype is creating real-world potential

According to a recent report from U.S. bank Citi, increasing interest in metaverses can create a market worth USD13 trillion by 2030, attracting up to five billion users.

Citi is interested in the financial side of the metaverse, and they say it will prompt a revolution in what actually counts as money.

Different forms of cryptocurrency are expected to dominate. Still, given the multi-chain trend in the crypto ecosystem, cryptocurrency is likely to coexist with fiat currencies, central bank digital currencies, and stablecoins.

Wealth management firms have also started taking an interest in the metaverse, focusing on real estate.

Virtual real estate prices across four large metaverse sites — Decentraland, The Sandbox, Somnium Space and Cryptovoxels — doubled from USD6,000 to USD12,000 in the second half of 2021, increasing the need for banking services, with the prospect of mortgages, credit, and rental agreements being offered.

JP Morgan was the first to build a presence in the metaverse after it set up its Onyx Lounge, a virtual space in Decentraland. It said that it wanted to “play a major role” in what it said could become a USD1trillion marketplace.

Virtual land has emerged as a new asset class among millennial investors after metaverse property sales hit US$500m in 2021 and are predicted to double this year.

Digital real estate in the metaverse has presented homebuyers priced out of the housing market with a new investment opportunity, said the Bankless Times, a crypto-focused website.

“Even though digital real estate doesn’t offer the same kind of utility as physical property, it can be used as an investment tool,” it said, adding that the average cost of digital land was USD5,300 (AUD6,993) in 2021. Early adopters believe buying virtual property at the moment is akin to having bought real estate in London 80 years ago.”

The insanity will end

Indeed, some of the metaverse developments seem far-fetched, frivolous, and playthings for cashed-up digital consumers with too much time and money on their hands during pandemic lockdowns.

The virtual Gucci purse costs more than its real-life equivalent and a one-of-a-kind electronic Dolce & Gabba tiara that someone paid more than US$300,000 for at auction.

In February, Cult & Rain, a New York-based sneaker maker, sold 1,179 pairs of real shoes, each paired with a digital version in the form of an NFT, or nonfungible token, and priced at 0.5 Ethereum, equivalent to about USD1,635. This is around twice what the company was hoping for.

The digital luxury market might seem absurd, but according to investment bank Morgan Stanley, it could be worth USD55 billion by 2030, or one-tenth of projected revenues for the luxury consumer market.

As the metaverse matures, it will inevitably move into other more meaningful areas of human activity and sectors with more direct applications.

The technology components of the metaverse will become more mainstream and interconnected, hardware costs will drop, computing power will increase, and there will inevitably be more adopters.

Beyond fashion bands, virtual property, and NFTs, there will be more and more use cases — from small groups of people with unique needs to more widespread usage in diverse areas.

Educators, for example, are beginning to talk about how the metaverse can transform education and learning.

When these innovations arrive and are widely implemented, it will be time to believe the metaverse hype.

And in the meantime, let’s suspend our cynicism because anyone who doesn’t could well find themselves obsolete and on the wrong side of technology’s next big development.

Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].

Image credit: iStockphoto/Thinkhubstudio