Recently, metaverses have become the most talked-about topic among venture capitalists, tech giants, and business media. They predicted a significant future based on the forecasts associated with them and described the forthcoming transformation of the media, entertainment industry, and people's lives. Less than two years later, the same business media published obituaries on the demise of the metaverses. Thousands of employees who had worked on their development were fired, and investors struggled to maintain their composure.
What is the Metaverse?
Metaverses were supposed to be the future of the Internet — at least, that's how the leading business media wrote about them quite recently. In 2021, Mark Zuckerberg stated that the metaverse would be "an Internet that users can experience from the inside, and not just observe from the outside." Two years later, Meta shifted its focus to artificial intelligence, and the business media was quick to dismiss the metaverse, which had not yet had the chance to develop fully.
Metaverse is commonly referred to as a virtual world where users can live, work, study, communicate, and make purchases without leaving their physical homes in the real world. In the metaverse, individuals are represented by digital avatars that can move between different locations and interact with other users. However, despite the numerous explanations of what it is and how it should work, no one has been able to implement all these ideas with acceptable quality. For example, Zuckerberg's metaverse still has fairly mediocre graphics and avatars lack legs.
Therefore, when discussing the metaverse, many companies actually refer to only a slightly enhanced online environment. These can be interactive maps with communication in games, for example, in Fortnite, or virtual workplaces, as seen in Microsoft Mesh, which was utilized during the World Economic Forum.
Because the metaverse, in its classical sense, still does not exist, there is some disagreement regarding how it should function. However, in general, a metaverse digital ecosystem exists because of various 3D technologies, real-time collaboration software, and decentralized financial instruments based on blockchain technology.
Lauren Lubecki, Senior Manager at Bain & Company, has identified three possible scenarios for the development of the metaverse.
- These remain in the realm of niche applications used by consumers for entertainment and gaming.
- They will become large competing ecosystems such as Apple and Android app stores.
- They will become dynamic, open, or unified spaces.
However, these scenarios are not technologically feasible. The crucial moments should involve the interface of human-computer interaction through the implantation of a chip into the brain and an increase in the speed of data exchange and bandwidth to accommodate the volume of this data.
The Rise and Fall of Hype
The founder of Meta saw the metaverse as the Internet of the future, where users could, just like in the real world, "make eye contact" and "feel the physical presence of the interlocutor."
Fascinated by the poetic speeches, the media published articles about the potential of the concept and quoted the entrepreneur's words that his "metaverse" would be used by 1 billion people and he would spend hundreds of dollars there.
Microsoft CEO Satya Nadella said that the company is developing an "enterprise metaverse" in which "the entire world becomes a canvas for applications." With a bet on the metaverse, the Roblox gaming platform entered the stock exchange at an estimated value of $41 billion. The hype was quickly embraced by the crypto world, with proponents claiming that NFTs would be the "key to mastering" virtual worlds’.
Analysts teamed up with companies to participate in the games. Gartner predicted that by 2026, 25% of the world's population would spend at least one hour per day on the metaverse. The Wall Street Journal predicted an irreversible transformation in the labor market. Citigroup researchers estimate the market to be worth $13 trillion.
However, things are not so simple in the world of metaverses. Reality Labs, the team at Meta responsible for developing virtual and augmented reality technology, has been experiencing financial losses for several months. According to a meta-analysis for the first quarter of 2023, real labs incurred a loss of nearly $4 billion during this period.
Decentraland, valued at $1.3 billion, is visited by fewer than 40 users per day. The company stated that there are 8,000 of them, but that is still insufficient for the "internet of the future." Especially when online games like Minecraft and Fortnite are played by millions of people every day. In the case of Minecraft, 3 million people play it daily, while 25 million play Fortnite.
Meanwhile, Business Insider magazine has already published an obituary for the untimely demise of the metaverse, in which they called Mark Zuckerberg "Don Quixote," who burned tens of billions of dollars and led people obsessed with an idea that died before it was born. Paolo Pescatore, an analyst at PP Foresight, told Business Insider that "there is currently little demand for metaverses," especially during the "cost of living crisis."
Fewer than 1,000 people enter the online spaces of the Decentraland and Sandbox metaverses each day, while the platforms themselves are estimated to be worth $1 billion. Coindesk titled an article with the following data: "It's lonely in the metaverse." At the same time, the companies themselves noted in an interview with the publication that these figures were not entirely accurate. They explained that the figures only represent "active users" who make transactions with smart contracts and do not account for everyone who interacts with other users. However, even in this case, the numbers are not an order of magnitude higher; companies are discussing 6000-8000 users per day.
Industry's and Society's Perspectives
According to The Wall Street Journal, in the Zuckerberg metaverse, only approximately 9% of user-created worlds have been visited by more than 50 players, and the rest have fewer visitors. The Verge reports that flagship metaverse functions so poorly that even company employees avoid it.
Microsoft shut down its AltspaceVR virtual workspace platform in January 2023, laid off 100 members of the industrial metaverse team, and significantly downsized the HoloLens team. Disney shut down its Metaverse division in March, and Walmart followed suit in April, bringing an end to the Roblox-based Metaverse projects. Tinder abandoned the concept of virtual dating. Thousands of people in Silicon Valley have lost their jobs due to the suspension of metaverse-related projects.
It turned out, according to Business Insider, that creating a working metaverse that will be accessible, understandable, and user-friendly is very difficult and expensive. Even Apple, the most experienced player in the market for creating ergonomic technologies, is not in a hurry to release augmented reality devices despite its aspirations.
The Current Status of the Metaverse
Against the backdrop of the economic crisis and excitement surrounding generative AI, the feasibility of the metaverse has come into question. In January 2023, Microsoft shut down the AltspaceVR VR platform and established 100 employees from the MetaProject Development Department. In March, Disney reorganized its meta-division, and in April, the Walmart retail chain was the same.
Another issue is that only a small number of users are willing to pay for access to metaverses, and a minority of consumers are willing to purchase costly VR and AR devices, particularly in the midst of an economic crisis. Not so long ago, the world witnessed the bursting of the NFT bubble, which was closely linked to the metaverse bubble, further undermining user confidence.
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