The most popular definition of the metaverse is an immersive, virtual ecosystem powered by the internet, augmented, and virtual reality technology. People can make purchases, trade, live, and play in the metaverse.
This futuristic environment will have robust economic and social systems and offer its users unprecedented online living interoperability between various apps.
Meta’s Mark Zuckerberg describes the metaverse as the successor to the mobile internet. He says it is an ’embodied internet’ that allows its users to view content and experience it.
“You feel present with other people as if you were in other places, having different experiences that you couldn’t necessarily do on a 2D app or webpage, like dancing, for example, or different types of fitness”, Zuckerberg says.
PWC tech analysts partly agree with Zuckerberg’s definition of the metaverse. They say the metaverse is an evolution rather than a revolution or trend. That said, metaverse innovations currently have all the features of a hot but temporary fad.
To illustrate this point, buzzwords associated with metaverses such as digital twins, mirror worlds, and mined realities reigned supreme in internet searches in 2021. As per Google Trends data, NFT and metaverse keywords hit their all-time highs between October and December 2021.
As per Google Trends data, these search terms’ volume began to fade at the start of 2022 and hit their lowest volumes in March.
This rise in metaverse and NFT searches coincides with Facebook’s official brand name change to Meta in October 2021. It also corresponds to Meta’s full release of its metaverse, Horizon Worlds, to US and Canada adults in December 2021.
Horizon Worlds is a futuristic vision of a persistent work and play virtual world. The entry ticket to this metaverse is Facebook’s Oculus VR headsets and a legless avatar that can freely wander in Meta’s animated digital world.
Explaining their vision of the metaverse, Zuckerberg said that Meta plans to bring a billion users and hundreds of billions of dollars’ worth of digital commerce onboard this digital world. Meta has set aside billions for Horizon World development in its race to attract more investors and users into its virtual world.
Meta’s Horizon Venues and Horizon Worlds had at least 300,000 users two months after their release to the US and Canadian markets. The Meta team says their efforts are bearing fruit as its private 20,000 Facebook creator team develops over 10,000 worlds on Horizon Worlds.
Meta has also sold at least 10 million Quest headsets to date. In addition, it will release a mobile phone Horizon version in 2022 to “bring early metaverse experiences to more surfaces beyond VR.”
Unfortunately, despite its sizable development budget, Horizon Worlds has not positively impacted Meta’s bottom line. For example, data shows that Meta’s reality Labs, the entity that researches, develops, and engineers Horizon Worlds, made $877 million in revenue in the fourth quarter of 2021 but had an operating loss of $3.3 billion.
Reality Labs also lost over $10 billion in 2020, so Facebook stock is tanking in the markets. It, for instance, lost 26% of its value in early February 2022, after a weaker than expected revenue growth forecast in the coming quarters.
The metaverse is an evolution.
Despite Meta’s hiccups with metaverse technology, this evolutionary phase of the internet is in its early days. Any businesses that ignore it risk losing out on first-mover advantages. The metaverse is the endgame of long-running major technological trends such as cloud technology, 5G, blockchain, and decentralized finance (DeFi).
Cloud technology and 5G address data storage, higher electronic device processing power, and interconnectivity. AI and deep learning, on the other hand, support the development of immersive worlds.
DeFi and blockchain technology are automating financial transactions ensuring that digital native consumers can trade virtual experiences and products on a peer-to-peer basis.
Likewise, blockchain technology is developing the interoperability building block. The Metaverse will provide a seamless transition between multiple words and experiences.
In contrast, Internet 2.0 only supports dynamic content within walled garden systems in the current reiteration of the internet. Therefore, interoperability is one of the most significant virtues of the new web ecosystem, engineering robust digital identity and data ownership services. Interoperability will bring the dawn of the content creator’s golden era.
Functional video game metaverses
Meta’s virtual world is off to a slow start, but metaverse-building video game businesses are on a roll. The Covid pandemic has accelerated the gaming world’s metaverse development by destigmatizing virtual work and digital living. As a result, video games have the most functional, fully realized, albeit rudimentary metaverses on the internet.
As per Bloomberg data, the video game industry had a 23% growth in 2020 due to stay-at-home measures. As a result, the sector could rise from its 2020 $177 billion global revenue rate to the $219 billion mark by 2024.
The pandemic also positively affected game streaming, with users of game streaming services such as Twitch growing from lows of 1.3 million in 2019 to 2.8 million in 2021. For instance, Epic’s Fortnite video game made a $9 billion two-year gross revenue in 2018 and 2019. In addition, the American video game developer and publisher grossed $5.1 billion in returns in 2020.
In 2020 Epic Games Fortnite had over 350 million registered players from its 2019 highs of 250 million accounts. These gamers spent 3.2 billion hours in the game. As an illustration, their December 2020 Galactus in-game event had over 15.3 million concurrent players and 3.4 million spectators.
Roblox, Fortnite, and Minecraft metaverses have over 600 million monthly users, and their user uptake is rising.
Video and mobile games have built impactful metaverses because they are major drivers of the ongoing shift from electronic device interactions to virtual simulation. Unlike Hollywood, game developers do not prioritize visual fidelity over physics.
Rather, they focus on unpredictability and fun. As a result, video game developers make inroads on achievable simulation capabilities
by avoiding the visual fidelity hurdle.
Moreover, video games’ simulation atmospheres are powerful digital state-building environments that are fun. Unlike social media users, gamers derive joy from gaming interactions.
Epic’s Tim Sweeney believes that metaverses prioritizing meetings, shopping, and working in VR rooms will not easily achieve mass adoption.
Speaking to Patrick McGee of the Financial Times, Sweeney says, “it’s not much fun to sit around in 3D and talk to people. It gets awkward really fast. A bunch of guys can’t get together and sit in a room for hours and have a conversation, right? You have to be shooting darts, playing billiards, shooting hoops, or doing something together to break up the dull moments and keep you entertained for a long period… if you strip the entertainment aspect from it, you end up with a super creepy version of America Online chat rooms!”.
Sweeney does not believe that people will spend all their waking hours in the metaverse. “We are not going to plug our brains into some device and meditate as our consciousness is embedded in some virtual world. The future isn’t that different from the present, at least not in 20 years”, Sweeney says.
Additionally, gaming ecosystems have over time developed unique incentivization processes that are absent in Web 2.0 centrally governed platforms. For example, they incentivize user-generated content with Epic Games releasing the Unreal Engine 5 to unlock the development of user-generated 3D content further.
All roads lead to Web 3.0 protocols.
The Unreal Engine 5 will enhance the development of Fortnite’s metaverse experience through realistic sound development and automated natural lighting effects. More so, digital assets development tools such as the Unreal Engine are massive revenue drivers for businesses.
They help businesses create opportunities absent in the current Web 2.0 ecosystem. The Unreal Engine 5 release is particularly useful to companies as handheld electronic devices increasingly capture personal and environmental data and lock it in their walled gardens.
These mobile hardware providers could construct virtual twins of the physical world using customer data and lock out any competition from the Metaverse. In addition, mobile devices and VR can create digital worlds through contextual awareness of the physical world, eliminating the need for dedicated VR Rooms as encapsulated by Meta’s Horizon Worlds and Venues VR technology.
For instance, Google’s Home Nest smart thermostat can track your temperature preferences and adjust them to suit your home. In addition, these devices can predict your choices by studying your past actions and picking up a behavior pattern, then modeling its algorithm for your ultimate comfort.
Nest has other convenience and behavior tracking features such as doorbells, locks, security cameras, smoke detectors, and speaker control. These mobile electronic device businesses collect massive amounts of personal data that can build digital worlds that mirror your physical world.
Consequently, one of the biggest risks of the metaverse is increased loss of data and privacy rights. Epic has rallied against Google and Apple for stifling competition and innovation by locking hardware users into their software ecosystems.
Sweeney says that this vice is killing independent app creators by restricting access to hardware that billions of people use daily through their app stores. For instance, the Apple App store grossed $64 billion in revenues in 2020, a 28% increase from its 2019 $50 billion returns.
The Apple App Store is a significant growth area for the technology business, even though Apple only reaps this profit through gatekeeping tactics. In the past, Apple levied a 30% fee on platform digital sales.
It also forces Apple app store users to make payments via its payment processing services partnerships with PayPal, Visa, and Mastercard. Consequently, all Apple app store users pay 2% to 3% charges on transactions.
Sweeney says that while Apple has won the hardware arms race fair and square, it is abusing its competitive advantage. Centralized platforms that store user data, such as Google, Apple, or Facebook, use the intermediary capacity as an unfair market advantage eliminating all competitive dynamics that keep the tech industry innovative, balanced, and healthy.
Epic demands fair competition from these hardware and cloud storage providers. Epic warns that failing to control these businesses’ power could build new monopolies in the latest phase of the internet, further choking tech sector innovation.
Fortunately, regulators are listening to Epic’s cry, and there are speculations that laws such as the US Open App Markets Act could end Apple and Google’s monopoly on the Apple App Store and Google Play store. Sideloading or the freedom to download apps to iOS and Android devices is one stepping stone to the Web 3.0 era.
Web 3.0 is the third phase of the evolution of web development. The Web 3.0 definition is also a moving target, but its protocols emphasize decentralization, machine learning, and AI.
Web 3.0 protocols make obsolete the walled gardens business processes of the current Web 2.0. Instead, its protocols will create a rewarding content creator environment epitomized by decentralized metaverses such as Decentraland and the Sandbox. These metaverse’s play or build-to-earn ecosystems are self-governing, ensuring that no one entity can own the multi-trillion-dollar Metaverse.