Demystifying the Metaverse

It seems that ever since Facebook made the official name change — rebranding to Meta back in October 2021 during a virtual Facebook Connect event — that the term “metaverse” has become one of the most hyped and buzziest words in media, tech, and corporate America. According to reporting from CNBC, companies from Google, Nike, and Ralph Lauren to Walmart are all looking to plant a flag in this virtual reality landscape. The day after Microsoft announced its intent to buy gaming powerhouse Activision Blizzard, the company released a statement saying the deal would “accelerate the growth in Microsoft’s gaming business across mobile, PC, console, and cloud and will provide building blocks for the metaverse.” 

Recently, PricewaterhouseCoopers (PWC) published a comprehensive article on this topic, explaining that “when it comes to ‘the metaverse,’ few business leaders would consider themselves experts. Some may wonder if it even matters to their companies. The short answer: yes, it does.”   But just as some companies are trying to jump on board, not everyone is believing the hype. There have been a few tech and gaming executives (including Elon Musk) who have voiced their skepticism regarding this trend. The inventor of  PlayStation told Bloomberg News that he “can’t see the point” of the metaverse. CNBC reported that Phil Libin, founder of Evernote, the note-taking app, tweeted that the metaverse is a “squishscammy word. If you include things like video games and the internet, it’s already a big success. AR has future potential. But I’m calling b.s. on a persistent, decentralized, skeuomorphic, interconnected 3D world, experienced primarily through VR.”  

As in the internet’s early days, this innovation likely contains pockets of speculation, overvaluation, and unwise investment — especially since a true metaverse, as tech visionaries imagine it, is still years away.

So, how does a business leader cut through the noise and decide if this emerging tech trend has legitimate use cases and opportunities to be had? I am going to try and separate reality from the hype: explain what the metaverse is really about and offer some practical, affordable steps your company and board can take to get started. 

What exactly is the metaverse — and what does it mean for business?

First, people (especially Gen X, Gen Z, and millennials ) are spending more time engaged with digital systems and socializing through digital spaces, enough that some are starting to see virtual life as equivalent to physical life. Two, with technology driving connectivity, communications, sharing, immersion, sensing, and simulation, all are advancing rapidly and becoming more interconnected. It feels like we’re on the steps of the next big change, like when the mobile internet was about to erupt the world. 

The metaverse promises a stunningly realistic 3D digital world where you can, for example,  purchase and sell goods and services, sign and enforce contracts, recruit and train talent, and interact with customers and communities. As some technology visionaries imagine the metaverse, this world won’t primarily run on platforms whose owners control data, governance, and transactions. Instead, customers — and businesses — will be able to take their identities, currencies, experiences, and assets anywhere they wish. Also unlike today’s web experiences, much of this digital world will persist even when no one is in it.

These consulting firms are already setting up in-house design studios to help their clients develop and test break-through capabilities that leverage virtual worlds powered by enabling technologies (e.g., AI, blockchain, IOT, AR/VR, 5G) that require the most advanced computational infrastructure and skills.

So, the PWC article mentioned earlier lays out the enterprise applications of the metaverse and web3 could be, for example, putting on a virtual reality (VR) headset and visiting a factory on the other side of the world. You’ll see and touch its machines, shake hands with the local supervisor, and inspect its operations without leaving your desk. You could even send one digital version of yourself to that factory, while another meets with your board of directors. Consumers could jump from one virtual car dealership to another, feeling the wind in their hair as they take test drives. And after you leave that digital re-creation of a factory, it will keep producing in parallel to your physical factory. The virtual car will await its next virtual driver. Today, many millennial consumers already try on virtual clothes at virtual retail stores or buy virtual merchandise for their virtual gaming environments.

For organizations, the implications of an immersive, persistent and decentralized digital world could be huge.

Even though the so-called ‘metaverse’ has not been fully realized yet — and may never be — that is not stopping forward-thinking companies from experimenting with it to: 

• Enrich the consumer experience

• Introduce virtual products, only available in the metaverse

• Collect new data on customers

• Market physical and digital products and services

• Support metaverse payments and finance

• Offer hardware and applications that support metaverse activities    

From a business standpoint, unlimited reality represents enormous and rapidly growing opportunities in the marketplace. Metaverse-focused companies raised $10.4 billion across more than 600 venture capital deals in 2021, nearly double the amount raised in 2020. A recent Bloomberg analysis estimates global metaverse revenue opportunities could approach $800 billion in 2024. Recent research by Alliance Bernstein says the combined annual run rate of the most relevant markets, which is a predictor of financial performance, is valued at $2 trillion and is growing.

Established technology companies, independent creators, and startups are taking on varied roles in building the metaverse. Platforms are forming where users can engage with or experience the metaverse, while tools are emerging to enable creators to make and monetize their metaverse content.

What are the immersive technologies building the foundation of this metaverse?  

Still largely missing is the metaverse’s promised interoperability — a digital world where you and your customers can transition seamlessly among multiple experiences offered by various providers. This connectivity will require a new architecture for the internet, often called web 3.0. This new Web 3, which many tech start-up innovators and investors are currently working on, is supposed to be a decentralized structure with countless interoperable platforms. Many people have different interpretations of what the concepts or layers are going to be. Varun Mallapragada wrote a post in Medium where he included a graphic. 

The PWC article now states that they have identified six major converging concepts that will serve as the metaverse’s foundation. They also point out that companies in retail, real estate, and entertainment are already investing and earning profits. These six converging and enabling trends are automating trust, extended reality, immersive interfaces, working autonomy, digital reflection and hyper-connected networks.  

The underlying software and computing power necessary to provide a backbone for the metaverse are rapidly developing. The metaverse likely will require edge computing capabilities and faster connectivity, which would, in turn, necessitate investment in next-generation chips, servers, and networking hardware.

A variety of consumer and enterprise hardware will be required to support the metaverse as well. Demand may increase for devices such as headsets, gloves, smart jewelry, improved cameras, sensors, and other peripherals that can enable consumers to access the metaverse. And to help power this ecosystem, longer-lasting, smaller-footprint batteries may also be important.  

A well known venture capitalist and writer named Matthew Ball authored a nine-part piece on a bunch of the different aspects of what the metaverse could be, where he says “Personally, I’m tracking the emergence of the Metaverse around eight core categories, which can be thought of as a stack.”  Those eight categories, according to Ball’s piece, are:

Hardware: The sale and support of physical technologies and devices used to access, interact with, or develop the Metaverse. This includes, but is not limited to, consumer-facing hardware (such as VR headsets, mobile phones, and haptic gloves) as well as enterprise hardware (such as those used to operate or create virtual or AR-based environments, e.g. industrial cameras, projection and tracking systems, and scanning sensors). 

• Networking: The provisioning of persistent, real-time connections, high bandwidth, and decentralized data transmission by backbone providers, the networks, exchange centers, and services that route amongst them, as well as those managing ‘last mile’ data to consumers. 

• Compute: The enablement and supply of computing power to support the Metaverse, supporting such diverse and demanding functions as physics calculation, rendering, data reconciliation and synchronization, artificial intelligence, projection, motion capture and translation.

• Virtual Platforms: The development and operation of immersive digital and often three-dimensional simulations, environments, and worlds wherein users and businesses can explore, create, socialize, and participate in a wide variety of experiences (e.g. race a car, paint a painting, attend a class, listen to music), and engage in economic activity. These businesses are differentiated from traditional online experiences and multiplayer video games by the existence of a large ecosystem of developers and content creators which generate the majority of content on and/or collect the majority of revenues built on top of the underlying platform.

• Interchange Tools and Standards: The tools, protocols, formats, services, and engines which serve as actual or de facto standards for interoperability, and enable the creation, operation and ongoing improvements to the Metaverse. 

• Payments: The support of digital payment processes, platforms, and operations, which includes fiat on-ramps (a form of digital currency exchange) to pure-play digital currencies and financial services, including cryptocurrencies, such as bitcoin and ether, and other blockchain technologies.

• Metaverse Content, Services, and Assets: The design/creation, sale, resale, storage, secure protection and financial management of digital assets, such as virtual goods and currencies, as connected to user data and identity. This contains all business and services “built on top of” and/or which “service” the Metaverse, and which are not vertically integrated into a virtual platform by the platform owner, including content which is built specifically for the Metaverse, independent of virtual platforms.

• User Behaviors: Observable changes in consumer and business behaviors (including spend and investment, time and attention, decision making, and capability) which are either directly associated with the Metaverse, or otherwise enable it or reflect its principles and philosophy. These behaviors almost always seem like ‘trends’ (or, more pejoratively, ‘fads’) when they initially appear, but later show enduring global social significance.

PWC had a few interesting ideas on how companies can start playing in these tech trends:

• Assign at least one resource or source of knowledge (such as a group) to understand key concepts such as cryptocurrencies, NFTs, blockchain technologies, and decentralized autonomous organizations (DAO).

•  Identify gaps to close and long-term opportunities to build from the metaverse and start recruiting digital native employees who are already at home with the metaverse’s key concepts. 

• Try getting started with some lower-risk use cases including selling digital versions of physical goods, offering virtual tours of virtual products or facilities, and launching NFTs to enhance brand awareness and connections to customers.

Women Leaders in Data and AI is launching their WLDA Summit, Nov 3, 2022, focusing on Web3, NFT and Metaverse.