Silicon Valley has a new favorite buzzword: Ever since Mark Zuckerberg announced earlier this year that Facebook's future would be in the metaverse, everyone has been rushing to figure out what a metaverse even is. And when Facebook rebranded as Meta in October, metaverse fever swept the tech industry. From Microsoft to Nvidia, every company is suddenly in the metaverse business, and seemingly overnight, countless people became metaverse experts.
But what actually is the metaverse? Why does it matter, and who needs to worry about it? If the metaverse is truly "the next chapter for the internet," as Zuckerberg put it, it's important to understand and define it so as not to be caught flat-footed when (or if) the metaverse wave catches on.
What is the metaverse?
The metaverse, at its core, is an embodied internet: a social sphere where people will be able to meet with the help of personalized avatars that make them feel more present than a plain video call. It's synchronous, which makes it feel more like real life than today's feed-based social media. Instead of catching up on what others have been up to, you'll meet with them in real time.
It will also be persistent, just like the world around us. When you revisit a metaverse space, you won't have to start over from scratch. And just like real life, it's going to encompass all kinds of things that you may want to do with other people: go to concerts and other events, play games, hang out, date and, yes, work and shop.
But to be very clear, the metaverse does not exist — yet. What we do have, though, are some predecessors:
- Virtual reality. VR often gets confused with the metaverse, which is understandable. Having an embodied presence feels a lot more real if you wear a headset, as opposed to an avatar that you control with a keyboard or gamepad. But while VR, AR and other forms of spatial computing will be part of the metaverse, it's just as important that the metaverse will work across multiple device categories. It's not something that you dip in and out of for half an hour at a time, but something that accompanies you throughout the day: on your phone, your VR headset and eventually consumer-ready AR glasses.
- Fortnite and Roblox. Both games have been hailed as early incarnations of the metaverse, and they do check a bunch of boxes: Fortnite and Roblox are both social spheres with avatars and in-world economies, and massive live events have demonstrated that they're about more than just gaming. At the same time, both titles are effectively standalone properties. Players can't take their Fortnite avatar to their Microsoft Teams meeting, and good luck finding a business outside of Roblox that accepts Robux for payments.
Ultimately, there's one big reason why we don't have a metaverse just yet:
The metaverse is a network. It's not one single service, but a collection of services loosely tied together, both by companies building dedicated roads between their services, as well as by people beating their own paths to get from one destination to another. That's also why some of the first generation of avatar-based services, like Second Life, are not the metaverse on their own. Just like the mobile internet isn't just one single app, and none of the apps on your phone would have succeeded if it weren't for the existence of many other apps and services, the metaverse depends on a multitude of interconnected services to succeed.
Why the metaverse matters
Believe it or not, the rush to the metaverse didn't start with Zuckerberg falling in love with VR. Instead, it's driven by a multitude of factors. People are adopting avatar-based social gaming platforms by the millions; the pandemic has driven all of us to find new forms of real-time interaction; and companies like Apple, Amazon, Google and Meta all are trying to figure out the next big thing after the smartphone. And while these trends play out in real time, a few very important questions are still up in the air.
- Who will be the new gatekeepers? The companies that make the AR and VR headsets of the future are in a strong position to financially benefit from, and impose rules on, the metaverse. One reason that Meta is so interested in the metaverse, as Zuckerberg has himself admitted, is that the company missed out on mobile hardware, and is now forced to play by the rules of Google's and Apple's app stores.
- What about privacy, safety and mental well-being? Facebook, YouTube and other social networks have rightfully been scrutinized for their bungling of misinformation and privacy issues, as well as the effect they're having on the mental health of their users. All these issues don't disappear in the metaverse, but they will likely play out very differently. Hiring tens of thousands of moderators may not be the right approach to prevent hate and harassment in real-time environments, and spatial data gathered by headsets surveying people's living rooms raises all sorts of new privacy questions. Paying attention to these issues from the get-go will be important for both industry insiders and regulators alike.
- Who is going to pay for it, and how? Large parts of today's consumer internet are based on advertising, with a healthy froth of subscription revenues on top. Some of those same models may work in the metaverse. We might also see a return to transactional business models, perhaps even powered by decentralized finance. The business models for these services of the future will have a major impact on the companies vying to build the metaverse, but they could ultimately also decide who gets to participate in these new worlds, from small businesses to everyday people.
There are plenty of companies trying to build the metaverse. Here are some of the biggest players in the space:
- Meta has so far spent $10 billion on metaverse technologies in 2021 alone. The company's efforts include its VR hardware, social VR apps like Horizon and its bet on AR wearables.
- Roblox's proto-metaverse world generated revenue of $454 million in Q2 of 2021. The company also has more than 43 million daily active users, most of them kids.
- Epic has made more than $9 billion with Fortnite in 2018 and 2019 alone, and the company's Unreal Engine is fundamental to a lot of AR and VR experiences.
- Apple has stayed clear of the metaverse hype, but the company's massive investments in AR hardware make it clear that it wants the App Store to be part of whatever the future will bring.
What people are saying
- "The full vision of the Metaverse is decades away. It requires extraordinary technical advancements … and perhaps regulatory involvement too. In addition, it will require overhauls in business policies, and changes to consumer behavior. But the term has become so recently popular because we can feel it beginning." — Hollywood-exec-turned-metaverse-expert Matthew Ball in the foreword to his upcoming book "The Metaverse."
- "Our hope is that within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce, and support jobs for millions of creators and developers." — Meta CEO Mark Zuckerberg, laying out a more ambitious timeline in Meta's founder's letter.
- "What the internet is for information, the metaverse is going to do for social connections. I'm no longer bound by physical distance or all these constraints in terms of who I interact with or how I represent who I am. All these things are suddenly unleashed. It's insanely disruptive." — Roblox CBO Craig Donato told Protocol last year why he thinks his company is well-positioned for the metaverse.
- "I would hope that the Metaverse as a future medium can be a much greater engine for economic efficiency than any of the closed systems that exist today. And that we'd ultimately get to a point where a much higher percentage of the profits go to creators than with any of these other platforms that currently exist." — Epic Games CEO Tim Sweeney on the economy of the metaverse.
No matter whether creating the metaverse will take one or many decades, it's clear that immersive hardware will play a major role in making it popular. That's why the horse race between Meta, Apple, Snap, Microsoft and others to create AR glasses is so important. Whoever wins it may not automatically win the metaverse as well, but will definitely have a massive home team advantage.
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