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Ever since its evolution in the early 1990s, the internet has served as a medium for connecting people. Over the decades, internet technology has evolved from Web 1.0 to Web 2.0, simultaneously changing the way people interact with it.
The Metaverse is the next step in this digital evolution and is being dubbed as an extension of Web 3.0. It can be defined as the convergence of physical and virtual worlds to create a space wherein one can interact, socialize, work, transact and perform an array of many different activities. The term,which refers to a 3D virtual world that mirrors and enhances the physical world , was first coined in 1992 by Neal Stephenson in his science fiction novel, Snow Crash, which refers to a 3D virtual world that mirrors and enhances the physical world. Since then, it has transitioned from a dystopian future envisioned in numerous science fictions to a tangible reality, albeit in the nascent stages of development.
We have already seen the early versions of it in varied applications,ranging from World of Warcraft to Runescape to MySpace. Technological developments coupled with the growing interest of consumers could propel it to become more mainstream. The stage has been set for the next set of immersive experiences to come to life which would change the way we see and interact with the world today.
The term is currently used in the context of either Augmented Reality based, or Virtual Reality based1. The Virtual Reality (VR) based Metaverse is where virtual space completely overrides the real space. The Augmented Reality (AR) based Metaverse is where virtual space partially overrides the real space, thereby retaining some portion of it. A fully developed one would involve several stages of development and technological advancements.
The idea of ‘mechanization of humans’ through AR/VR Metaverse and ‘humanization of machines’ through a Robotic Metaverse is driving technological trends in the field. The integration of both these ideas through spatial coupling would likely lead to the development of an Integrated Metaverse.
The following are the three stages of its development:
The first stage includes an array of individual AR/VR Metaverses including robotics, VR/AR, and more. The companies at this stage of development would likely focus on expanding their reach in terms of offerings and customers as well as on retaining those customers. The individual Metaverses at this stage are not compatible with each other and it would be difficult for the operators to move from one to another.
The second phase would see individual Metaverses become increasingly compatible with one another as the technology begins to converge. This stage would also see the emergence of companies that provide solutions to integrate multiple Metaverses. The increase in efficiency of individual Metaverses would likely lower costs and enhance integration.
The final stage would include advanced integration and increased compatibility between multiple individual Metaverses. The inter-Metaverse2 would likely lead to a fusion of AR/VR and robotics.
As Metaverse begins to take shape, it is poised to auger a new digital era into existence – one which is likely to transform our social interactions, businesses, and the internet economy at large. The $1 trillion3 market opportunity that it promises spans across advertising, social commerce, virtual events, digital infrastructure, and developer/creator monetization. As such, Metaverse is witnessing the emergence of new players as well as old ones shifting their focus towards the trending theme.
The potential of the Metaverse has attracted Web 2.0 companies like Facebook to pivot towards Metaverse which would propel more tech giants to make the shift. Meta Platforms Inc. (Facebook) has refocused its efforts on becoming the first Metaverse social media company. The tech giant is investing heavily in Augmented and Virtual Reality and is designing its VR world, Horizon.
Another tech giant, Nvidia has forayed into building its own Metaverse offerings by investing in 3D technology and has built a scalable, real-time reference development platform called Omniverse. Nvidia’s chips are already integrated into Meta Platform’s upcoming supercomputer, the AI Research SuperCluster – which is expected to play a crucial role in building technologies for the Metaverse. Similarly, Microsoft is working on building an ‘Enterprise Metaverse’ where it plans to converge its digital and physical offerings. Its acquisition of Activision Blizzard is widely seen as a big push by the company to expand its offerings in this growing space.
In the gaming sector, often considered to be the birthplace of Metaverse, companies such as Roblox, Decentraland, and more, are actively working towards the creation of their Metaverse platforms and related products. Epic Games is building 3D experiences in their games with a vision to build a child-safe Metaverse. It has received a $2 billion investment from Sony and Kirkbi, the family-owned holding and investment company behind the Lego Group.
The monetization of Metaverse offerings via digital assets is already worth more than $10 billion4. The need for digital assets is to exist independent of the creating entity while having a real, measurable value. NFTs (Non-Fungible Tokens) are a great example as they are digital assets that can be created, sold, and controlled by any individual user without the supervision or support of a central authority. According to Dappradar, a firm that tracks NFT sales, show that trading in NFTs reached $22 billion in 2021, compared to $100 million5 in 2020.
Elsewhere, virtual events in Fortnite (a free-to-play Battle Royale game with numerous game modes for every type of game player) have become quite popular in recent years, garnering millions of users. Digital concerts in the Metaverse present an opportunity for creators to massively expand their reach without any physical and geographical constraints. Similarly, virtual meetings in three-dimensional spaces involving digital avatars present another possible opportunity.
Metaverse also provides opportunities for companies engaged in the retail business to leverage their offerings to provide an immersive shopping experience for their customers. Several retail giants such as Alibaba, Zara, Nike, etc have already opened virtual stores and are buying virtual land to expand their offerings. Traditional brands such as Nike, Hyundai, Disney, etc are also venturing into the Metaverse to increase their product reach and gain new customers. Examples include Disney6, which has filed a patent for a virtual simulator that would reproduce the company's theme park into a 3D realm. Both Hyundai and Warner Bros have leveraged the Roblox platform to launch their Metaverse offerings.
As an increasing number of companies adopt its use cases for their core functions or start using the Metaverse for marketing, it is expected to grow into a billion-dollar industry. Based on an analysis by Bloomberg, Newzoo, IDC, PWC, Statista and Two Circles data, the Metaverse revenue opportunity could approach $800 billion by 20247.
The idea of Metaverse entails a holistic virtual world existing in tandem with the real world and offering sovereign digital ownership, unique online identities, interoperable ecosystems along with immersive experiences. It is the next iteration of internet wherein experiences are built by the people, for the people, in an ever-more accessible landscape. The covid pandemic has accelerated the quest for this digital world as it has increased digital activity and altered the lifestyle of people across the globe. Its growth has led to the emergence of diverse opportunities for firms to explore new business horizons, expand their customer reach and leverage the digital world to improve their financials. Moreover, it opens exciting opportunities for investors looking to invest in companies that are likely to shape the future. Though still in its infancy, the excitement and immense potential of Metaverse marks the beginning of a new digital era.