It’s time for a frank discussion about the current state of the metaverse.

Let's have an open discussion about the current state of the metaverse.

Source: Heart of the Metaverse

If you sit down and chat with a fervent supporter of the metaverse, it won’t be long before they paint a beautiful picture of how the virtual world will change our lives. Metaverse enthusiasts insist that within a few years, we will be shopping, socializing, learning, and working with Oculus Rift (a head-mounted display designed for gaming). Our virtual avatars will be just as important as our physical selves. We just need to wait a little longer.

This conviction is not only held by the visionary founders of the metaverse, but also by those with millions of tags on their X (formerly Twitter) resumes, and those who firmly believe that metaverse technology is the future of the internet. In 2022, Pew Research surveyed over 600 “technology innovators, developers, business and policy leaders, researchers, and activists” and asked if they thought the metaverse would become part of our daily lives by 2040. 54%, more than half, said “yes”.

A recent consumer survey commissioned by KPMG shows that consumers have a similar view that the metaverse will eventually become part of everyday life, but to a slightly lesser extent.

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The problem with optimism is that it has a relatively short shelf life. People cannot remain hopeful and enthusiastic forever. If you cannot deliver on promises, or at least make some progress, you will soon find yourself engulfed by a rising tide of cynicism and shattered dreams.

Therefore, now is the time for us to have an honest discussion about the current status of the metaverse, its current functionalities, and why it takes so long to fully realize the potential promised by its evangelists and enthusiasts.

01. The Current State of the Metaverse

In many ways, the metaverse (as of the end of 2023) resembles early-stage technology products, although it is still in the conceptual stage, with dozens of competitors vying for dominance.

By comparison, look at the home computer market in the 1980s, where Apple, Commodore, IBM, and countless other manufacturers were constantly at war for dominance. Each manufacturer had their own interpretation of what a home computer should be. This war was not only about market share, but also about winning over consumers psychologically.

The core of any metaverse experience is the platform, and currently there are several platforms, each with some essential differences. Roblox and Fortnite are primarily games. Decentraland and Sandbox revolve around Crypto, using the concept of “ownership” on the blockchain to design their own virtual economies. Meta’s Horizon Worlds takes a blended approach, combining gaming and social elements, and explicitly states its intention to expand into other use cases.

In addition to these “giants,” there are also some smaller independent “experiences” that are not affiliated with any major platforms and are usually operated by a single brand. Although they include the core components that distinguish the metaverse from video games (inherent multiplayer experiences, user avatars, and typical functional goals), they lack the scale and versatility of large platforms. These experiences are utilitarian, existing to solve specific problems or focus on specific IPs.

A good example of a metaverse experience launched by Celebrity Cruises in 2022 is “Celebrity Wonderverse,” where potential customers can create a virtual avatar and explore their ships and destinations.

Finally, there are B2B metaverse products that are often overlooked by more flashy, consumer-centric platforms. The most well-known of these products is Microsoft Teams’ Mesh.

Although these B2B products are still in the early stages of development and have not reached a similar level of maturity, they have already proven their value. According to a recent survey by Ernst & Young and Nokia, 80% of businesses that have implemented metaverse technology believe that it will have a “significant or transformative impact” on their operations, with only 2% considering the technology to be a “fad.”

02. Existing Metaverse Cases

In many ways, the current use of the metaverse aligns with the goals expected by enthusiastic metaverse enthusiasts, at least in a very similar way. People socialize and work in virtual worlds. Goods and services from the digital and real worlds have economic benefits. It’s just a matter of scale and proportion.

So far, we have seen large concerts in Fortnite, featuring Ariana Grande, Travis Scott, and Marshmello. Brands have started building portfolios of metaverse real estate, with early adopters including Burberry, Lucid Motors, and Hyundai. While the economic scale of digital goods and services (including virtual land) is small, it is growing.

In addition, even in the business world, corporate metaverse users are reaping some of the benefits advocated by metaverse proponents. As the aforementioned survey by Ernst & Young and Nokia shows, 51% of corporate metaverse users report benefits in terms of sustainability. Another 39% and 29% of businesses have seen improvements in CAPEX (capital expenditures) and OPEX (operating expenses), respectively. This is because they use the virtual world as a substitute for other more expensive (both environmentally and financially) solutions, such as remote conferences.

The issue is not the functionality of existing metaverse platforms, but the scale. Providing these advantages to a large number of consumers and business users requires time, money, and investment. In addition, it requires rapid market deployment, channel management, and human resources.

Although I first admit that the underlying technology is not yet fully mature, this issue is secondary compared to the overall ecosystem shortcomings in the metaverse field.

03. The Biggest Obstacles and Solutions for the Metaverse

An unknown fact is that most metaverse platforms do not want to see the level of application that industry evangelists expect because they are not fully prepared.

Unlike the traditional internet, the metaverse inherently requires a significant amount of computing costs. Rendering virtual worlds and providing a consistent, seamless user experience requires a lot of computational power. Although some platforms try to pass these requirements onto users, it is not a reasonable option for platforms that hope to achieve mass adoption because it inherently limits the potential user base – only users with powerful, expensive, and resource-rich computers.

For a long time, this has been the most severe challenge faced by metaverse platforms seeking expansion. Fortunately, this challenge is not insurmountable. Even without any external intervention or new innovations, there has begun to be some relief.

After experiencing several years of price surges, the price of GPUs has started to decline, partly due to improvements in the semiconductor supply chain and the continuous decline in crypto prices. Even if the platform does not intend to operate its own infrastructure, cost improvements from cloud service providers will be seen as the saved costs are passed on to the platform.

In addition, metaverse platforms can take measures to invest in multi-cloud infrastructure strategies to increase capacity and serve more users. This approach, combined with new advances in streaming technology, will greatly expand the reach of the metaverse and provide a smooth, consistent, and seamless experience.

Similarly, as I discussed earlier – content is another major obstacle to metaverse applications, perhaps the biggest obstacle. Without content, consumers will not accept the metaverse, and without an audience, content creators (including brands) will not invest in the metaverse. It is a chicken and egg dilemma.

The development and maintenance costs of the metaverse experience can easily reach millions of dollars, and it is understandable that brands remain skeptical within their expected lifecycle. Fortunately, over time, this issue will be resolved, partly due to the increasing maturity of developer tools and the adoption of generative artificial intelligence, which is expected to reduce or eliminate many of the costs associated with developing and updating content.

Another hopeful reason is the continuous decline in VR headset prices. Although not all metaverse experiences require VR headsets, many experiences do. Therefore, in the minds of consumers, the concept of the metaverse is closely associated with VR. To attract potential users, certain models, especially Meta’s Quest and Quest Pro series, have significantly lowered their prices, and analysts expect the average price to decrease between 2023 and 2028.

Therefore, coupled with the adoption of streaming media and larger infrastructure investments on the platform, it will help reduce consumers’ upfront costs and inevitably play a role in making the “metaverse” a mainstream and widely accepted technology.

04. Stay Optimistic and Patient

Although some people pessimistically claim that the “metaverse bubble has burst”, I still believe that the metaverse has a bright future.

I firmly believe that the metaverse has value for brands, consumers, and businesses. I truly believe that it will soon be widely applied. But I also know that before it reaches its peak, the metaverse must mature first.

In the past few years, the metaverse has been following the Silicon Valley mantra of “building the plane while flying”. This approach inevitably limits its scope to early adopters and idealistic believers. These people, unlike others in society, accept a certain degree of “bumpiness” as the cost of being the first.

These early adopters are crucial in proving the value proposition of the metaverse. They have demonstrated that the metaverse is both fun and useful. With this knowledge, the metaverse ecosystem should feel more confident as it starts to refine and expand. We have the Minimum Viable Product (MVP). Now is the time to build real products.

The future of the internet is 3D. But this clearly takes time. Similarly, building the infrastructure to handle hundreds of millions of users also takes time (and money). We need better and more sophisticated developer tools to accelerate the launch of metaverse products for brands.

In this regard, while optimism is popular, it needs to make way for patience and planning.

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