March 30, 2022
The short answer is that metaverse presents a generational opportunity for businesses, investors, and individuals. As the first article of the Independent Study on metaverse, the article aims to answer the fundamental question of why metaverse matters.
Do you know that if you type the keywords “the next internet” in the search box on Google, the first result page will be mostly about metaverse? If cryptocurrencies open up the expectation of a new type of asset class, the metaverse fits in the technological trajectory enabling people to spend more time (and money) in the virtual world since the Internet age. Since 2020, COVID19 has also accelerated the trend on a global scale, which forced people to get used to working/socializing remotely online and purchasing virtual services. From the science fiction Snow Crash to Ready Player One movie, humans have never stopped collectively imagining a future where our real lives weave virtual reality.
The last time when a similar narrative appeared was the start of blockchain/crypto adoption, as people expected more decentralized applications can be built upon it. While it’s still too early to say whether the narrative is correct or not, we do see the exponential growth of the total market cap of crypto growing to around 2 trillion US dollars in 3 years with total transaction value (TVL) in decentralized finance increased 1120% YoY in 2021. With these experiences in mind, we can conclude some characteristics that mark a generational opportunity, which “metaverse” happens to share as well.
“Narratives can be potent factors affecting our society, economies, and even the direction of capital investment.” -- ― Robert J. Shiller, Narrative Economics: How Stories Go Viral and Drive Major Economic Events
The most direct impact of an emerging narrative can be reflected in VC investment in the metaverse and the official announcement of mega tech companies’ metaverse strategy, represented by Qualcomm’s announcements of the $100m Metaverse Fund and Facebook’s renaming of Meta. Coupling with the Web3 narrative, NFT sales, and virtual lands are also hitting high volume with new funds ready to deploy capital into the field. Brands and even banks like HSBC and J.P.Morgan are also viewing metaverse as the necessary part of their strategy in engaging customers of the new generation. In turn, the real dollars generated can attract more entrepreneurs and developers into the space that creates even more great companies.
The emergence of the internet can be attributed to several technologies’ advancements across software and hardware such as TCP/IP standards, personalized computers, smartphones, and chips. The rise of cryptocurrencies also reflected the accumulation of different verticals in cryptography. These patterns can also apply to the metaverse, where a combination of technologies is needed across application/infrastructure/ network layers. Here is a broad picture of how metaverse incorporates different technologies.
While the layers of metaverse have different versions and the interactions of these technologies may also differ depending on the type of metaverse discussed, we can tell that metaverse sits at a great position as becoming the common applications of these technologies. As each technology improves, the compounding effect can lead to better user experience and interoperability.
It’s also worth noting that crypto assets and blockchain technology have opened up the possibility of the Web3 metaverse that featured interoperability and digital ownership. Compared to the Web2 metaverse applications such as Meta’s Horizon World, Web3 metaverse is still early and way smaller in market value, but the potential is no longer ignorable as more capital and sales are generated from the market.
Since the concept of metaverse incorporates holistic aspects of human behaviors in virtual environments, the affected industries can grow beyond technologies but almost all major sectors directly or indirectly including entertainment, gaming, education, consumer, and communications.
As one of the key components of the metaverse, Virtual reality (VR) has already experienced a boost which many labeled as a “bubble” in 2016-2017 when funding amount increased. However, if observed from a larger time scale, we can see that AR/VR investments from VC still reached multi billion dollars with strong yearly growth in 2021.
The argument for calling AR/VR “bubbles” was mainly because products didn’t generate many sales due to bad user experience, lack of enough quality content, and high costs of VR headsets. But we think all these trials and errors have paved the way for technological breakthroughs, paving the way for the blossom of metaverse. This time is different for VR because:
· VR headsets have been improved in user experience: Metaquest 2 has shown great improvement versus its predecessor with new headsets/ glasses in AR/VR launched by other companies such as Sony, HTC, and Microsoft.
· VR content is driving consumer spending: As more game developers and creators are participating in the content creation of VR, we have seen more options of VR content than before, which is also reflected in the trend that spending on content has outpaced hardware since 2018.
· Virtual reality has shown growth in multiple sectors: Beyond the consumer-facing market, other sectors like tourism, healthcare, and manufacturing are also adopting VR.
Following the trend that more people are spending time and money in virtual worlds and on virtual products, it’s worth thinking about how humans will present themselves and socialize. As every advancement of technology ushered in a new wave of culture, the metaverse can follow the course that extends cyberculture in the Internet age while opening up new paradigms in communication and entertainment.
One obvious change of culture now can be that people are spending thousands or even millions of dollars on NFTs, the scale and number of people involved didn’t happen before in human history. One interpretation of people paying high prices is that digital assets signify the status and belongings of certain prestigious circles. While it’s new to see people spending a high amount of dollars on “jpeg”, the psychology behind the behavior is not new for humans if we compare it to the consumption of luxury goods, which also have high premium prices from their pure utility. Read more on Metaverse Culture (Part 1) - What it is and how it can change the world
Metaverse has opened up opportunities for new companies to become recognizable “metaverse-native” brands and existing ones to approach new generations of customers. Some popular NFTs like World of Women have started allowing holders to use their NFTs as IPs to manufacture products. Fashion brands such as Givenchy, Gucci, and Nike have ventured into the metaverse by launching virtual series.
The meaning of forecasts is not just discovering opportunities but also preventing risks. If more social activities are moving virtually, the same social problems that appear in real life such as fraud and different forms of discrimination may repeat virtually.
Understanding what metaverse stands for and its implications can help companies and individuals to insert the desired value such as inclusivity and privacy in new virtual worlds early on through processes like product design and code of conduct. Investors can direct resources to the teams that deliver value and positive social impact. Fresh graduates can have chances to understand new opportunities that make them unique talents in the job market while choosing the teams that match their values or even starting their own businesses.
As history shows, it’s human nature to label every new popular opportunity as bubbles and mock the sweats of pioneers, and indeed under every new trend, there are lots of cash-grabbing fraudulent cases. But let’s not forget that every start of technological innovation is a chance to make humans’ lives better or worse.
That’s why I think the metaverse matters.