ARE WE IN THE METAVERSE YET? WONDERED THE NY TIMES IN AN ARTICLE IN JULY 2021. ESTIMATES OF THE TOTAL MARKET IN THE METAVERSE RANGE FROM $5 TO $13 TRILLION BY 2030, WITH A TOTAL USER BASE OF AROUND 5 BILLION. WE HAVE GATHERED A NUMBER OF INSIGHTS FROM AUTHORITATIVE REPORTS, MCKINSEY, WUNDERMAN THOMPSON AND FORRESTER RESEARCH, TRENDS AND FORECASTS THAT RELATE TO A GLOBAL CONTEXT
Matthew Ball, venture capitalist and essayist, describes the metaverse not as a virtual world or space, but as a kind of next phase of the mobile Internet – a framework for a highly connected life. There will be no ‘Before the metaverse’ and ‘After the metaverse‘, he writes. ‘It will slowly emerge over time as different products, services and capabilities integrate and merge together‘.
The metaverse does not exist: this is how Edoardo Zavarella, Senior Consultant for Forrester, introduced his speech during the SCAI Storming event Virtual world, real opportunities? The conundrum of the metaverse tested by the market. It is therefore not a ‘renunciation’ of the physical world, but a three-dimensional layer of the Internet experiencea layer that is added to the evolutionary path of the network: from the 1D internet to the 2D social world to arrive at a third dimension that will only generate value for companies if we succeed in defining the interoperability between platforms, protocols standards for asset transfers and digital identities.
This interlocutory phase is confirmed by reading the data, trends and forecasts collected in the reports of McKinsey, Wunderman Thompson and Forrester Research: trends and forecasts that refer to a global context. Looking specifically at Italy, if we read the Anitec-Assinform Report The Digital Sphere in Italy 2022released in June, it is clear that we are still at an embryonic stage when it comes to speaking of a real market: however, it is foreseeable that technologies such as Augmented Reality, Blockchain and cryptocurrencies will become increasingly widespread in Italy as well, enabling the enormous economic potential linked to the Metaverse to be exploited.
Estimates of the metaverse’s total market range from $5 to $13 trillion by 2030, with a total user base of around five billion.
Even without going too far with predictions, new business models (Direct-to-Avatar) new markets and opportunities are already emerging that will have an impact on the growth of an economy based entirely on digital, but strongly anchored in physical reality.
For a couple of years now, Big Tech – from Epic Games to Google, from Apple to Microsoft, from TikTok to Facebook – have publicly announced their plans to build metaverse worlds and allocate a large part of their internal resources to departments dedicated to building immersive spaces with VR and AR. Investors include venture capital, private equity, start-ups and established brands from every sector, from Gucci to Coca Cola, Visa and Ikea. NFTs have now conquered the art world, with renowned auction houses such as Christie’s and Sotheby’s offering digital masterpieces worth tens of millions of dollars.
There are three main phenomena:
- acceleration towards innovation and research and development on technologies such as virtual reality (VR) and augmented reality (AR);
- the proliferation of social and cultural gaming platforms as spaces that are populated by players from all sectors;
- the rush of companies to claim a right to their corner of the metaverse.
The metaverse as the next global utility: aneconomy of experience
In this all-encompassing virtual as well as physical space in which commerce, education, entertainment, community building, wellness, work and more already gravitate, we are likely to have mixed, complementary experiences that are also accessible via traditional devices (e.g. smartphones) and not just AR/VR devices, at least in the early days. Precisely for this reason, without a decisive improvement in infrastructure (latency, higher connection speed, 5G) the experience in the metaverse may not fulfil its promises.
At this stage, many questions remain open: how the balance between the physical world and a virtual world that can be built as a safe environment will be achieved, possibly according to principles of accountability and fairness; how privacy and security frameworks will be realigned.
“An interconnected and limitless virtual world”: definitions of the metaverse
We are trying not to define the metaverse so rigidly that it limits the imagination of the creators, recalls Yosuke Matsuda, CEO of Square Enix.
Defining the indefinite: what is the metaverse? A set of gaming platforms, virtual sales spaces, a training tool, a classroom or a digital office: the definition of the metaverse must still remain fluid. All we know is that it is real and potentially revolutionary. The definitions proposed so far are not meant to exhaust the topic, but to open our eyes to the scenarios that are emerging for the ICT sector and beyond.
These are the characterising elements found in every reading: identity, persistence, connectivity, immersiveness, real-time interactivity and active user participation. According to the report by Wunderman Thompson Into the metaverse (September 2021) there are 9 key elements that should characterise the metaverse:
Persistent [continuity of online and offline life].
Reactive [virtual environment responding in real time to user actions].
User-defined [owned and shaped by the people who experience, connect to, create and participate in it]
Creative [a catalyst for creativity and inspiration, where people actively engage without passively consuming]
Everyday [intertwines perfectly with our daily activities].
Social [a place for socialising, meeting, relationships].
Interoperable [experiences, possessions and digital identities should remain the same from platform to platform]
Limitless [there is no limit to the number of users, experiences or worlds].
While 62% of consumers surveyed by McKinsey in the Report Value creation in the Metaverse is enthusiastic or very enthusiastic about the possibility of travelling in the metaverse, the metaverse should be thought of as a digital representation of the physical world but also as a continuum of time and space. It is where you are socialising, concludes Kai Bond of Courtside Ventures. The metaverse is just an extension of our physical lives into the digital realm according to Kerry Murphy, founder and CEO of The Fabricant. It is a digital twin of our world, but you can cross infinite amounts of worlds for Leon Ng, founder and CEO of LNG Studios.
We are therefore facing the emergence of a digital economy that will intertwine with the traditional economy without replacing it. The Metaverse may coincide with Web3 – made up of virtual worlds such as Decentraland, The Sandbox, Somnium Space or Cryptovoxels, but not entirely: immersive experiences may be both centralised and decentralised, and even user interactions and forms of payment for commercial exchanges may coincide to some extent and not entirely (think of Forrester Research ‘s analysis in the report The State of Metaverse and the recommendation not to consider cryptocurrencies as an exclusive currency that will necessarily take hold everywhere, in a world where digital payments of ‘classic’ currencies are already very simple and familiar to most users).
Metaverse: trends and forecasts
For companies, a department dedicated to virtual reality is starting to become as important as it once was to have a website, develop a mobile app or manage social media; these are the thoughts of Ryan Gill, CEO of Crucible, one of the agencies most at the forefront of the metaverse’s possibilities in terms of digital identity creation.
Consumers are replicating their physical daily routines in the virtual realm, assigning increasing value to digital assets and giving rise to new direct-to-avatar (D2A) business models and demanding hyper-realistic and sustainable digital identities.
Back in 2017, The Proteus Effect, which brings together two experimental studies from the Stanford Human Interaction Lab, observed how our digital self-representations can modify our behaviour in physical environments, regardless of how others perceive our avatar. With more than 4.6 billion active Internet users worldwide engaged in online activities, the habits and certainties of our physical lives not only extend into the digital realm, but become more meaningful: this is why major avatar companies are focusing on the effort to replicate complex details of a person’s features, from complexion to wrinkles, from broken capillaries to scars. The most influential factor seems to be realism: for 88% of global consumers, their online identity should be consistent with their ethics and values in real life (with a focus on sustainability).
Wunderman Thompson ‘s report Into the metaverse (September 2021) examines consumer expectations and the implications for brands and companies, along with original research, distinctive elements of the metaverse, case studies and brand takeaways.
93% of global consumers agree that technology is our future
76% say their daily life and activities depend on technology – and more than half (52%) say their happiness depends on it
81% believe that the presence of brands in the digital environment is as important as that of physical stores
In Value creation in the metaverse, a report released by McKinsey in June this year, the impact of major technological changes is described: so much technology that we take for granted today seemed like science fiction 30 years ago – just think that we didn’t even have Wi-Fi until 1997. The metaverse is still in an early state today, with current adoption comparable to that of artificial intelligence 5 years ago.
However, the pace of its development will depend on many challenges: edge computing and computing power, 5G technology, for example, and four constituent factors:
- contents and experiences;
- infrastructure and hardware (including devices and networks);
- enablers (payment mechanisms, security).
Around these pillars, McKinsey identifies as many as ten ‘layers’ of components that constitute the physical and operational structure on which all the experiences of the metaverse are based: these range from back-end technology enablers (engines, blockchain and hardware devices), to platforms and virtual worlds, to the development of scalable standards and protocols to enable interoperability, which is still limited at present.
Corporations and venture capital have already invested more than $120 billion in the metaverse in the first 5 months of 2022, more than double the $57 billion invested in the whole of 2021.
Every company must take into account that the metaverse could become a new ecosystem encompassing digital possessions, relationships and social spaces, where real-life values can be mirrored and could forever change the way physical products are tested, manufactured and sold. As the metaverse develops, collaboration between brands will be essential.
Our insights into the metaverse continue on the LinkedIn profile of the SCAI Group Company Page