Metaverse: Hype and substance

No doubt many of us are already fatigued by the term, metaverse. Like artificial intelligence, it feels hackneyed, appearing in endless newsfeeds, posts, and social chatter. Even my young kids are talking about it. Like all new technologies, there is inevitable hype, mischaracterization, and misunderstanding. Amusingly, early protagonists such as Matthew Ball and Mark Zuckerberg spent years trying to convince people of its importance and are now having to downplay expectations amid the frenzy of excitement and anticipation. It’s reminiscent of the old WAP days and as was the case in 1999, it’s almost impossible to accurately predict the shape of the curve. Nobody knows the timeframes

Irrespective, there is some real substance, development and progress happening and a risk such hype and overexposure deter enterprises, particularly operators, from digging deeper to understand the opportunity and its implications, thereby missing the signposts. This is the time future winners are positioning themselves, investing in capabilities that will allow them to respond swiftly to market developments and opportunities. If recent history has taught us anything, it’s organizational change lags that of technology.

Having been working in and around this topic for some time, my early thoughts include the following.

The internet as we know it will be remembered as an analogue dress-rehearsal.

Whilst there is undoubted hype and unrealistic timeframe expectations, when the metaverse does eventually reach a point of relative maturity, it could arguably prove to be one of the most transformative creations of modern history. The 2D internet as we know it will likely be remembered as the PSTN of the internet era and we’ll laugh at how we all watched 2D videos on small rectangular screens in a similar vein to how we recall ISDN dial-up experiences.

We will see massive productivity gains.

The metaverse will combine with other technologies, including artificial intelligence, blockchain, distributed compute / networking, 3D printing, and miniaturization to create an era of significant productivity gain and economic disruption. I suspect Jeremy Rifkin didn’t contemplate the metaverse in its full form when he wrote The Zero Marginal Cost Society, but it’s reasonable to believe the combination of such technologies will dramatically impact operating costs and returns on capital. Furthermore, an entirely new digital economy will emerge with vastly different economics (abundance of resources at close to zero marginal cost). This will likely lead to hyper-consolidation and concentration of capital and wealth which will amplify the need for governments to rethink social and economic policies (as Rifkin articulates in his thesis).

Augmented reality (AR) is underplayed.

There are many definitions of the metaverse. Many people conceptualize it as a connected virtual world (i.e., Roblox or Sandbox) on steroids, experienced through Oculus-type headsets. VR will play a key role but the metaverse will be much broader, much more significant, much more profound, merging the physical world with a plethora of interconnecting digital worlds experienced through a diverse set of interfaces. Whilst recent attention has been on VR (largely, thanks to Facebook and its rebranding to Meta) the overlay of digital objects (twins, holographic projections) in the physical world, using AR and MR technology, will arguably be the more transformative. This is also where operators should focus given their smartphone install base. Next-generation AR glasses will provide a catalyst. Apple has a habit of building great products and it’s reasonable to believe their much-anticipated AR glasses will not disappoint, but I suspect we’ll see many traditional (and less traditional) players vying for share.

Highly visceral and social experiences will drive consumer adoption but don’t underestimate the role of B2B.

It’s surprising how many people have yet to experience VR. Watching those that try for the first time, and their reaction, provides a glimpse into the future. Yet these experiences are an analogue amuse-bouche. Developments in edge-compute and associated latency improvement will bring truly visceral interactive experiences that feel genuinely real (and better than real!), evoking deeply emotional responses. What won’t change from today though is the desire for these experiences to be social. Some people talk about the metaverse as a platform to escape the ‘real’ world (although the notion of ‘real’ will change). Whilst that’s true, and we’ll see the creation of social havens for those left behind by the physical world, the metaverse will be a very real dimension to our everyday lives. It will be a real-time 3D internet that interplays with the physical world across countless work and social settings. Whilst much of the discourse has centered around consumer experiences (e.g., Ariana Grande’s and Travis Scott’s respective live performances in Fortnite and Justin Bieber’s metaverse collaboration with Wave), the more likely trigger for mainstream adoption could be 3D virtual office and collaboration platforms as the shift to hybrid and remote working solidifies.

 

 

Major industry disruption and new business models.

As with all major technology cycles, we will see traditional industries and their business models disrupted. A clear case in point is music. Spotify pays between $0.003 and $0.005 per stream, meaning artists need 250 streams to earn $1. As such, even well-established artists have been turning to merchandise, concerts, and other avenues to generate money. Emerging artists have a much tougher time. A vast number earn less than $49,764k USD, the median wage for workers in the US. 90% of all streaming revenue goes to 1% of artists. The metaverse, combined with (non-fungible tokens) NFTs has the potential to radically redefine the business model, enabling artists to distribute highly visceral and interactive live shows via already well-established metaverse platforms (such as Decentraland and Sandbox), using NFTs with utility and personalized features (e.g., unique art, backstage pass, track voting rights) to generate far more than money for their efforts. The implications for labels and distribution platforms are highly significant. We’ll likely see new platforms (such as Animal Concerts) and traditional players seeking to take advantage of this disruption.

New actors, winners, and dynamics.

History tells us those companies that dominate one era tend not to endure. It would be difficult to bet against some of the mega-tech players (e.g., Microsoft given its global cloud, XR device, and gaming assets, including Minecraft and Activision Blizzard), and reasonable to believe we’ll see some less visible, yet highly sizable, platforms such as Nvidia become multi trillion-dollar companies. Players such as Epic, Roblox, Sandbox, Unity and Matterport look set for strong growth, but the next era will undoubtedly give rise to new actors, new stars, and multiple surprises.  What is particularly interesting when reflecting on the internet 2.0 era is the question surrounding devices, operating systems, app stores and the implications for Apple and Google. We’ll likely see new types of interfaces, new operating systems. The future role / significance of current app stores is questionable. Apple and Google exerted significant control (and extracted disproportionate value) from their device, OS, and app-store stranglehold during the last 10 years or so. That could change.

 

The fun economy. For real.  

The metaverse will give rise to an entirely new digital economy (set of economies) and with it, a new era of opportunities for people to contribute, collaborate, co-create, and get rewarded for it. Children will leave school with a fundamentally different philosophy on what a career looks like with many choosing what their parents might today consider an ‘alternative path’, yet one that will become, in time, mainstream. This phenomenon is not entirely new. There are over 2,000 YouTube channels with over 1m subscribers generating very meaningful income (Ryan Kaji topping the list with 30m subscribers, generating $29.5m in 2021) yet this remains fringe and many people make little money. It’s reasonable to believe the metaverse could, in time, change this, shifting mindsets and expectations around how people can have fun and make money. Coding will become a 2nd language for children and a core part of the standard education approach, akin to how we consider foreign languages today. With it, we’ll see the emergence of a new type of schooling system. The vastly outdated Victorian-age education system of today will gradually give way to an entirely new model, using technology to deliver personalized, creative, and collaborative learning.

New dawn for operators (potentially). 

Web 3.0 and the metaverse will generate a hyper-growth in network demand. Rewards for scale will increase driving further consolidation. This will trigger a growth in national infra-co superhighways. Beyond connectivity, there will be a highly significant opportunity for operators to restate their participation claim, leveraging distributed compute and 5G to extend beyond the constraints of the web 2.0 era. The edge will be pivotal and where the participation battle lines will be drawn. This is where the industry has an opportunity to rethink its model and asset structure (Net-Co, Platform-Co, Service-Co) and evaluate the merits of cross-carrier edge orchestration and collaboration, redefining and extending the role of the operator vis-à-vis the hyperscalers and allowing operators to increase value share in the B2B2C space.

 

 

Multiple fundamentals to be solved for the vision to be realized. Much of the discussion centers on the opportunity, which is understandable, but there are key questions to be solved for the vision to be realized (and for us to see beyond the hype). These include fundamental infrastructure related questions (i.e., how to scale decentralized persistent and concurrent environments) and interoperability (i.e., how to ensure users can traverse metaverse platforms seamlessly and reuse digital assets easily). These are not simple issues to solve.

In my view, identity, privacy, ethics, and compliance are of greatest importance since these are largely unsolved Web 2.0 issues that become dramatically more relevant in a 3.0/metaverse era. The highly visceral nature of immersive experiences heightens the consequences and impact of abuse and bad actors. The stakes are much higher. Who gets to define the truth in an environment that can make many things very believable? What will be the rule of law and how will it be monitored and enforced? The potential consequences are worrying. There are some dystopian viewpoints out there and they’re not necessarily unfounded. It’s reasonable to believe technology related issues will be resolved quicker than social ones which amplifies such concern. For operators, this topic reinforces the opportunity for the industry to step up and take a clearer role in enabling and protecting personal data, identity, and privacy. Much to think about.

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