The metaverse was once touted as the future of human interaction, a virtual world enabling users to live, work and play in a fully immersive virtual realm seamlessly blending physical and digital worlds.
But the metaverse has hit a snag, and leading technology companies such as Meta, Microsoft and Apple have reduced their focus on the R&D behind the virtual world. Despite substantial investment, the metaverse still faces technical challenges such as latency, infrastructure and content creation.
Moreover, the return on investment remains to be determined, as the metaverse is still largely an untested market.
Despite these obstacles, many experts say the metaverse is still alive and will continue to evolve. Industrial and consumer product companies are among the types of organizations placing sizable bets — and, in some cases, already reaping the rewards.
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For instance, Siemens Energy reported that metaverse applications for maintenance and inspection reduced downtime by 70% and saved the company’s steam turbine business a staggering $1.7 billion. Likewise, the entertainment and retail industries have noted the metaverse’s potential to provide immersive, interactive experiences and are already exploring its possibilities.
A year ago, the primary question concerning the metaverse was, “What is it?” Today, the focus has shifted to more practical questions about what the metaverse will offer, when it will be available, who it’s for, how it will work and why it matters.
What happened to the metaverse?
Just three years after the metaverse generated a frenzy of excitement, interest seems to be fading, according to Google Trends and other real-world indicators. The Oxford Word of the Year 2022 has seen hard times.
What early implementers have discovered is that building a metaverse requires high levels of expertise and innovation, with technical challenges that can be frustrating and demotivating for developers. This has led some tech companies to shift their focus to other areas, leaving the metaverse on a back burner.
Meta, which experienced consistent losses in — and Wall Street criticism of — its Reality Labs Metaverse vertical, has shifted its focus away from the metaverse. Last month, the company followed others in unveiling a large language model, dubbed LLaMA (for Large Language Model Meta AI). This model is the fundamental software behind a new artificial intelligence system that aims to extract extensive amounts of text from its text dataset to produce condensed information and generate content. The AI personas that may result from this work will be designed to aid individuals in various ways. Such AI applications may in fact lead back to metaverse applications.
Tech giants like Tencent and Microsoft have also suspended their plans for the metaverse, leading to the dissolution of their core teams working on the “phygital world.” Microsoft unexpectedly shut down its industrial metaverse team, resulting in the layoff of nearly 100 employees, perhaps signaling how the growing success of AI, with models like ChatGPT and DALL-E, is taking over the metaverse space.
Still, the virtual world remains a mystery that many businesses aim to unravel and commercialize. At CES this year, Accenture estimated that by 2025, business and consumer interest will drive $1 trillion into the metaverse as “a creator economy tool to enhance day-to-day tasks,” according to a report released at CES.
Today, the metaverse evokes a multiplicity of opinions. Experts hold varying views on whether the phenomenon is dying or merely facing a temporary setback, and whether it will come to fruition soon or only after several more years of development and investment.
More than a game?
Jeetu Patel, EVP and GM of security and collaboration at Cisco, believes that metaverse implementations have not been as compelling in areas outside gaming, and that the technology’s timing might not be right.
“The idea of [the] metaverse was never fully baked beyond gaming. No one cared to meet with floating avatars of people to feel immersed in a conversation,” Patel told VentureBeat. “However, my 12-year-old daughter, who is an avid user of Roblox, finds it rather natural.”
But Patel doubts the metaverse will link with the workplace at a mass scale in a three-year window. “Maybe in a 10-year window, preferences will change,” he said. Patel suggests the vast majority of ideas companies have experimented with in the metaverse will prove to be interesting but without mass-market appeal in the near to medium term.
“Rather than referring to the metaverse as the virtual universe that people congregate in, the alternative will be thinking about how virtual and augmented reality can be applied to highly critical use cases that benefit consumers and businesses in an infinitely more immersive manner,” said Patel.
Upal Basu, partner at venture capital and private equity firm NGP Capital, said it is still unclear to most people, including investors, what the term “metaverse” even means.
“It was coined from a dystopian science fiction novel and then co-opted by Facebook — which had challenges with public trust. It is thus perceived as a place of social media, avatars and goggles, none of which does it justice,” Basu said. “Many assumed it was a consumer technology, but the real opportunities could be across many industries and sectors.”
In search of … better headsets
In addition to many foundational issues, the metaverse has been slow to gain mainstream adoption due to technical limitations. The hardware required to support the metaverse experience is still prohibitively expensive for most consumers.
Meta recently reduced the prices of its Meta Quest Pro and Quest 2 headsets. The price reduction, by a full $500 in the case of the Quest Pro, may indicate a lack of interest from consumers in Mark Zuckerberg’s ambitious vision of replacing real-life experiences with digital avatars. In addition, many users have reported discomfort and motion sickness when using virtual reality devices for extended periods, which limits the devices’ overall usability.
These technical limitations have amounted to a significant hurdle for the industry, resulting in slower growth than initially anticipated.
“A current constraint is the form factor of the VR/AR headsets, so I believe those need to get smaller and feel more like a pair of glasses rather than ski-goggles. That’s when it will feel much more natural. But I am confident that the holographic rendering fused in someone’s current environment will be a killer use case once the hardware evolves to be less bulky,” added Cisco’s Patel. “Many are already making good progress on this front, like MagicLeap — and other innovations will be reasonable to expect.”
Grant Anderson, cofounder and CEO of AR game development company Mirrorscape, says that developing small, lightweight devices with the all-day battery life that every consumer wants is a very hard hardware problem to solve.
“There’s a lot riding on this year for XR [extended reality], including Apple’s release of its first mixed-reality headset incorporating both VR and AR. However, this headset, while lighter and sleeker than those that have come before it, will still look like a ski mask and reportedly cost upwards of $3,000,” said Anderson.
“Obviously, this will not be a mass-market item at this price point. But if this initial, limited-run device (reportedly only a million will be made) is looked on as a failure, then there is a real possibility that it could stall development within the industry.”
However, he believes that whether it’s five years from now or 20, the metaverse will come to be; the potential is so huge that some company or companies are sure to deliver on it.
“Digital avatars are starting to mimic our movements and facial expressions, making interactions in the virtual realm much more engaging. Software has gotten better, and you can be productive in XR, especially when playing and collaborating with people,” Anderson explained. “But yes, serious technological and business issues need to be addressed before we can all move beyond the walled garden.”
Will the metaverse rise again?
Greg Kahn, CEO of marketplace development firm GK Digital Ventures, says that the idea of the metaverse is still evolving and each new advancement addresses some lack of commercial viability found in earlier iterations.
He sees analogies with the state of AI. Notably, the seemingly instant growth of ChatGPT and other generative AI models builds on a foundation of failures.
“The metaverse will take more time. After all, we’ve been talking about AI and natural language processing for over a decade now. So [ChatGPT] is not quite an overnight success,” said Kahn.
Building communities to populate the metaverse will also take time.
“It will depend on advertisers experimenting with immersive environments along the way, and that is already happening with high-profile brands as diverse as McDonald’s and Gucci and Wendy’s and Ralph Lauren,” he said.
In select areas, metaverse development and experiments can be anticipated to continue. But these may occur with less accompanying hyperbole. That is a natural thing, NGP Capital’s Basu suggests.
Clearly, the metaverse is somewhat at the mercy of hype cycles. Hype can counter progress, as people expect too much too soon, he said.
“Yes, millions will be lost, but that is the nature of all venture investments. The AI industry has been through three or four AI winters and is back with an even bigger bang now,” said Basu.
“Every time we write off AI it comes back much better a few years later. The metaverse will be no exception. Hype cycles tend to focus on one technology at a time,” Basu said. “Last year it was crypto and this year it is generative AI.”
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