It was two years ago this month that ‘the metaverse’ went mainstream.
This futuristic vision of the next generation of the internet had become the obsession of one of the largest companies in the world and talk of it dominated tech column inches. As analysts produced ever-wilder estimations of the metaverse’s growth potential, brands and marketers were stumbling over themselves in the race to conquer this new digital frontier.
Fast-forward to autumn 2023 and it’s yesterday’s news. User growth has greatly underperformed against expectations and businesses have been hopping off the metaverse bandwagon almost as quickly as they hopped on.
Rather than becoming the ‘successor of the mobile internet’ as promised, the metaverse has become a little-used curiosity and has been derided as a classic example of Silicon Valley hyperbole.
So what happened? Did the hype lead to unrealistic expectations around the technology? Was it ever anything more than a buzzword? Or, alternatively, have rumours concerning the metaverse’s demise been greatly exaggerated?
What is the metaverse?
The term ‘metaverse’ has been knocking around for a while, first appearing in the 1992 dystopian sci-fi novel ‘Snow Crash’ in which author Neal Stephenson depicted people interacting inside a 3D virtual space. In the years since, it’s come to refer to a new version of the internet accessed via virtual and augmented-reality technology.
But the metaverse didn’t really come to widespread attention until October 2021. Facebook founder and CEO Mark Zuckerberg announced his company was rebranding as ‘Meta’ and shifting from being “Facebook first to being metaverse first.”
To Zuckerberg, the metaverse was the future of the internet; a virtual space where people could work, play, shop and enjoy live experiences like concerts. In a keynote video, Zuckerberg explained how VR headsets or glasses would allow users to interact with each other as 3D avatars in digitally-rendered meeting rooms, classrooms and even live concerts. The metaverse would make these feel like real-world experiences.
Meta was first to signal its intent to start building and developing this immersive virtual landscape, but other brands quickly bought into the hype.
Zuckerberg’s announcement in effect fired the starting gun on a stampede towards the metaverse as brands sought to capitalise on the host of commercial and marketing possibilities they saw within this new channel.
Investors were excited and brands quickly took steps to get ahead in the metaverse. Meta itself proclaimed plans to hire 10,000 people to work on the metaverse in the EU alone, and big names including Disney and Walmart soon announced large-scale investments in metaverse projects. Nike launched its own metaverse platform hosted on Roblox, Samsung and Coca-Cola unveiled metaverse stores and Ferrari partnered with Fortnite to launch its new car.
For these brands and others, the metaverse represented huge potential. The then-CEO of Disney, Bob Chapek, lauded how it could “create an entirely new paradigm of how audiences experience and engage with our stories”, Zuckerberg claimed the metaverse would soon be home to up to one billion users and Microsoft CEO Satya Nadella expressed his belief that it would “transform the world.”
These bold pronouncements were backed up by exuberant analyst reports. McKinsey estimated the metaverse would generate $5tn in value by 2030; Citi predicted $13tn. And according to Gartner, 25% of people would be spending an hour a day in the metaverse as soon as 2026. With those sorts of numbers flying about, no wonder business leaders were getting excited.
There was a problem though: regular people just didn’t seem that interested in the metaverse.
The metaverse bubble bursts
Despite the big claims, the metaverse hasn’t proven popular with consumers. Meta had set a target of 500,000 monthly active users of its metaverse platform, Horizon Worlds, by the end of 2022; it achieved less than half of that.
Users have suggested that various metaverse platforms appear buggy and scarcely populated, and it’s been reported that most users don’t return to metaverse platforms after one month. Part of the problem was that fully realising Meta’s idea of the metaverse required the use of VR headsets – clunky, expensive equipment which still has a niche audience.
As the economy turned and the launch of ChatGPT pushed generative AI into the position of ‘next big thing’ in tech, investors and brands reassessed. Disney shut down its 50-strong metaverse division. Microsoft and Walmart followed suit by quietly cancelling their metaverse projects. Even Zuckerberg changed course; by March this year he was saying that AI was Meta’s “largest single investment” and it was reported the company had stopped pitching its metaverse projects to advertisers.
In 2022, Kantar had reported that a net balance of 61% of marketers were planning on increasing spend in the metaverse over the next year. In the end, only 12% did. Metaverse hype had died almost as quickly as it arrived.
Is the metaverse dead?
There’s not been much to show that the metaverse will live up to the sky-high expectations set for it, but it might not be a total dud.
Statista suggests that the value of the metaverse is still set to rise to $936.6bn by 2030 – not quite the scale of growth suggested by others, but hardly insignificant. In part this will be driven by the continuing rise of VR headsets, which are set to become less cumbersome and more affordable over the next few years.
And the footwear brand Vans has proven there is scope for engagement within the metaverse, becoming the first fashion retailer to attract 100 million people to its virtual skatepark and shop. For brands which can find a crossover between their own target audience and the demographics interacting with the metaverse, it could still be possible to realise the immersive engagement opportunities that got businesses so excited in the first place.
The way that companies have abandoned their metaverse projects in droves may not suggest a bright future for the platform, but there’s still potential for clever brands to use the metaverse to pull off noteworthy experiential experiences over the coming years.
What remains to be seen is if the metaverse will ever achieve the popular appeal predicted by business influencers.
VR headset-owners are themselves a niche and the fact that plenty of them are more interested in using their headsets for gaming over exploring the metaverse makes metaverse-enthusiasts a niche of a niche. Being able to interact with people in a way that made you feel as though you were in the room with them may well have had huge appeal in the middle of the pandemic lockdowns, but, coming towards the tail-end of COVID, the big push towards the metaverse seems to have missed the boat.