Before generative artificial intelligence (AI) and its top product ChatGPT made a splash in the tech and non-tech worlds alike, metaverse was the talk of the town, a revolutionary technology that would usher in the next leg of the Internet revolution. Faith was immense and hype even more—so much so that tech major Facebook rebranded itself as Meta, clearly defining where the company was headed. It called the metaverse “the successor to the mobile Internet”.
And a lot did happen in that space. Financial services major JP Morgan opened a lounge in Decentraland, a virtual 3-D world where users can buy and sell digital real estate apart from its other functions. Korean electronics major Samsung held a launch event in the virtual world, and Barbados announced opening a diplomatic embassy in the metaverse. Top brands including Louis Vuitton, Gucci and Coca-Cola made their metaverse presence felt while Nike sold shoes there. There were metaverse weddings, people bought digital designer clothes there, and rapper Snoop Dogg even released a music video that featured a digital avatar of himself.
Not just that, in February last year, consulting firm Gartner predicted that 25% of people will spend at least an hour on the metaverse by 2026. Two months later, Citi said in its report that the metaverse could be worth a whopping $13 trillion by 2030.
Almost two years after Meta’s historic rebranding and beyond the forecasts and hype, has the metaverse flopped?
A quick glance through Google Trends shows that the users’ interest has fallen after a brief peak between October 2021 and February 2022, around when Facebook became Meta.
If not Google Trends, the financial performance of Reality Labs, Meta’s unit tasked with creating augmented and virtual reality technologies for the metaverse, too, reflects a bumpy ride towards the virtual world. In its first-quarter earnings report released earlier this year, Meta said that Reality Labs recorded a $3.99 billion operating loss. On top of that, it generated $339 million in revenue, a meagre value compared to what the company rakes in advertising revenue. Reality Labs also saw an operating loss of $13.72 billion last year.
If this is any indication, Meta and the metaverse haven’t been able to stoke enough interest yet.
All hype, no work?
“When we started in January last year, we saw around 22 minutes of user engagement per user per day,” says Krishnan Sunderarajan, founder of LOKA, a metaverse startup that is creating a world where one can “explore, socialise, play and shop in an immersive and interactive way”. However, by the end of 2022, that came down to just five to six minutes, he added, highlighting the mood of users.
In terms of user growth, he adds: “While initially, we used to get DAU (daily active user) of roughly 3,000 people, that came down to about 100-300.”
This is not a lone case but a reflection of the overall decline in the users’ interest in the technology in general.
And quite understandably so. It is still difficult to describe and understand what metaverse actually is. For some, it is an immersive virtual world, where one can shop, participate in meetings and play video games while wearing a headset. For others, Web 3.0 elements such as cryptocurrencies and non-fungible tokens (NFTs), too, figure in the whole scheme of things, making the simple act of understanding the concept an uphill task.
“Due to a lack of literacy, users correlated metaverse to being tightly coupled with cryptocurrencies. Users also assumed that one needs to have VR headsets to access the metaverse. Interoperability turned out to be a myth initially despite being one of the core principles of the metaverse,” says Rajesh Mirjankar, MD and CEO, Kiya.ai, which launched India’s first banking metaverse, Kiyaverse, last year.
On top of that, VR and AR headsets are expensive, posing a hindrance to large-scale adoption, especially in a developing country like India. In what can be seen as a move towards making the devices accessible, Meta, in March this year, slashed the prices of its Quest 2 and Quest Pro headsets by $70 and $500, respectively, and they now cost $430 and $1,000, respectively. However, it remains pricey for devices with limited uses. While Quest 2 is now available at $299.99, as per Meta’s website, Apple’s just-released mixed reality (MR) headset Apple Pro Vision is priced at a whopping $3,499 (around `3 lakh).
Then there is a lack of a definite purpose. “Users go online with a definite purpose—to shop on Amazon, to meet friends on Instagram, etc. One of the reasons metaverse failed or didn’t work out the way it needed to be was that it created a world without any definite purpose in mind,” feels Sunderarajan. From the hardware limitation point-of-view, too, we currently engage “only two senses—eyes and ears, and that too using a VR device, which is expensive”, as per Sunderarajan.
Notably, while the devices are the best way to interact with the virtual world, the metaverse is not restricted by it, and there are PC and mobile phone options available.
Apart from hardware limitations, “concerns about user privacy and data security, and challenges related to interoperability between different platforms” also play a role in hindering the widespread adoption of the technology, says Kapil Jain, co-founder and chief business officer of Piro Space, which hosts virtual events in the metaverse. “The affordability, availability, and user-friendliness of metaverse devices and tools need improvement. Protecting user privacy and implementing security measures are essential to address data risks. Enhancing interoperability among platforms is crucial to enable seamless user experiences,” he explains.
Meta, too, might have a role to play here. “I believe that was one of the major inflection points of how the hype started,” says Sunderarajan. “When I look back, I feel, their pivot to the metaverse was unplanned and hasty,” he adds.
As the users’ interest faded, multiple companies took the cue. For example, Microsoft, a backer of OpenAI that created ChatGPT, has pressed a pause button on its metaverse plans and has even downsized its MR and AR teams, as per media reports. Disney, too, has taken similar steps. Not just that, in a major staff downsizing by Meta in November last year, which amounted to over 11,000 people, those at Reality Labs were also impacted.
Is AI the killer?
While Meta was bullish on the metaverse, recent events hint at the company’s growing focus in other areas, especially the buzzing artificial intelligence. For instance, Mark Zuckerberg, during Meta’s earnings call in April, mentioned AI over 20 times and called it a “key theme” for the company. The tech “will impact every single one of our apps and services,” the Meta chief said.
So, has the rise of AI dealt a death blow to the metaverse? The answer is a resounding “no”, as per the industry players.
“One of the problems the metaverse faces is loneliness. You do not meet a lot of people there and end up roaming around. However, with AI, you can have a conversational company, and have an experience where you would not be able to distinguish if you are talking to a real person or AI,” says Sunderarajan. “The rise of generative AI is promising for creating immersive experiences, such as realistic avatars and dynamic environments,” adds Jain.
According to Zuckerberg, “The two areas are also related.”
“Breakthroughs in computer vision were what enabled us to ship the first standalone VR device. Mixed reality is built on a stack of AI technologies for understanding the physical world and blending it with digital objects. Being able to procedurally generate worlds will be important for delivering compelling experiences at scale. And our vision for AR glasses involves an AI-centric operating system that we think will be the basis for the next generation of computing. Metaverse technologies will also help to deliver AI as well,” the Meta chief said at the earnings call.
A futuristic technology
Despite the several bumps, the industry is still betting on the metaverse. “A narrative has developed that we’re somehow moving away from focusing on the metaverse vision, so I just want to say upfront that that’s not accurate,” Zuckerberg had said, terming metaverse “a long-term project.”
Speaking on the devices, the Meta chief commented that “the next milestone is that we’re gearing up to launch our next generation consumer virtual and mixed reality device later this year. We launched Quest 2 almost three years ago at this point. It was a very big step forward for VR, and I’m really excited to show the world all the improvements and new technology that we have developed since then at a price point that will be accessible for lots of people.”
Interestingly, the rise of AI is serving as an inspiration here. “The adoption of the metaverse is not hindered. It is simply technology in development that will be available to people soon,” says Supreet Raju, co-founder of OneRare, said to be the world’s first 3D metaverse for the F&B industry. “We heard the term ‘artificial intelligence’ decades ago, and there were years when it felt like the technology was ready to take over the world. However, the first successful scaled solution for AI has only come with the launch of ChatGPT,” she says.
Along similar lines, Sunderarajan says, “There was a whole wave of AI in 2017-18, and it all went flat after that after many people felt it didn’t progress as it was intended to. However, it came back again in 2022 and reached a tipping point, and I would imagine metaverse undergoing a similar experience, probably in the next three years.”
For the industry, the metaverse is a futuristic technology, and hopes are high that it will see widespread adoption in the times to come.
“I believe that the metaverse has the potential to be a major new platform for social interaction and entertainment. As the technology matures and more compelling content is created, I expect to see more people adopt the metaverse,” says Jain. Kiya.ai’s Mirjankar believes “as the ecosystem matures, increased accessibility, improved user experiences, and compelling use cases will drive the widespread adoption of the metaverse. With this, it is safe to predict that this year will see significant adoption of use cases in culture, commerce, banking and finance, retail, fashion, and lifestyle.”
In a blog post in April, Nick Clegg, the UK’s former deputy prime minister and current president of global affairs and communications at Meta, enumerated how this technology could transform education. “Metaverse technologies like virtual and augmented reality have the potential to revolutionise education and training, bringing teachers and students together in new ways, introducing interactive elements to classes that can help students retain what they learn, making experiences accessible that would otherwise have been out of reach to many due to income or geography, and taking the risk out of otherwise dangerous or expensive training,” he wrote.
Apart from social interactions, commerce and education, gaming warrants a mention here. Taking the cue, Sunderarajan’s LOKA is too pivoting towards gaming. “We expect that a lot of users will now come back as there will be a definite purpose,” he says.
Piro’s Jain also bets on gaming. “Gaming continues to be a major trend, with users actively participating in multiplayer experiences, exploring virtual worlds, and contributing to the development of metaverse-based games,” the co-founder said.
Multiple reports also hint at a brighter future. As per research by EY and Nokia released last month, the metaverse is highly futuristic. Not just that, according to global majors such as PwC and Goldman Sachs, the metaverse market is expected to be worth nearly $1 trillion in less than 10 years. Global consulting firm McKinsey has also made a similar prediction.
Removing bottlenecks
While the industry remains bullish, the eventual success of the metaverse will require addressing the bottlenecks. “Metaverse has seen a few use cases and is gradually evolving. It is still in its nascent stages of acceptance and experimentation with various industries,” says Chandrashekar Mantha, partner, media and entertainment industry leader, Deloitte India. “To build a unique metaverse experience, a combination of hardware, software, development tools, and platform all will be required together,” he explains.
On cost, the industry believes that the prices of VR and AR headsets will eventually come down. “I believe that the price of AR/VR headsets will gradually decrease over time,” says Mirjankar. At the same time, while VR headsets provide a more immersive experience, “accessing the metaverse without them allows for a more affordable entry point,” says Jain. “Developers can optimise experiences for non-VR devices to make the metaverse more accessible, and advancements in AR technology may provide more affordable alternatives in the future,” he explains.
While the headsets currently engage two senses, “when we eventually evolve into a device or a set of devices that engage five senses and give you an output that is close to reality, that is when things start becoming serious,” says Sunderarajan. “Also, creating a world with a definite purpose will be crucial as users tend to gravitate more towards them,” he adds.
The story unfolds
1935: In Pygmalion’s Spectacles, a book by Stanley Weinbaum, the main character navigates through a fictional world using a pair of goggles equipped with aiding senses of sight, smell, taste, touch and sound
1956: American cinematographer and inventor Morton Heilig created Sensorama, one of the earliest known examples of immersive, multi-sensory technology
1982: The term ‘metaverse’ mentioned for the first time in Neil Stevenson’s novel Snow Crash
2010: Palmer Luckey, then 18 years old, created a prototype of the Oculus Rift VR headset
2014: Facebook acquired Oculus VR for $2 billion. The same year, Sony and Samsung announced their own VR headsets. Google also released its Google Glass
2016: Microsoft launched HoloLens headsets. This was the first peek into mixed reality. The same year, Pokémon GO, an AR game, became a rage
2021: In the biggest push towards the metaverse, Facebook rebranded itself as Meta
2023: Apple launched its mixed reality headset Apple Pro Vision at a price of $3,499
Status check
Far from bleak: Despite the lukewarm user interest in the metaverse, the future looks far from bleak for this futuristic technology, say industry observers
$65.51 bn: The size of the global metaverse market in 2022, as per data gathering and visualisation platform Statista
$936.57 bn: The expected size of the global metaverse market by 2030, as per Statista
25%: Percentage of people who will spend at least an hour on the metaverse by 2026, as per Gartner
Highly futuristic: As per research by EY and Nokia released last month, the metaverse is highly futuristic
