Summary

The metaverse is expected to be a successor to the mobile Internet as the next computing platform. One way to think about the Metaverse is as an immersive, real-time, persistent, and economic virtual world. For immersivity, the further development of VR and release of AR headsets are required. For real-time and persistence, many parts of the networking and computing stack are required. For economic activity, platforms like Fortnite and Roblox have limited economies; crypto may provide more sophisticated economic tools.

Viability (3)

The engineering challenges of enabling a global scale, persistent and real-time virtual environment were lost in the hype of 2021/2022. We already have Metaverses 1.0 with Second Life, and Roblox, Fortnite, etc are 1.5. A Metaverse isn’t a phase change, it's more of an evolution of increased immersivity and persistence. Metaverses are already commercially viable, but real-time, multiplayer Metaverse 2.0 need improvements across a host of computing and networking infrastructure.

Drivers (2)

It’s hard to overlook commercial interests as the core driver of the Metaverse today. First Meta as a cynical strategy to change the increasingly negative conversation about Facebook. And then the crypto industry looking for digital-only spaces to grow to avoid regulation. This hype has resulted in many brands and retailers experimenting with Metaverse strategies, but none are commercially viable. There are few demand side drivers, although some demand for parts of it such as persistent applications and augmented reality headsets.

Novelty (2)

Metaverses compete with all other forms of entertainment and broadly in the market for attention (e.g. games are the biggest competition for TV and film). 3D worlds draw users looking for more social and immersive experiences. Across these dimensions, only those that are highly social and highly immersive are novel relative to games like Roblox on the social side or Half-Life: Alyx on the immersive side. Metaverses 1.0 won’t be entirely novel because the infrastructure and hardware won’t be mature enough. But over time as connectivity and computing improve we can expect metaverses to offer superior experiences.

Diffusion (4)

Few restraints to adoption other than market demand. Access to the Metaverse will be through different devices however metaverse adoption will track closely AR and VR hardware adoption. As an evolution of existing services and games with billions of users, it’s likely applications and experiences will be connected seamlessly in the back end with little consumer switching required. It will be similar to the switch for the PC to smartphone in which users visited the same websites in much the same way. AR will be a complement to smartphones and wearables, and VR will compete with existing gaming devices. Adoption over the next 15 years unlikely to be a big bang because China will limit usage and interest is likely to be highly generationally stratified, eg roblox DAUs are 25% under 9, only 14% over 25.

Impact (5) High certainty

Highly likely a hugely valuable software platform on the scale of Windows/Android/iOS emerges from AR/VR. Just combining social media and gaming leads to a $1tr+ opportunity. The metaverse has potential to become the social layer for digital life. Eventually users will watch the TV shows and play games in these spaces mirroring how young users use Twitch and YouTube. Despite the dystopian origin, the multiplayer focus of the metaverse could make it superior to single-player digital experiences today.

Timing (2025-2030) High certainty

Metaverse expectations ran away somewhat in 2021/2022. Real adoption will track AR/VR adoption. Meta’s pivot, Microsoft’s acquisition of Activision, and Epic’s $2bn raise are all driving Metaverse interest on the supply-side. AR devices are a likely a major catalyst in 2023/4, although novel experiences unlikely because of infrastructure constraints until late into the 2020s. We should expect to see Metaverses evolves from digital spaces, especially games like Roblox or Fortnite, that exist today building out ever richer experiences.