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The developing metaverse: Commercial realities of extended realities

The metaverse is almost certain to become a highly competitive commercial playground, if not battlefield. It will likely not only establish highly profitable markets but also lead to high-profile failures

This article can also be found in the Premium Editorial Download: Computer Weekly: Exploring the metaverse

In July 2021, in The beneficial (and frightening) implications of virtualising reality, we placed a spotlight on some of the worrisome implications of augmented and virtual reality (AR and VR). The timing of that article’s publication was fortuitous to serve as background information for developments that accelerated substantially not even four months later.

On 28 October, Facebook CEO Mark Zuckerberg introduced the new name of his company, Meta Platforms. “Meta’s focus will be to bring the metaverse to life and help people connect, find communities and grow businesses,” he said.

Zuckerberg believes that after desktop-based and later mobile experiences, “the next platform will be even more immersive – an embodied internet where you’re in the experience, not just looking at it. We call this the metaverse, and it will touch every product we build”.

He added: “In the metaverse, you’ll be able to do almost anything you can imagine – get together with friends and family, work, learn, play, shop, create – as well as completely new experiences that don’t really fit how we think about computers or phones today.”

First things first. What actually is the metaverse? The question is difficult to answer – and that is likely the reason why definitions tend to be conspicuously absent from most articles. In truth, the metaverse is better understood as layers of extended realities.

Therefore, business opportunities abound, depending on the layer you want to work in, the applications you want to address and the technologies you want to employ. The commercial potential of the emerging network is so large that it is easy to see why most industries could benefit one way or another, directly or indirectly, as provider or as user of the metaverse.

By now, even casual readers of technology and business media will have become aware that the term metaverse originated in Neal Stephenson’s 1992 sci-fi novel Snow Crash. The novel featured a rather disturbing future society, in which such a virtual network exists in a dystopian real world. Perhaps the choice of the term for today’s emerging network is therefore problematic, hopefully not prescient. In the novel, the metaverse constitutes a virtual reality-based environment in which avatars interact with each other – a sort of advanced internet.

The metaverse, at the most basic level, enables connectivity of users that can interact with virtual assets or avatars in an immersive fashion. Everything else – in my opinion – is negotiable and depends on design, purpose and applications of such environments. The metaverse should be treated as a general idea rather than a concrete definition. Any attempts to define the metaverse in detail inevitably will only limit the potential of what types of environments could emerge and therefore miss associated business opportunities.

Similarly, the internet of today is a means for communication and collaboration, but also for entertainment and gaming. The internet is a toolbox, a toyshop and an office space – a network for learning and education. Yet while innovation and creativity increasingly rely on the internet as a facilitating medium, mis- and disinformation thrive, enabled by the ease of connecting and going viral.

Alternative landscapes, extended realities

If all the promises of the metaverse come true, today’s internet will be enveloped by the metaverse. A range of immersive landscapes will cater to many use cases and desires. Whether these various extended realities will connect – and if so, how seamlessly – remains to be seen. To assume that Facebook’s, rather Meta’s, idea of the metaverse represents its totality is a fallacy – it will represent a flavour of what the metaverse can offer, but so many more options to creating value exist.

It is no surprise, then, that many companies are already working on a wide range of alternative landscapes, various kinds of extended realities. Very prominently, Meta is working on developing Horizon Worlds. Meanwhile, Microsoft is creating its Mesh platform, which connects to Microsoft Teams.

Both companies look at VR environments, but also AR-enabled offerings. Both companies are looking into productivity solutions and entertainment applications. In fact, Microsoft’s Minecraft sandbox game, originally developed by Mojang Studios, already represents a metaverse of sorts – a virtual one for entertainment purposes.

Meta’s and Microsoft’s creations, coupled with AR and VR software, provide a simple matrix that will be helpful to judge landscapes moving forward. What type of application is the focus of the landscape – productivity or entertainment? And what type of reality is at the centre of the interaction – AR or VR? Applications and reality types are not mutually exclusive, and overlaps will be the norm rather than the exception. Such a categorisation nevertheless will help to understand the varying metaverse types and their benefits and associated concerns. One has to start somewhere

A crucial consideration for users will be how transferable elements of these worlds will be. In particular, can avatars move from one type of metaverse to another, or will they be stranded in separated realities? In the current version of the internet, one can move from one website to another seamlessly, but that does not mean every website accepts the same types of online payments or that all websites seamlessly connect to a user’s set of preferred third-party applications.

Avatars might move from one world to another (although that won’t necessarily be true), but certain capabilities and features might work only in some environments. Perhaps there will be a wide range of parallel worlds that focus on specific applications. Maybe some worlds will connect, and other services might deliberately remain closed for profitability or security reasons, for example. It is not unreasonable to expect that serious and entertainment applications will live in different realms. AR and VR also offer another potential for separation of application markets.

A real virtual commercial success

It is not difficult to foresee an upcoming battle that is brewing between the named technology giants. Meta and Microsoft are pouring money and talent into the development of their metaverse initiatives. Although the competition could end up in a winner-takes-all situation, it is conceivable that the result will be parallel worlds of the metaverse concept that target different applications or consumer segments.

The question then will be if these ecosystems will be closed off from each other, becoming walled gardens. Or will these worlds become marketplaces of an overarching universe that connects various corners, pockets, and niches of applications and use cases?

A battle is brewing between technology giants. Meta and Microsoft are pouring money and talent into the development of their metaverse initiatives

After all, Meta and Microsoft are not the only ones hoping for success in this new commercial landscape. Although Meta and Microsoft have perhaps established themselves as frontrunners in many consumers’ minds, the number of companies working on the metaverse concept is substantial. Many companies now provide their own flavours of what the metaverse could be to different users (see Metaverse companies panel below).

Nevertheless, all of the listed companies have a shot at carving out valuable market segments. Some might focus on industrial AR, while others might put their efforts into VR gaming. A number of companies could become successful in well-defined applications segments without directly competing with other metaverse providers. Some companies will have to pivot in their search for value-added applications as the market develops and changes. Companies are likely to experiment with approaches and technologies, not unlike the way startups and incumbents needed to find viable offers during the dot com era some two decades ago.

Many observers judge the current excitement about the metaverse as hype and related market efforts as not worthy of investment money nor consumers’ enthusiasm. These Cassandras deserve ignoring. The dot com era provides an illustrative blueprint of how overwrought exuberance resulted first in a painful shakeout phase but finally transformed the way we communicate with friends and businesses, collaborate with colleagues and partners, and entertain and educate ourselves.

Looking at the development of the internet – how long it took to enter the public’s awareness and how fast the changes then occurred once all the bits and pieces were in place – it is worthwhile looking at the internet’s timeline to draw inferences about the metaverse’s fate in coming years.

In the early 1990s, the internet had been around for almost a quarter of a century, but commercial success took time to arrive. In fact, most consumers probably didn’t even know by the beginning of the 1990s that there was such a communication network. By the end of that decade, e’s (as in e-commerce and e-books) and dot coms had changed the business world. It can take a long time to prepare the ground to become fertile soil that suddenly supports all types of opportunities.

Metaverse companies

The grande dame of virtual worlds, Linden Lab’s Second Life, is still around. The virtual representation of life started in 2003 and 10 years later had some one million users – the first true metaverse community, if you will. 

Nvidia Omniverse is a “development platform for 3D simulation and design collaboration”. The applications currently centre on professional tasks and productivity solutions.

Spatial provides virtual spaces that bring us together to enable teams to work together globally in a shared environment. The company is looking at communal spaces for collaboration and e-commerce, but also for education and exhibitions.

Upland is a non-fungible token (NFT) metaverse that is mapped to the real-world blockchain-based economy. The online environment enables users to buy, sell, or trade virtual assets, allowing participants to build houses or start businesses virtually. A marketplace then lets them sell their NFT properties to make virtual or real-world money.

In November 2021, Niantic opened its Lightship Platform for developers. The company’s augmented reality developer kit guides developers “on the way to creating immersive AR experiences that inspire movement, exploration, and shared experiences”.

Niantic is worth highlighting. Although the company itself might not be a household name, its AR gaming application is. Pokémon Go has been tremendously successful since its launch in 2016. The company has proved that augmented reality can make the entire world a convincing playground for virtual representations. While other companies will have to show that they can attract a large audience, Niantic already has a track record of doing so.

Lessons from history

The internet goes back to 29 October 1969. On that day, the internet’s predecessor Arpanet started its first operations. The University of California, Los Angeles, sent a message to the Stanford Research Institute (now SRI International) in Menlo Park, California. Its potential use for commercial applications eluded all but the most visionary minds.

Already the year before, on 9 December 1968, SRI researcher Douglas Engelbart gave a live demonstration of a range of applications his team had created. The demonstration, which later became known as the mother of all demos, introduced collaborative work protocols, the computer mouse, hypertext, video conferencing and window applications, among other features.

The demonstration preceded – and highly influenced – work at Xerox Parc, which itself provided the crucial impetus to Apple’s and Microsoft’s focus on graphical user interfaces. Pieces of the future tend to appear way before commercial applications follow – Engelbart’s demonstration resembles what most of us do with our computers on a daily basis some 50 years on.

In the 1980s, project work at the European Organisation for Nuclear Research, CERN, in Switzerland, led to the introduction of the World Wide Web – the www in internet addresses – to the world in December 1990. And in January 1993, Mosaic, the first usable web browser, appeared in the market. In the following years, universities provided network access, and students got familiar with computers and the World Wide Web. Now, the first consumers knew about the network’s capabilities.

The mid to end 1990s then saw a rush to business opportunities and to investors’ heads. Launch parties of unknown startups were legendary, culminating in the now-infamous broadcasting of the 2000 Super Bowl event that featured prohibitively expensive advertising spots of 14 dot com companies. Overexposure comes with the excitement that new opportunities breed – something to look out for in the metaverse space in coming years.

The dot com crash during the same year – which began not even two months after the Super Bowl – calls for caution when looking at the metaverse’s immediate developments. But nobody will argue that the internet changed businesses, economies and even societies as we knew them in the long run.

Buzzwords like dot com, big data, cloud, internet of things (IoT) and AI attract investors’ imagination and users’ attention – hype is perhaps par for the course when change is about to happen. Such excitement provides a guiding point to work towards a goal, after all. And promises of growth and market success then appeal to companies and entrepreneurs, who as a result develop new product lines or simply rebrand already existing offers as metaverse services.

Metaverse market realities

Concepts people believe in have a tendency to create their own markets. The metaverse will be no exception. Even if there will never be a metaverse in the way many experts currently envision, in the end, all the investment money and attention will result in innovative interfaces, advanced sensors, novel graphics solutions, and a slew of software applications that transform communication and collaboration. Such innovations will find use outside of metaverse environments too.

It makes sense to argue which stage the metaverse is – the internet’s still-quiet early or later overheated 1990s. Immersive AR and VR are not new, we’re already some decades into their development.

First experiments with AR gaming – similar to Pokémon Go – took place at least almost two decades ago. A 2004 report, Signals of change in advanced user interfaces, for SRI International’s consulting spin-off, discussed the Fraunhofer Society’s AR gaming application NetAttack. The game used Wi-Fi networks and semitransparent personal displays in headgear to project three-dimensional objects into real-world settings.

The aim of the combating teams was to destroy a virtual object of interest. The setup was clunky, but advanced for the time. Similar to the way Engelbart’s “mother of all demos” set the stage for future interactions with internet-based services, preliminary work for the metaverse has already taken place. Now, commercial applications can start finding their way into the marketplace.

There is still a question about the right browser – to stay with the comparison with the early times of the internet – to make access to the metaverse easy for the majority of users. Many companies see the future in smart glasses or VR headsets, but some simple smartphone applications or speech-enabled interfaces might do fine as they are already very popular with the public.

The right interface will be a driver of adoption. And the majority of consumers still need to become familiar with the concept of the metaverse, just as students had to learn about the internet in the 1990s. Successful applications will play a role in diffusion too. There are still hurdles and potholes to navigate, but current developments will lead to a sea change in technology use, entertainment options and productivity capabilities.

Martin Schwirn is the author of Small data, big disruptions: How to spot signals of change and manage uncertainty (ISBN 9781632651921). He is also senior advisor, strategic foresight at Business Finland, helping startups and incumbents to find their position in tomorrow’s marketplace.

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