Economic insecurity in the metaverse
Last year, the world learned the word for what you get when the lines between the real world and the internet blur: The metaverse. In theory, most people have wrapped their heads around the concept. But what do we do in and with this metaverse?
First mentioned in Neal Stephenson’s 1992 science fiction novel Snow Crash, the metaverse is essentially an online world where you can go to school, go to work, play games, watch concerts, go shopping, and much more without ever leaving your home. It’s the two-dimensional texts-and-images internet come to life à la the mirror worlds in The Matrix.
The first frontier—virtual reality headsets transporting people to different worlds visually—was achieved several years ago. Since then, the attempt has been to make the metaverse “livable” in all its glory, complete with all senses. A handful of startups are working on integrating scent; haptic gloves will allow wearers to touch and feel things; there’s a lickable TV prototype, and another tech that uses electrodes in cutlery to replicate sour, sweet, salty, or bitter sensations in the mouth.
But for the most part, the metaverse as it has been imaged and capitalized on hasn’t taken off. There are too many questions—what does policy and governance look like, how will children be protected, how much is a virtual shoe really worth, and so on—and not enough answers. Getting those answers will take time and money. Experts are split down the middle on whether or not a fully-immersive virtual world is even possible.
So, will any investment in this massive virtual economy be worth it? Grab a headset, we’re going in.
By the digits
2.8%: The metaverse’s contribution to global GDP in 10 years, as per a May 2022 projection by Analysis Group (a research company contracted by Meta)
$40 billion: How much the metaverse will pump into sub-Saharan Africa’s GDP in a decade, according to Analysis Group
238,000: Followers India’s first metaverse influencer, Kyra, has amassed on Instagram. The internet personality created by TopSocial has forged brand deals with headphones maker boAt, Chinese smartphone company Realme, TV channel Colors, and more.
$25: Monthly cost to raise “virtual children” in 2070, according to Catriona Campbell, one of Britain’s leading AI experts
77%: Drop in funding to startups in the metaverse space—companies in virtual reality (VR), augmented reality (AR), and the virtual world industries—in the first quarter of 2023 compared to the same period two years ago
$3,499: Cost of Apple’s Vision Pro headset, well above the $999 price tag for the top-line Meta Quest model
The price isn’t right
The metaverse ain’t cheap
While Meta initially dominated the metaverse talks, other big firms like Microsoft, chipmaker Nvidia, Amazon, and Disney quickly made their own big bets on its potential. Starbucks and Nike jumped on the bandwagon. One thing all these companies had in common in their metaverse hype? Money to burn.
But all those dollars haven’t paid off. Meta (formerly Facebook), the biggest company in the space, hasn’t cracked the economic balance yet. In fact, it’s far from it. The company that literally changed its name to show its commitment to the cause has seen costs, and therefore losses, widening. Since its inception in 2019, its Reality Labs division has lost more than $46.5 billion. Meta has warned investors to expect the situation to get worse before it gets better.
Some companies are now penny-pinching and turning their virtual world dreams toward AI. Google is training large language models to make search better. Microsoft, with its $13 billion bet on OpenAI, is improving search and—likely to kickstart some return on the AI investment pronto—selling AI integration across Microsoft Office’s suite of apps. Disney has set up an AI task force to look at how the tech can save the entertainment giant costs. Meta chief Zuckerberg has explicitly stated AI will be the company’s “biggest investment areas in 2024” in both engineering and computing. May we suggest a new name: Chatbook.
The brief (recent) history of reversing metaverse bets
January 2023: Microsoft shuts its virtual workspace AltSpaceVR.
February 2023: Microsoft ends its industrial metaverse project a mere four months in, and fires 100 people. It also slashes staff from its VR headset HoloLens’ team.
Also in February 2023: Chinese internet giant Tencent ditches plans to make VR hardware as a mature market for it appears to be many years off.
March 2023: Meta pivots toward generative AI in its “year of efficiency.”
Also in March 2023: Walmart shuts down a six-month-old branded space in the gaming world Roblox called Universe of Play.
March 2023, again: Disney eliminates its Metaverse team, comprising of 50 people.
June 2023: Google scraps its Project Iris for AR glasses, choosing to focus instead on AR software.
Quotable
“We are in a winter for the metaverse, and how long that chill lasts remains to be seen. The hype was way exceeding the reality of the capabilities of the technology, the interest from customers—both business and consumer—and just the overall maturity of the market… We think that, in the future, something like the metaverse will exist, whereby we have a 3D experience layer over the internet.”—J.P. Gownder, vice president and principal analyst on Forrester’s Future of Work team
Pop quiz
Once upon a time, Meta neé Facebook was a…
A. Yelp-like review site for campus dining halls and food.
B. Hot-or-not polling site pitting two student ID photos against each other.
C. Pet-sitting service for professors.
D. Chatroom service for anonymous homework trades.
Scroll on down to the bottom to find the answer—no headset required.
Fun fact!
In October last year, Interpol, the global police organization, unveiled the first ever metaverse specifically designed for law enforcement worldwide. Its purpose is twofold: Defining which acts are criminalized in the virtual world, and protecting human rights as the metaverse presents itself as a tool for mass surveillance of sorts.
Poll
What would you actually use the metaverse for?
- Attending a Beyoncé concert in LA while physically being in Laos
- Buying some land to build a house (but be warned, land in the metaverse doesn’t come cheap either)
- Definitely raise a child. The $25 per month cost is much more appealing than the $1,334 a real child needs on average
- Fitting cows with headsets to put them in a better environment for increased milk production. Sounds crazy, but what if we told you that it’s already been done?
Let us know which scenario you’d pick.
💬 Let’s talk!
In last week’s poll about megatrends, 45% of you said that climate change is the megatrend that’ll most influence human life in 2100. 37% of you said that the most influential megatrend will be AI, while 18% said it’ll be aging populations.
🤔 What did you think of today’s email?
💡 What should we obsess over next?
Today’s email was written by Ananya Bhattacharya (who hopes it doesn’t all turn out to be a meta-curse), and edited by Morgan Haefner (prefers the written verse).
The correct answer to the poll is B. While studying at Harvard University, in 2003, Mark Zuckerberg started Facebook—then called FaceMash—as an online service for students to judge the attractiveness of their fellow students.