What’s in store for the metaverse and immersive technology?

When Facebook announced that it was changing its name to Meta at the height of the pandemic in October 2021, jaws started dropping in technology and media circles around the world.

Okay, with teleworking and lockdowns there was an exploding demand for virtual interactive tools, but wasn’t an about-face like this a bit over the top?

1. Gadgets and widgets galore suddenly in search of a market

Mark Zuckerberg’s $2 billion acquisition of Oculus in 2014 was a sure sign that he felt pretty strongly that the future of mass-market digital and immersive technology lay in a universe that had yet to see the light of day: the Metaverse.

And in case there was any doubt about his intentions, Zuckerberg concentrated all his Meta initiatives in the Reality Labs brand, a Facebook subsidiary that consumed an additional $21 billion since 2014, including more than $13 billion in 2022 alone. No surprise that the media gleefully piled on as one Reality Labs project after another was cancelled. Of course none of these shipwrecks even came close to the massive 75% drop in the valuation of Meta stock last year.

Nearly ten years after the Oculus acquisition, fewer than 20 million headsets (that eventually became known as Meta Quest) were sold.

Compared with the 2.6 billion iPhones sold to date, it’s clear that virtual reality has a very long way to go before anyone can say it’s anywhere near mainstream. But that’s not deterred Apple from getting into the race with a Vision Pro headset tagged with a mind-blowing mid-four-figure retail price. You can bet your bottom dollar they won’t be selling billions of those babies any time soon.

So what’s behind the high-stakes gambling on such a slow-to-go virtual universe? And why are leading global enterprises with oodles of proven mastery in catering to our most deep-seated desires betting the farm on a vague and amorphous concept like the metaverse?

2. Sustainable interactivity is why

The idea of an immersive society embedded in an entirely digital and artificial world is not new. Back in 1992, Neal Stevenson developed the theoretical and totally dystopian Street, a perfectly spherical planet of finite dimensions and home to subcultures of permanently connected individuals in his novel Snow Crash. On the Street all property is sold by a monopoly owned by the billionaire behind its neo-feudal society. Sound familiar?

In both current literature and other creative efforts, the idea of being assigned an avatar that can interact with others has met with monumental failure, either because of the extreme control the platforms exercise, or because of user interest that drops to zero in a matter of nanoseconds.

The Second Life universe, launched in June 2003, was not immersive but focused entirely on the interactive dimension between avatars. Second Life allowed users to live in an alternative world, to interact with other individuals and communities, to work, and to enjoy new relationships.

At Second Life’s peak, two million active users were being connected every month. In all, some 70 million user accounts were created. But its publisher’s (Linden Labs) refusal to add anything other than a bare imitation of real life led to the platform’s slow and steady demise. Today a mere 20 thousand active daily users connect to the platform and no more than 80 thousand unique users on a monthly basis.

The robust 2D interactivity space that Second Life promised is now largely occupied by online games like Minecraft and Fortnite. Epic Games’ Fortnite tallies up some 15 million active daily users and close to 240 million a month. Its flagship product, Battle Royale, with an offering that includes a multitude of other challenges and activities, generates $4 billion to $5 billion in sales annually. In Fortnite, you can hold a meeting, attend a concert, and still destroy 99 enemies to win the game.

With some 400 million active accounts, Fortnite manages to reach a sizeable chunk of the global population. While the game is mostly popular with twentysomethings, it’s also become a true metaverse for players of all ages.

Like Fortnite, it’s a safe bet that the metaverse will very likely start out as a free, 2D, device-agnostic multiplatform.

Man In Cyberspace Of Meta Universe Discussing Architectural Project

3. Ready Player One

In his bestselling book Ready Player One – and also in Steven Spielberg’s film version – Ernest Cline lays the foundation for a world that Zuckerberg and other tech titans dream of: where the disenchanted citizens of an Earth in ruins escape for hours and hours every day to study, work, socialize, and play. And there’s only one metaverse option for them: the Oasis, a totally unique planetary monopoly.

Oasis founder James Halliday decides to hold a competition with the sole objective of transferring control of this unparalleled virtual planet to a successor: a replacement who shares his own benevolent philosophy. In the age of Cambridge Analytica and Bill C-18, this is where any comparison with Zuckerberg comes to an abrupt stop.

Cline’s inspiring universe is especially interesting for its economic dimension. Aside from the monopolistic aspect, the Oasis open economy allows the conversion of virtual currency from the real world to the virtual world and vice versa. Activities carried out in Oasis have an economic impact in the real world. Same goes for immersive exchanges. These can be translated into goods and services in the real world as well.

That’s how the book’s protagonist, Wade Watts – who uses a fake identity to work as a technical consultant – initially gets a headset from his virtual school. Watts is then able to get a full-body haptic suit so he can sense the effects of the immersive dimension even more intensely.

By the way, you can pick up a haptic suit in Canada today for between $500 and $13,000 (as of 2023).

4. The metaverse value chain

The question is not whether a metaverse will eventually emerge in the decades ahead but how many metaverses will emerge. In the same way that circumvention services have built fortified gardens requiring simultaneous subscriptions to multiple platforms, the metaverse will first and foremost be a story of fierce rivalry. So, from now on we can think about metaverses.

At the forefront of this new economy are equipment manufacturers and distributors. Following on the heels of Meta and Apple, a number of major brands are putting their money where their mouth is by producing their own access tools (Meta Quest, Vision Pro). And a similar modus operandi will eventually apply to game consoles and other hardware-interface-platform-content combinations.

Within this multitude of metaverses, a major challenge will be to mint and manage virtual currencies where convertibility is anything but guaranteed. There are very few games today that allow for reverse conversion, from virtual to real money. Dealing in a range of cryptocurrencies within different metaverses could prove to be tricky without oversight of reliable exchange rates, and validation and conversion mechanisms.

The temptation to create their own currencies will be irresistible even with the glaring example of Meta’s fabulous Libra fiasco staring them in the face. Which means handing supervision over to the authorities that be…be it the AMF, the CSA, or the SEC…watchdogs tech giants try to avoid at all costs because of the constraints that tend to cramp their freewheeling style.

Futuristic Play To Earn Concept

From a regulatory point of view, metaverse currency issuers will also need to address the debt and interest mechanisms that will inevitably arise, not to mention maintaining acceptable labour relations standards. We must never forget that heinous episode where Chinese prisoners were actually forced to mine gold for World of Warcraft players in the West as a reminder that the value creation inherent in such games needs to be rigorously supervised.

And last but not least, there’s the matter of what makes the metaverse work. While Canadian documentary filmmaker Dan Olson has declared that the metaverse is nothing more than a dead shopping mall, there are many questions relating to access rights, copyright, superusers, content producers, and feature developers that still need to be addressed.

From the outset, a significant portion of the metaverses will undoubtedly be powered by virtual spaces, assets, and projections generated by artificial intelligence, which is in itself currently in the throes of a crisis over intellectual property problems relating to the sources it uses.

There’s also the issue of Apple’s dominant position in the digital distribution ecosystem as a number of content and software producers have brought to light. In a no-holds-barred legal battle, Fortnite publisher, Epic Games, even pulled its flagship game from the Apple Store while waiting for the court to rule. In particular, Epic has taken a very dim view of Apple’s 30% cut on the sale of its own VBucks in-house currency.

Obviously, the virtual content economy is going to have some adapting to do. Although many major international brands will be lining up at the portals (as they’ve already done for Second Life, Decentraland, and many other social platforms), the question of independent content creation, or business activity within metaverses, has to be dealt with once and for all.

5. A tarnished tabula rasa

Will future two-way marketplaces allow creators to sell directly to consumers? And will it be possible to get funding partners to pay for the time, talent, and materials needed for creative production?

Only time will tell what new modes of economic interactions metaverses will make possible. As has been the case ever since online interactions became widely accepted, asymmetrical power networks will emerge within metaverses, and perhaps even more benevolent and egalitarian alternatives will also. Of course, we shouldn’t fool ourselves. Those who hold all the cards have a tendency to deal out hands that stack the deck in their favour. The more things change, the more they stay the same…Nevertheless opportunities will pop up. And, as always, the only way for a chance to win is to play the game.

Francis Gosselin
Francis has a doctorate in economics and is a multipreneur. Associated with the Sage Consulting Group since 2018, he is also the president of Norbert Hill and chairman of the board of directors of FailCamp, an NPO dedicated to promoting entrepreneurism and apprenticeship. He has worked as a consultant in the fields of education, media, real estate and financial services for clients such as Ubisoft, École des sciences de la gestion (ESG UQAM), Radio-Canada, Lune Rouge, BNP Paribas, Allied Properties and the Institut de Développement Urbain. He is a staunch believer in the virtues of social and philanthropic engagement, sits on the board of directors of the MUTEK Festival and is a member of HEC Montréal’s Club of 100 young philanthropists. Since 2012, he raises MIRA dogs for the benefit of people in need and contributes financially to this important cause.
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