Making sense of the Metaverse
Businesses must prepare for the online world’s next big evolution or risk being left behind in the digital economy
IN a world crowded with new tech trends, the metaverse is the one creating the most buzz at the moment. Yet, despite hogging the headlines, there is still no clear consensus over what exactly makes up this virtual realm – grandly dubbed by experts as the next iteration of the Internet.
The metaverse has existed in some form or other for decades, initially through applications like Second Life in the 1990s, and more recently, in immersive games like Fortnite that boast hundreds of millions of users. These platforms are characterised by virtual worlds that continue to exist even when users are not engaged with them, and combine aspects of the physical and digital worlds.
Looking ahead, experts are excited about the prospect of a digital economy flourishing in the metaverse; one where users can create, buy, and sell goods. Some envision the various digital platforms to be interoperable, allowing a person to take virtual items like clothes or cars from one to another.
Technologies such as virtual reality headsets and blockchain are expected to push the boundaries of the metaverse beyond gaming, and into all aspects of work and play. Indeed, analysts estimate that the metaverse will present a market opportunity estimated at over US$1 trillion in annual revenue.
“The metaverse is a facet of the ‘next Internet’ – a more immersive, 3-dimensional virtual space where large groups of people can interact, work and play at the same time,” says Duleesha Kulasooriya, Centre for the Edge Leader, Deloitte Southeast Asia.
“The opportunities lie in new digital content for the metaverse, and this can open doors to new marketplaces, revenue channels and business models. We expect some of the more compelling characteristics from the gaming world – such as immersive spaces, customisable avatars and gaming mechanics – to bleed into our daily digital interactions, allowing for deeper connections with friends, employees and consumers,” he adds.
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For businesses, the metaverse represents another opportunity for growth that is layered on top of the brick-and-mortar economy. These twin economies can mimic each other, allowing for an immersive experience in the virtual space, and the projection of images into the physical world. Through a digital avatar, for instance, a user can socialise, travel or work in the digital realm of the metaverse.
“The best way of understanding the metaverse is as a “digital twin” of life. This means that the metaverse is copying the value of the offline and putting them online,” explains Joongshik Wang, Asean leader at EY-Parthenon.
Fuelling the creator economy
For Mr Kulasooriya, 3 use cases for the metaverse stand out: the creator economy, the entertainment space, and the retail sector. The creator economy has ballooned with the emergence of metaverse worlds that have attracted millions of users who play, spend, and create their own content and games.
The most popular among them, Roblox, features over 50 million daily active users, with many brands building a presence there. Users who created their own games on Roblox reportedly made more than US$538 million last year. In the entertainment space, celebrities and influencers are crossing more frequently into the virtual world. For instance, some 46 million fans attended K-pop group Blackpink’s virtual fan event earlier this year to receive digital autographs from their idols.
Meanwhile, the metaverse has been popping up in suburban shops in rural Indonesia. WIR group, one of the pioneers in Augmented Reality (AR) technologies in South-east Asia, is creating a metaverse platform for consumers in Indonesia’s smaller cities, enabling them to create their own digital avatars at the nearest retail kiosk.
More than a game
Beyond these use cases, the economics of the metaverse is throwing up opportunities in almost every sector. Consumers with avatars will be able to buy limited-edition, digitally branded clothing from a virtual store, while manufacturers could potentially test their products in the metaverse at a lower cost.
Meanwhile, new business models will emerge with the growing adoption of tokenisation, fractionalisation, and portable ownership. These concepts involve the digitisation of assets using blockchain technology into “tokens” that can be divided into smaller pieces, or fractionalised. These tokens are portable as ownership is in the hands of the one with the “private key”, and not kept or owned by a third party or an intermediary.
The much-discussed non-fungible tokens (NFTs) are already being used to represent real-world items such as artwork and real estate. Tokenising these tangible assets makes buying, selling, and trading them more efficient, while reducing the probability of fraud.
“NFTs can be used as digital credentials to prove ownership due to their non-fungible nature. NFTs can tokenise artwork, music, film and television, and even real-world assets such as real estate and livestock, ensuring that ownership is public, verifiable and immutable. Creators can sell NFTs to monetise talent and services,” says Professor David Lee, chairman, Global FinTech Institute.
Fear of missing out
Experts argue that the paradigm shift to a more immersive Internet is already happening, even as some of the more advanced use cases are still several technological breakthroughs away. Therefore, companies should prepare for the metaverse becoming mainstream, or risk being left behind.
“While there is still time before the metaverse becomes widely adopted, this is an opportune time for companies to start with small-scale pilots to familiarise themselves with the possibilities presented by the metaverse. Companies should take the time to figure out not only new products or process innovations, but also what their identity in the next Internet will and should be,” says Mr Kulasooriya.
Mr Wang adds: “While companies are still cautious, they also want to remain relevant. So they are looking at the metaverse to improve productivity, for new sources of revenue or to improve margins. So every sector to varying degrees is already starting to adapt to the metaverse.”
However, Prof Lee believes not all companies are equipped to be in the metaverse. Due to limited resources, for instance, SMEs will focus first on survival amid rising competition. “If the companies do not pay attention to the metaverse, they will miss great opportunities. Companies must choose which way to explore based on company culture and target clients,” he says.
“This industry is full of opportunities and noise. Awareness and empowerment through proper training are required to understand the risk, reward and complexity of the metaverse.”
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