Why this time around, the metaverse is different
Mark Zuckerberg’s recent public embrace of the metaverse this summer (2021) has gotten a lot of people talking about virtual 3D worlds. The buzzword was all the rage the last few months**.
I’ve chuckled a few times at the resurgence of the term. Five years ago I worked in the VR industry and we were similarly abuzz that 2016 was the time for the metaverse to emerge.
Fast forward five years, and the ‘verse is having its moment — again. A combination of 3D worlds, social gaming, NFTs, and virtual goods ownership has emerged into the broader public consciousness, thanks to the convergence of several timely cultural trends.
So given this concept has been around for nearly 30 years, and surged several years ago when Facebook bought Oculus, what is different this time around?
I’ll explain more below but in short, the pandemic showed us the metaverse doesn’t have to be the VR headset-driven 3D world we imagined, and new synchronous first gaming & social platforms have become a “third place” where people can hang out, watch concerts, even date. All of this with the infusion of crypto and virtual currencies driving real-world outcomes, has made the metaverse even more real.
Obviously, the pandemic has been a big driver of gaming adoption. Over the last 18 months we’ve seen a huge boost in both the amount of time people spend playing games (40% more globally) and the type of people playing them. The gaming audience increased across every age group, especially for social and mobile games.
The Roblox IPO and the enormous growth of Epic Games* is further evidence that virtual worlds have reached new levels of mass consumer awareness.
Perhaps most significantly, people have begun to use gaming platforms for more than play. The concept of ‘virtual experiences’ got a huge boost in April 2020 when more than 12 million players attended a series of virtual Travis Scott concerts inside Fortnite. Suddenly people realized they could enjoy experiences inside 3D worlds that were unavailable anywhere else.
Social gaming is also seen as a more authentic form of personal expression than traditional social media, especially among digital natives. We’ve seen a backlash among Gen Z against platforms like Instagram, where everything is carefully staged and people pretend to be something they’re not in real life.
For this generation, playing games with strangers is a better way to find out what they’re really like. Yes, you can create an avatar inside Fortnite that looks nothing like your IRL self, but your behavior inside the game is something that’s not so easily faked.
People are even using game platforms to go on virtual dates. Animal Crossing is becoming the new Tinder.
At the same time gaming was exploding, crypto was having a moment with Bitcoin and ETH reaching all time highs in 2021. The popularity of crypto currencies coincided with global headlines about Coinbase’s IPO and governments like El Salvador officially adopting crypto as legal currency. This fueled virtual currencies for the metaverse.
What the pandemic showed is that people fully embraced virtual worlds, and they were actually mostly accessed through 2D interfaces. If anything, the cherry on top of the metaverse cake is that Facebook has now sold at least 4 million units of its wireless Oculus Quest 2, making it the fastest selling VR headset of all time. It’s still a fraction of console sales, but the metaverse didn’t need it to arrive.
An emerging virtual eco system
These factors are driving investment into startups that fill different niches in the ecosystem surrounding social and immersive gaming. Checkout this marketmap by Jon Radoff:
There’s been a proliferation of tools and apps that let you generate and customize online avatars, like Voilà AI Artist, FaceApp, Genies, & ItsMe and another relatively new genre of startups lives at the intersection of gaming and crypto. We’ve seen the emergence of play-to-earn (P2E) companies like Axie Infinity, Uplands, Dapper Labs, Sorare, and Splinterlands, where players can generate non-fungible tokens by raising digital pets or exchanging trading cards.
P2E games have attracted new types of players who might not otherwise have picked up a controller or downloaded a mobile game. The use of NFTs also introduces the concept of digital property rights that exist outside the control of the game’s developers. Enabling individual ownership of in-game assets brings us another step closer to a true metaverse.
The future will be meta
The Ready-Player-One metaverse isn’t here yet. We won’t all be jacking into Facebook 3D and chillin’ with grandma and grampa on the surface of Pluto during Thanksgiving (or, if you are, please let me know).
Today’s technology isn’t quite advanced enough to make fully immersive, consumer friendly experiences widely available. We still need more affordable, higher power GPUs and mass adoption of low-latency 5G networks that could enable seamless lightweight headsets. Snap’s latest AR Spectacles* and Facebook’s new Ray-Ban eyewear might get us closer, but they’re not widely available.
Web2 and the pandemic proved major players can deliver on experiences & emotions at mass scale and fulfill requirements of the metaverse such as persistent, synch-first, presence. Web3 players are proving out functionality: fueled by crypto & interoperable, portable economies, real earnings, irl to url. We need both.
If the mid 2010s era gave us institutional-level investment in the infrastructure layer of the technologies needed to support the 3D metaverse such as Oculus x Facebook, Nvidia, crypto, then the early 2020s era will go down as giving us the retail investment and mindshare needed to propel the space forward through 2D access points.
So what does all of this mean for companies?
Companies need to experiment with the metaverse to prepare for what’s coming. How will their brand look and feel in an immersive environment? Do they have a graphics team that can create the 3D images and artwork required? Or a tech team in place to support whatever virtual worlds emerge as market leaders? How do they engage with users in a synchronous first, digital avatar driven, social world? Companies need to begin thinking about this strategy now as gaming is headed for the metaverse and gaming is the largest entertainment category, greater than movies and music combined.
Obviously, we’ve been down this virtual road before. In the mid 2000s, major brands jumped into Second Life with both feet, then watched their investments wither as the 3D cities they built became ghost towns.
Technology moves in cycles, but this era of the metaverse feels different. It’s been a perfect storm of events and we’re one huge step closer to the visions laid out in Ready Player One and Neal Stephenson’s Snow Crash. And to be clear, I’m not excited about the dystopian inequality shown in those books. It’s important to speak about how the metaverse is being built now so we can design thoughtfully around its dangers. We have that opportunity now. Bring on the ’verse.
* Lightspeed portfolio company
**Now that Facebook has changed its name to Meta, metaverse being all the “rage” has turned into actual rage & people not liking the word. Facebook/Meta co-opting the word aside, I’m still a fan of the concept
Mercedes Bent is a partner at Lightspeed Venture Partners where she invests in consumer, edtech and fintech