Defining the Metaverse

Defining the metaverse, potential applications, enabling technologies, and engagement strategies for the next generation of internet.

By: Andy Wegleitner, Jonathan Okon, Erik O’Brien, and Eli M. Galayda

Welcome to Our Metaverse Blog Series

In what has become one of the most talked about, yet most misunderstood concepts this past year, the metaverse has taken the tech world by storm. We’ve seen everything from Facebook’s “Meta” rebranding to Microsoft acquiring Blizzard for a stunning $68.7 billion, all in hopes of securing a piece of what could be an $8 trillion dollar market opportunity. But most organizations are still asking, “what in the world (or digital world) is the metaverse?” and “What could all of this mean for my business?”

Over the course of our new Metaverse Blog Series, we will demystify the metaverse and provide customer-centric approaches for how you and your company show up in this digital environment. To kick things off, we will define the metaverse and its vision, breakdown the layers of its value chain, and provide some examples of how companies are showing up in the metaverse today.

What is the Metaverse?

While this seems like a straightforward question, you’ll get a wide variety of answers on what the metaverse is and is not. The challenge with defining the metaverse largely stems from the fact that we’re still in the “visioning” phase of what it can become. The components necessary for any future version already exist, but the ability to seamlessly connect them is just now becoming feasible. More than technology curiosity, we’re starting to see the first cusp of real business cases (and real investment) for allowing machines and data to integrate with our natural cognitive capabilities. As you read this, brands and companies are furiously building out the technologies and tools that will ultimately coalesce into what will one day be considered the metaverse. The technologies that enable and deliver the metaverse could be the most consequential humanity has seen. The transition will truly blend the real and digital worlds — and how we perceive this new version of reality. As such, any definition has the tough task of touting the limitless potential of the metaverse, while also recognizing the grand assumptions and technological breakthroughs necessary for it to materialize.

With that understanding of the potential future state and where we are today, we define the metaverse as an emerging generation of internet that enables creators (brands, users, AI, or a hybrid of all) to deliver connected, intelligent, and immersive experiences based around activities or a utility.

The metaverse will compress distance and reshape how we do things, how we share information, travel, learn, go to the doctor, meet with friends, or run a business.

A key aspect of this definition is that it includes the notion that early-stages of the metaverse exist in limited forms today and will continue to develop over time. There are a major opportunities for businesses to begin the process of testing and learning within the components of the metaverse to ensure they’re able to take advantage as it matures. As we enter the last phase of the industrial revolution, the lines between the physical, digital, and biological sciences will continue to merge to deliver an all-new reality with all-new possibilities. Companies who have gathered lessons learned from previous experience will be ahead of the curve in establishing their brands in this new reality.

In the following sections, we will begin to deconstruct the metaverse by breaking down its characteristics, elements, and current use cases to help make it more real for enterprise applications.

How It Works: The Value Chain

While the question of “what” the metaverse is can be complex, the “how” is a little more straight forward. Illustrated below is the value chain of how a metaverse experience is created. At the highest of levels, the value chain is made up of 3 basic layers: Creation, Connection, and Convergence. Within each layer, there are a number of different technologies and services that will enable each component of the value chain.

We’ve highlighted just a few key pieces of technology along with providers to illustrate how each enable the various elements. It is yet to be determined which vendors will ultimately “win” in becoming the key providers for certain aspects of the value chain, but major players are seeking to stake their claim.

Create

Creation in the metaverse is enabled by the dematerialization of products, services, and physical space. Formerly limited experiences or technologies are becoming normal and expected. From immersive games like Fortnight and Beat Saber, or emerging platforms like The Sandbox and Axie Infinity, to Coinbase and MetaMask on our phones and our home gyms powered by Peloton, not only are experiences and technologies becoming increasingly accessible, but the number of creators who design and/or build them are exponentially growing.

From a bottoms-up, code-centered process to a top-down, creatively centered process, the creation of compelling, realistic content will be a key component of what drives end user adoption of the metaverse. This greenfield opportunity to create and own content has already begun to spawn a creator economy centered around developing and profiting from building experiences within the metaverse. A true shift from centralized communities of content consumers to content and community-creators and amplifiers developing a decentralized flywheel powered by tools, templates, social networks, marketplaces, and monetization capabilities

To aid in this development, various design tools are needed to create, rig, animate, and simulate content. GPU’s are needed to power content creation and render high-fidelity experiences to end users. Game engines are needed to enable real-time 3D creation of hyper-realistic content. Most importantly, these technologies need to advance together as they are heavily reliant on each other’s success.

Connect

In order to bring creators and users together, the proper infrastructure needs to be built to effectively deliver content. The metaverse will rely heavily on existing infrastructure technology to continue to mature in order to increase connection speeds for data-rich experiences. For example, the prevalence of 5G and other advanced networks added with continued miniaturization and increased processing power of chipsets will enable fast, low-latency connection speeds. The ability to store and share content at low costs on established cloud platforms will make data more accessible. Blockchain technology is enabling new ways of componentizing and assembling content, utility, and currencies and can be used to securely store data and content in a decentralized manner. We expect to see various forms and formats of decentralized markets and applications built on blockchain technologies to continuously emerge.

As these types of infrastructure technologies continue to evolve, metaverse experiences and technologies will continue to become more accessible and understood like the technologies before it.

Converge

The convergence layer is where value of the metaverse is realized as consumers and enterprises are able to engage. Advancements in technology ranging from hardware and software will augment our human capabilities and make it easier for end users to step into the metaverse for extended periods of time. Next generation mobile devices, VR/AR headsets, smart glasses or contact lens, haptic suits, and neural technology will further blend our perception of the world, both real and virtual. Sitting on top of blockchain technology, cryptocurrencies will be used to exchange value between users in the metaverse. With the advancement of these experiential technologies, more everyday experiences will become available across the metaverse.

What Will Drive Its Success: Key Attributes

While we may not know exactly what the metaverse will look like in the future, there is a shared understanding of some of the key attributes that will make it successful. Though these attributes already exist on a spectrum today with respect to how well they’re being utilized, they will continue to develop in importance as the metaverse matures. Below are some of the key attributes, how they’re showing up today and what they may mean for the future of the metaverse.

Interaction

Interaction is characterized by the ability for individuals, businesses, and digital content to communicate with each other within the metaverse.

A current example of interaction in the metaverse as it exists today is Meta’s Horizon Worlds. In this application, users can create, communicate and dwell in any space they can imagine. With the creation tools Horizon Worlds provides, users can construct environments ranging from battle royale arenas to collaboration spaces to learning forums.

In the future, the ability to interact will go beyond what you can simply see and hear from a sensory perspective. One instance of this is how wearable devices have started to integrate haptic technology that can translate virtual contact in the metaverse into simulated physical contact, giving the user a realistic sense of touch and feel. For example, shaking someone’s hand in the metaverse can cause a haptic glove you’re wearing to compress simulating the physical interaction of a handshake. See the wind whipping off the ocean? Imagine if you could feel that breeze via cooling sensation of a haptic suit consistent with wind direction. This ability to simulate digital experiences into the real world will be a defining characteristic of a mature metaverse.

Economy

Much like the real world, within the metaverse there will be an economy whereby individuals and businesses can create, own, invest, sell, and earn from actions that produce value.

Most early consumer adopters view the decentralized aspects of the metaverse as the value driver with the promise of better security, ownership of assets and data, and the ability to create, distribute, and monetize their earned, paid, or owned content.

An example of a metaverse economy can be found in the mobile game, Axie Infinity. In the game, users go to battle with creatures and earn cryptocurrency as a reward. The universe has a player-owned economy where players can own, buy, sell, and trade resources they earn in the game through skilled-gameplay and contributions to the ecosystem.

As the metaverse matures, its economy will continue to scale with emerging job markets and value exchanges. Users will fill full-time digital jobs as they are paid for activities that contribute the virtual economy. Compensation may be provided using cryptocurrencies or other proprietary tokens to be spent either in the digital or physical world. NFTs could be used to display ownership of goods, space, and other items of value in the digital reality. The full scale of this digital economy is immense and will continue to grow parallel to users and companies joining the metaverse.

Interoperability

Interoperability is characterized by the ability to make use of content (data, information, digital assets) across separate platforms in the metaverse.

NFTs and cryptocurrency are examples of interoperable forms of ownable digital assets we use today. They can be brought into, placed, and transacted across a variety of digital platforms. The same can’t be said for other forms of digital content. For example, a “skin” (or avatar) that you buy within Fortnite cannot be brought with you into Roblox. That “skin” is not interoperable.

Digital assets will be transferable in a mature metaverse. For example, skins, currency, clothes, and other pieces of content earned or purchased in one platform will be able to follow you as you as you exit one platform and enter another. They become more tied to your online identity and not just your character within an individual game.

Identity

Speaking of identity, in the metaverse it is characterized by the individual agency afforded to everyone to be a part of the same digital experience while maintaining their own uniqueness and autonomy.

Your Apple ID or your Facebook account are digital representations of yourself being used in the metaverse today. Meta’s Horizon Worlds uses your Facebook login to mark your identity in their VR creation space, however this application is a siloed experience in that this identity is not carried into other experiences.

If we extrapolate this example to a more mature metaverse, we may see a version of the ‘digital wallet’ similar to that of a gaming inventory with digital identities attached to your physical identity through a secure encrypted connection, allowing digital attributes and assets to be perpetually linked to your digital identities across platforms or virtual worlds. This will allow users to spend, earn, or operate in the metaverse in a similar fashion to the real world in the sense that you maintain your identity across physical experiences, places, and interactions.

Digital Immersion

Digital immersion alludes to the spectrum of experiences that spans both the digital and physical worlds and the degree to which you are within one or the other.

A current trend in digital immersion in the metaverse is training. Brands, like Walmart, are using VR and AR to instruct their employees and have found a 10–15% increases in information retention and employee confidence compared to online courses. Due to that success, Walmart has shipped their VR sets and training modules to over 17,000 stores.

Digital immersion in a mature metaverse may even take this a step further from simply training in a virtual world, to working within it. Digital twin technology maps physical spaces and creates exact replicas that customers can access digitally via virtual reality. AI employees may help with the carting and checkout process while VR employees play a role in the metaverse shopping experience. All of these technologies and more will combine to create a more immersive reality.

How to Engage: Where to Start

While there is no universally accepted game, place or URL that you can point to and say, “That is the Metaverse!”, there are plenty of smaller sandboxes you can play in that represent in part what the metaverse could be. Fortnite and Roblox are two great examples. It is on these types of platforms that companies, brands and other creators have begun the process of testing and learning to see what is possible, and what people are responding to. While there have been plenty of ideas that have fallen flat, there are a number of verticals that have taken off. Today’s successful use cases live in the logistics, healthcare, military, and industrial industries, but early consumer explorers are emerging within retail, media & entertainment, and CPG.

Entertaining

If you haven’t seen a concert within the metaverse, it may only be a matter of time before you find yourself sparking up your proverbial digital lighter. Ariana Grande’s Rift tour racked in millions of livestreams on Fortnite along with huge sales from NFT based memorabilia. This event, as well as others by Justin Bieber, Travis Scott & Lil Nas X across a variety of platforms have demonstrated the streams and dollars that concerts in the metaverse can generate. This has not only led to investments, such as Fortnite’s purchase of Bandcamp to attain additional music content, but also the creation of an entire Fortnite Soundwave series that is expected to generate millions of streams and dollars. With “attendance” to these concerts reaching into the tens of millions in combined views and streams, a new and exciting market has been established. While much of this activity occurred during a time when in-person entertainment was limited, it is expected that these events will continue to grow in popularity as physical spaces continue to reopen.

Shopping

Retail in the metaverse has come a long way since the first store opened its doors in 2018. Since then, a number of companies, Gucci, Adidas, and Ralph Lauren, have purchased space in the metaverse where they are selling the latest direct to avatar fashion trends. Retail titans like H&M, Walmart, and Etsy have also embraced the metaverse by opening digital to physical shopping experiences. Nike’s Nikeland on the Roblox platform has been a huge success by not only introducing their brand to a younger generation, but also by acting as a testing ground collecting data on the styles and trends that people on the platform are responding to. We expect that retailers will continue to seek out opportunities to build their brand, while bridging the virtual and physical retail space.

Dining

To the surprise of many, the dining vertical has taken off in the metaverse as companies look to build their brands and drive in-restaurant traffic. Early to the game, Chipotle has been successful not only bringing people through their virtual doors, but also translating that activity to foot traffic in their physical locations in the form of coupon redemptions for free food.

Fast followers, McDonalds and Panera, have taken note and are creating their own experiences linking orders placed within their metaverse locations, to meal delivery services, and ultimately your front door. Any way you slice it, the metaverse creates another avenue through which restaurants can reach a new audience.

Socializing

People have been meeting up online to game and chat for decades now. For many it’s an important social outlet. The metaverse has already begun to capitalize on this sense of community by creating an ability to interact with others in a deeper sensory capacity then text on a screen. That said, the metaverse experience needs to have benefits that outweigh a simple phone call or video message. This needs to be done by finding new ways to capitalize on and link the key attributes of what makes the metaverse unique.

Companies like Spatial And MetaHub are looking to make the most of on the need to gather by giving you the platform to create unique spaces to meet up. Through these platforms you can set up a poker room for yourself and a couple buddies to play cards, or set up a space where you and your family can all get together for grandma’s birthday if she can’t be there in person. It’s unclear how people will ultimately adopt and leverage the metaverse as a means of communication but it has potential to improve the virtual socialization experience for targeted use cases.

Working

Similarly to socializing, working within the metaverse is starting to take off. Bill Gates is on record with his belief that in just a few years our work meetings are going to be moving away from the 2D tiles on our screens and into the 3D metaverse. In addition, virtual immersive training has immense potential to offer easily accessible, more engaging forms of training to employees. Remote collaboration has taken on a new level of immersion with Horizon Workrooms and Microsoft Mesh for Teams, where employees can create AI-enabled avatars of themselves to engage in digital meetings. With the thought that a more immersive work experience can improve productivity, there will continue to be more companies exploring how they can use the metaverse to grow their business.

How Can You Show Up in the Metaverse?

As you can see, the metaverse has immense potential to continue to grow and attract consumers. Gartner estimates that by 2026, 25% of the population will be spending at least one hour a day in the metaverse. This is an opportunity to increase your brand exposure by engaging your customer in a new and innovative way. While there is still a lot to be determined on how the metaverse will materialize, we recommend getting started now with a test and learn approach to understanding your potential metaverse customer and brand-specific use cases to build a business case around.

Keys to getting started are finding the right technology, network and creative partners that will co-create and ideate with your team along your metaverse journey through time and whatever ‘space’ means in the metaverse.

Finding the right skill sets, encouraging curiosity, and being okay with failure is important in the early ages of the metaverse. As with our real universe, creating stars takes time, energy, mass (amounts of learning), and a little bit of luck.

In our blog series, we will continue to look at how the metaverse is being used in various industries and try to shed some light on ways our partners can get involved. Please follow our account and check back for updates!

Authors

Andy Wegleitner

Specializing in customer and product strategy, Andy has led engagements to empower clients to solve complex strategic challenges from the lens of the customer using a combination of emerging technologies. He’s built digital strategies that leverage augmented, virtual, and mixed reality solutions to a variety of cross-industry clients.

Jonathan Okon

Jonathan draws upon over 7 years of experience in design research, experience strategy, and product design to deliver solutions that are desirable and feasible. He is passionate about utilizing design thinking to improve experiences, increase user adoption, and help enterprise companies better understand their internal and external users.

Erik O’Brien

Erik specializes in business and product strategy with a focus on the future. His expertise lies in helping identify trends, understanding external forces, and creating unique ways to look at problems. Erik has spent the last 12 years working with brands large and small at the intersection of technology, design, and data.

Eli M. Galayda

With a background in customer experience innovation, Eli works extensively with clients in both the physical and digital spaces helping them to identify, integrate, and optimize innovative technologies into their clients’ customer journeys.

Slalom is a global consulting firm that helps people and organizations dream bigger, move faster, and build better tomorrows for all. Learn more and reach out today.