I was thinking about how to represent this transitory season as the waning days of summer cruelly dissolve into… lord knows what comes next. Yes, there was the resurrection of COVID, as well as, paradoxically, another stock market run-up, but I believe this summer was defined by something else. This, in my opinion, was the moment when the Metaverse became a thing, a phenomenon that will grow to be bigger than COVID, or even the stock market.
Before I go into detail, let me tell those of you who are well-versed in the Metaverse and are rolling your eyes at the Boomer and mumbling “that was sooo 2020,” that the vast majority of people on planet Earth have no idea what the Metaverse is, and it is to them that I write.
What is the Metaverse, and how does it work? Simply defined, the Metaverse is the internet’s next mega-phase, a fusion of the physical world with XR, AR, and VR that is already revolutionizing the way we interact, work, and live.
“A vast online universe transcending individual digital platforms, where people reside in immersive, shared virtual spaces,” according to the Wall Street Journal. People would be able to try on products in stores or attend concerts with pals using avatars, just as they would offline.” (The Metaverse will also necessitate a tremendous increase in processing power, as well as tools and programming that have yet to be developed.)
Mark Zuckerberg, the CEO of Facebook (FB), spent a lot of time on his earnings call in late July talking about the Metaverse: He described it as a “virtual world” in which “you may be there with others in digital settings.” “Think of it as an embodied internet that you’re inside of instead of just gazing at. This, we believe, will be the successor to the mobile internet.”
Metaversians also talk of the Metaverse being synchronous and constantly live for an infinite number of players, which means that your avatar will be walking around this digital world in real time, perhaps through some kind of glasses, for both leisure and work.
If all of this sounds too complicated for you, remember that instead of checking your phone first thing in the morning, you’ll be checking into the Metaverse at some time. That’s impossible to believe. Oh, it’s on its way. Check out “A Day In The Metaverse” by Cathy Hackl, CEO of the Futures Intelligence Group, a consultancy that assists brands with Metaverse strategy, for a glimpse into what life might be like in the Metaverse age.
Is there any evidence that the Metaverse exists? The answer is yes, at least in its early stages. Digital game platform Roblox (RBLX), Second Life, which bills itself as a virtual world rather than a game, and, most notably, the smash-hit game “Fortnite,” which is rapidly transforming itself into a virtual world replete with everything from commerce to Ariana Grande concerts, are the closest approximations of it right now. (I’ll go into more detail on “Fortnite” later.)
If you’ve never visited one of those worlds, you might find it difficult to comprehend what’s going on here. Watching the 2018 Spielberg film “Ready Player One,” which, if you ignore the Hollywoodization, includes some fantastic simulations of what people are pondering, is a nice shortcut approach to understand the Metaverse (never mind that life may end up imitating this art.) Another source is Neal Stephenson’s 1992 novel “Snow Crash,” in which he invented the term “Metaverse.”
And for the most insightful deep-dive explainer on the Metaverse, I recommend this “great” [that’s according to Mark Zuckerberg and tech writer Casey Newton] essay by Mathew Ball, a venture capitalist (and former Canadian firefighter), who has become one of the most prominent Metaverse thought leaders, from last year. In June, Ball dropped an updated, nine part(!) “primer” here.
“The internet era was defined by the computer being in the living room and the connection to the internet being occasional,” Ball says. “The shift to mobile computing meant moving the computer from the living room to the office and into your pocket, and changing access to the internet from occasional to continuous and persistent. Metaverse is the idea of computing everywhere, ubiquitous, ambient. In a simplified sense, think about the Metaverse as a series of interconnected and persistent simulations.”
Another important point is what techies call interoperability, meaning that you can move seamlessly around this virtual world on multiple devices without friction. Ditto for intellectual property. Marvel characters (say you as Black Panther) could hang with DC characters (your best friend could be Wonder Woman) without corporate overlords Disney and WarnerMedia, respectively, throwing a hissy fit.
‘The next internet, web 3.0. We don’t want to be left behind.’
“The Metaverse is a network of interconnected virtual worlds in the same way the World Wide Web is a network of interconnected website,” says Rabindra Ratan, an associate professor of media and information at Michigan State University who specializes in the interaction between people and technology. “I can jump in a web browser, cruise from one website to another. In the future, you will jump in the Metaverse browser from one virtual world to another to another.”
That ease of digital mobility is critical. “The greater degree of interoperability, the greater utility of any simulation,” says Ball. “Like how a J.Crew belt is interoperable with Gap pants; an American-bought car works in Canada and Mexico. It’s generally more efficient, better for the economy and users, and everything has more utility.”
“The second element is the extent to which interoperability enables greater competition in the marketplace,” Ball says. “If every company had proprietary belts or shoes, would it become impractical for a new pants apparel company to emerge that wouldn’t work with the belts you purchased previously? No one would buy new pants if they needed to replace the belts and shoes.”
NB: And of course crypto, or some sort of digital descendent, will be the coin of this new realm. And already retailers like Ralph Lauren and others like Visa are beginning to dip their toes in the Metaverse water.
“Take a look at the internet and mobile internet. Over time it disrupted nearly every industry in nearly every geography,” Ball says. “It changed which companies consumers patronized, business models, products, behaviors. This produces an extraordinary economic opportunity overall.” Same will happen from the Metaverse, Ball says.
“Back in the 2000s, people thought we’ll never need an e-commerce team or a social media team, just have an intern start it,” says Hackl. “I see this and think there’s a little more seriousness from companies thinking ‘this is the next internet, web 3.0. We don’t want to be left behind.’ They used to say every business is a tech company. Now every company will be a Metaverse company.”
Sure the origins of the Metaverse have been kicking around for years, but what’s happened this summer is that Silicon Valley, media and the world of business are starting to not only pay attention to the incipient Metaverse, but they are beginning to transition into it.
Mark Zuckerberg talked to his workers earlier this year about the importance of turning Facebook into a Metaverse firm, and Casey Newton of the Verge conducted an interview with him on the subject in July, which you should read.
Zuckerberg’s musings on the Metaverse are smart and insightful, and they reminded me that we often dismiss him as a one-dimensional CEO bent on digital dominance and utterly disdainful of Facebook’s flaws. Nonetheless, Newton correctly characterizes Zuckerberg’s vision of the Metaverse and Facebook’s position in it as “audacious,” given that it “comes at a time when the United States government is aiming to break up his own corporation.”
In his interview with Newton, Zuck discusses how Metaverse meetings will work, describing them as “what Zoom calls are to conference calls” (remember them?). You should read the entire interview again.
“A lot of the meetings that we have today, you’re looking at a grid of faces on a screen. That’s not how we process things either. We’re used to being in a room with people and having a sense of space where if you’re sitting to my right, then that means I’m also sitting to your left, so we have some shared sense of space in common. When you speak, it’s coming from my right. It’s not just all coming from the same place in front of me.
In the future, instead of just doing this over a phone call, you’ll be able to sit as a hologram on my couch, or I’ll be able to sit as a hologram on your couch, and it’ll actually feel like we’re in the same place, even if we’re in different states or hundreds of miles apart.
I already do a bunch of meetings in VR. Even though the avatars aren’t as realistic today as they will be in a few years, in a lot of ways it already feels almost more real, and more like you have a sense of space, than a Zoom call, because you have the shared sense of space….If you’re sitting in a circle, everyone can kind of remember what order people were in. There’s spatial audio. You look over to the head of the table and there could be a screen there, where people who can’t be in VR or AR can videoconference in and be a part of your meeting from outside. You can project and different people can share as many documents as they want. So it’s no more of this, “Oh, I can only share one document at a time,” because everyone, you presume, only has one screen. And in VR, people can pull up as many screens as they want so you can share as much context as you want during a meeting. You have a whiteboard, people can draw. It’s pretty wild.”
Ratan of Michigan State University, who was inspired to pursue a PhD in virtual reality and avatars after reading “Snow Crash,” argues Zuck isn’t a late bloomer. “Since Zuckerberg bought Oculus in 2014, this has been in the works for years,” Ratan adds. “Perhaps no one noticed it at the time. Beyond games, the goal was always to create a Metaverse-like experience. The Metaverse and the internet will eventually become synonymous.” Facebook Horizon, a virtual reality online game, was unveiled in September 2019 as another aspect of the company’s Metaverse journey.
They want a tipping system, but it’s impracticable because Apple has to take 30% first. Gaining market share relative to big tech companies, diversifying into platform and hardware, and escaping the restrictions of the platform ecosystem that currently defines the business are all opportunities for economic expansion.”
The Metaverse is undoubtedly mission crucial for Zuckerberg. “Of the top five internet giants [Apple, Amazon, Google, and Microsoft], Facebook is the only one without an operating system,” adds Ball. “It’s the only one without a major piece of consumer hardware. At the very least, the Metaverse permits them to possibly displace those who do, and at the very most, it can go even further. Because they lack a hardware and software platform, what they can achieve now is hampered in part by this issue. Apple frequently blocks Facebook’s business models and consumer offerings. They want to start a cloud gaming platform, but they can’t.
CEOs of the other FAAMG (Facebook, Amazon, Apple, Microsoft, and Alphabet’s Google) firms, who are moving forward into the Metaverse for their own goals, are well aware of this. “As the digital and physical worlds combine, we are leading in a new layer of the infrastructure stack, the enterprise Metaverse,” Microsoft (MSFT) CEO Satya Nadella said on his earnings call on July 27 (only days after Zuckerberg’s call).
Others, such as Nvidia (NVDA) CEO Jensen Huang’s comments regarding the Metaverse in July, when he said, “I believe we’re right on the cusp of it.” According to Venture Beat, Nvidia has constructed an Omniverse, which is a “virtual environment the company defines as a “Metaverse” for engineers. Huang has stated that the Metaverse’s economy will be larger than the actual world’s. Impossible? Not when you consider all of the work that will be done from home, all of the designing (of everything), and all of the leisure activities that will take place in the Metaverse.
So, which businesses (stocks!) stand to gain from the Metaverse? Who do you think it is? For openers, Ball suggests the traditional FAAMG suspects, and he explains why in his first piece. Balls also mentions Unity Software, as well as private firms such as Valve, Ubiquity6, Singularity 6, Genvid, and Magic Leap (no relation, believe it or not) (the latter being almost an old school player by now).
But the granddaddy of them all is Epic Games (owner of Fortnite), which was created 30 years ago at his parents’ house in Potomac, Maryland, by CEO Tim Sweeney as Potomac Computer Systems. Epic Games, which is now based in Cary, North Carolina, debuted “Fortnite” only four years ago. The game now has 350 million registered users, with six to twelve million active users at any given moment.
Some reports suggest growth at “Fortnite” may have topped out or that it is even declining (as a private company, Epic can pretty much divulge what it wants), but nonetheless it is still a juggernaut, making billions of dollars for Epic. Some business details were revealed in Epic’s recent battle royal with Apple (AAPL) over payments on Apple’s App Store. (In fact, Sweeney has become a major thorn in Apple’s side. Pretty remarkable for a little ol’ game company CEO.)
In April, Epic raised $1 billion (added to the $4 billion plus it raised previously, according to Crunchbase), and is now worth nearly $29 billion. Sweeney’s stake in the company is worth $7.4 billion, according to Forbes. Let’s just say if Epic ever went public, there would be strong investor interest.
Still with all the excitement, the Metaverse is hardly a virtual utopia. Imagine the problems of today’s internet in 3D with avatars, just for starters. Yahoo Finance’s Dan Howley does a great job of laying out potential problems: 3D bullying for example and even worse.
“Think about all the data they can be tracking,” says Ratan of Michigan State. “They can identify you by nonverbal gestures and height. They can use machine algorithms to predict your sexual orientation based on the way you look at different people in the virtual world. I worry about privacy becoming even more limited in these Metaverse experiences. Technological innovation is always a double-edged sword. The Metaverse is a great example of a technology that will likely bring huge benefits to people but there will be unintended, unanticipated costs and harms.”
Right now the Metaverse has next-to-no regulations, few agreed upon industry standards and an ecosystem that is overwhelmingly male. What could possibly go wrong? It all needs addressing, that’s for sure.
“I don’t want to turn to the Metaverse to escape reality,” says Cathy Hackl. “I don’t want to have that dystopian view of it. In some ways the Metaverse is an extension of humanity and creativity, where we’re heading next.”
And paradoxically, whether that’s for the better or for the worse will in fact be up to us. Up to humanity. After all, reality is the only thing that’s real.
Source: Yahoo News