A metaverse reality check: Defining the metaverse

For the past 12 months, the “metaverse” has been the talk of the digital town. While the term has been in existence considerably longer than this – having been coined in 1992 by Neal Stephenson in his cyberpunk novel Snow Crash – the volume of discussion, speculation and predictions about the metaverse has exploded over the past year, driven in large part by an announcement by Mark Zuckerberg that his company would transition to becoming a “metaverse company” within the next five years.

Since then, commentators have speculated about everything from the metaverse’s impact on society to its influence on business and fashion, and bold predictions have been made about its economic potential. In December 2021, analysis from Bloomberg Intelligence predicted that the metaverse could be a “nearly $800 billion market opportunity”, while McKinsey & Company has even said that the metaverse has the potential to generate between $4 and $5 trillion in value by 2030.

Small wonder, then, that businesses have rushed to get in on the ground floor of this burgeoning trend by developing ‘metaverse strategies’, purchasing digital plots of land, and building experiences in the platforms that purportedly form part of the metaverse.

However, anyone who is closely following commentary about the metaverse might have noticed some inconsistencies in how it is talked about. Mark Zuckerberg, for instance – arguably one of the biggest proponents of the metaverse given that he changed the name of his company to ‘Meta’ to reflect its metaverse ambitions – said in his keynote at Facebook Connect 2021 that “the metaverse … doesn’t fully exist yet”. And yet many businesses and commentators talk about the metaverse as a current phenomenon, with consumers said to be spending a lot of money in it.

So, is the metaverse here yet or not? And what is the metaverse, anyway? Most of us have at least a vague sense of “the metaverse” being some kind of alternate digital world where people live out virtual lives – but what that looks like in practice also seems to be up for debate. The term “metaverse” is being applied to everything from virtual fashion shows to multiplayer online games like Fortnite and Roblox to augmented reality experiences.

In a new three-part series on Econsultancy, I’ll be taking a realistic look at the metaverse: what it is, who’s using it, and what the opportunity is that it offers to marketers, both now and in the near future. I’ll examine some of the studies that have been published on the metaverse in order to understand how experts are defining the metaverse and what the statistics say that the usage of, interest in, and understanding of the metaverse is among consumers. I’ll also offer up some useful questions that marketers may want to ask about potential metaverse opportunities, as well as things to consider before embarking on a metaverse investment.

First, let’s look at how the metaverse is defined. What is it, and what do those definitions mean for how marketers should approach the metaverse?

Defining the metaverse: a shifting phenomenon

A number of major studies have already been published that make ambitious predictions about how the metaverse will influence our lives. However, each study uses its own definition of what “the metaverse” is – meaning that even though the same term is being used across studies, different pieces of research are not necessarily describing the same thing.

In February 2022, for instance, Gartner published a prediction that 25% of people will spend at least one hour per day in the metaverse by 2026. That’s in four years’ time – so if we take “people” to refer to the entirety of the global population, which is just shy of eight billion people at the time of writing, Gartner predicts that in just four years, we’ll be in a situation where some two billion people are spending at least one hour out of their day in the metaverse. That sounds like a major societal shift.

But how is Gartner defining “the metaverse” in this context? The study states that “Gartner defines a metaverse as a collective virtual shared space, created by the convergence of virtually enhanced physical and digital reality. It is persistent, providing enhanced immersive experiences, as well as device independent and accessible through any type of device, from tablets to head-mounted displays”.

The phrase “virtually enhanced physical and digital reality” sounds like a reference to augmented reality, or possibly virtual reality, although Gartner’s specification that the metaverse should be accessed through any type of device (not just head-mounted displays) effectively rules out a VR-only environment. Another key word in this definition is “persistent”: this essentially means that the metaverse will remain in the same state regardless of who is interacting with it, rather than only coming into being once a device is turned on or logged in. Changes made to the metaverse would remain there for others to engage with, rather than wiped and started again at the next session, or only being accessible to the person who made them.

This is a step beyond the VR and AR experiences that we have today, which typically persist for the duration that the device used to experience them (usually either a head-mounted display or a mobile phone) is active. They don’t retain any characteristics from previous interactions, but begin afresh with each new interaction, or each new person that encounters them.

The metaverse of Gartner’s description, therefore, doesn’t exist yet. Or does it? In the study, Gartner Research Vice President Marty Resnick is quoted as saying that, “From attending virtual classrooms to buying digital land and constructing virtual homes, these activities are currently being conducted in separate environments. Eventually, they will take place in a single environment – the metaverse – with multiple destinations across technologies and experiences.”

So, the metaverse has yet to come into being, but we are already seeing some related activities play out in their own virtual spaces. The research also states: “The adoption of metaverse technologies is nascent and fragmented, and Gartner cautions organizations about investing heavily in a specific metaverse.”

Arguably there is some cognitive dissonance here, as Gartner advises “caution” with metaverse investment on the one hand while on the other, is forecasting adoption by two billion people in the next four years.

Another study published by The Institution of Engineering and Technology (IET) in April 2022 looked at the time that will be spent in the metaverse by children specifically. It has predicted that “the next generation of children” (this could be a reference to Generation Alpha, who were born between the 2010s and 2020s, or could refer to a generation that comes after Alpha) will spend roughly 10 years of their lives, or an average of two hours and 45 minutes per day in the “VR metaverse”.

The study treats VR and the metaverse interchangeably, noting that “a new virtual reality is undoubtedly on the horizon. Meta’s CEO Mark Zuckerberg has stated his goal of achieving one billion [metaverse] users by 2030 … and other Silicon Valley giants such as Google and Microsoft are also investing heavily in this space.” It also reports that more than a fifth of five to ten-year-olds (21%) either own a VR headset or have asked for one as a present, while 15% have already tried VR. Only 6%, however, are currently using it on a regular basis.

The IET research is supported by a report, ‘Safeguarding the Metaverse’, which offers up a more substantive definition for the metaverse: “Metaverse, as a term, describes an embodied internet: one that no longer relies on representation on a flat screen, but which simulates direct experience.” The report’s authors, Catherine Allen and Verity McIntosh, specify that both VR and AR represent the “gateway” into the metaverse, but add that, “For the purposes of this report, the focus is on VR as it currently has more commercial and user activity, with more products, services and infrastructure.”

This is debatable given that the adoption of smartphones, the primary device for accessing AR experiences, far outstrips that of VR head-mounted displays; correspondingly, commercial uses of AR are also more common, with brands employing AR for everything from product visualisation to interactive marketing to virtual try-ons. That aside, what the IET is predicting is that children will be spending an average of ten years of their lives in VR. The adoption statistics that it draws on are all VR adoption statistics, but VR can be used for many things; even if in future a metaverse does emerge and become accessible via VR, that doesn’t mean that all VR interaction will become metaverse interaction.

This is not a criticism of the research; rather it is one example of the way that a lack of clarity about the metaverse, and therefore a lack of consistency between studies, can muddy the waters of the conversation. This leads to a lack of clarity from marketers, brands and industry experts about what exactly is being discussed, what the predictions are, and what they really mean.

Another major, and widely-cited, prediction about the metaverse is McKinsey & Company’s prediction that the metaverse will generate between $4 and 5 trillion in value by 2030, which was published in the report, ‘Value Creation in the Metaverse’. The report opens by acknowledging the ambiguity that surrounds the metaverse:

“It is a gaming platform, a virtual retail destination, a training tool, an advertising channel, a digital classroom, a new gateway to digital experiences. The metaverse seems to be whatever people’s imaginations dream it to be. But today the metaverse remains difficult to define, even though the term has been in circulation for decades.”

McKinsey’s report makes a distinction between the “most basic” version of the metaverse, which the report authors state will have three features – “a sense of immersion, real-time interactivity, and user agency” – and the “full vision of the metaverse”, which will have “interoperability across platforms and devices, concurrency with thousands of people interacting simultaneously”, and “use cases spanning human activity well beyond gaming”.

The last point is specified because McKinsey’s report states that a “proto-metaverse” already exists, “fueled by … the gaming experience”. The authors add that “Gaming has been critical in seeding the metaverse, but the metaverse is not exclusive to gaming”, citing virtual concerts in Fortnite as one example of “multiple use cases” in the metaverse. Later, the report refers to online multiplayer game Roblox as a “metaverse gaming platform”.

Again, a lack of differentiation between the ways that McKinsey is using the same term, “metaverse”, introduces a level of ambiguity. When referring to the “metaverse” in studies and predictions, is McKinsey talking about the “proto-metaverse” of online gaming platforms or the “full” metaverse of a nebulous future?

You might argue that as the metaverse is an emerging phenomenon, a level of uncertainty around exactly what form it will take is unavoidable, in the same way that discussions about the early internet could never have predicted what the internet might look like in 2022.

But what does this ambiguity mean for business?

The problems with metaverse ambiguity

The fact that any two reports showing findings about “the metaverse” could be using different definitions of what the metaverse is makes it extremely challenging for businesses and marketers to get to grips with the phenomenon and the opportunity it may present. If “the metaverse” is already here, or imminent, and being used by huge numbers of people, then investing in it is very urgent indeed. If, however, “the metaverse” describes a far-off technological innovation with an unknown arrival date, in which consumer interest is lukewarm at best, the imperative to explore and invest in it becomes much less urgent.

One article about the metaverse might say, “The metaverse is here, and people are using it!” and mean augmented or virtual reality. Another might say, “The metaverse is here, and people are using it!” and mean online gaming platforms like Roblox and Fortnite.

And while these are technologies that may form part of the metaverse in some way, and some would argue that it makes sense to group them under the umbrella of “the metaverse” while discussing its development and the emerging opportunity, I would argue that a lack of precision is still unhelpful. Even though there has been a recent upsurge in interest in technologies like AR and VR and in multiplayer online gaming platforms due to their potential role in bringing the metaverse to life, these are all very different technologies at different stages in development that currently represent different opportunities for marketers. Though they may become more interconnected in an eventual metaverse, they aren’t yet – and what that might look like in practice is still completely unknown.

Not all metaverse opportunities are created equal

Therefore, if brands are going to experiment with “metaverse”-related technologies, they should have a clear idea of what they are expecting to get from the experiment. Nikeland, an interactive space created by Nike in Roblox, is one of the most frequently-cited examples of a brand “metaverse” activation, and by all accounts has been a great success for the company, both in terms of positive PR and in terms of actual engagement, attracting 6.7 million consumers from around the globe between November 2021 and March 2022.

Nike’s rival Adidas is following what would appear to be a similar path in another gaming platform, The Sandbox, buying up a virtual plot of land there in November 2021. Adidas seemed to have a less defined idea of how it would use the virtual space, tweeting, “adiVerse anyone? ???? What should we build, together in @TheSandboxGame?” Reports have since revealed that Adidas is “working to fill [the plot] with exclusive content and experiences”, although nothing appears to have been created at the time of writing. When Adidas does launch its eventual Sandbox experience, it may be looking at a much smaller potential audience than Nike: in May 2022, Roblox reported 50.4 million Daily Active Users, up 17% year over year. By contrast, in April The Sandbox was revealed to have just 300,000 Monthly Active Users – “despite partnerships with top brands”, as publication New World Notes pointed out.

Even within the realm of online gaming platforms, not all “metaverse” opportunities are created equal – illustrating just how unhelpful it is to lump all of these very different platforms and technologies into one category. However, it is at least possible to imagine what a sports and fashion brand like Adidas might use a virtual space for; Adidas has already created NFTs that it has said will be available as wearable items in The Sandbox. It’s less clear what the application is for financial brands like JP Morgan, which became the “first major bank” to enter the metaverse when it opened a virtual lounge in Decentraland, which notably features a tiger but has few discernible links to finance or banking. Or consultancy PwC, whose Hong Kong wing has purchased a virtual plot of land in The Sandbox.

We frankly don’t know when the metaverse might emerge, and by all accounts a phenomenal amount of computing power would be required to bring it to life at the scale that many envision. A lot of the rhetoric around the metaverse invokes imagination and ideas of infinite possibility – Mark Zuckerberg said in his 2021 Facebook Connect keynote that, “You’re going to be able to do almost anything you can imagine [in the metaverse]”. McKinsey & Company’s ‘Value Creation in the Metaverse’ report says that, “The metaverse seems to be whatever people’s imaginations dream it to be.” But I think most would agree that imagination is probably a poor basis for making tangible marketing and business investments.

So, in order to pinpoint the real opportunities for marketers, and understand where it would benefit brands to get involved and which areas they should steer clear of, we need to be clear about what is really being discussed. In the midst of the current metaverse hype, the word “metaverse” is being applied to everything from online gaming platforms to blockchain, web3, NFTs and virtual reality. But these are all different things that have different levels of consumer adoption and sentiment surrounding them, and which should be approached by brands in vastly different ways. Simply referring to all of them as “the metaverse” flattens the distinctions between them, and prevents a more nuanced discussion of their merits from a marketing perspective.

Some common-sense questions to ask about the metaverse

When analysing a study or report that discusses the metaverse, or considering the potential opportunity within a “metaverse” marketing activation, here are some common sense questions that it might be useful to ask in order to get to the bottom of what is really under consideration.

• What is the technology that is actually being talked about? Is it AR and/or VR; an online gaming platform; NFTs?
• What are consumers really saying about this technology/opportunity? Enthusiasm from businesses aside, is the consumer interest there?
• Who are the audience for this technology or platform? How many of them are there? What is the goal in reaching them in this way?
  • As a follow-up: does it need to be achieved through a “metaverse” activation, or are there other ways to engage with the audience that would make sense for the brand? If yes, what are the advantages of doing this in the “metaverse”?
• If it is a marketing activity that is being discussed, what will be the tangible outcome? What are the risks involved?
• Will this translate into an attractive experience for consumers – even those who don’t necessarily have an existing understanding of the metaverse?

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