Meta Platforms spending on Metaverse initiatives (Reality Labs) in 2021 was $12.5 billion and growing rapidly. A big bet even for Meta, especially in the light of a slowing core business with new challenges from competitors like Tik-Tok. Mark Zuckerberg seems to be truly passionate about the Metaverse, having thought about since middle school, and then acquiring Oculus VR for $2.3 billion in 2014 when it has essentially no revenue, and funding a $10 billion loss on Reality Labs last year. Many others have jumped on the hype cycle since he renamed the company Meta Platforms in October. What are the odds on this bet?
One reason for Meta’s (and Microsoft’s) investment in the Metaverse is the potential that VR and AR devices may provide a compelling new way for consumers to access cloud services, challenging Apple’s and Android’s near-monopoly of the mobile devices used today. Meta is off to a good start on this, while Microsoft trails well behind.
The iPhone sold about 13 million units in its first year and a half back in 2007. While Meta does not publish Quest 2 unit sales, Qualcomm estimated it has exceeded 10 million since its introduction in Q4 2020, based on the number of chips it has supplied to Meta. The company confirmed that cumulative store sales has exceeded $1 billion, from a small number of apps. Meta claims almost 1200 apps and games available, although the majority of these are in the uncurated App Lab, not the Quest Store. The Apple App Store opened with 500 apps in 2008, grew this by more than 100x within a year, and is up to almost 5 million today. Meta needs to continuously improve headsets, and greatly extend its content to show that kind of growth.
It will take some experimentation to find Metaverse apps that grab and keep consumer attention across more segments of customers. Creating real time 3D content is still a specialized skill—tools need to enable many more developers as well as consumers to author content efficiently if dramatically more “sticky” use cases are going to be created.
Emerging Metaverse Use Cases
On the consumer side, early VR content has emphasized 360° videos and games. Computer gaming of all types grew rapidly during Covid lockdowns, and was estimated to be $180 billion globally in 2021 and has billions of players globally. Multi-player games and virtual worlds, with their own currencies, virtual objects, and virtual real estate are segments of the Metaverse market that some analysts point to as models for the future Metaverse. Several are vying to become the dominant “walled garden” of that future.
The bigger opportunity is an open Metaverse, enabled by new web browser standards to provide a runtime infrastructure for next generation applications. HTML was never designed for this purpose, but there is huge value in extending the existing internet infrastructure. The dominant authoring tools for XR content were designed for artists in game development studios. Encouraging a much broader base of developers by bringing no or low code authoring to XR content development will allow user generated content to flourish will further accelerate adoption.
Meta Platforms is still a consumer-focused company that monetizes customers primarily through targeted advertising. The company has been focused on improving the social experience with VR, although the technology they are investing in can support many other use cases. And the Metaverse will likely require new business models beyond selling advertising or VR games. Many of the opportunities will be in the enterprise market. To pick one example, the Meta Quest headsets are already being used effectively for enterprise training. This seems like a good candidate for widescale early adoption as hardware and content authoring costs fall. https://trainingmag.com/training-gets-a-radical-makeover-through-virtual-reality/. The total corporate training market alone (a key segment for enterprise VR) is estimated to be approximately $350 billion.
Enterprise workflow applications can incorporate 3D visualization, including digital twins of equipment and facilities and IoT data from distributed sensors. Many types of data are more easily understood this way, which support “digital transformation” initiatives that can dramatically improve productivity, providing a huge incentive for Metaverse adoption.
It's More than Headsets
Global smartphones in use exceed 6 billion, while XR headsets are well under 1% of that number. Metaverse content will need to be accessible on a variety of devices, not just XR headsets. A 360° photo is most compelling when viewed on a VR headset, but it provides a very different experience that a typical portrait photo even when viewed on a PC or mobile device.
Pokémon Go is an early example of a consumer AR application, which is accessed on mobile devices. Automobile heads-up displays (HUDs) and AR navigation overlays on forward facing cameras are an example of a compelling consumer use case that uses custom displays. “Omni-channel” AR provides visualizations supporting workflows and experiences across mobile, XR headset, HUDs, and potentially other display form factors. It is designed around providing the best experience to the user, analogous to omni-channel retail, rather than focusing on end-point device silos.
Multi-tasking vs Immersive Applications
VR can create compelling immersive experiences, but many of these will be for defined events. Screen time on these devices will be less than the 3 or 4 average daily hours of mobile phones today, but more focused. There will be users who dwell in virtual worlds for extended periods, but most users will be more episodic. Typical use cases will include
- Entertainment, such as gaming or streaming content.
- Retail, providing brands new ways to share product experiences with customers.
- Presence, including social “hangouts” and virtual meetings (once digital avatars reach a sufficient degree or realism in capturing body language and facial expressions - https://www.youtube.com/watch?v=aHJOZ_Y4TDc
- Training, such bringing the realism that FAA-approved Level D simulators have used for decades to wide variety of enterprise training scenarios, at dramatically lower cost.
AR can overlay data on the real world, and may become eventually become an “always-on” experience once headsets become comfortable and stylish enough to wear for extended periods.
- It can support multitasking, for example by overlaying a few key data points at the edge of one’s vision (already available in some automotive HUDs and nav systems)
- It can be immersive, for example when a complex maintenance procedure is overlayed on a piece of physical equipment, or when a colleague’s virtual avatar joins you at the table.
Pass through AR may provide better solutions for immersive AR applications. The real world is captured by hi-res camera (which may include specialized cameras such as infrared). Data is overlaid on real-time video of the real-world and viewed using a high-res display, with much better field of view and gamma control. It also provides the opportunity to give the user “bionic vision” (night vision, controllable magnification, etc.).
No AR headset has yet equaled the price/performance that the Quest 2 has achieved in VR. Microsoft’s HoloLens has sold perhaps 5% as many units as the the Quest 2. AR use cases will remain limited until one does.
How to encourage experimentation and adoption of Metaverse applications?
There are a lot of uncertainties in how the Metaverse will evolve for both enterprise and consumer applications. Hardware limitation have slowed the rate of development, but Meta’s Quest 2 for VR and presumably Apple’s impending AR headset are removing some of the largest barriers. The process of authoring and publishing XR content still resembles a fairly specialized task, as did web development in the early days. There is a need for authoring tools that simplify, shorten, and democratize the creation of Metaverse content. A fragmented Metaverse comprised of multiple “walled gardens” is going to be less widely adopted than one based on next gen internet and browsers that can support next generation 3D applications.
Like the iPhone, the Metaverse has started with a few compelling features and applications for early adopters. It will reach mainstream users as hardware improves and available applications serve a broader range of use cases beyond gaming and virtual hangouts.