In 2021, metaverses began to make their way to the headlines in Forbes, The Washington Post, The Economist, and tech giants began calling metaverse building their new strategy. Let’s see what examples of metauniverses already exist, and how large it is in terms of money.
What is the metaverse?
The metaverse is a world in which the offline is in close contact with the online. It’s not just Zoom, Google Meet, VR and AR technologies that fall under this definition. Think of the metaverse as a hybrid of social media, entertainment, work and personal life. For example, let’s say you want to buy sneakers. You need to check how harmonious they will look with the rest of your wardrobe. You put on VR glasses, where your clothes base is already loaded, and evaluate the combination with the help of a virtual mirror.
Next, you have a work party planned. But it takes place at the main office of the company, 2000 km from you. You connect to the platform, where you find yourself in the form of a 3D avatar at a corporate party wearing new sneakers. Walk around the location, play games and chat with colleagues who could not be physically present. Rather, with their avatars.
Venture funds are always the first to test new trends with their capital: business angels have believed in Facebook and Clubhouse, PayPal and Stripe, now this is happening with the metaverse. So what is the metaverse: utopia or the future? Let’s figure it out.
How do the metauniverses of tech companies work?
The metaverse can function as a mixture of software, immersion hardware, data centers, and blockchain technology. AIN analyzes each of these points and its significance for the existence of the metaverse.
- Software are projects of the virtual world that are created using 3D engines. The most famous platforms are Unreal Engine and Unity.
These engines build the infrastructure of the virtual world: cars, houses, landscapes, characters. And they do it so realistically that movie studios use them to speed up the filming process. Example: the series “The Mandalorian” and the animated film “The Lion King”, where some of the scenes were created using the Unreal Engine. Unity and Unreal Engine are doing well with money, too.
In April 2021, Epic Games, the creators of the Unreal Engine, closed a $1 billion funding round where Sony Group Corporation invested $200 million. Epic Games is now valued at $28.7 billion.
Unity is a game engine used for Android and iOS. Call of Duty, Hearhstone, Pokemon Go are built on it. In September 2020, Unity went public, and today its capitalization is $31 billion.
- The equipment is VR glasses and AR gadgets for interacting with the metaverse. Let’s call them guides of the user to the metaverse.
There are about 7000 companies in this industry. But the main players are already well-known companies: Facebook, Snapchat, Microsoft, HTC, Google. Some teams have believed in this trend for a long time. Example: Oculus Rift, which was founded in 2012. In 2014, Facebook bought the startup for $2.4 billion. Other big players started to get interested in VR after buying Oculus. For example, Snapchat with its Snap Spectacles and Microsoft with Hololens only joined the trend in 2016.
- Data centers are cloud storage for metaverse data.
The AR data storage market is valued at $50 billion by 2024, according to the Three Kit. Here the story is symmetrical with the equipment: the main suppliers are well-known companies: Amazon, Google, Microsoft, Nvidia and others.
- A blockchain that will attach the data and money of each user directly to their digital account and will allow the purchased products to be used throughout the metaverse.
Virtual Innovation: Popular Metaverse Projects
There are approximately 2,000 different projects that link themselves to the metaverse. These are workspaces, blockchain-based games, social networks, and more. Let’s go through the most popular ones.
- Fortnite is the first project that comes to mind when the word “metaverse” is used. This is a battle royale game where 100 players land on one map, get weapons and resources, kill and even save each other in order to remain the only survivors on the map and take 1st place.
There are quite a few popular battle royale games out there, like PUBG, Call of Duty Warzone, but Fortnite takes the top spot. To the question “Why?” the answer is banal: “Because there is a metaverse.” Gamers don’t just play. They walk in a crowd of 12 million users to a Travis Scott and Marshmellow concert in costumes from the universes of Marvel, DC, Netflix or the new Balenciaga collection, create worlds with their own rules and complete quests like “Save the World from the Universe Devourer” or “Exterminate all the zombies on island “.
This is what users love. And also investors.
Until 2012, Epic Games did not bother raising outside capital. In 2012 alone, 5 years before the release of Fortnite, the Chinese media holding Tencent bought 40% of the company for $330 million.
The Chinese company believed in the then innovative Game-as-a-Service model, where earnings are based on the subscription model or the sale of additional features. Excluding the dilution, Tencent’s stake is now worth $11.48 billion. Investors earned 34 times more from this investment than they invested. Fortnite itself brought in $5.5 billion in revenue in 2020. We remind you that the game is free.
- Roblox is a construction platform game where independent developers can create story games for kids. The beauty is that each user can create their own game. You don’t need to know the code or be an expert in the gaming industry to do this.
This is exactly what children and adolescents do.
For example, 16-year-old Ammon Runger and his 23-year-old colleague Stefan Baronio receive 6-figure salaries of $ for creating the game – Mad City Prison Break. 200,000 monthly users have already paid for one of the creators for a new car and college tuition. Where is the metaverse here?
Metaverse in the system of personalized avatars and the economy. When a user enters any Roblox world, they do not control Sonic, Mario or Lara Croft, but create their own avatar. Essentially, this is a virtual you. The economy is all about supporting personality through the purchase of clothes, hairstyles, accessories, and skins. In the first quarter of 2021, users spent nearly 10 billion hours on Roblox, with over 42 million users logging into the game every day.
Now let’s talk about financial indicators:
- In 2021, Roblox went public on the NYSE and is now worth about $51 billion.
- Altos Ventures, one of the earliest investors in Roblox, poured $2.9 million in round C, and $6.6 million in the next round, along with another fund.
- Result: 29.5% share of Altos Ventures, which is estimated at almost $ 15 billion. Investors of this fund over 13 years earned on Roblox 1,579 times more than they invested.
- $652 million was spent on in-game currency in the first quarter of 2021.
- Replika – bots with artificial intelligence that can play the role of a friend or soul mate. Bots use text messages to communicate with people, play games, and even write songs and poems. Since September 2021, the bot has been working with Oculus Rift VR glasses.
Remember the “Black Mirror” series in which you received a virtual assistant in the form of your digital copy? As always, the creepy scenario turned out to be a harbinger of reality. Conversations with Replika are not just about dialogue. In the company’s surveys, a significant proportion of users responded that they have a serious level of emotional attachment to their Replika.
And this is where their monetization fits perfectly:
Do you want to choose an interesting topic for conversation? Do you want to change the appearance of your bot? Do you want to be in a romantic relationship with artificial intelligence? Subscribe to the paid version of the application.
Seems too niche specific? In 2020, the media wrote about the active 7 million users of the project. Over 6 years of operation, Replika has raised almost $11 million from two venture capital funds. It is too early to talk about earnings for investors, because the company is at the growth stage.
- Gather. Investors Gather, Sequoia Capital originally described this project as “Minecraft meets Zoom”. Although the option “Minecraft and Zoom gave birth to a child” is more suitable. Gather is a virtual online 2D space that duplicates office space, wedding halls, conferences and other crowded places.
The main task of the project is to live your life without many of the physical limitations of the real world. And that’s not it. The platform uses spatial sound technology, where you can hear a person’s voice louder when you are near them and quieter when you move away. Gather is working to add more personality: favorite plants, paintings and stationery to their premises. This project can be called an ideal startup in terms of development. Incubation at Y Combinator, a product-market fit that emerged during the pandemic, and an investment from the elite of the venture capital world – $26 million from Sequoia Capital in March 2021. According to statistics for March, the audience of this startup was more than 4 million users.
- Facebook. In July 2021, Mark Zuckerberg officially announced that Facebook would turn into a metaverse within 5 years. The company uses several products to achieve this goal. Two of them are known. These are Horizon and Rival Peak. The rest have not been announced.
Horizon is Facebook in the virtual world. Together with the Oculus Quest 2 VR glasses, users will be able to navigate a specific map, chat with their friends, watch broadcasts, play games and even cook.
On August 19, Facebook Horizon launched a beta version of the remote work app, says NIXsolutions. Let’s call it Zoom with 3D avatars, where the avatar follows all your movements and facial expressions. The app is free, but only works with their VR glasses.
Bottom line: is it future or toy?
Clayton Christensen’s Disruptive Technologies theory says that the reason promising products slip past most users is because each product feels like a toy. The Metaverse is at a very early stage, and many do not believe it will grow into something worthwhile. The metaverse currently has 4 difficulties:
- States want to control the virtual world. The Chinese government has already limited the amount of time children can play during the week.
- Content moderation. There have already been stories of sex parties and neo-Nazi club meetings in the metaverse.
- Privacy. Tracking all user actions is a large amount of personal data. It is important to keep them safe.
- Intellectual property. The metauniverse should be like the Earth: everyone creates something of their own in it, but physically cannot own the whole universe.
Despite all the difficulties, the pandemic has accelerated the development of the virtual world. COVID-19 has shown how important the metaverse is: people buy virtual things for $69 million, make their living playing digital Pokemon, spend more time on social networks and platforms that rely on the metaverse, and prefer to work remotely. Perhaps for 10 years we will not transfer our life to VR glasses. But the fact that most of the time we will spend in the virtual world and say to each other “see you in the metaverse” is more than likely.