The world of technology is bleak. The Metaverse, a shared virtual platform, is even darker. Obituaries have surfaced in recent weeks (“RIP Metaverse”: Insider; “Wasteland”: New York Magazine; “meh-taverse”: Wall Street Journal). Sales of VR/AR (Virtual Reality/Augmented Reality) headsets are declining. According to International Data Corporation, global shipments of VR/AR devices fell to 8.8 million units in 2022, down 21%. Companies like Microsoft, Disney, and Walmart have reversed their bets on Metaverse, which has led to job losses.
The world of technology is bleak. The Metaverse, a shared virtual platform, is even darker. Obituaries have surfaced in recent weeks (“RIP Metaverse”: Insider; “Wasteland”: New York Magazine; “meh-taverse”: Wall Street Journal). Sales of VR/AR (Virtual Reality/Augmented Reality) headsets are declining. According to International Data Corporation, global shipments of VR/AR devices fell to 8.8 million units in 2022, down 21%. Companies like Microsoft, Disney, and Walmart have reversed their bets on Metaverse, which has led to job losses.
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The main reason for the Tribulation is Facebook, which in 2021 was so optimistic about the Metaverse that it changed its name to Meta. It still dominates the AR/VR headset market. However, Reality Labs, home of the company’s VR technologies and projects, has consistently lost money with no notable increases in revenue.
Meanwhile, in response to OpenAI’s ChatGPT, Meta has focused on generative artificial intelligence. Meta CEO Mark Zuckerberg and Chief Technology Officer Andrew Bosworth, who is also the brains behind his Metaverse initiatives, reportedly spend all of their time on AI. For many industry observers, this means that Meta has quietly buried the Metaverse.
While the AI has killed the Metaverse hype, it’s still too early to write off the technology itself. There are concerns, but the technology is evolving and money is still pouring into it. Even if consumer acceptance is slow, proponents see long-term economic benefits.
According to a survey of venture capitalists and institutional investors conducted by KPMG last year, 90% of respondents believed the Metaverse was the next phase of the internet and saw usage increasing. Additionally, 63% plan to increase their Metaverse investments over the next five years. Those planning to cut back their investments cited a lack of understanding and maturity of the technology as the main reason. Elsewhere, about 70% of all investors raised concerns, including the increased likelihood of regulation, privacy issues, and issues related to widespread adoption. As the unintended consequences of social media become more visible, the metaverse must adapt to tighter restrictions. However, as the technology matures, more computing power, broader cloud adoption, the growth of 5G and better cybersecurity, some concerns will recede. Lower production costs make devices more affordable and acceptance increases.
These improvements will be the result of investments in the sector, even if they may not have been well spent. VC firms have invested over $22 billion in Metaverse-connected startups since 2017. Meta itself has invested over $36 billion in the Metaverse since 2019, according to an analysis by Insider.
In addition, major technology players have invested in foundational infrastructures such as NVIDIA’s Omniverse Enterprise, a metaverse platform built for collaboration and real-time simulation across multiple industries, as well as improvements in graphics processing units (GPUs) used in rendering images and Videos help better. There are also innovations that drive the performance of devices. For example, at CES, an influential technology event in Las Vegas earlier this year, OVR Technology introduced a wearable device that adds fragrance to the virtual reality experience. The product is scheduled to be launched later this year.
While Meta’s new focus on Generative AI has sparked debates about the death of the Metaverse, Meta itself hasn’t written it off. It plans to continue investing billions in technology alongside AI. She recently commissioned a study from Deloitte that says the metaverse could contribute about $760 billion to the US economy and $538 billion to the EU’s GDP by 2035.
Even though AR/VR headset shipments declined last year, IDC expects compound annual growth of 32.6% for the period 2023-2027. This optimism stems from the idea that AI could ultimately help build a better metaverse. But it could take longer than its supporters realize because of a number of factors that need to be aligned – hardware, software, regulations, business priorities and consumer behavior. Metaverse isn’t dead, but it’s enjoying a much-needed respite from the hype of the past two years.
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