World Reimagined

What is the Metaverse? Answering Frequently Asked Questions

Virtual reality and the metaverse
Credit: Amira Karaoud / Reuters - stock.adobe.com

The metaverse has been a hot topic these days, and what's more, the business world is eager to embrace it. A survey by the World Economic Forum found that 71% of corporate leaders believe the Metaverse will be good for business. And 42% say it will be “transformational” or “breakthrough.” JP Morgan, meanwhile, says it will be worth more than $1 trillion in annual revenues in the coming years.

Those are encouraging numbers for something that doesn’t have a clear-cut definition yet. The metaverse, after all, is a lot like the Internet was in the early 80s— something still very much in development. But if you’re just nodding along with the conversation when the topic of the metaverse comes up, we’ve got some answers that can help you gain a better grasp on things.

What is the metaverse?

The metaverse as we know it right now likely won’t be the same thing people experience in five years. The term was first coined in 1992 by author Neal Stephenson as a digital world that exists alongside the real world -- think Ready Player One. The simplest definition of the Metaverse as it exist today would be described as a 3D version of the internet. Using virtual or augmented reality tools, users can explore virtual worlds that are media-based than text-based, meaning you can ‘talk’ with someone in person, versus via email or messaging programs.

The technology’s not at Ready Player One levels yet, though. And there are a wide variety of different metaverses, which aren’t connected. Platforms include Meta’s Horizon Workrooms, Accenure’s Nth Floor, Fortnite and Decentraland.

Are the metaverse and Web3 the same thing?

While the terms are sometimes used interchangeably, the metaverse and Web 3.0 (or Web3) are not the same thing. They are intertwined, though. Both address the vision of a next step for the Internet. While the metaverse is conceived as a digitally native place, but one that still lacks a real form, Web3 is a technology that runs counter to the walled-garden ecosystems that are common on today’s Internet. Its focus is to use the blockchain to distribute data freely. For example, the Web3 model envisions the owner of an NFT to be able to utilize that avatar, regardless of where they are on the Web (as opposed to using that avatar only on a specific game, website, or app). It’s also a tool that manages data, so it’s best viewed as a building block of the metaverse, but hardly the entirety of it.

What can you do in the metaverse?

That’s what people are figuring out now. Virtual meetings is one common example. During the pandemic, some trade shows experimented with virtual events. Services like Roblox and Fortnite (which, yes, are also games, but have metaverse components) have held live concerts (with real world artists). You can purchase virtual land lots in areas like Decentraland and build a virtual home there. And you can shop for products, both virtual and real-world.

How metaverse virtual reality impacts business

In some ways, it already has—and very successfully. Fortnite has been a leader in virtual-to-virtual transactions. Players spend the game’s V Bucks to buy skins for their avatars. Epic Games, creator of Fortnite, doesn’t normally share financial figures, but in its court battle with Apple, the developer revealed Fortnite brought it over $9 billion in 2018 and 2019. The company had gross revenue of $5.1 billion in 2020, the majority of which was due to Fortnite. These companies have captured the first steps of future business potential for the metaverse. We can continue to monitor their metaverse business models to watch how this ever evolving business opportunity unfolds.

Up next are virtual-to-physical world transactions, where you visit a retailer’s virtual shop and buy something that’s sent to you in the real world, such as a pizza or product. Conversely, real world products could unlock items in the metaverse -- imagine buying a ticket to a movie, concert or sporting event, and getting a virtual goody along with that purchase. That’s where analysts see the real financial potential.

How will success in the metaverse be measured for businesses?

Ultimately, of course, it will come down to money. But instead of the other metrics businesses focus on today, like clicks, likes and subscribers, it will likely be something else.

“It’s going to be an evolution of learning how to know what you’re measuring and having a clear idea of what success means with each pilot that you do—what is it that you’re trying to test and what are you trying to learn?” Cathy Hackl, futurist and metaverse expert, tells McKinsey. “That will then help define success beyond just a number.”

How to invest in the metaverse

It’s a fast-growing list. While plenty of smaller companies have claimed to open the first law firm in the metaverse or the first real estate agency, the real attention is being paid to companies like Disney (DIS), which has patented metaverse technology for its theme parks. Warner Bros. (WBD) hosted a Roblox event for the release of In the Heights. Samsung (SSNLF) has held product reveals there. And Microsoft (MSFT) has introduced Mesh for Microsoft Teams, which blends the mixed reality of that company’s metaverse offering with the productivity tools of Teams.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Chris Morris

Chris Morris is a veteran journalist with more than 30 years of experience, more than half of which were spent with some of the Internet’s biggest sites, including CNNMoney.com, where he was Director of Content Development, and Yahoo! Finance, where he was managing editor. Today, he writes for dozens of national outlets including Digital Trends, Fortune, and CNBC.com.

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