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Metaverse: Hype or inflection point?
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The Metaverse - is it hype or an inflection point marking the dawn of a new age? The following commentary was published by me in the Journal of „Wirtschaftsinformatik & Management“ (in German). The original paper can be found here and can be shared as it is published under a Creative Commons license that allows this.
When Harvard Professor Howard Stevenson speaks of inflection points, he is thinking of changes that bring dramatic effects. These inflection points can have far-reaching effects on industries or on humanity, but they occur only rarely, such as the Word Wide Web, smartphones or social networks. In retrospect, it seems obvious that these developments succeeded, marking an inflection point. However, inflection points are usually only recognized in retrospect. Historically, this is documented, among other things, in statements by futurologists who still gave the Word Wide Web no chance of becoming a mass medium around the turn of the millennium or in comments by marketing experts who ridiculed social networks in their early phases. Even influential tech greats, with all the resources available to analyze developments, can miss inflection points. That's what happened in the case of Steve Ballmer, longtime CEO of Microsoft. Shortly after Steve Jobs unveiled the first iPhone in 2007, Ballmer did not paint a good future for it, saying it was not a good email machine without a keyboard, so business people would not like it. Hardly anyone at the time could have guessed how wrong Ballmer was. So when one of the leading tech entrepreneurs of our time, Elon Musk, is asked in an interview about his assessment of the Metaverse and he answers that he cannot see where the Metaverse is heading and that he does not believe that people will voluntarily put a screen directly in front of their eyes, then his critical perspective should certainly also be viewed critically in the light of past inflection points and the prognostic quality of past experts.
At the latest since Clayton Christensen's research on disruptive innovations, we know that these innovations begin their march to victory from a niche before completely transforming existing markets and leaving numerous market participants obsolete. It is even described in his theory that disruptive technologies are inferior to existing technologies in their early stages. The first mobile phone camera was installed by a Japanese manufacturer in 1999 and had a resolution of 0.11 megapixels. The current iPhone Pro camera has a resolution of 48 megapixels. In 1999, hardly anyone seriously considered whether mobile phone cameras would eventually replace conventional cameras. So when Marc Zuckerberg is publishing pictures of comic-like avatars from the virtual worlds of the Meta Group and is being torn apart by the press and on social networks for it, the question arises as to whether we are simply in a very early phase of a disruptive innovation and whether observers should not rather direct their attention to a possible future of the Metaverse instead of assessing the status quo. And by future, is not meant next year, but rather a perspective of 5 to 10 years. Even Zuckerberg, in a conversation with investors, explains that the technological and market foundations for the Metaverse will be laid in the next few years and that he expects a very successful business development in the 2030s. This does not mean that nothing will happen in regard to the Metaverse until then, but that Meta foresees long-term investments to develop the necessary technologies and build the market. The company currently invests more than $10 billion annually in the development of Metaverse-related technologies. But other major tech corporations are also investing billions in the Metaverse. Microsoft is planning a $68.7 billion acquisition of Activision Blizzard, the largest acquisition in the company's history. In a press release, the tech company writes that the acquisition provides a cornerstone for Microsoft's Metaverse efforts, among other things. And other major tech companies such as Apple, Nvidia, Epic Games and Alphabet are also making notable investments in this area. In this respect, many of the major stakeholders are preparing for a world in which the Metaverse represents an inflection point and which will be widely changed by the Metaverse, but this does not necessarily mean that this scenario will arrive.
Currently, the metaverse is more of a vision than a reality, even though many market participants are now marketing their isolated virtual worlds as the metaverse. But virtual worlds are nothing new. Second Life, one of the best-known virtual worlds, was founded back in 2003 and is even still online today. But although the vision of an interoperable, persistent and scalable metaverse is still years away, current technological advances are already enabling the development of novel experiences. And many entrepreneurs and brand managers are looking to seize the opportunities that this can create. For example, well-known brands are experimenting in virtual worlds, such as Gucci in Roblox, Samsung in Decentraland or Ferrari in Fortnite. They are creating virtual experiences, buying virtual land, hosting virtual events or opening virtual stores. However, many companies are reluctant to publish the results of their Metaverse activities, so interested market observers often have to make their own assessment. From my observation, a picture emerges in which activity in virtual worlds is by no means a sure thing, and many activities are likely to fall short of expectations if formulated in terms of financial rather than development goals. Managers should therefore think carefully about the purpose of their metaverse activities.
A metaverse use case that is less strongly accompanied by the media, but has potential in my opinion, is the application of metaverse technologies for everyday work. While tech companies and startups have lured their employees into their offices for many years with numerous attractive benefits (free food, free gym, etc.), we are now increasingly seeing a desire for complete flexibility in the way work is organized. This became visible in an open letter from Apple employees, who appealed to their management ("Office-bound work is a technology from the last century") to reconsider the increasingly demanded physical return to the Apple offices after the end of the strict Covid precaution measures.
Consequently, in order to differentiate itself more as an employer and to attract talent, a complete flexibilization of work location could be an evolution within the work environment, starting in the tech industry. Metaverse technologies may become a foundation for remote work and an alternative to video conferencing. On the hardware side, there is also the possibility that headsets will open up new market opportunities. According to Zuckerberg, 200 million new PCs are sold every year, and Meta is looking to take a slice of that pie with its new mixed reality headset, especially in a professional context ("Work in the metaverse is a big theme for Quest Pro"). Consulting firm Accenture has already purchased 60,000 Meta Quest 2 headsets from Meta, welcoming 150,000 employees to its virtual office during the onboarding process. The trend toward more flexibility at work and the possibility of implementing Metaverse-related technologies beyond the mass market in a meaningful way in individual organizations already now could be beneficial for their use and spread. Should new headsets take on a role as substitutes for PCs or mobile phones in the next 5-10 years, this would be a major step towards marking an inflection point.
The next few years will certainly be interesting and eventful with respect to the Metaverse. But even if it is not yet clear from the current perspective whether the metaverse represents an inflection point, companies should start building metaverse competencies, because the dynamics in this field are high and there are already numerous relevant opportunities emerging today that at least need to be perceived, evaluated and possibly exploited. In my view, the development of metaverse competencies is therefore a reasonable investment for the future, despite the uncertain future of the metaverse.
Disclaimer: The thoughts published in this publication are my personal opinions and should not be viewed as investment advice. I am not a financial expert. My specialty is entrepreneurship, innovation & marketing. Readers should always do their own research. I own various cryptocurrencies and NFTs, however in many cases it is for the sake of researching the field and gaining a deeper understanding of Web3, NFTs and the Metaverse and not for investment purposes.