On 1 May 2006, the world entered a new epoch with Businessweek’s ground-breaking decision to make a digital avatar its cover star.
Known as Anshe Chung, the woman of the moment was the online self of real-life entrepreneur Ailin Graef. As Chung, Graef had distinguished herself as an early adopter of the virtual experience Second Life – drumming up a roaring trade in pixel-powered real estate devoured by users hungry for their own slice of digital paradise.
In November that year, Chung announced that she had become “the first online personality to achieve a net worth exceeding one million US dollars from profits entirely earned inside a virtual world”.
She was soon either equalled or surpassed by a crop of fellow Second Life whizzes who were blazing a trail in the sale of virtual goods on the platform. For example, Jonty Glaser earned the title “the Jimmy Choo of Second Life” with his Stiletto Moody brand of luxury footwear.
But while Second Life chugged on and is still in use now, it has remained largely a cult concern – never achieving the scale or prominence of leading social networks such as Facebook or Twitter.
Today, though, evidence suggests that the concept of a business-friendly virtual world has come of age. Spearheaded by several tech giants, the ‘metaverse’ has been tipped for success beyond the wildest dreams of even Second Life’s wealthiest digital moguls.
As per Big Tech’s fevered imaginings, the metaverse will essentially be a new internet – one comprised not of endless scrolling and screen time, but an elaborate network of conjoined virtual experiences: a nascent version of something like the OASIS from the sci-fi film Ready Player One.
Developers are hard at work on bringing the metaverse up to spec – but Bloomberg researchers have already forecast its total market value to hit $800bn by 2024. Revenue streams that the analysts cited as particularly promising include live music, sports events, advertising and games – as well as the virtual reality (VR) hardware that consumers will need to access those diversions in the first place.
And much in the spirit of Second Life, virtual real estate is a major draw. According to a January report from JPMorgan, metaverse land venture The Sandbox has so far amassed 200 strategic partnerships with firms eager to trade chunks of this gleaming, new frontier.
But is there a gap between promise and (virtual) reality? Despite the current surge of enthusiasm around the metaverse from the big guns of market intelligence, stern critiques have emerged from respected voices in the tech community.
In a recent interview with GameRant, former Evernote chief executive Phil Libin called the metaverse “uncreative”, arguing that the technology was still too limited to make the concept a commercial hit.
And speaking to Nikkei Asia, none other than Philip Rosedale – the man who founded Second Life – cast doubts not just on the technology behind the metaverse, but its underlying business model, too.
So, while the JPMorgan report shows that numerous corporates are flocking to the metaverse in some 21st-century simulation of the 1930s goldrush, is the terrain they’re targeting actually fit for purpose?
For a sense of where the metaverse currently stands, how it could evolve and what corporates could do to make the most of it, The Treasurer reached out to futurist and economist Bronwyn Williams. Here are her thoughts…
What we’re seeing at the moment is a major shift in supply and demand, in terms of supply of attention and demand for capital. That trend is neatly encapsulated in the shift from Web 2.0 to Web 3.0 – and there are crucial differences between them.
Web 2.0, which grew up around the likes of Facebook, Twitter and Amazon – all the big platforms that made the internet what it is today – was based around economies of scale: driving prices down as low as possible, even to below zero. We see that dynamic playing out very strongly among the ride-hailing platforms, for example – most of which are currently operating at a loss.
Web 2.0 as we know it was about slashing prices, boosting access and helping people to get stuff for free in exchange for attention. So, to a large extent, it was about democratising access to information.
If we turn to Web 3.0, the pendulum is swinging in the opposite direction. And that’s happening from a global, macro perspective, as we see real-world politics shifting from abundance to scarcity. People are looking for new ways to create capital in order to endure highly inflationary times.
Where the metaverse fits in here is that if you look at it from a Big Tech, Meta, Microsoft perspective – or even from a decentralised finance (DeFi), crypto perspective – it’s essentially an exercise in re-monetising the Digital Commons that had enabled people to get stuff for free.
And perhaps that’s why Second Life didn’t catch on with the public imagination. At the time it emerged, there wasn’t a sustainable demand for it, because the world was still in a growth cycle and an abundance mindset.
The entire premise that underpinned the internet was one of exponential growth, coupled with an exponential decline in prices. But that’s now pivoted to a state where people are looking for ways to harness multiple revenue streams so they can survive a much more challenging environment.
That’s where it gets really interesting. Real value comes from real scarcity. And in the real world that’s quite a simple proposition: we have finite supplies of oil, diamonds, gold, fresh water and so on.
In the metaverse, the real value we’re talking about is attention. So, you can spin that attention into belief systems about what has value and what doesn’t. You can spin metrics of attention into what’s known as ‘fame laundering’, whereby big brands have the capability to launder human attention into cash on the strength of their brand presence.
Web 2.0 wasn’t very good at that, because the business models in many of the big platforms just weren’t suitable. But the new era is all about the monetisation and commoditisation of every single human transaction and relationship.
Digital goods and services are going to be huge – but they’ll be intermingled with ties back to the real world. So, that’s the intersection where we’ll see lots of growth: companies using digital assets or products as gateways or links back to real-world experiences.
And that’s going to be complicated, because a lot of that activity will take place in grey areas around how relevant digital and/or real-world laws will be applied and enforced – so those boundaries will be tested.
Ticketing and events have significant potential. But essentially, any firm with a brand name is well advised to get in on this space, because the metaverse economy – whether we’re talking about VR spaces, DeFi or crypto – is going to be very effective at laundering anyone who’s got attention to spare into capital.
If you’re a celebrity of any sort who’s been making a fortune with real-world cosmetics, now’s a pretty good time to get into virtual cosmetics in the metaverse. The bigger your brand is before you go in, the more likely you are to succeed – and that’s based purely on what we know about how the internet works. For example, as we’ve seen from how search engines prioritise results, success goes to the successful.
Fame and notoriety are great draws for eyeballs – and now, once you’ve attracted those eyeballs, there are ways of converting them into income.
For example, we’ll see an interesting evolution in affiliate ads, particularly in the context of what we might call ‘pay-per-eyeball rotation’. A recent Meta patent outlines the concept that instead of having pay-per-click ads, we’ll have VR headsets that track where eyeballs are looking and trigger a payment. So, brands could host ads or content from other brands, and then charge them for any eyeball swings that veer towards that material.
The monetisation potential of Web 3.0 is incredible. It’s total monetisation – which means total monitoring and total measurement. All those various attention metrics will be tracked for conversion into dollars and cents. Micropayments will become the norm.
It’s going to be much, much harder for creator economies to make a mark. There are very low barriers to entry – and where we have low barriers, we have high competition. Which means that only the bigger brands will really stand out.
The line between what’s metaverse and what isn’t is entirely arbitrary and up to us, as people and organisations, to define. So, I guess the question is whether something like a firm that uses VR headsets instead of good old Zoom to carry out staff meetings is a fundamentally different type of company – and I would suggest it’s not.
Indeed, I’d say that approach is really a gimmick, and more of an incremental change than the sort of fundamental change we’ve seen with decentralised autonomous organisations (DAOs), and all the other types of remote companies where staff have never been in the same physical space. However, what we have to remember about those is that they’re post-hoc: they’ve already happened.
That said, there are interesting opportunities for firms to earn incomes through the metaverse via digital twins of organisations. But bear in mind that all of this activity is still being propped up by the underlying real economy – and that while the real economy can continue without the metaverse, the metaverse cannot survive without the real economy.
I don’t care if you’re in an entirely digital, remote DAO kitted out with Oculus Quests that you use to have your Meta-based meetings between your floating avatars – the fact is that you will still have to eat real food to keep yourselves going. Which means that real workers are propping up the gains that you’re making from your business.
That out-of-sight, out-of-mind strata of the commercial world is the only real economy. Everything that happens in the metaverse is an extraction of the real world, and cannot live without it. People keep forgetting about this. They think that, in the metaverse, businesses can somehow be independent from the real world, and they’re entirely incorrect.
Matt Packer is a freelance business, finance and leadership journalist
