Karim Nurani is an entrepreneur, investor, CSO of Linqto, cofounder of the Global Investor Conference & host of the Global Investor Podcast.
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The term metaverse was first coined in the 1992 novel Snow Crash, and the 2003 virtual world platform Second Life is often described as the first metaverse. Stephen Spielberg, in his 2018 film Ready Player One, further popularized the idea, and in 2022, Facebook’s CEO Mark Zuckerberg popularized the “metaverse” even more, going so far as to rebrand Facebook as Meta; it has become one of the most popular buzzwords in the tech world.
What is the metaverse? It’s a hypothetical version of the internet where one experiences an immersive singular virtual world using virtual reality and augmented reality headsets. It’s a network of 3D virtual worlds centered on social connection. The metaverse may turn out to be something like the internet on steroids: just like the tangible world, only online and with us navigating and interacting in three-dimensional worlds as avatars in real time. We’re still in the early days of what the metaverse will evolve into, and it remains to be seen who tomorrow’s winners and losers will be as to who architects it.
Many companies have set up stakes in building the immersive internet. Second Life, for example, allows participants to create avatars, own “land,” interact with places, socialize, shop and trade virtual currency. Second Life has even spawned virtual millionaires. Other companies are hard at work with digital payments, while others are promoting the use of NFTs (non-fungible tokens).
In the most advanced visions of the metaverse, the physical world will be populated everywhere with cameras and scanners that would generate data—on everything—to create parallel virtual worlds. In this sense, the metaverse is really about the convergence of our physical and digital lives. This portrayal may make some nervous, perhaps leaning toward hoping that widespread adoption of the metaverse never comes to pass. Issues of privacy, user addiction and user safety are concerns within the metaverse, stemming from challenges facing the social media and video game industries as a whole. To others, the metaverse is an inevitable and exciting place to live in—to socialize, game and transact in already. Many see the metaverse as the future of how we will work. This picture may capture the imagination of what’s possible. The book is yet to be written.
Early visions of the metaverse exist today in games; World of Warcraft, Minecraft, Fortnite and Roblox are already enormously popular and populated, with some having more than 20 million daily users. But these versions are a ways off from the vision some have for what the metaverse will be five years from now.
Expectations are high for the metaverse’s future. JPMorgan estimates people are already spending $54 billion annually on virtual goods, or twice as much as is spent on music. Price Waterhouse Coopers projected that metaverse revenue could surpass $1.5 trillion by 2030—a big, potentially very big, future.
So, the market size of what people are doing inside the metaverse, how they’re expected to be transacting in there, is enormous. But building an infrastructure where we will not only shop, but see doctors, get educated and work, has even more upside opportunities for investors. New companies get funded all the time by venture capital to build a parallel virtual world. It’s going to take hardware, software, security tech, better chip technology, headgear and goggle technology, haptics, better compression for video, and faster connectivity, all hosted on clouds that need to continue to get more secure and more affordable.
There are two big challenges with such bright views of the metaverse’s future, however. First, who needs it? Prior to Covid-19, the answer was basically no one but gamers. That has since changed. We saw virtual doctor visits accelerate. We saw the education system attempt to be effective virtually. Zoom has been called a metaverse we now dwell in for work. One area that is driving strong adoption of the metaverse is gaming. For example, Axie Infinity was the first crypto metaverse game to surpass $4 billion in NFTs. This area of the metaverse was inspired by Pokémon; within the game, virtual pets and items are available as non-fungible tokens (NFTs).
The second big issue the metaverse faces is security. Crypto, NFTs and smart contracts are the predominant modes of paying for digital assets like skins, shields, swords, pets, clothes, accessories, etc. How will valuable virtual assets be stored and used? What about the security of crypto wallets? These technical questions may seem too far out there for the average Joe to think about, but threats to identity security, fraud and theft could make or break the potential success of the metaverse. If we don’t solve these security issues, adoption won’t grow by much and therefore its funding won’t either.
The biggest opportunities are betting on who is building it. Meta committed $10 billion to build the virtual reality internet even though they’ll likely lose money developing it over the next five years, while Microsoft has mentioned building an “enterprise metaverse.” Meta’s board went so far as to say that the “embodied internet” probably won’t be profitable for the next 10 to 15 years.
Overall, there are a lot of companies and projects tackling the enormity of what an interconnected virtual world could be, and only some will survive. But just think about the possibilities. The internet—something we spend almost seven hours every day on—could transform how we work, communicate, date, tackle mental health, play sports, even how we have sex, how we view and own real estate, how we deal with violence, and many other possibilities. And since the metaverse creations would be virtual, more things could occur without doing irreversible harm to others.
The metaverse could turn into the best experience one will ever have, with the ability to satisfy any virtual desire, or it could turn into another over-hyped fad that peters out. The jury is still out.
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