Demystifying the metaverse madness could be maddening

The Situation: The buzz around the “metaverse” is increasing as Facebook rebrands to Meta, JP Morgan creates Onyx Lounge, retailers open virtual reality stores with NFTs (non-fungible tokens) for sale, and other industries explore the possibilities. Companies are appointing “chief metaverse officers” and creating a narrative around the metaverse’s potential. There is a sense of FOMO (fear of missing out) developing by enterprises across most industries without understanding real-world opportunities.

In our “Demystifying the Metaverse Madness” discussion at the September 2022 HFS Super Summit in New York, Saurabh Gupta, President of HFS Research, queried the select panel of gurus in the image below about this emerging technology whose purpose continues to be fluid.

Meta-debate by our panel of experts from left to right: Dan Burnett, Mary Lacity, Shubham Mehrish, Subha Tatavarti, David Cushman

What in the devil’s name is metaverse?

Ideally, defining a problem before the solution leads to good outcomes. However, occasionally, an exciting solution appears with so many potential use cases that it becomes hard to easily define the problem it solves. The metaverse may be one such technology.

Our rapid-fire poll of execs at the HFS Super Summit in New York revealed a broad range of “metaverse” interpretations.

Exhibit 1: Over 50% consider metaverse an experiential construct – Poll response to “what is a metaverse?”

Source: HFS Super Summit, 2022

Dan Burnett, Executive Director, Enterprise Ethereum Alliance, indicated that it was just a user experience with the potential to bring multiple experiences together. However, the dictionary and Wikipedia have descriptions using words like “an immersive, 3D virtual world” or “a hypothetical next iteration of the internet,” as Mary Lacity, Walton Professor of Information Systems and the Director of the Blockchain Center of Excellence, University of Arkansas, pointed to. She further leaned toward an immersive metaverse 2.0 aligned to a cryptocurrency and a metaverse 3.0 accessed through avatars; metaverse 2.0, she indicated, is clearly “kicking 3.0’s butt,” given the economic model that supports metaverse 2.0.

Shubham Mehrish, Global Vice President, Mars, took us on a journey from Web 1.0, framing communication between machines, to Web 2.0, supporting connections between people and driving social interactions through mobility. Web 3.0, he argued, is the building block to delivering the metaverse, which is about participation in a purpose-built, authentic community.

Subha Tatavarti, Chief Technology Officer, Wipro, picked up the journey with Web 2.0, framing it in the context of democratization of connections. Web 3.0, she argues, is hyper-personalization at scale, with metaverse as an instantiation of our hyper-personal needs. She indicated it appears that Web 3.0 is addressing needs before they exist.

Our very own David Cushman, Practice Leader, HFS, has been through the journey from Web 1.0 through the current iterations; he has written extensively about the metaverse and Web 3.0. A key caution in his work is that there is a world of difference between virtual or augmented reality and the metaverse. Consequently, suppliers and buyers must be careful about what they sign up for.

Metaverse, huh? Yeah…what is it good for? Absolutely…

HFS has been following metaverse use cases that are, indeed, good for something. For example, Mars is attracting corporate sponsorship at scale by leveraging the metaverse to begin tracking non-profit dollars estimated to be worth half a trillion dollars. Raising money by selling NFT virtual coral reefs, Mars led the restoration of the actual geotagged coral reef of the coast of Sulawesi, Indonesia, through the Sheba Hope Reef restoration program. Blockchain ensures every penny goes to the charity, generating very little carbon footprint.

Mary pointed the audience to Metaversity, a community-based education platform helping individuals generate income through Web 3.0, a potential path to practical use cases for the metaverse.

In addition, we’ve highlighted some interesting use cases evolving in healthcare. The common theme in most examples is that they’re exciting, but the long-term impact is unclear.

The fundamental stumbling blocks of the metaverse

The panel highlighted two key challenges to the metaverse. The first is the lack of a clear and viable business model. A study by Mary Lacity and the University of Arkansas parsed more than 39,000 10K reports and found that while the significance of “token economy” (including the metaverse) technologies is increasing, only 5% of corporations recognize them as materially significant, as indicated by lack of mentioning them in their reports. A further 175 reports alluded to being awarded patents that include the metaverse. Either companies aren’t reporting on these investments, or it is unclear to corporations what economic models are possible and how they manifest.

The second challenge is addressing the ethical principles that must be foundational to all metaverses. The challenges we face with social media content and its lack of moderation and artificial intelligence (AI) evolving its ethical governing principles are issues we must take to heart as metaverses expand. Right now, metaverses are like the wild west; given the nascent regulatory environment, it is best to proceed cautiously.

The Bottom Line: The metaverse is driving excitement, but without clarity regarding its definition or potential viable economic models, it is prudent to remain cautious.

As our panel of experts indicated the metaverse’s impact lacks clarity yet is being sold aggressively. HFS Research developed an excellent reference to help enterprises and individuals navigate the maze of the metaverse; it belongs on your must-read list.