When Facebook CEO Mark Zuckerberg announced the rebranding of his company to Meta in October 2021, he said the aim was to focus on creating the “metaverse, a “hybrid of today’s online social experiences … to help people connect, find communities and grow businesses.” What the metaverse actually means, however, “hasn’t gotten any clearer,” wrote Eric Ravenscraft of Wired magazine.
Nonetheless, some pieces of the metaverse puzzle are starting to take shape. Meta is working on a virtual reality social platform called Horizon. The platform “lets people build custom environments to hang out and play games in as legless avatars,” explained The Verge’s Alex Heath. Other companies are getting in on the action, too. Gaming company Roblox, described by CEO David Baszucki as “shepherds of the metaverse,” makes user-generated video games more accessible. Several other companies are pitching in, “offering up game worlds that happen to have NFTs attached,” wrote Ravenscraft. NFTs are non-fungible tokens, which are “‘one-of-a-kind’ assets in the digital world that can be bought and sold like any other piece of property, but which have no tangible form of their own,” according to one definition by the BBC.
While the metaverse concept attracts companies and users alike, there are risks to venturing into something vague. For example, while Horizon had 300,000 users join in December 2021 and was forecasting 500,000 monthly players by the end of 2022, it fell severely short of that number with less than 200,000, according to Paul Tassi of Forbes.
Egypt is venturing into the metaverse with creative community hub Tutera developing Metatut, the “first Egyptian city on the metaverse.” However, it is vital to strike a balance between investment opportunities, profits, and the right PR image. Ashraf Abdel Mohsen, chairman of the board of directors of Tutera, spoke to Al-Monitor about the “importance of investing in the metaverse” so as not to fall behind. However, with the metaverse still unclear, the Egyptian city might still be a win because it can “reflect the strength and history of the Egyptian civilization” to the world and affect offline economic impact.
Practical yet controversial
Even if the metaverse is still fuzzy, it has investment potential. For example, some businesses have started holding meetings in virtual boardrooms, with employees represented by their avatars, according to Andrew Michael and Kevin Pratt of Forbes.
In addition, the metaverse has shown potential as a promotional tool. Rafaelle Lennox of Franklin Templeton Investments holding company said companies already use the metaverse to “host virtual events, live concerts, and fashion shows to promote and sell their products,” Those products might be real or virtual. She estimates that by 2030, the academic virtual learning market could be worth $270 billion, with the metaverse market as a whole potentially worth $5 trillion.
The U.K. firm AXA Investment Managers outlines four sectors that could offer the most rewarding financial investment opportunities. Not surprisingly, the top one is gaming. Sales of virtual reality and augmented reality headsets sales could increase to 42 million worldwide by 2025 from 4 million in 2021. Next is socializing, as the metaverse creates new ways for people to connect, followed by work and online collaboration.
It also impacts the real world, as its proliferation will require providing semiconductors, network infrastructure, and technologies that allow the metaverse to function.
Estimated earnings and potential financial gain from the metaverse are not without controversy. Game creators tasked with building the metaverse expressed doubts about blockchain technologies, according to the Game Developer Conference’s 2023 State of the Game Industry report.
Blockchain technology allows the decentralization of the metaverse, preventing any one company from being in charge. The technology “allows for the permanent, immutable and transparent recording of data and transactions” in a way where all companies can share the knowledge and data to create and run the metaverse, said a December McKinsey & Company article.
That might sound appropriate for a decentralized virtual world, but there is controversy among game creators regarding its use and promise. The GDC report shows 56% of respondents disapprove of the technology altogether, 44% believe consolidation efforts supporting blockchain will harm the industry, and only 17% see it as beneficial.
Another point to consider is to know who benefits from the metaverse “buzz.” Owen Vaughan, director of research at nChain, Europe’s leading data integrity and blockchain development company, said, “They’re trying very hard to create demand and to create this idea of scarcity and not wanting people to be late to the party.”
Virtual real estate on the metaverse consists of pieces of code in an interactive web experience that are partitioned to create “plots” on the platforms and then sold as NFTs on the blockchain. If everyone wants real estate next to American rapper Snoop Dog, said Olinga, they can get real estate next to him.
That is why creating digital scarcity can be problematic, according to Vaughan. “That’s always a very worrying place to be because what’s stopping them from whenever they feel like just inflating the supply of the money or the real estate?”
Some even argue against the metaverse’s entire premise. The GDC survey found that 45% of gaming industry professionals who responded believe “the metaverse concept will never deliver on its promise.” One respondent called the promise “nothing” and confirmed earlier concerns about vagueness. He said: “The people trying to sell it have no idea what it is, and neither do consumers.” They compared it to Google Stadia, a cloud gaming service with revolutionary ambitions that was slowly shut down due to missing features and a lack of consumer trust, explained Jay Peters of The Verge.
Nevertheless, the metaverse has value and potential to grow the business and generate revenues. Michel Kilzi of Forbes called Metaverse “an entirely new economy” instead of the typical thought that it’s meant for gaming or living out a science fiction fantasy.
In February 2022, McDonald’s filed trademarks for a metaverse branch. It allows metaverse users to order food in the online store through their avatars, with the store delivering it in real life.
The trademarks would “protect the idea of a McDonald’s restaurant in the metaverse that can sell both virtual and real-world food,” said trademark lawyer Josh Gerben. He described the process on Twitter as pretty straightforward, yet it still seems like something out of science fiction. “You are hanging out in the metaverse and get hungry. You don’t have to put down your headset. You walk into a McDonald’s and place an order. It arrives at your door a little while later,” he wrote.
And it’s not just McDonald’s. Nike has also filed for trademarks for metaverse stores. However, the Nike store would sell only virtual branded sneakers and apparel for use in the metaverse. Shortly before the filing in November, Nike started its search for a “virtual material designer of footwear” and other virtual design roles in producing the virtual apparel for metaverse stores.
Both filings are still under review by the U.S. Patent and Trademark Office. However, Gerben said the office “will likely approve the trademarks.”
Egypt’s Tutera doesn’t focus on generating direct revenues from the virtual world. It imagines the return of King Tutankhamun, who ruled from 1332 B.C. to 1323 B.C., in a modern setting. The vision is for the city’s residents and visitors to “live a unique experience that combines ancient Egyptian civilization in a modern way with an imaginary civilization of the future,” said Mohsen. Residents and visitors also engage in economic activities, such as housing, business, trade, education, and entertainment, as well as “innovative areas of the imaginary world,” wrote Salwa Samir of Al-Monitor.
The UAE went further, opening a virtual government headquarters in the metaverse. According to the official announcement, citizens could sign legally recognized documents and request services in that metaverse. Sharad Agarwal, chief metaverse officer at Cybergear, a metaverse developer, said in July 2022, “Dubai [for example] has a huge real estate market … People will be able to fly like superman to a community, look at the villas and view [them] and also configure the interior decoration to their likely. Once they are satisfied, they can pay digitally.
It is still too early to tell whether the metaverse will go in the direction of Google Stadia or if it has the potential to revolutionize Web 3.0. While investment opportunities sound attractive, critics say it is a publicity stunt. Luc Olinga of The Street, a business news website, says: “Every company that wants to be at the forefront of technology throws the word metaverse all over the place. Rare are those who manage to give us a vision of their metaverse and … how they intend to make money from it,” he said.
Generating profits from the metaverse is the crux of the doubts surrounding the viability of this virtual world. “There is no clear path to profitability for most businesses,” said Kilzi. “Everyone is scrambling to strike gold first.”
One option is for the company to use its metaverse presence to provide a “digital-forward mindset that puts the customer first,” wrote Kilzi. That might be the key to being a pioneer.
Other uses for the metaverse could be to promote real-world products or sectors in the virtual world. For instance, many note the effect the metaverse could have on tourism. The metaverse “will not replace physical travel; it will only create more desire to travel and augment and enhance our travel experiences,” wrote Mohammad J Sear, digital government and public sector consulting leader (MENA) at Ernst & Young, in a LinkedIn article. It might “enable those who cannot travel … to virtually experience visiting countries and places,” wrote Sear. The “technology will enhance and supplement the traditional travel industry, offering new ways to engage with potential customers,” according to a blog by knowledge platform for the hospitality and travel industry Revfine.
For example, with Metatut containing landmarks such as the Avenue of the Kings, the Gate of the Pyramid of Tutera, and Enchanted Melody Square inspired by actual locations, the metaverse can drive tourism to Egypt in new ways.
Companies and governments must clearly identify their targets and benchmarks to realize real-world gains when entering the metaverse. They must also be willing to upend how they operate and their business model. They should also be ready to start that transition quickly, as the lack of regulations (so far, at least) makes barriers to entry into this virtual economy low.
Lastly, while creativity and adaptation are essential, Kilzi highlights the importance of knowing the young audience of the next phase of the Internet (Web 3.0 or Web3). “The cohort that grows up with the metaverse may cause explosive growth for your venture if it catches their attention early.”