Tech companies are already betting heavily on the so-called “metaverse.” Although it is unlikely that the metaverse will force you to save humanity (as Keanu did in the fictional Matrix), it could end up being as important an advance as the Internet was in the 1990s.
What is the metaverse?
There is no single definition of what the metaverse is. Some see it as a kind of “Web 3.0” that will connect people, spaces and assets in the physical world. For others, though, it’s a fully virtual world where you can work, play, shop, go to concerts, watch a movie, or just hang out.
In October, the company formerly known as Facebook said it would hire around 10,000 people in Europe over the next five years to build a metaverse platform. In fact, it is such an important part of the corporate strategy that it has led it to change its name (Facebook) to Metaplatform. It has also been experimenting with a virtual reality (VR) meeting app called “Workplace” and a social space called “Horizons,” both of which use avatars, or digital representations, of users.
For its part, Microsoft, which helped launch the PC revolution with its Windows operating system, also wants to create an enterprise metaverse, which will initially focus on developing a virtual office.
What will help create the metaverse?
According to venture capitalist Matthew Ball, there are seven “enablers” of the metaverse:
- Computing: companies that facilitate and supply computing power to support the metaverse.
- Networks: They provide real-time connections, high bandwidth, and data services to consumers.
- Virtual platforms: develop and exploit immersive (often 3D) digital worlds, environments and simulations for users and businesses.
- exchange tools and standards: create tools, protocols, formats, services and engines that allow computer systems and software to exchange and use information (interoperability). There are also other companies that create, operate and improve the metaverse.
- Payments: support digital payments and transactions, including services that allow the exchange of fiat currencies (eg, US dollars) for cryptocurrencies (eg, bitcoin), along with digital currencies and pure financial services.
- Content, assets and identity services. They design, sell, resell, store, provide secure protection and financial management of digital assets (such as virtual goods and currencies). There are also other companies that work with user data and security.
- Hardware: dedicated to the sale and support of technologies and physical devices used to access, interact with or develop the metaverse.
You can also separate the metaverse into:
- Consumer and business; and software and hardware.
The software includes the virtual platforms or gateways of the metaverse. There are two formats here, although both are equally applicable to social and gaming:
- centralized: A closed system that is owned and governed by a company (for example, Fortnite, Minecraft, and Roblox). Online gaming may be the entry point, but Fortnite and Roblox2 have also hosted virtual concerts. User stickiness (i.e. time spent in the environment) and immersion in the experience are driven by content such as virtual product launches. In Korea, Naver’s Zepeto has “SNS,” which has K-pop, or Korean pop music, as its attraction. In September, Zepeto hosted a virtual fan signing with a pop group, Blackpink, which drew some 46 million fans.
- Decentralized: it is closer to the metaverse idealized by some, which consists of an open decentralized platform where users can even own digital assets (for example, non-fungible tokens (NFTs) supported by blockchain technology) that have real value in fiat currencies . Two of the most popular platforms are ‘Decentraland’ and ‘Sandbox’, which use their own cryptocurrencies called Mana and Sand, respectively.
Hardware, meanwhile, can include the equipment needed to visit these virtual worlds, such as Oculus headsets, network infrastructure to support cloud storage, physical data centers, and powerful computing chips (for example, from Nvidia). ).
Where are the opportunities?
We are still at an early stage and there will be many potential development paths for this technology. But, within Asia, there are opportunities in:
- El hardware: We see access to virtual platforms moving away from mobile devices and laptops and toward headsets and goggles, as the costs of these virtual reality headsets go down and the quality of the virtual experience improves. Asian companies will play a role in the supply chain and assembly of these devices.
- Infrastructure support: the importance of latency, along with image quality and real-time rendering, will require more powerful chips, more cloud storage, and edge computing. This, in turn, will increase demand for semiconductor chips, capex on the cloud, servers, components, and data centers (DCs), particularly those for edge computing. This should be a positive for companies like Taiwan Semiconductor Manufacturing Co, as well as Taiwan’s supply chain for servers and networks.
- virtual platforms. We expect growth from both centralized and decentralized platforms over the next five to ten years as major internet players, brands and gaming platforms invest to remain relevant and connected to younger consumers. It is also likely that advertising money will spread further into the digital space in terms of brand building. Likewise, there will be an increase in content to enrich consumer experiences through events, such as virtual concerts. This should favor owners of intellectual property (IP) in games and entertainment such as movies and music. Content creation is key.
- China. China is likely to operate its own ecosystem. If the government allows market dominance, Tencent has the right mix of a gaming and social platform, cloud infrastructure, and multiple intellectual properties across many categories, such as music, gaming, and entertainment, which could make it into a major player in this space. Tencent has also invested in Epic Games, the developer of game engine technology called the Unreal Engine, which powers games like Fortnite. Aside from the consumer, Tencent could potentially build an enterprise metaverse offering on its Tencent Meeting platform.
- Korea. Korea is another Asian leader, as Naver’s Zepeto has some 240 million users. Naver is also an intellectual property and content powerhouse, with its entertainment businesses including K-pop, webtoons and games. The country’s government supports the creation of a metaverse alliance. Large established brands (such as Samsung and Hyundai) are also creating digital products and advertising on the Zepeto platform. Activity levels are increasing at gaming companies (eg Com2uS, WeMade) and even companies like SK Telecom.
In abrdn they hope that the metaverse will grow into something that would have been considered pure fantasy only two decades ago. This journey promises to change the way we interact with the world around us, just like the Internet did when it first appeared.
So, like the fictional characters in the Matrix, why not choose the “red pill” (rather than the blue one)? It may end up changing your life.
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