Metaverse : The Last Platform ?
The Rookie VC #9
Hi ! Today I wanted to talk about the concept of Metaverse. Reading about its general aspects and about “proto-metaverses” in healthcare and wellness (thanks to this great piece by Brett Bivens) or in gaming (thanks to the much discussed Fortnite case) prompted my curiosity, and I figured I would write a short primer and share it with you all here !
Although the concept usually sounds outlandish and refers to a very long-term trend, the current social distancing context reminded us that this reality is slowly shaping, from the monster incumbents of Silicon Valley to smaller AR and VR startups, to gaming companies.
Let’s dive right in.
A short history of the term
What we refer to as a metaverse is defined as an infinitely large, persistent, digital and interactive information space that subsists even while you’re not interacting with it. The inclusivity of the term has evolved with the progress made by both computers and networks, so much that we tend to think today’s metaverse is a manifestation of reality based in a virtual world (similar to what you can observe in Ready Player One).
The original computers were the first entry point into the metaverse. By being able to store and process small amounts of data, they all became their owner’s primal metaverse. Then, computers came to form a network of networked computers: the internet was born. The concept of metaverse partly applies to the internet, for that it is persistent and the overarching reunion of “cyberspaces” or simply put, a collection of digital worlds.
Moving into the 21st century, this idea of metaverse has evolved from a monolithic access point (the personal computer) to a multiplicity of devices that are all potential access points to the metaverse. Today, this environment is the internet, and devices are often still poorly integrated with each other. The multiplication of interfaces between what is digital and persistent and the physical world is about to change how we think about the metaverse forever. If the interface we have with a unified metaverse is increasingly interoperable and closer to our senses, the line significantly blurs and opens up immense opportunities.
Concretely, this would mean living in a mirror world where the intermingling of augmented vision and interaction has almost merged with our physical world, which is the reason why a lot of people think AR devices are the next big entry point in an advanced metaverse. Here’s a short video (skip to 2 minutes in) by Adobe representing what a day in this future might look like :
Since the term was coined, we could argue that only “proto-verses” have emerged in selected domains sitting on the frontier fence, namely gaming. But what exactly are the defining characteristics of a complete metaverse ?
Characteristics and conditions
In an essay written earlier this year, venture capitalist Matthew Ball outlines the fundamental attributes for a metaverse, while acknowledging our definition for it isn’t chiseled in stone :
Persistence. Persistence is the first, and perhaps the most important trait of the Metaverse. This characteristic describes our current paradigm (the internet) pretty well. Networked by nature, it never resets, shuts down, pauses or end. Theoretically, its existence is indefinite.
Synchronicity. Synchronicity means the ideal metaverse is a living experience that exists consistently and for everyone. If persistence is a defining trait of the internet, its ubiquity is still underway and not a given in many areas of our world. Some entrepreneurs understand the value of ubiquity and real-time access for virtually anyone, as a prerequisite for the first true Metaverse.
Unlimited participation. Like synchronicity, unlimited participation is essential to the emergence of a unified Metaverse. According to Ball, another sub-trait is individual agency, i.e. the capacity of the user to make its own decisions and moves in this system.
Functioning Economy. A unified metaverse would have not only to cover all aspects of human life and interactions of the physical world, but would also have to be designed so that individuals and businesses can create, own, trade, and invest to create value that is fungible in the “real” physical world
An overarching, common experience. The traits of the metaverse we cited should let individuals and organizations identify it as one experience, regardless of it taking place in an open or closed platform.
Interoperability. Interoperability is in my opinion the second most important trait of our imagined Metaverse of the future. The metaphor used by Ball is particularly helpful to understand why today’s digital world is anything but interoperable : it looks more like a mall in which every store might have its own currency, identification system, etc. In a true metaverse, any data, items, component of a platform are virtually interoperable with anything else. For example, you could gift Fortnite skins through Facebook, Tiktok or Snap, or sell them onto a separate 3rd-party exchange in the Metaverse while still sharing revenue with Epic Games.
What are the primary vectors ?
We saw that the personal computer, then smartphones have gradually become the most widespread access points to our imperfect Metaverse: the internet. Along the years, virtual reality (VR) hardware has been a great source of excitement, as many thought it could be the ultimate access point to the Metaverse, one that could kickstart the paradigm shift.
Here’s why VR probably isn’t just that perfect medium yet :
Virtual reality headsets are a way to experience a digitally created world and can give a sense of presence to the user, but don’t alone make a metaverse
So far, virtual reality has offered little interaction outside of gaming use cases, and VR-created worlds lack many of the characteristics of a metaverse: mainly, they do not blur the frontier between the digital and physical world but as an experience propose to entirely replace the physical world altogether
Then there is AR:
Augmented reality today still largely obeys a “look but don’t touch rule”, meaning that the augmented realities of our current time are “museums” in which you can move objects or display information
Its main problem is that it clearly does not allow a full spectrum of interactions (payments, communications, virtual interactions with indirect effects on the physical world, various interactions with another participant)
So we’re beginning to conceptualize, but seldom build Mixed Reality :
Mixed reality appears where a user is able to directly interact with the Metaverse in a physical setting
Mixed reality could be permitted as soon as we figure out the interoperability of interaction with AR-displayed objects and the physical world. The poster child of this type of use is “Minority-Report style” controls and animations
So far, mixed reality appears to be one of the best entry points into a full-blown metaverse, for it bakes in more interaction possibilities than VR and AR as previous iterations
To conclude on vectors, it’s important to keep in mind that our current access points will not vanish overnight. The web as we know if today is not built for a massive mixed reality paradigm and our numerous ideas for new vectors. Instead, it was built for peer-to-peer file transfer, which won’t cut it for the massive bandwidth and 1 to 1 interactions the Metaverse would require.
Some platforms are able to narratively generate the illusion of a Metaverse: Fortnite gameplay has impressive tactics to make you not aware that when jumping between instances and universes inside the game, you’re also constantly switching servers. That means the entire networking stack the web has us locked into will need a complete redesign.
The web as we know it today works because of a variety of standards, protocols in file names, identification, data exchange, etc. If the web was built on open standards, an increasingly big part of the web users spend their time on platforms best positioned to become Metaverses: the GAFAM. All of these companies have religiously protected their own protocols and standards when it was in their interest not to share, with little oversight on harmonizing and encouraging convergence of all of these proprietary assets into a “common”. Not to mention the various moral and societal issues that could arise from the lack of commonly agreed standards: censorship, tax fraud, radicalization, etc.
By now, it is clear that we know the emergence of a true metaverse is still a long way out. Before all bottlenecks resorb, the time can be counted in decades. However, there are interesting early examples of large swaths of our digital worlds entering the age of Metaverses.
Where it’s already happening
Gaming. Gaming has emerged as a starting point and it has become visible with the rise of Fortnite. Although EPIC’s flagship game is not technically a Metaverse, it has a significant number of great characteristics : it mixes up major third-party IP, is on-brand across multiple closed instances, triggers purely social experiences and is starting to intentionally go past gaming. Indeed, the firm is building a platform to host interconnected games and virtual realities built by community, thus positioning for a possible Metaverse play in the future. While Epic can rely on an extensive 1.6bn player session data, others like Playable Worlds are also taking a crack at this ambitious endeavour
Healthcare and wellness. Brett Bivens recently released an article arguing that a Metaverse of health was underway. As wellness and health related spend is already accounting for 5% of all spending, grows twice faster than the overall economy and suffers a massive “impact gap” (spending does not produce the desired effects), the paradigm shift in this field has rippling effects. After the age of the quantified self, of content and community comes the age of precision wellness. Precision wellness mixes passive monitoring and active hyper-personalization features to deliver a high-end, seemingly one-to-one experience. This new wave has attracted investment and M&A activity from incumbents like Google, Amazon and Apple. Although incumbents have a head start, some of them like Apple are known for their self-centered product and ecosystem ethos, which could cut them from many opportunities of the “health metaverse”
Commerce. The case for commerce in a future metaverse finds its foundations on the multiple economies and workarounds found by gamers (them again!) and “virtual world” (think Second Life) players from the early 2000s up until nowadays. Although not full intermingled as a true Metaverse would demand, many games have seen people trade virtual goods in a parallel economy. For instance, Second Life cashed out $65m to its users and had the only virtual goods Ebay would not ban. Even more interesting, we’re starting to see parts of consumer fintech moving in game proto-verses: LootBear helps with credit to buy lootboxes and other popular items, and micro-insurance already insures players for virtual goods they can’t afford to lose in the proto-verse (e.g. Eve Online). We’re still a long (long) shot from a unified Metaverse economy, but investment firms are already showing interest in pooling money to invest in virtual assets. Along with this comes a mouthful of difficult challenges, some of which we’re already grappling with today : who will define and ensure financial compliance in a future metaverse ? How can we prevent money laundering from infiltrating Metaverse economies in the future ?
Most voices discussing the metaverse tend to agree that two types of companies are positioned to build the proto-verses that could later gradually merge to form the much discussed Metaverse.
Gaming incumbents. Gaming companies from which the closest examples to what a Metaverse could be are ideally positioned to start building out of their core game expertise. Epic games has a two-step plan to transition from its first hit to being a Metaverse builder : (i) It has proved its ability to attract a massive amount of competitor IP on Fortnite, and built a platform with no borders, rendering the closed ecosystems (PSN, Xbox live) old and useless (ii) It is building a free-of-charge “online services” hosting system, that allows to develop and launch cross-platform games with federated identity (iii) Greater interoperability between games, existing platforms (iv) Finally building the game metaverse (v) World domination ? Epic games is currently the most credible Metaverse builder in my opinion, but there are contenders. Minecraft and Roblox are interesting in that regard: while complex and graphically perfect game Metaverses can intimidate users and deter them from contributing, the humbling simplicity of these games could prove to be an interesting adoption medium. A pioneer in this space, the maker of Second Life Linden Labs is in my opinion quite unlikely to lead the resurgence : although it’s trying parts of the Epic Games playbook, its infrastructure and tech are lagging behind that of competitors.
Vertically integrated tech giants. Despite its foray into VR with the Oculus buyout, I think that Facebook is almost disqualified for a landgrab in building the Metaverse. Unlike Google or Amazon, it hasn’t diversified into hosting and computing infrastructure and is only so good for its own services (granted, this is already quite a challenge). In addition, its distrust is growing out of the user base to affect partners: let’s not forget that Cambridge Analytica was, in a sense, a 3rd-party developer using the platform for unethical purposes. Facebook has the advantage of the most content-generating user base on the planet and is investing in brain-to-machine research, but it’s far from being positioned as an integrated player that will handle infrastructure building in cooperation with other stakeholders. And finally, Apple has a closed platform ethos which made part of its immense success, but is also a very heavy weight to bear when envisioning an open-ended collaboration to build the Metaverse. To conclude, I would argue that Amazon is best positioned to win in any configuration: its current weight in web hosting, future protocol building, its domination and instant market share in any backend overhaul makes it an obvious winner
This primer is probably a bit dense, so I’m happy to discuss any clarifications, disagreements ! :)
Ressource list
The Metaverse, Matthew Ball
The Metaverse of Health, Brett Bivens
Virtual World Economies Will Unlock a Whole New World of Business Opportunities, Techcrunch Series on Virtual Worlds
The Technology of The Metaverse: It’s Not Just VR, The Startup
Has The Pandemic Launched Us Into The Age of The Metaverse ?, Forbes