Metaverse: The emerging challenges and the growing popularity

The seminal date, October 28, 2021, when Facebook transitioned to Meta. The transition was a historical event and not merely a rebranding exercise. The transition to Metaverse represents a new era of web experience design, transforming traditional internet experiences into connected, immersive virtual- and augmented reality worlds.

The term metaverse combines “meta” and “verse” and transcends the actual physical universe. The term ‘metaverse’ was first introduced in 1992 in Neal Stephenson’s Snow Crash. In its first iteration, the Metaverse was presented as a virtual reality (VR) black spherical planet accessible through the internet and augmented reality (AR) via virtual self or digital avatars. In simpler terms, a virtual world exists in the digital realm and operates parallel to the real world.

Three decades later, the fictional notion of the Metaverse has steadily evolved into a real business consideration for marketing, among other applications. The trigger for immersion of the virtual world in the physical world was March 10, 2021, when the sandbox gaming platform Roblox mentioned the concept of a “metaverse” in its prospectus. Roblox noted eight critical characteristics of the Metaverse: identity, friends, immersiveness, anywhere, low friction, variety content, economy, and safety.

The emergence of Metaverse has implications for multiple industries and individuals. However, the present article is focused on the corporate adoption of the Metaverse. The concept is still shrouded in ambiguity in the public perception. Metaverse has been described as a universal virtual world with the ‘residents’ living their “second life” as digital avatars as part of a community. Whereas popular virtual worlds and games like Minecraft, and Fortnite, Web3 variants: Decentraland and Sandbox are examples of varied Metaverse, each unique in its positioning, value proposition, and the ‘residents.’

The above contradictory conceptualizations lead the authors to assert that the Metaverse is still an under-studied phenomenon, and efforts are being made to provide a universal definition. Believing in the assortment of many metaverses is akin to saying there are multiple internets. The Metaverse has been designed as an end-state phenomenon, incorporating and ensuring interoperability between the digital and physical worlds.

The Metaverse can be envisaged as a series of interconnected virtual worlds, a network of 3D worlds, where users interact with content, objects, environments, and each other through virtual and augmented reality interfaces. Next-web applications already include emerging 3D worlds that introduce immersive e-commerce and shopping experiences. The seamless experience offered by Metaverse has enticed brands like LVMH, Gucci, Prada, and Nike to explore the Metaverse for business opportunities. The fact that The Dematerialized, a virtual luxury showroom, sold out its entire stock of 1212 digital sweaters (US$137 per piece) within three hours of its launch highlights the evolving consumer behavior. Consumers purchased these digital sweaters for their cyber doppelgangers in the meta. Thus underscoring the emerging trend in consumer behavior studies wherein the consumer is equally conscious of his digital avatar personality and seeks to maintain equality between his physical and digital persona.

The data on Metaverse looks promising. However, it’s important to remember that these are the early days of the Metaverse. The development of the Metaverse is gaining momentum. While the gaming segment acted as a catalyst for adopting emerging Metaverse, hyper-personalized, gamified learning and training, communal activities and UX-based interactions, and expansion of digital (remote) manufacturing and operations are likely domains to expand the Metaverse adaption and acceptability in different consumer segments.

Meta (formerly Facebook) has spent billions of Dollars on developing the composite reality infrastructure. However, the company’s Q3 2022 financials show that Meta’s revenue was down 49% annually at US$285 million. Simultaneously, the expenses were US$4.0 billion— due to employee-related costs and technology development expenses. This has resulted in Reality Labs- the exclusive Metaverse division losing over US$ 9.4 billion in the first nine months of 2022. This excessive spending on the futuristic iteration of the internet has alarmed the financial stakeholders of the firm.

In comparison, a segment of analysts believes that Meta’s investments are conducive to the more significant metaverse movement. Large technology companies, venture capital (VC), private equity (PE), start-ups, and established brands seek to capitalize on the metaverse opportunity. The VC and PE funds have already invested more than US$120 billion in the Metaverse in the first five months of 2022. This figure is more than double the US$57 billion invested in 2021. Meanwhile, Microsoft has announced a plan to acquire Activision for US $69 billion.

The analysts’ confidence is derived from the fact that organizations in every domain willingly participate in developing the metaverse ecosystem. Instances in the form of Accenture creating a digital headquarter to stimulate team(s) collaboration, South Korea is planning a ‘Metaverse Seoul’ – a full-service virtual world where the residents could perform touristic and administrative city-related activities, media and entertainment organizations like Disney, food chains like Wendy’s, Donald’s, entertainers like Daler Mehendi and even professional teams like the Atlanta Braves are exploring Metaverse to engage with their consumers and/or audience.

Challenges

However, numerous challenges are emerging from the growing popularity of the Metaverse. Research has highlighted significant causes of concern relating to ethics, data security, regulation, and psychological impact on vulnerable community members. Already the Metaverse users are complaining about offensive and undesirable behaviors in the form of data exploitation, sexualization of avatar interactions, addiction to simulated reality, and privacy issues. In their recent report, Researchers for The Centre for Countering Digital Hate (CCDH) found that users were: “exposed to abusive behavior every seven minutes” this included instances of bullying, presentation of graphical sexual content, racism, threats of violence, and grooming of minors.”

Companies already leveraging the Metaverse seek to build lasting competitive advantages. In accordance with this purpose, the management leaders should develop a strategic purpose firstly by defining their organizational metaverse goals, the end-result they want to achieve, design the user-experience, plan their initial activities in conformity with their brand ambassadors and the user profile, evaluate the customer response, their engagement, review the feedback and finally, scale-up by integrating technologies, plans, reviews and embedding them in the Metaverse. The marketers should also explore becoming metaverse users themselves. Prior to operationalizing the Metaverse, employees too need to be re-educated and reskilled to enable them to derive maximum value from their investments in the Metaverse.

Conclusion

Concluding, it is sufficient to suggest that the Metaverse has socio-marketing implications. The organizations operating in an ecosystem must define a plan for a safe, inclusive and value-driven metaverse experience for an immersive company-customer relationship.

About the author:

Dr. S.C. Kakkar is Director and Dr. Gautam Agrawal is Researcher & Management Consultant at FOSTIIMA Business School.