Against the backdrop of the Great Resignation and tech companies announcing layoffs and hiring freezes daily, one has to wonder where people will go to make a living. One answer, albeit quizzical: virtual worlds. A growing number of people are employed in jobs that only exist in virtual worlds – holding new titles such as Avatar Stylist, Digital Architect, Virtual Tour Guide and even Virtual Barista.
This is the beginning of what could become the “Great Activation” – when more people will come online as virtual avatars, employed in virtual jobs, getting paid in virtual currencies, and spending on virtual entertainment. Gradually, more and more commerce will take place virtually, governed by developing regulations and outside of traditional bank settlement systems.
However, there is skepticism around the widespread transition into virtual worlds. Many people have asked if virtual economies are a fad. Here we will dive into the context around virtual worlds as well as adoption and use metrics, which sets the foundation for evaluating potential economic opportunities for businesses.
Setting Parameters for Borderless Places
“Virtual worlds” can be defined as “(1) a computer-simulated environment which may be (2) populated by many users who can create a personal avatar, and (3) simultaneously and independently explore the virtual world, participate in its activities and communicate with others.” Although terms like “virtual worlds” and “metaverse” have more recently gained popularity, these virtual spaces have been around for decades – some of the more populated ones being Roblox, World of Warcraft, SecondLife, Minecraft, Decentraland, and The Sandbox. Notably, the value propositions of virtual worlds vary across the worlds themselves, from entertainment via games (e.g., World of Warcraft, Eve Online), connection via virtual social spaces (e.g., SecondLife, IMVU), productivity via virtual conference calls (e.g., Mytaverse), or combinations of the above (e.g., Roblox, Horizon Worlds). Virtual worlds also provide invaluable benefits like more accessibility to those with disabilities and a place to discover oneself as a young person.
So, where exactly does the Metaverse fit in? Similar to virtual worlds, the “Metaverse” has been defined in various (and often contradictory) ways. Meta’s vision of the metaverse—a term drawn from science fiction—is a 3-D online world that consumers will experience through increasingly powerful virtual and augmented reality headsets, for purposes of work, recreation and social connections. More recently, proponents have expanded the definition to be “a movement.” Critics argue that virtual reality hardware is a prerequisite for accessing the Metaverse, and if not, then the Metaverse is simply a rebranding of virtual worlds. Indeed, many virtual worlds are online or mobile, and metaverses do not require virtual or augmented reality to access. The two are thus not mutually exclusive, and it remains to be seen whether the Metaverse will be wholly separate and distinct from virtual worlds.
What’s real and what’s a dream within a dream?
Over the last few years, the Metaverse has filled headlines, bringing attention to activity in virtual worlds, and necessitating a hard look to separate the signal from the noise. Those bullish on the Metaverse have likened it to a tectonic platform shift similar to the shift to mobile, while others, including Meta and Microsoft, call it the “future of the internet.” Gartner estimates say that by 2026, 25% of people will spend an hour or more in the metaverse each day. Leading the way in the hype is Meta, the rebranded Facebook, which has committed to invest over $10 billion a year to build out its vision of the Metaverse.
In today’s reality, however, the trends in data don’t fully support estimates by the likes of Citi Group, Goldman Sachs and Morgan Stanely that the Metaverse will be a $8-13 trillion dollar opportunity by 2030. A recent research report by Metaversed posits that there are over 400 million monthly active users in the Metaverse; however, over 50% of the users are aged 13 and under, 78.7% of the total market is aged 16 and under. Thus, the vast majority of existing users are unlikely to generate meaningful economic activity. Indeed, in 2022, Meta set out to grow its platform to more than half a million people, but it has sunk to below 200,000 monthly users. To realize the lofty estimates for the Metaverse market, investment dollars would be best spent towards developing compelling use cases to attract and retain adult users.
Building a Bridge from Today’s Physical World to Tomorrow’s Virtual Worlds
The Silicon Foundry team hosted a private reception during Money 20/20 – a leading fintech conference held in Las Vegas annually – bringing together professionals across financial institutions, insurance companies, fintech VCs and startups, and corporate law, who agreed that there are applications for virtual worlds that will scale, while many others will ultimately fall flat.
Interestingly, the buzziest terms around the Metaverse, including NFTs and crypto, were mostly absent from the discussion. The group was instead most bullish on education for young people and gaming. Even considering gaming alone, it would be hard for organizations to ignore. The gaming industry has grown tremendously over the last few years, with the global market estimated to reach $361 billion by 2026. Economic activity in virtual games today includes the purchase and sale of tools and weapons, insurance for in-game assets like spaceships, and wages paid to avatar designers, digital item developers, and game guides.
Before a robust job market develops in these virtual worlds, we no doubt will need to drive more users. Brands play a critical role in this, by educating people on how to use virtual worlds, and what the opportunities are for experiences. With larger populations in virtual worlds, corporates have the propensity to win big, or miss the train as other players emerge to tap the opportunities unlocked by virtual worlds. Already, brands are exploring ways to interact more deeply with customers, market existing products to new users, and co-develop new products with customers. Nike, for instance, recently announced .SWOOSH, a resource for Web3 education and a platform to buy and trade digital collectibles, such as virtual sneakers or jerseys, which can be worn in video games and other immersive experiences.
We are seeing two key approaches to designing a business strategy for virtual economies: (1) replicating what we have in the physical world, and (2) addressing new needs posed by the unique conditions found in virtual economies. As companies build products for virtual worlds they should consider the following sentiments we encountered:
“I play games to get away from real life, I don’t want to be in a virtual world that’s trying to emulate real life.”
“After all, in a space where you can be anyone and do anything, why would you choose to be your regular old self driving a regular old car?”
What does your company’s service or product look like in the virtual world?
This article was written by Camille Manso, a Principal with Silicon Foundry.