What ever happened to the Metaverse?

​​Sascha: [00:00:04] I'm Sascha Kelly and welcome to the Dive, the podcast that asks, Who said business news needs to be all business? Take your mind back about 18 months when the buzz word that was everywhere and every news article on every website was the metaverse. 

Audio Clip: [00:00:20] We're going to talk about the metaverse Metaverse. The metaverse, a metaverse. Everyone is talking about the metaverse. 

Sascha: [00:00:26] Investment was flowing. Any company that mentioned that they were getting into the metaverse in some way, it didn't matter whether it's tech or banking or your sports franchises, they were all investigating how they could be a part of this massive craze. Facebook literally changed their name to Meta, but now it seems it's all crashing back to Earth. 

Audio Clip: [00:00:49] The results have been pretty disappointing. The lamest platform the Internet had ever seen. He spent $10 billion for this. Mark Zuckerberg has decided to kill off the metaverse.

Sascha: [00:01:01] So was the metaverse just a phase or is it like many other disruptive technologies that just take time to develop? It's Monday, the 1st of May, and today I want to know what's happened to the metaverse. To talk about this today. I'm joined by Darcy Cordell for the final time in a little while. Darcy, it's a pleasure to have you with me, but it's also a little bit bittersweet. 

Darcy: [00:01:24] It is. Sascha, I'm going to miss chatting to you all the time, but it's good to go out with a bang with a fun episode on the metaverse. 

Sascha: [00:01:31] And I've got to say to everyone else listening, we are taking a little break as well. It's not because we can't go on without Darcy. As fantastic as he is, it's actually because we're all taking a well-earned break. So we're going to be back with you by the end of the month. But Darcy, let's get into the topic today. Tell me, did you ever buy into the metaverse hype? Did you get a bit of land? 

Darcy: [00:01:51] Look, I didn't buy any land, but I did buy some cryptocurrency that was metaverse related and it went well. And now it's come crashing back to earth, as you said in the intro.

Sascha: [00:02:01] All right. So you felt this first hand. So for all the hype of 2021, 2022, we just barely hear about the metaverse anymore. Unless it's a company scaling back their investment that they've made into it. But before we really get into why that is, let's do a quick recap. What is the metaverse? 

Darcy: [00:02:20] Well, this is part of the problem, Sascha. There isn't a universally accepted definition of what the metaverse is. It's supposed to be some sort of immersive 3D environment where people interact through avatars, but currently it's not a singular entity or place. Any company in theory can create its own metaverse. 

Sascha: [00:02:40] So it's not like Narnia where you go through the COVID to a designated location. There's many. Narnias and many companies have their own cupboards. 

Darcy: [00:02:48] Yeah, absolutely. And most of these metaverse is accessed through some form of headset Facebooks, parent company, Meta. This is called the Quest Headset. But at the moment, Sascha, it's not really clear how or why people should visit the metaverse at all.

Sascha: [00:03:03] It's not great when they say, Why should we go to this thing that you've put as we're going to here, billions of dollars into it. But before we get there, I want to hear is it a new thing? It became more discussed, of course, when Facebook and Mark Zuckerberg started saying that they were literally changing their name to Meta and then other companies were also talking about this huge craze. But was that when the concept was first created? 

Darcy: [00:03:28] No, it's not actually that new. The hype obviously arrived after Facebook changed its name, but immersive online games have been around for years. We've got Minecraft that already had Metaverse like features and it's now often described as a pro time metaverse platform. But the word metaverse was sort of coined in 2003 with the virtual world platform Second Life, and the user in that game was represented as an avatar, and there were certainly big companies investing in it before 2021. Meta actually paid $2 billion for Oculus Virtual Reality In 2014. Microsoft bought social virtual reality platform ALT space VR in 2017, and that was with the purpose of using its intellectual property for mesh, which is basically its own metaverse platform. So the metaverse was around before October 2021 when Facebook changed its name.

Sascha: [00:04:21] But search volume for the term metaverse has fallen by that 80% over the past year or so. Take me back to 2021 when some of these crazy investments were being made. 

Darcy: [00:04:34] The hype was insane, Sascha. 

Sascha: [00:04:36] It really was. I mean, like they do say, you have to live through a certain amount of crazes to see them. And I thought pokemon in my late childhood years was big, but this was like on an adult scale, people going crazy about this new concept.

Darcy: [00:04:49] I mean, Mark Zuckerberg literally changed the name of Facebook to Meta. He said it was going to be Metaverse first, not Facebook first anymore. He was calling it the next chapter for the Internet, his company said they'd hire 10,000 people in Europe to work on the metaverse, and they've now spent about $36 billion since 2019 on the metaverse. 

Sascha: [00:05:11] But they weren't alone as well. He wasn't a lone wolf out there talking about it.

Darcy: [00:05:15] No, certainly not. So Microsoft's attempted purchase of gaming company Activision Blizzard, that was reportedly to strengthen their metaverse plans, although that deal is in serious doubt. Nike went all in on the metaverse in 2021. They created Nike land inside Roblox. Google announced it was setting up about a $40 billion private equity firm set up exclusively to fund metaverse projects. Decentraland, which is a metaverse itself, was actually selling plots of land and property. Mind you, virtual land of property for up to $2.4 million. Snoop Dogg even bought land there. 

Sascha: [00:05:53] I certainly prefer an apartment in Bondi any day. 

Darcy: [00:05:57] Well, another person actually bought a $900,000 yacht in the metaverse. 

Sascha: [00:06:02] I mean, I'm going to tell you, that was stupid at the hive. 

Darcy: [00:06:05] Jp Morgan, they set up a lounge consulting firm, Accenture, they bought 60,000 quest headsets from Facebook in 2021, and they plan to use them in their offices. And then, Sascha, we had crypto coins just skyrocketing, some of them about 1,000% in a matter of days. 

Sascha: [00:06:23] Which you were certainly guilty of.

Darcy: [00:06:25] And now I've lost my mind.

Sascha: [00:06:28] But two years later, that has all changed. So we're going to take a break and then when we get back, Darcy, you're going to tell me exactly what happened and why we're in the situation we are in today. Welcome back to the dive. Well, Darcy, you just stunned me with some astronomical figures. I mean, 2.4 million for virtual land just does my head in, but. Okay, we'll put that to the side. When I hear about the metaverse now, it's usually headlines about other companies deciding to draw back. They're saying like, no, it's not for us. What's going on?

Darcy: [00:07:05] Yeah, there are just several companies reining back their investments in the metaverse. Meta is one of those, and I've fallen very quiet about their plan, as I said, to hire 10,000 people in Europe to work on the metaverse. I don't think a single person has been hired yet. And Mark Zuckerberg recently said that the metaverse is not the majority of what we're doing, which is a big change in tune to a couple of years ago. There's Disney and they've completely shut down their pursuit of the metaverse and they deleted their Metaverse app for socialising, which was called AltSpaceVR early this year. And then we talked about Decentraland, the virtual land. The prize for virtual land in Decentraland has fallen 90% from about an average of $9,000 in April last year to just over 1200 dollars now. So companies are leaving the metaverse. But it's not just them. Investors are also losing enthusiasm. There's been a massive amount of funding for Metaverse Start-ups that has just dropped off in the past year, and I can tell you where that money's been going, Sascha, Generative AI.

Sascha: [00:08:08] And then now that is something I can get excited about. So I want to talk about how that declining interest has affected the revenues of companies like Meta and others that were actively pursuing the metaverse and might now be rethinking that decision. 

Darcy: [00:08:25] Yeah, it hasn't been pretty viewing. So Reality Labs, which is the division that makes Metas Quest headsets, made an operating loss of $13.7 billion last year alone. I mentioned Meta itself. They've spent about $36 billion on the metaverse and it certainly hasn't been profitable whatsoever. Meta share prices down about 40% since it announced its Meta name change. 

Sascha: [00:08:50] So the big question is why did it all go so wrong after so much hype? But what actually changed? Was it just so the air came out of the balloon and everyone just lost enthusiasm?

Darcy: [00:09:01] Oh, there was so much excitement in 2021, but it hasn't really been backed up with the amount of users required to keep people investing. The main reason companies are pulling back is there's just simply not enough demand for the metaverse at the moment. And I think that's because none of them are really that good yet, Sascha. And that's not my personal judgement. It's pretty obvious when you say these avatars without torsos moving around and it can cost up to a couple of hundred dollars to even enter the metaverse. There's also the argument that some of these companies are targeting the wrong people. Meta had a big push to sell headsets to corporate users for virtual meetings in the office, and they wanted to sell the more expensive Quest Pro, which costs $1,000. But some people say they should be focusing on gamers who are generally more willing to embrace virtual reality. 

Sascha: [00:09:53] It's interesting that you made that connection, too, between the money now going into generative AI, because I feel like the conversation hype was the same around both of them. But, you know, my parents have used A.I.. There's no way that I didn't even ever get into the metaverse, and I'm spending lots of time playing with it. So it's interesting how sometimes the hype and the practicalities don't always marry up. But just because the metaverse hasn't been a successful experiment so far, especially financially, doesn't mean that it's destined to fail. Many supporters of the metaverse say it's like other disruptive technologies. It's just going to take time and then it's going to really explode. Do you think that's what's going to happen? 

Darcy: [00:10:35] It's definitely a fair argument. I think some of the main issues at the moment are the clunky headsets. There's poor graphics, but these can be ironed out and improved in the next few years if companies release more high tech, lightweight, faster headsets that make entering the virtual world more quick and easy. And there are plenty of projects still in the works. It's just that the hype has died out. Apple is launching its mixed reality headset in June this year, and we know how good Apple is at developing products. They are obviously known for invigorating new markets with a better design product than what's out there. Think about it. Entering the smartphone business when there was Nokia and Sony Ericsson around, think about its AirPods when it was maybe both headphones and the Apple Watch. They've really improved all these other technologies. So their big player that is entering the market, we've still got companies like Microsoft chipping away with their mesh platform, Roblox. They're coming out with more and more games and universes that are being added to their system. 

Sascha: [00:11:35] So what are some of the predictions for the future of the metaverse then? 

Darcy: [00:11:39] I think the idea of a second world where people spend all their time in the metaverse, it just doesn't really seem to be realistic. But having said that, it's not to say there's no place for it. According to verified market research, the metaverse as a sector will be worth more than $800 billion by 2030. Sascha It's only at $70 billion currently and we are seeing growth. Metaverse platforms grow by 15 million users year over year in the first quarter of this year, and there are roughly 520 million monthly active users. Using Metaverse is Facebook Oculus Quest two headset. It's actually just recently surpassed the number of Microsoft Xbox Series X and S lifetime sales, and it's closing in on Sony's PlayStation five. So that's pretty significant. There is meaningful growth here. 

Sascha: [00:12:28] Wow. Well, Darcy, really interesting. I guess only time will tell to see whether this was just a phase or whether it is a truly disruptive technology that we're going to see come into our lives. Maybe not in the way that it was originally sold in a new inventive mechanism that helps make life and work easier. Maybe I'll be talking to you in a metaverse figure from your travels overseas and you can continue to host with me. So we'll let's keep our fingers crossed that the network gets their skates on and gets something going. Darcy, it's me. My absolute pleasure sitting across the desk for me for the last year. Best of luck for your future travels. And also, I want to be really clear that this is going to be our last dive for a couple of weeks. We'll be back in your ears by the end of the month, so make sure you're subscribed when our new episodes drop. We're going to take a well-earned break and we will be back with you with all the business news with a bit of fun. Until next time. This is Sascha from the Equity Mates team.