The Metaverse didn’t last more than two years.

This article starts with the origin and development of the Metaverse, and explains the reasons why the Metaverse is currently declining: the grand narrative of the Metaverse needs the support of the comprehensive development of the entire industry, otherwise it can only remain a marketing tool in the concept. At the same time, this article also gives suggestions: Nowadays, if the Metaverse wants to break through the circle, VR/AR may be a good choice.

While ChatGPT is rapidly gaining popularity, the popularity of the Metaverse has plummeted. Although Internet giants have not denied the long-term imagination of the Metaverse, they have all expressed pessimism about the short-term prospects of the Metaverse.

The metaverse that claims to change the future has been abandoned so quickly?

The layoffs at ByteDance's PICO, the closure of Tencent's Huanhe, the departure of the head of Baidu's Xirang...all these signs indicate that major Internet companies are not willing to invest too much in the Metaverse at the moment. In the context of "reducing costs and increasing efficiency", the Metaverse project is a useless project that is difficult to commercialize in the short term and has become the primary target of organizational layoffs.

The same is true from a global perspective. Meta, the most radical metaverse flag bearer, lost a total of $13.117 billion in its metaverse department RealityLabs in 2022, a year-on-year loss expansion of 34.57%. In November 2021, Meta suspended the development of the VR/AR operating system XROS project. Since November 2022, Meta has launched two large-scale layoffs of 10,000 people.

As VR headset sales decline, the future performance of Meta's metaverse business is not optimistic. In the first quarter of this year, Meta's metaverse business lost $3.992 billion, nearly $1 billion more than the same period last year. Meta predicts that Reality Labs' operating losses will "increase significantly" in 2023.

In March, Disney closed the division developing its metaverse strategy, and Microsoft recently shut down AltpaceVR, a social VR platform it acquired in 2017.

Even in the content field, it is not difficult to see the decline of the metaverse. The popularity of virtual digital people such as Liu Yexi, Ling, Xia Yubing, and A Xi has declined, and the sales effect of commercial cooperation has been questioned. At the same time, the high operating costs of digital people themselves make it difficult to attract more new players to enter.

According to Baidu Index, the search volume for the term "Metaverse" peaked in December 2021, briefly rebounded in February 2022, and has continued to decline since then.

Obviously, the failure of the metaverse lies in the fact that it is too far away from the current world. Even the definition of the metaverse is still quite vague and abstract. Everyone has different expectations for the metaverse, which makes it difficult to build industry consensus behind the term "metaverse" and to promote the industry smoothly.

In contrast, AIGC tools such as ChatGPT have realized the C-end productization of AI capabilities. Its application scenarios in user interaction, content creation and other aspects are clearly visible, and its role in promoting industrial efficiency is very clear. The metaverse is a basket that can hold anything. AIGC is also considered by many to be the infrastructure of the metaverse. In any case, the shift of market attention from the metaverse to AIGC shows a style transformation from "virtual to real".

1. Grand Narrative

Unlike digital identities like QQ accounts, the metaverse world can achieve a more realistic "sense of presence" through VR and other means, build a simulated experience economic ecosystem, and gradually connect with the real world while connecting various metaverse worlds to each other.

According to Matthew Ball, one of the earliest researchers of the Metaverse and an American venture capitalist, the Metaverse can be considered a real-time, shared, 3D version of the Internet. But at the same time, the future envisioned by the Metaverse will subvert the business model of current technology and Internet giants, and also pose a huge challenge to the regulatory cooperation of governments. Therefore, it will be a very long process of technological and ecological iteration.

For large Internet platforms such as Apple, Meta, and Tencent, the Metaverse may be a matter of life and death, but for ordinary companies, the Metaverse provides a new perspective for business operations and reshapes the business model of the company.

The "people, goods, and venue" model is a classic model used by companies in retail and e-commerce analysis, while the Metaverse provides a new story of "reconstructing people, goods, and venues." Simply put, the Metaverse business operations of companies are divided into "three sets": virtual digital people, NFTs, and Metaverse space, which correspond to the changes in the three dimensions of people, goods, and venues:

A virtual digital human is equivalent to an upgraded version of a company’s official account, interacting and communicating with consumers’ digital avatars through one or several official digital human images similar to NPCs.

NFT is a certificate of consumer rights. It can not only be applied to virtual commodities such as digital collectibles, but also represent the unique rights and interests of specific consumers due to its non-homogeneous nature. Simply put, it is an upgraded version of the membership points system.

The metaverse is a virtual space scene for interaction between enterprises and users. Enterprises can hold brand events in the metaverse, and allow users to consume and socialize in the metaverse.

The Metaverse, which came with the face of a disruptor, has attracted the attention and followers of a large number of enterprises with its story of subverting people, goods and markets. Although this theory is logically self-consistent, it is too idealistic because it requires a lot of technology and external environment support, and it is almost impossible to implement the Metaverse practice of enterprises.

The truth is that companies often don’t care about how the long-term future will change, but are more concerned about how to deal with the short-term future. Although the metaverse has a grand narrative, the ecological niche of the company determines that its real focus is on how to combine and implement it in the present, rather than how to work on building a metaverse world.

Therefore, the current attitude of enterprises towards the metaverse is destined to be more inclined towards advertising and marketing, especially eye-catching marketing.

In the past few years, corporate metaverse events seem to emerge in endlessly, but homogeneity is extremely serious. The reason is that the metaverse is difficult to penetrate into the business core of the enterprise and cannot improve the business efficiency of the enterprise, let alone transform the "people, goods and places". Therefore, it can only exist as a conceptual communication action.

In the metaverse actions of enterprises, the so-called sale of digital collectibles is essentially the issuance of brand virtual peripherals; the so-called digital brand spokesperson is merely a stylized variant of the virtual spokesperson; the so-called digital human IP cooperation is merely a branch of IP joint marketing... All corporate metaverse marketing practices have not broken away from the routine of traditional marketing methods. There is only a certain degree of novelty in visual expression, but the public will still quickly become desensitized.

At the same time, Communication Gymnastics also found that the more high-end and mature large brands are, the more actively they participate in metaverse marketing. For example, Louis Vuitton built a metaverse world in the mobile game "LOUIS THE GAME", Burberry cooperated with the game "Blankos Block Party" to launch NFT dolls, and Bulgari watches combined with QR codes to create a metaverse entrance...

High-end brands and mature large brands are fond of the metaverse concept, not because of the metaverse's enabling effect on product sales and other businesses, but precisely because the metaverse is conceptual enough to be used to create brand tone and gain emotional recognition, thereby supporting product premiums and maintaining high-end brand attributes.

It can be said that the Metaverse components cannot improve the business efficiency of enterprises, but only serve as narratives to attract target users, which means that for enterprises, they only exist as a means of short-term brand advertising. In the complex Metaverse events, the core is still empty.

2. Out of reach

In March 2021, Roblox was successfully listed on the New York Stock Exchange. Its prospectus brought the concept of "metaverse" into the public eye for the first time. Its stock price soared 54% on the first day of listing, becoming the "first stock in the metaverse." The popularity of the metaverse concept is closely related to the success of sandbox games such as Roblox, Fortnite, and Minecraft. Today, a large number of imaginations and definitions about the metaverse are largely derived from these game experiences.

According to Roblox's definition, metaverse products need to have eight major elements, namely identity, friends, immersion, low latency, diversity, anywhere, economic system, and civilization.

Roblox's stock price has now fallen to $43, below the $45 IPO price, and 70% lower than the highest stock price of $141.6 in 2021. According to the first quarter report of 2023, although Roblox's revenue reached $655 million during the reporting period, a year-on-year increase of 22%, it fell by 27.22% month-on-month, and its revenue was lower than market expectations. At the same time, Roblox has been losing money for 9 consecutive months since its listing.

Roblox is similar to a small game platform that builds a UGC creator ecosystem, but its platform is still centralized in nature. Creators can use the tools provided by Roblox to create games, but the tools and the environment in which they exist also restrict the cost of creation and the final user experience, limiting the platform's ecosystem. For example, it is hard to imagine that a 3A game production team would base its game creation on Roblox or Minecraft.

A truly popular metaverse platform needs to accommodate multiple creator ecosystems such as UGC, PGC, and AIGC, which means that it requires more powerful engines, computing power, communication, and display technologies, which are obviously difficult to achieve with the capabilities of a single enterprise entity. In cross-entity cooperation, there is the difficulty of building universal technical standards such as TCP/IP.

Therefore, Roblox's definition of metaverse elements has great limitations. It defines the metaverse as a certain product or platform that can exist in a small circle, has its own unique economic system, and has its own life cycle. There will be a day when it will stop providing services and be abandoned by users.

We believe that the metaverse is more like an information organization model, similar to the concept of the "Internet". There is no "Apple's Internet" or "Google's Internet". Compared with Roblox's definition of the metaverse, we agree more with the eight elements of the metaverse given by Matthew Ball, namely: virtual world, 3D, real-time rendering, interactive network, large-scale expansion, persistence, synchronization, unlimited users and individual existence.

What Matthew Ball describes is the world of the metaverse, where a large number of metaverse products are interconnected through unified technical standards and have extremely low network latency and delicate visual display capabilities. This requires solving a large number of technical, property rights, regulatory, standard, ethical and other issues. It can almost be said to be a reconstruction of the entire human economic and institutional system, and therefore seems even more distant.

In this version of the Metaverse, people can travel between different Metaverse worlds, and virtual products and virtual currencies can be shared in different Metaverse worlds through NFTs. This is like the skins or products you bought in Tencent Metaverse can also be synchronized and used in Alibaba Metaverse.

It is worth noting that the construction of the metaverse does not rely on a breakthrough in a certain technology or hardware, but requires the development of various elements of the entire industry to promote it. This is like the explosion of mobile Internet is largely due to the advent of the iPhone, but the emergence of the iPhone also depends on the maturity of the external industry environment such as various communication technologies and semiconductor components. The iPhone is just the final step in the arrival of the mobile Internet era.

Therefore, although the current concept of the metaverse tells a beautiful story, the technology and industry accumulation in various aspects are not yet mature. Technologies in various aspects such as network, computing power, and display cannot yet support the emergence of a mature consumer-grade hardware product, which makes the arrival of the metaverse out of reach.

3. Hardware route

Although the industry's understanding of the Metaverse is very confusing and varies greatly, there is a consensus among most people that AR/VR headsets will become the hardware entrance to the Metaverse era, just as smartphones are the entrance to the mobile Internet.

In the era of mobile Internet, smartphones are not only mobile portals, but are often considered extensions of human organs. However, Communication Gymnastics believes that smartphones are portable tools for acquiring and processing information, and are essentially the mobility of PCs, which improves information processing efficiency. In the era of the metaverse, AV/VR head-mounted display devices can expand consumers' audiovisual sensory radius and provide a large number of unprecedented sensory experiences.

AR/VR devices make people "superhuman", which is why AR/VR devices are even more important than smartphones.

In 2012, Google released Google Glass, becoming the pioneer and martyr of the AR industry. In 2014, Meta (Facebook) spent $2 billion to buy Oculus, a star VR company that had only been established for two years, and then started a radical exploration of the metaverse. Social networks often shift with the iteration of hardware entrances, just like QQ in the PC era shifted to WeChat in the mobile era. Therefore, for Meta, behind its radical VR hardware strategy is Facebook's vulnerability in the transformation of the times, and its determination to build a new ecosystem independent of Google (Android) and Apple (iOS).

In China, ByteDance spent $1.5 billion to acquire VR hardware company Pico in August 2021, and officially entered the VR industry. After the acquisition, Pico launched a large number of marketing campaigns on Douyin during the 2022 Spring Festival, and quickly became the No. 1 VR brand on Douyin by relying on the traffic irrigation of "great effort makes miracles".

However, VR devices have always had a lot of experience shortcomings for many years, and sales are still tepid. According to IDC data, global AR/VR headset shipments in 2022 will only be 8.8 million units (Meta accounts for 80% and Pico accounts for 10%), a year-on-year decrease of 20.9% from 2021.

In the first quarter of 2023, the global AR/VR market fell by 54.4% year-on-year. Even Sony's PSVR2, which is aimed at gamers, has sold only 270,000 units since its release on February 22nd as of the end of March, far below Sony's first-quarter shipment target of 2 million units. It can be seen that the market penetration rate of AR/VR devices is still very low, and the product functions and experience have not been recognized by the general public, and the road to breaking the circle is full of difficulties.

But it is worth noting that Apple released the Vision Pro head-mounted display device this year and will be sold in the United States next year. Based on the current information, Vision Pro shows a different route from mainstream AR/VR devices.

First of all, Apple is more concerned about integration with the real world rather than building a purely virtual world. Compared with Meta's virtual reality VR direction, Apple chose the mixed reality MR direction. And unlike the metaverse space scenes in games, Apple obviously emphasizes integration and interoperability with the existing ecosystem to bring excellent product experience to Vision Pro, rather than building an independent virtual social system out of thin air.

Secondly, Apple pays more attention to the tool attribute of the product rather than the entertainment attribute. A large number of VR devices focus on a more immersive audio-visual entertainment experience, among which the most selling point is VR games, but Apple Vision Pro is more focused on making it a practical device. For example, you can write emails and make calls through the headset, and audio-visual entertainment is just a part of the headset function.

If Meta and other manufacturers are trying to create a new virtual reality world, then Apple Vision Pro is actually expanding and extending the Apple ecosystem. Its enhanced practicality may give users a stronger reason to buy, rather than making the headset just a new toy.

Although Cook believes that the concept of the metaverse is confusing and prohibits the use of the word "metaverse" within Apple, at present, Apple's investment and product actions in AR/VR may be the key driving force for the metaverse to break the circle.

Author: Zhuoran Team, WeChat Official Account: "Spread Gymnastics"