Hype over the virtual world is cooling as enthusiasm for AI's potential in the real world boils over
In 2022, the world learned the word for what you get when the lines between the real world and the internet blur: the metaverse. By 2023, a lot of people were even able to wrap their heads around the concept. But as 2024 gets underway, the metaverse economy as it has been imagined hasn’t taken off.
There are too many questions—what does policy and governance look like, how will children be protected, how much is a virtual shoe really worth, and so on—and not enough answers. Experts are split down the middle on whether or not a fully immersive virtual world is even possible.
First mentioned in Neal Stephenson’s 1992 science fiction novel Snow Crash, the metaverse is essentially an online world where you can go to school, go to work, play games, watch concerts, go shopping, and much more without ever leaving your home. It’s the two-dimensional texts-and-images internet come to life à la the mirror worlds in The Matrix.
The first frontier—virtual reality headsets transporting people to different worlds visually—was achieved several years ago. Since then, the attempt has been to make the metaverse “livable” in all its glory, complete with all senses. A handful of startups are working on integrating scent; haptic gloves will allow wearers to touch and feel things; there’s a lickable TV prototype, and another tech that uses electrodes in cutlery to replicate sour, sweet, salty, or bitter sensations in the mouth.
In October 2022, Interpol, the global police organization, unveiled the first ever metaverse specifically designed for law enforcement worldwide. Its purpose is twofold: Defining which acts are criminalized in the virtual world, and protecting human rights as the metaverse presents itself as a tool for mass surveillance of sorts.
While Meta $META, the company that changed its name from Facebook to show its commitment to the cause, initially dominated latest wave of metaverse hype, other big firms like Microsoft $MSFT, chipmaker Nvidia $NVDA, Amazon $AMZN, and Disney $DIS quickly made their own big bets on its potential. Starbucks $SBUX and Nike $NKE jumped on the bandwagon.
But all the hype and investment has yet to pay off.
Even Meta retrenched after disclosing that Reality Labs division had lost more than $46.5 billion since 2019, testing the patience and fortitude of investors. In October 2023, Meta chief Zuckerberg explicitly stated that engineering and computing resources devoted to AI, not the metaverse, will be the company’s “biggest investment areas in 2024.”
Other companies are similarly pinning their futures to AI. Microsoft, with its $13 billion bet on OpenAI, is focused on selling AI integration across Microsoft Office’s suite of apps. Google $GOOGL is training large language models to make search better. Disney has set up an AI task force to look at how the tech can save the entertainment giant costs.
February 2023: Microsoft ends its industrial metaverse project a mere four months in, and fires 100 people. It also slashes staff from its VR headset HoloLens’ team.
Also in February 2023: Chinese internet giant Tencent ditches plans to make VR hardware as a mature market for it appears to be many years off.
March 2023: Meta pivots toward generative AI in its “year of efficiency.”
Also in March 2023: Walmart $WMT shuts down a six-month-old branded space in the gaming world Roblox $RBLX called Universe of Play.
March 2023, again: Disney eliminates its Metaverse team, comprising of 50 people.
June 2023: Google scraps its Project Iris for AR glasses, choosing to focus instead on AR software.
“We are in a winter for the metaverse, and how long that chill lasts remains to be seen. The hype was way exceeding the reality of the capabilities of the technology, the interest from customers—both business and consumer—and just the overall maturity of the market… We think that, in the future, something like the metaverse will exist, whereby we have a 3D experience layer over the internet.”—J.P. Gownder, vice president and principal analyst on Forrester’s Future of Work team
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