This article is a chapter in the journal — Raisina Files 2023.
It is easier to define the Metaverse by what it is not.
<1> The Metaverse is not AR/VR, because users can also interact with other interfaces (smartphones or computers); the Metaverse does not come from gaming, and this is demonstrated by the virtual game platforms themselves, which are veering towards other markets or businesses; the Metaverse is not Web 3.0 which, unlike the former, includes only decentralised worlds; and the Metaverse is not a desert, considering that 400 million monthly active users were recorded in 2022.
<2>
To be sure, there are some compelling definitions of the ‘metaverse’, such as: "the evolution of the current internet from something we primarily observe to something we are more immersed in."
<3> Or else, as venture capitalist and Metaverse expert Matthew Ball points out, projecting his vision into the future, a potential "interoperable network of real-time rendered 3D virtual worlds and environments which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data."
<4>
While there are many aspects of the Metaverse that can be difficult to define, what is clear is that there is only one Metaverse. It encompasses various virtual worlds that exist parallel to the physical world—such as Decentraland, Fortnite, Roblox, Minecraft, and The Sandbox—but it is all part of a single entity.
To further understand the concept of the Metaverse, it might be helpful to use similes and metaphors. One way to think of the Metaverse is as a semantic field, or a group of words in a language that is related to a specific area of meaning. In the case of the Metaverse, the platforms within it are organised based on their level of immersion, data continuity, and persistence. However, unlike a semantic field, the interoperability between these platforms is not guaranteed. They are all part of a single set but do not necessarily share or use the data they have in common. It is as if the individual words in a lexical field have rebelled against the shared meaning and are now competing for dominance. There is no alliance or interoperability between these platforms in the Metaverse.
The battle for users' ‘eyeballs’
In the competitive landscape of the Metaverse, platforms are constantly strategising to gain an advantage over their rivals. They protect themselves from external threats, and build systems to attract and retain users. It is similar to any other battle, where each side tries to anticipate their opponent's moves, strengthen their defences, and win over those not directly involved in the conflict.
The following are some examples.
- In August 2022, The Sandbox, a virtual world based on the Ethereum blockchain, launched Alpha Season 3. It registered more than 200,000 monthly active users (a more-than-significant milestone) and immediately hosted some 90 ‘experiences’, of which 27 came from partners of the calibre of Warner Music Group. Offering the opportunity to participate in new interactive play-to-earn games and offering access to exclusive events and projects, sales for the platform increased by 190 percent compared to the previous quarter. The number of users following the initiative was surprising: the platform reached around 39,000 daily users, and the website hosted 1.6 million visitors in the last month.<5> The only hint of interoperability was related to NFTs: owners of the largest collections of non-fungible tokens, such as Bored Ape Yacht Club,<6> had the opportunity to use the tokens as avatars in Alpha Season 3. This move resembled less a strategic alliance, and more a particular wartime patronage aimed at hegemony.
- Commenting on Q3 2022 data, Roblox CEO David Baszucki cited strong growth in the platform's key operating metrics, due to the synergistic action of developers (about 4 million) and experiences (30 million, including gaming and events). He said these events created "high-quality experiences that appeal to a broad, global audience."<7> In parallel, however, Roblox said it was continuing with a defensive capital allocation strategy focused on maximising long-term shareholder value. Even then, the third-quarter figures are impressive: revenues totalled US$517.7 million, up 2 percent from the previous year; average daily active users were 58.8 million, recording an increase of 24 percent from 2021; and hours spent on the platform grew by 20 percent to 13.4 billion.<8>
- In September 2022 alone, Decentraland welcomed 56,000 daily users, a 6-percent increase from August. Once again, the reason lies in the implementation of a precise tactic: in the same month, the platform offered more than 160 experiences, including a fashion event—a usual strategy, as Pride Week is organised in June, Art Week in August, and the Music Festival in November.<9>
As can be inferred, victory comes from attracting as many eyeballs as possible. Similar to the
engagement rate—dependent on the engagement derived from a piece of content—
Eyeball Driven is a marketing strategy adopted by websites, social media, or streaming services,
<10> and inherited in the Metaverse, which derives profit solely from the number of views received. The more users access the platform, the more visibility the platform gains. The more experiences and services are added, the more users there will be. This is also key in the Metaverse, where platforms first have to be “known” and “tried” by users. And then one can look at other key performance indicators such as engagement rates.
If nailed, profits for the platforms (and, inevitably, for the brands displayed "in the window") can be steep. This may also explain why, on the 18
th of December, Twitter announced a ban on users promoting their presence on other social networks—a policy that was then promptly withdrawn following objections from users.
<11> This is also the reason for the growing polarisation and specialisation of platforms in the Metaverse that are able to monetise visitors' virtual footprints.
The bright side of competitive pressure: the "meta-Job to be done"
In 2016, Clayton Christensen studied consumer behaviour to develop a strategy for selling more milkshakes at McDonald's. If the greatest consumption of milkshakes occurs in the morning, during the car ride from home to work, why not make the drink more viscous so that it lasts longer, create self-service dispensers in drive-ins, and make more robust packaging? The Harvard professor coined the concept, ‘
Job to be done’,<12> suggesting that consumers purchase a product to fulfil a specific purpose. If that purpose is satisfied, they will continue to choose that product. This concept emphasises the imperative for companies to not only consider what they are selling and who their consumers are, but also the reason why their product is needed. Understanding the 'why' can help companies effectively meet the needs of their customers and maintain their loyalty.
The creators of
Pokémon Go perhaps also believed that a milkshake is just a milkshake. Despite
Pokémon Go’s extraordinary initial success, within months, the augmented reality game—a true precursor to the Metaverse—proved to be a failed experiment in a major innovation precisely because it lacked the ‘why’ necessary for triumph.
<13>
Indeed, Christensen's mantra echoes among the Metaverse's most important platforms. One thinks of Fortnite, a
free-to-play game that, sensing the possible success of virtual
player vs. player (PvP) battles, modified the original
player vs. environment (PvE) prototype and achieved enormous popularity. A
Job to be done that has been fully fulfilled thanks also to the strategy of collaborating with famous brands and hosting big events. Indeed, all the biggest platforms (Meta, Decentraland, Zepeto, The Sandbox) have realised that
JTBD can be achieved by making activities more efficient, focusing on entertainment, and adding value to social interactions, which, however – and this is the focal point – must never go beyond their scope of action.
The downside of competitive pressure: too many shoes for one user
Imagine being limited to wearing a pair of shoes only in the city or store where you purchased them or being wealthy in one country but unable to use or convert your currency in another. This is the reality in the Metaverse, where it is not possible to bring assets, data, information, or even your identity with you as you move between virtual platforms. For example, you may be able to buy a particular virtual pair of shoes on Roblox, but your avatar on Decentraland would have to wear a different pair and pay for them with a separate, non-convertible currency (MANA) rather than the currency used on Roblox (Robux).
As one may guess, the barriers to entry and exit raised by platforms for defence, indirect attack and hegemony can easily turn into a limitation for users. It could also represent a missed opportunity for profit for companies.
Therefore, some external players, aware of the potential losses due to the absence of interoperability, have taken steps to implement "alliance" pacts. This is the case with
Ready Player Me,
<14> which allows users to create a customisable avatar and employ it on different gaming platforms. This was also done with
Louise: the game, created by Louis Vuitton in which the brand offers customers the chance to collect and transport a variety of looks across different platforms as part of a Customer Loyalty project.
<15>
‘If we don't end war, war will end us.’<16>
It is often said that all is fair in love and war, but both can come with significant risks. The lack of interoperability and standardisation in the Metaverse creates a general anarchy, as individual independent realities governed by their own laws co-exist.
It is worth noting that the lack of cohesion between platforms in the Metaverse contributes to the proliferation of extremist movements, facilitates money laundering, and makes it more difficult to combat terrorism. As the monopoly of the legitimate use of physical force is one of the key features of the modern state, Metaverse needs an established body with a monopoly of the use of virtual force. The current absence of institutions would make it easier to carry out terrorist activities: for instance, recruitment would be facilitated by augmented reality and artificial intelligence, coordination and training would be accelerated by 3D reconstruction of possible objectives, and the very existence of the metaverse would create new potential targets for extremists – such as virtual spaces and buildings.
<17> Just as in the real world, there is a need for a supranational organisation in the Metaverse that is empowered to issue general and individual measures that become part of the systems of rules for all participants, rather than being optional. Without this type of organisation, it is more difficult to establish a cohesive and orderly society within the Metaverse.
It is important to be intellectually honest and acknowledge that while interoperability may increase the risk of inappropriate use of data for influencing user behaviour and choices, it could also be a means for achieving better regulation of privacy, security, and data protection. A higher protocol for compliance may be a utopian solution in the real world, but it is possible that such a solution could be implemented in the virtual world of utopia within the Metaverse.
Meta-armistices and meta-peace treaties: Recommendations for governments and organisations
To maintain balance within the Metaverse, it is important to regulate the presence of individual platforms and horizontally integrated ecosystems, as well as the dominance of Big Tech companies investing in this new sector. For example, Apple announced the launch of a VR headset in 2023 and already controls the entire value chain for a market segment, from hardware to marketing. Google also plans to integrate future services with current ones, and Microsoft acquired Blizzard in January 2022.
<18> Without intervention, the Metaverse may become a market controlled by a few actors from within, as well as by the oligopoly of large technology companies from the outside, which has already gained significant market power through centralisation in the physical world.
What ‘peace treaties’ need to be concluded to distribute the Metaverse space in a fair manner among major ‘powers’ and emerging, independent players? What can governments and organisations do to foster and stimulate desirable interoperability?
Investing in technology. To improve the Metaverse, it is necessary to increase integration and connectivity systems, with a particular emphasis on leveraging blockchain technology as a secure, transparent, and universally verifiable mechanism.
Building multiple layers of standards. Each pillar of interoperability needs to be built: a standard model, to reproduce properties, assets and geometries of virtual environments; a protocol standard, to facilitate interactive and transactional contracts between the user and the server; an identity standard, to provide unique credentials that can be used in multiple worlds; a location standard, to search for places and landmarks in virtual worlds (an evolution of the URL); and a currency standard, to facilitate trade and exchange of currencies.
Officially regulating digital markets, including in the Metaverse.
Laws need to be drafted for the regulation of Big Tech and platforms, regarding antitrust, competition, data protection, and GDPR enforcement. The Digital Markets Act and the Digital Services Act,
<19> approved in July 2022 by the European Parliament, are already moving in this direction.
Strengthen open Metaverse projects. It is crucial to support and intensify existing standardisation initiatives. One example is the World Economic Forum's
Defining and Building the Metaverse,
<20> which strives to create economic and governance frameworks for secure and economically viable interoperability. There is also the
Metaverse Standards Forum,
<21> supported by companies such as Meta, Google, and Microsoft, which serves as a cooperative body of organisations and businesses to accelerate the development of this project.
A crucial question is whether the Metaverse will remain a closed space, dominated by a few players (the same Big Tech that now rule the internet and social media), or will open up to the active participation of smaller companies.
Henning Stein, Global Head of Thought Leadership and Market Strategy at Invesco, has observed that it is likely that investors themselves will want to take advantage of a more stable universe where “the giants are able to perpetuate their rule.”
<22> At the same time, it must be admitted that an open space is more likely to collapse due to the possibility of a single bid becoming dominant. In the long run, however, this scenario could annihilate innovation—impossible without conflict or collaboration, but more than necessary in the virtual world.
The aforementioned standardisation initiatives push in favour of opening up the Metaverse, a fertile ground for progress; they serve not only to regulate but also to connect companies. Even more supportive are the antitrust agencies, which tend to apply the same rules used in any sector to the digital universe. With the Digital Markets Act and the Digital Services Act,
<23> approved in July 2022 by the European Parliament, the EU is already moving in this direction. Its intention is to rebalance the balance of power of Big Tech. This example could be followed by other nations, in the interest of inclusiveness, transparency, and user protection.
Recalling the metaphor of the semantic field, individual platforms must work together and collaborate in constructing a shared meaning for the Metaverse. Such union will soon be more than a hope, but a necessity. This would allow the Metaverse to be a place where one can always and everywhere virtually be oneself, despite the many divisions that exist.
Endnotes
<1> McKinsey & Company,
Value Creation in the Metaverse: The Real Business of the Virtual World, June 2022, .
<2> “
The Metaverse Universe,” Metaversed.
<3> McKinsey & Company,
Value Creation in the Metaverse: The Real Business of the Virtual World.
<4>Matthew Ball, “
Framework for the Metaverse,” June 2021.
<5> Sara Gherghelas, “
Metaverse Report #2: Demand for Metaverse Remains Amidst Crypto Turmoil,” DappRadar, October 20, 2022.
<6> Jade Gao, “
Bored Ape Metaverse Is Here: See You on the Otherside,” DappRadar, March 2022.
<7> Sarah Perez, “
Roblox Stock Drops on Widening Losses in Q3, but Other Growth Metrics Remain Strong,” TechCrunch, November 2022.
<8> Roblox, “
Roblox Reports Third Quarter 2022 Financial Results,” September 2022.
<9> Gherghelas, “Metaverse Report #2. Demand for Metaverse Remains Amidst Crypto Turmoil”
<10> Phil Pearson, “Eyeball vs Engagement: The Struggle of Digital Advertising,” Medium, May 2015; Simon P. Anderson, Øystein Foros and Hans Jarle Kind, “Competition for Advertisers and for Viewers in Media Markets,”
The Economic Journal (September 2016); Gina Keating,
Netflixed: The Epic Battle for America’s Eyeballs (London: Penguin Group, 2013).
<11> Brian Fung, “Elon Musk Says Twitter Will Ban Some Links to Other Social Media Sites, Sparking Backlash!,”
CNN Business, December 2022.
<12> Clayton M. Christensen, Taddy Hall, Karen Dillon and Davis S. Duncan, “Know Your Customers’ ‘Job to Be Done’,”
Harvard Business Review 94 (September 2016).
<13> Chris Larson, “
Pokemonster: A Job to Be Done?,” Business Insights Blog, July 12, 2016.
<14> Rainer Selvet, “
The Interoperability Layer for the Metaverse. Announcing Avatar API,” Ready Player Me Blog, October 2022.
<15> Maghan McDowell and Maliha Shoaib, “
Louis Vuitton to Release New NFTs,”
VogueBusiness, April 2022.
<16> H. G. Wells,
The War of the Worlds (William Heinemmann Ltd., 1898).
<17> Joel S. Elson, Austin C. Doctor and Sam Hunter, “
The Metaverse Offers Much Potential – For Terrorists and Extremists,”
The Conversation, January 2022.
<18> Gian M. Volpicelli, “
Big Tech Needs to Stop Trying to Make Their Metaverse Happen,”
Wired, January 31, 2022.
<19> “
The Digital Services Act Package,” European Commission.
<20> “
Defining and Building the Metaverse,” World Economic Forum.
<21> The Metaverse Standards Forum.
<22> Henning Stein, “
Why Investors Should Support an Open Metaverse,” LinkedIn, July 2022.
<23> European Commission, “The Digital Services Act Package”
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