We’re just months into 2022, but there’s no question about it: ‘metaverse’ is this year’s big buzzword. While some are, no doubt, caught up in the hype and a vision that is still years away, for businesses that offer AR experiences, the metaverse offers a vehicle for real value right now.
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A trillion-dollar opportunity is what the metaverse presents, declared Grayscale. In 2020, the metaverse sector generated $478.7 billion in revenue. According to Bloomberg Intelligence, it’s poised to top $783 billion by 2024.
How did it come to grow so rapidly in the past couple of years?
The Meteoric Rise of the Metaverse
The confluence of technological advances and the shift to remote activities necessitated by the pandemic rapidly accelerated the various components of the metaverse. Five factors came together over the past five years, propelling the metaverse into such a vast enterprise that the trillion-dollar forecast may not be all that far off.
- Deeply immersive metaverse games are known as massively multiplayer online games (MMOs). Thanks to the improvements in broadband connections that reduce latency, they can engage hundreds of participants simultaneously. That bestows the type of crowd excitement that had been reserved for in-person live events on a digital experience.
- The same type of excitement on a large scale made the metaverse an ideal staging platform for elaborate live shows like concerts and fashion shows. Giving live access to millions of people produces a volume of attendees far beyond what would be possible for an in-person event. That is what has made such events a spectacular success — so much so that many expect they will still be used even when we return to a post-pandemic normal.
- The pandemic was, possibly, the single greatest catalyst for the metaverse’s entry into the mainstream. When playing video games was elevated to a virtue, due to lockdowns and extended restrictions that precluded entertainment options outside the home, the number of players grew from 944 million to over 1.2 billion in 2020. As a result, revenues for metaverse games topped $155 billion.
- Increasing adoption of cryptocurrency and the popularity of NFTs expanded opportunities for digital creators to monetize their activities. Metaverse worlds typically offer transactions in their own form of currency. For example, purchases made in or for real estate in Decentraland are priced in MANA. It all added up to serious money, as the sales of virtual real estate topped $500 million in 2021, an amount that is expected to double to billion dollars in 2022.
- Big purchases come from businesses that see the metaverse as a marketplace, meeting place, and marketing vehicle that could reach anyone anywhere. Brands started to stake out ground in the metaverse, buying virtual plots of land on which to set up virtual stores, selling NFTs and other virtual goods, and building branded experiences on gaming platforms.
Game On for Brands
Many brands have already sought to tap into the potential of gaming platforms like Roblox that draw in hundreds of millions of players. In fact, brand spending on ads in games is anticipated to hit $18.41 billion by 2027.
In-game advertising is particularly appealing to fashion brands, many of which have made branded digital apparel for avatars available for purchase in the metaverse. Some fashion labels have even created their own branded virtual theme parks.
You can enter both NIKELAND and Vans World on Roblox. These athletic brands are a natural fit for the game’s demographic of players, who tend to be in their teens and early twenties. But the metaverse is even attracting luxury brands, which offer virtual versions of goods to consumers who would not be able to afford the real thing yet.
Patrice Louvet, Ralph Lauren’s CEO, observed that he considers the metaverse “a fantastic opportunity to interact with younger consumers, to create experiences.” No doubt, that’s what motivated American Eagle to extend its Members Always campaign into Roblox, as well as Snapchat and TikTok.
But some brands are also intent on staking their own claims to virtual real estate. In November 2021, the Metaverse Group spent $2.43 million on a stretch of plots in Decentraland’s fashion district. On the blockchain interview series, the group’s chairman and the CEO of Tokens.com, Andrew Kiguel, explained that he sees it as a solid investment.
Kiguel compared it to buying land in Las Vegas when it was just desert and then watching it develop into a city that draws in millions of tourists. He regards the metaverse as “the next iteration” of not just gaming but social media, live events, and branding.
Meta Hype Vs. the Experience of VR
Undoubtedly, Mark Zuckerberg agrees with Kiguel. He invested $10 billion in the metaverse and changed the name of his company to Meta. But in trying to corner the metaverse, he lost sight of how people like to access it now.
One thing all the most popular virtual venues have in common is that they don’t require VR headsets to experience them. In fact, in its present iteration, Decentraland is not compatible with VR headsets.
In contrast, Meta is predicated on the assumption that its Horizon platform will define the metaverse experience. That is a VR platform that requires wearing an Oculus headset and sensors on one’s hands to control the avatar’s movements.
As the responses to its trailer demonstrate, it’s not something everyone finds appealing.
Most people don’t like wearing VR headsets for extended periods of time both because of their short battery life and the headaches and nausea they can cause. That’s one of the things that the Wall Street Journal’s Joanna Stern complained about when recounting her VR experience in Trapped in the Metaverse: Here’s What 24 Hours Feels Like.
Another way the metaverse falls short of the hype is that “metaverse” sounds like a single universe in which you can travel around, retaining your digital identity and possessions. But that’s not how it works now. Each platform is a world unto itself that doesn’t connect with others. The ideal of the frictionless metaverse of Web3 is still a long way out due to the fact that each platform has developed independently of the others without consideration for interoperability.
Consequently, when Stern had to end her workout on the Altspace platform to participate in a scheduled meeting in Spatial, she had to change avatars to comply with this new environment’s requirements. The lack of interoperability within the different VR realms of the metaverse is a serious drawback for mainstream adoption.
The AR Advantage
Those VR drawbacks are the reason why both brands and platforms are opting for a more user-friendly experience by enabling players to enter a 3D environment without having to wear headsets. Instead, they rely on what they are used to using for everything from entertainment to shopping — their mobile phones.
With billions of daily users, as Allison Ferenci, Camera IQ’s Co-founder and CEO, has noted, mobile is the most convenient point of entry for brands to use when they want to connect with their customers through AR experiences.
Mobile-enabled AR experiences are the wave of the future. Mobile AR users worldwide are on track to reach 1.7 billion around the globe by 2024, according to Statista estimates. This year already, we will hit 1.1 billion.
That opens up huge opportunities for brands to give their customers the immersive experiences that they crave, increasing engagement rates more than 30X. Even the strongest non-AR content tends to generate engagement rates around 1.6%. In contrast, AR experiences deliver up to 50% engagement.
Such high levels of engagement lead to higher levels of conversion. According to Camera IQ’s research, while conversion rates for photo and video content averaged 3.5%, this figure was more than 3X higher for AR activations — 12%.
Metaverse experiences through AR enable brands to connect with customers in an impactful way that leads to increased conversion. All they need is their phones, and all brands need are the right development partners.
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