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The real metaverse is still far away

The metaverse to generate 4-5 trillion dollars in value by 2030

It’s a tech quiz: What is too big to ignore—but  its future is far from certain? Answer: The metaverse. It could generate $4 trillion to $5 trillion in value by 2030. The integrated or true metaverse is a long way off but companies have to get ready for it. These are conclusions from an article in McKinsey Quarterly written by four partners at the company.

Talking about the attraction of the metaverse they say: “With the real world beset by problems (such as war, COVID-19, inflation, and inequality), the metaverse offers an escape. That’s probably part of the attraction for the millions of customers who are flocking to early-stage metaverses. CEOs should ensure they are meeting their customers where they live—both virtually and IRL”.

The article says market value of metaverse activity in June 2022, was calculated to be between $200 billion and $300 billion. 

“It’s larger now, and in eight years or so, it could be $4 trillion to $5 trillion, which is roughly the size of Japan’s economy, the third largest in the world. Exponential growth is possible because of an alignment of several forces: the metaverse’s appeal spans genders, geographies, and generations; consumers have already shown they are ready to spend on metaverse assets; they are open to adopting new technologies; companies are investing heavily in the required infrastructure; and brands experimenting in the metaverse are finding that customers are delighted.”

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The authors say the potential is so large because the metaverse is a combinatorial technology: it combines elements of many of the top trends identified this year as most promising, including AI, immersive reality, advanced connectivity, and Web3. 

“Don’t be distracted by the debacles in crypto and nonfungible tokens (NFTs); those are Web3 technologies that are related but not exactly the same as the metaverse. Rather, the biggest risk is missing the wave of change that breakthrough technologies such as the original internet, AI, and the metaverse can unleash.” 

An April 2022 survey showed 95% of business leaders expect the metaverse to have a positive impact on their industry within five to ten years, and 61% expect it to change the way their industry operates.

The articles lists two of the largest and more advanced uses for the metaverse, one for consumer businesses and one for B2B companies:

  • Brand marketing and consumer engagement. Many companies have already added the metaverse to their omnichannel marketing mix, staking out a presence in virtual worlds like Roblox, Fortnite, and the Sandbox. Some are already finding success. Nike has hosted more than 26 million visitors at Nikeland, its space in Roblox, and it has sold over $185 million of NFTs for digital sneakers and suchlike products. And its digital division has tripled revenues to exceed $10 billion, almost a quarter of the company’s total. Now, companies are moving into the next wave of opportunities, including gamification, virtual reality (VR), and augmented reality (AR). Starbucks Odyssey, the metaverse upgrade of the company’s already strong loyalty program, is uncovering the potential for gamification. Amazon has added AR features to its apps, letting customers see what a product looks like in their own homes. IKEA does something similar, letting customers build a 3-D makeover of their home using AR tools.
  • Digital twins. In the metaverse, every asset, process, or person within and related to an enterprise can be replicated virtually—and connected. As a result, nearly every aspect of work can take place digitally before it does so physically. By building digital twins—virtual replicas of physical settings and objects in a metaverse that generate data in real time—far richer analyses can be generated to enable improved decision making. 
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The authors say that the development of the metaverse is a few years away from a true tipping point. 

“It could easily take longer (though that’s no reason not to prepare)”, they write and quote Brian Solis of Salesforce saying generational changes like Web 1.0, social media, and mobile “rarely happen overnight. They take years and are the result of an accumulation of incremental technological advances, evolving consumer demand, and cycles of experimentation.” 

“The technology is not yet ready to support the metaverse at scale: advances in 5G networks, edge computing, hardware, and software must come online (they’re in progress).” 

“At the moment, audiences are primarily gamers and the technically savvy; others must be recruited (our surveys suggest they’re very interested).” 

“Many metaverse transactions are made in cryptocurrency; we’ve all seen the shortcomings of crypto as a reliable, safe system of exchange.” 

“Finally, there is no connection among all the various partial metaverses (Roblox, the Sandbox, and many others). The integrated or true metaverse is a long way off.”

But CEOs in any sector can take three steps to ensure they have a reservation on the train and position their companies well for the metaverse’s eventual takeoff, the article says:

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  • The why: CEOs need to figure out how the metaverse factors into the current business model and what the company’s customers are excited to do in the metaverse. The authors quote Rob Lowe, formerly of LEGO Ventures, saying, “Don’t try to alter your core objectives to fit into the metaverse.”
  • The what: CEOs should consider identifying and prioritizing practical use cases that suit the company’s strategy and then develop the concepts, business cases, and road maps for those use cases. CEOs should treat these efforts with the same gravitas they would use for anything else, and not as a gimmick.
  • The how: The CEO can perform two functions: first, set the vision; second, choose leaders for each use case and initiative. Functional leaders might take the lead on these to ensure that the initiatives are closely embedded in functional agendas; it may also make sense to have one person champion the efforts on behalf of the functions. Several companies, including L’Oréal, have already appointed a chief metaverse officer, often reporting to the CEO.

The authors: Homayoun Hatami, managing partner for global client capabilities and a senior partner, McKinsey Paris, Eric Hazan, senior partner, Paris; Hamza Khan, partner, London; Kim Rants, associate partner, Copenhagen.

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