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Metaverse: hopes, promises and unknowns

What will the metaverse economy look like?

Jean Zeid, Journalist
On July 6th, 2022 |
4 mins reading time
2
What will the metaverse economy look like?
Thierry Penard
Thierry Pénard
Professor of Economics and Dean of the Faculty of Economics at Université de Rennes 1
Key takeaways
  • Some sectors are already at the forefront of the metaverse, such as the video game and porn industries, which are at the origin of the paywall or online subscription.
  • One of the main markets for the metaverse will probably revolve around commercial meta-environments such as commercial galleries powered by crypto-currencies or other NFTs.
  • The metaverse will probably be an entry point for well-known ecosystems such as Apple, Amazon, or Google.
  • However, it is likely that the “metaverse” will actually be “metaverses” as some governments will not allow their citizens to move freely in this digital space.

The poten­tial of meta­verse ser­vices is still large­ly unknown; a sit­u­a­tion that can be com­pared to the inter­net bub­ble at the end of the 1990s. At that time, many peo­ple dreamed of new forms of e‑commerce, but did not have the tech­nol­o­gy to put them into prac­tice. Many cloth­ing start-ups promised cus­tomers vir­tu­al booths where they could try on their next shirt or shoes. Most have since dis­ap­peared, and many scep­tics believed that peo­ple would nev­er buy clothes online. Times have changed, as have mind­sets and tools.

The oth­er major event with which the emer­gence of the meta­verse can be com­pared is the advent of the third-gen­er­a­tion mobile net­work UMTS in the mid-2000s. This was a time when 3G promised to cre­ate new ser­vices worth hun­dreds of bil­lions of dol­lars. But most of them did not see the light of day or did not catch on with the gen­er­al pub­lic. Yet, 3G has nonethe­less been a suc­cess with the emer­gence of social net­works, the app mar­ket, and the explo­sion of mobile advertising.

Tipping point

Today, it seems that we are on the verge of a sim­i­lar upheaval with the meta­verse. At some point in the near future, peo­ple will devel­op new uses, unaware of the tech­nol­o­gy behind their new prac­tices. If today almost all of us use smart­phones, tomor­row we will undoubt­ed­ly have oth­er devices for access­ing the meta­verse via aug­ment­ed or vir­tu­al real­i­ty. When these devices become more user-friend­ly, the time will come for the mass mar­ket. A whole new range of ser­vices will emerge, and we will expe­ri­ence a new dig­i­tal revolution.

The first of these rev­o­lu­tions was that of the com­put­er con­nect­ed to the Inter­net through search engines or web browsers. It had two dis­ad­van­tages: it required a wired con­nec­tion, and then you had to be at home. The sec­ond rev­o­lu­tion was the touch­screen smart­phone, where we moved from a brows­er approach to an appli­ca­tion approach. It led to a sig­nif­i­cant change in the way we use our devices, and in our rela­tion­ship to con­sump­tion, social­i­sa­tion, enter­tain­ment, etc.

But fore­cast­ing remains a com­plex sci­ence. The next rev­o­lu­tion, fol­low­ing on from the smart­phone, was sup­posed to be the voice rev­o­lu­tion with the craze for con­nect­ed speak­ers. But in the end, this did not real­ly gen­er­ate any inno­v­a­tive uses. The next rev­o­lu­tion will per­haps be that of the meta­verse – a more immer­sive access to vir­tu­al worlds that will no longer be lim­it­ed to the sur­face of a touch screen. With the meta­verse, this phys­i­cal­i­ty will disappear.

The market already exists

There are already sec­tors at the cut­ting edge of this field, such as the video game indus­try, which has had a foot in the meta­verse for almost twen­ty years, pro­duc­ing game expe­ri­ences that enable immer­sion in vir­tu­al envi­ron­ments. Oth­er inno­va­tions will also come from the porn indus­try, always at the fore­front of dig­i­tal inno­va­tion. It is the first sec­tor to have launched pay­wall or sub­scrip­tion-type eco­nom­ic mod­els for con­sum­ing stream­ing con­tent. With proven success.

In the com­merce sec­tor, the main chal­lenge of the meta­verse will be its abil­i­ty to cre­ate a uni­verse equiv­a­lent to shop­ping malls, meta-envi­ron­ments where con­sumer plat­forms, enter­tain­ment ser­vices and prob­a­bly many oth­er uses that we have not yet imag­ined will be aggre­gat­ed, whether or not irri­gat­ed by cryp­to-cur­ren­cies, NFTs and the blockchain.

But this sec­tor is still large­ly depen­dent on the phys­i­cal con­straints of logis­tics and prox­im­i­ty. Before the emer­gence of the inter­net, in-store shop­ping was intrin­si­cal­ly linked to geo­graph­i­cal prox­im­i­ty. Today, dis­tance is less of a con­straint, but it has not dis­ap­peared, con­trary to what one might think at first glance. The large plat­forms in the sec­tor have for the most part remained nation­al plat­forms. Trad­ing sites are not always the same from one coun­try to anoth­er and local speci­fici­ties per­sist. How­ev­er, if there are some dif­fer­ences in con­sump­tion, we can see that these glob­al plat­forms can adapt to region­al tastes and pref­er­ences. If we take the exam­ple of Net­flix, they have devel­oped an offer that can be adjust­ed to each indi­vid­ual country.

Integration with existing platforms

It is also very like­ly that the meta­verse will be the entry point to the same ecosys­tem, whether it is the Ama­zon, Meta or Apple ecosys­tem. This explains the fierce strug­gle between the GAFAMs and cer­tain Chi­nese giants such as Aliba­ba to become the future cham­pi­on of the com­ing rev­o­lu­tion. Faced with Asia and the Unit­ed States, Euro­pean play­ers are not in a posi­tion to mas­ter all these tech­nolo­gies. In France, for exam­ple, we have very suc­cess­ful com­pa­nies in cryp­tog­ra­phy or cyber­se­cu­ri­ty, but this is not enough to dom­i­nate this emerg­ing market.

On the oth­er hand, what is more or less cer­tain is that there will be no sin­gle glob­al meta­verse. There is bound to be a Chi­nese meta­verse, for exam­ple, which will not allow its cit­i­zens to vis­it vir­tu­al ter­ri­to­ries not sub­ject to cen­sor­ship. State reg­u­la­tions will nec­es­sar­i­ly cre­ate lim­its or bor­ders, even with­in these vir­tu­al spaces. It will also be nec­es­sary to pro­tect con­sumers, organ­ise rela­tions between Inter­net users and plat­forms, etc. And not every­thing will hap­pen exclu­sive­ly on the meta­verse. We can very well imag­ine a mixed use between the smart­phone, a vir­tu­al uni­verse and even a phys­i­cal shop. The suc­cess of online shop­ping has not killed off shops. And oth­er forms of com­merce have emerged that allow us to go back and forth between the phys­i­cal and online worlds.

Final­ly, the ques­tion of acces­si­bil­i­ty to these tech­nolo­gies is, in my opin­ion, fun­da­men­tal. How are we going to appro­pri­ate these tech­nolo­gies col­lec­tive­ly and har­ness them with­out cre­at­ing new dig­i­tal divides? If I take the exam­ple of a job inter­view on the meta­verse, will the can­di­date who has mas­tered its codes have an advan­tage over the neo­phyte? These are all ques­tions that this nascent meta­verse will have to answer if it is to become the next dig­i­tal revolution.

Staggering predictions

What will the eco­nom­ic weight of this meta­verse be in the near future? For the con­sul­tan­cy firm Gart­ner InfoTech, the promis­es will be ful­filled: this new iter­a­tion of the Inter­net will very quick­ly become indis­pens­able. By 2026, accord­ing to its study, the meta­verse will be adopt­ed by a quar­ter of the world’s pop­u­la­tion for work, shop­ping, edu­ca­tion, social inter­ac­tion, and enter­tain­ment. We are even expect­ed to spend at least an hour a day wear­ing a VR head­set to enjoy the enhanced immer­sive expe­ri­ence. The firm also pre­dicts that NFTs and dig­i­tal cur­ren­cies will fuel this vir­tu­al world econ­o­my. A McK­in­sey report con­firms this high poten­tial: the meta­verse would be capa­ble of gen­er­at­ing up to $5 bil­lion in val­ue by 2030.