The Metaverse has been the buzzword in recent years, covering every top news, while the level of common understanding of the term still appears to be very limited. This, however, is due to the fact that the Metaverse is still within its days of developing and perfecting. It would not be an overstatement to compare the Metaverse now with the World Wide Web during its day of development in the 1980s and 1990s. In this article, in the attempt to further understand the Metaverse, we will try to discover what is the Metaverse, the market opportunity and how businesses can monetize through the digital world.
A Brief History of the Metaverse
Broadly speaking, the Metaverse is a virtual-reality world where people can interact with their surrounding environments and other people in a similar matter to the real world. The first concept of the Metaverse can be traced back to the early 1920s. However, it was not until the 1980s, through all these very famous sci-fi movies like the Tron Series (1982), Neuromancer (1984), Snow Crash (1990), or The Matrix (1999), that the idea of a digital world became more influential and conscious among our society.
The Metaverse is actually a concept that we have all engaged in long before it becomes a trendy term in recent years. In fact, with the definition given above, most of us have already been living and interacting with other people in the Metaverse through many different vehicles such as social platforms (Meta, Discord, Twitter, etc.), online gaming (World of Warcraft, Minecraft, etc.), or web-conference software (Zoom, Google Meet, etc.). Below are some of the key milestones of the Metaverse.
The limitless capabilities of the Metaverse
Many believe that the Metaverse signifies the next step in our evolution. It makes the world become smaller by helping everyone overcome geographical differences and connect through the integration of the digital world into the real world. We would expect our experience in the Metaverse, with the help of AR/VR and future technologies, to be no less, if not more exciting, than what we could experience in the real world. It promises to bring out new forms of human connections, work, entertainment, and many other aspects that we may not even know yet. The most well-known capabilities that the Metaverse currently offers are:
A Digital Twin/Avatar — With the help of blockchain technology, we can create a mirrored unique version of ourselves in the Metaverse, and everything the avatar does in the metaverse represents one and only one individual that controls them in the real world. Through this avatar, we can interact with our surrounding environment in the Metaverse. This concept has been explained very well through movies such as Avatar (2009), and Ready Player One (2018).
Mixed Reality — Mix reality is the combination of both VR and AR to help the users interact with their surrounding environment in the digital world in the most realistic way that simulates the real world. This is also the foundation to other activities within the Metaverse such as gaming, conducting business, concerts, etc.
Blockchain Integration — It is undoubtedly that blockchain is one of the key technologies to the success of the Metaverse. The blockchain network constantly verifies all databases which help facilitate all transactions and validate the uniqueness of a digital asset or entity in the Metaverse.
New Business Opportunity in the Digital World
According to research from Fortune Business Insights, the Metaverse market stood at $63.83 billion in 2021 and is projected to grow to $100.27 billion in 2022 and continue to grow to $1,527.55 billion in 2029 at a 47.6% CAGR. With the growing market, many new business models have been created from the Metaverse.
Big companies have already been gearing up to join the Metaverse. The current most active players are the Online Game Makers such as Roblox, Epic Games, Microsoft, and Take-Two Interaction, then comes to the Gaming, AR & VR Hardware sellers such as Meta (through Oculus), Lenovo, HP, and Logitech, etc.
According to an article from Crunchbase, in 2021, companies related to the Metaverse raised approximately $10.4 billion across 612 deals. Funding for Metaverse in the last year could be broken down into four broad categories:
- Gaming ($7.5 billion & 382 rounds)
- Online Games ($2.5 billion & 110 rounds)
- Augmented Reality ($2.1 billion & 176 rounds)
- Virtual World ($62.8 million & 9 rounds)
Notable deals were:
- Epic Games ($1 billion)
- Upland ($18 million Series A)
- Inworld AI ($7 million Seed round)
- GuildFi ($6 million Seed round).
Monetization through the Metaverse
A survey conducted by Statista pointed out that business purposes and investment opportunities are the main reasons for people to join the Metaverse. This trend has directly led to many new services and business models that are thriving within the Metaverse.
NFTs Trading — The earliest and most common business in the Metaverse is NFTs trading. In Q3 of 2021, we saw an NFT sales surge to $10.7 billion. Notable companies that have participated in NFTs trading are Coca-Cola with their first NFTs sold for USD575,000 (August 2021), and Gucci which recently opened its “Vault” to sell Gucci NFTs (Jan 2022).
Real Estate Market in the Metaverse — Investors have been paying millions of dollars for real estate in the Metaverse. The sale of real estate in the Metaverse reached $500 million in 2021 and is expected by investors and analytics firms to hit $1 billion in 2022. BrandEssence Market Research forecasts the Metaverse real estate market to grow at a 31% CAGR from 2022 to 2028. Right now, the “Big Four ‘’ Metaverse — Sandbox, Decentraland, Cryptovoxels, and Somnium — accounts for the majority of real estate sales so far. Sandbox leads the market, accounting for three fourth of the real estate sales in 2022.
Constructions — The lands in the Metaverse can be used to build upon it. This is where new business models, Metaverse construction or web3 development, are created. In Sandbox, for example, professional voxel builders/developers will be hired to build shopping malls, theme parks, brand environments, etc. Notable leading builders in the Sandbox Metaverse are companies such as Admix, LandVault, and SandStorm.
Digital Leasing — A recurring revenue stream can also be generated through digital leasing. Instead of buying land and then hiring builders to make a unique space or environment, brands can still access the Metaverse by renting spaces from another party. This is in fact similar to how, for example, spaces in a real-world shopping mall are leased out for brands to set up stores and sell their products, or billboards on a highway or time square are leased out for brands to do advertising. One recent example is the sportswear retailer Sketcher, who recently signed a lease for a digital space in Decentraland to engage in new ways of providing brand experience to customers.
The Metaverse could potentially be the evolution of the World Wide Web. The market for this digital world is expected to grow significantly in the long run. Investors have already joined and put a lot of money into the Metaverse to seek business and investment opportunities. As a result, many new business models are being created from the Metaverse. With this fast-paced growth, we can expect the Metaverse soon become crucial to our society.
Rocket Equities is a Southeast Asia-focused financial advisory firm experienced in capital raising, M&A, and buy-outs.
Rocket Equities works with market leaders in tech and tech-enabled companies to raise capital in debt & equity markets, acquire competitors locally and regionally, and create an exit for founders by leveraging its network of 300+ professional investors composed of VCs, PEs, Corporates, and CVCs in APAC.
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