2023 off to a Good Start for the Metaverse Despite Some Negative News and a Weaker than Expected Showing at CES 2023

While some expected 2022 to be a banner year for the metaverse, it proved to be “worthy of attention, but not yet ready for the mainstage as the headliner,” as noted in last month’s 2022 metaverse retrospective (see IN-6803). CES 2023 fit this billing perfectly. Leading up to CES 2023, the Consumer Technology Association (CTA)—the trade organization that owns and produces CES—listed “Web3 and Metaverse” as some of the key topics, calling them out among some of the mainstays like automotive, smart home/city, and the Internet of things. This created the expectation that the metaverse would have a strong showing at the show, and while it did have a noticeable presence, it was evident that the metaverse is not ready to share the same stage as the other leading markets.

A significant number of metaverse companies have been immersive and Extended Reality (XR) mainstays at CES and were “rebranded” as metaverse. While these XR companies do fit within that context by virtue of 3D-first interfaces, little was done to expand on these XR roots to the broader metaverse landscape. With the crossover with XR, there was a decided focus on interface technologies, including head-mounted displays (and glasses-free displays), haptics, and full-body tracking. Companies in other key areas such as digital humans and digital twins were also on display, although metaverse platforms overall were not a strong showing. Companies such as ROYBI (education) and Lotte Group (broader metaverse environments, including commerce) showed metaverse environments and applications, but these examples also reinforced the nascent status (i.e., limited number of users, early-stage examples) of the metaverse and the buildup to its future.

CES as a show extends well beyond the consumer markets and in many cases has arguably become less consumer-centric, but mainstream coverage of the metaverse still skews heavily to the consumer angle. This is why some may find this insight’s headline to be surprisingly optimistic in light of the metaverse showing at CES 2023 and other news such as Microsoft’s planned shuttering of AltspaceVR.        

Microsoft’s shutting down of AltspaceVR in March 2023 is negative news, but it isn’t bad news for the metaverse—even though some of the headlines would suggest otherwise (again, the mainstream media tends to focus too strongly on the consumer market). In fact, headlines such as PC Gamer’s “Microsoft is shutting down its metaverse” not only miss the point of the metaverse but also fail to note other “metaverse” efforts like Mesh. There needs to be a shift away from multiple metaverses—or everyone having their own metaverse—to a cohesive system of technologies, standards, interfaces, and services. Microsoft’s shutting down of AltspaceVR shouldn’t be viewed as an ending to a “metaverse” but rather as an ending of a service, not unlike a website coming off the Internet. Further, Microsoft’s focusing on Mesh instead of the more consumer-centric service is the optimal strategic decision, given the stronger near-term opportunities in the enterprise and industrial markets over consumer.

In positive news, the Linux Foundation announced it had established the Open Metaverse Foundation (OMF) to work on open-source software and standards for the metaverse. The OMF dates back to 2006 but now has a larger platform thanks to the Linux Foundation. While the founding members are not as extensive as other, similar metaverse groups, it is a solid list that includes ChainHub, the Cloud Native Computing Foundation, FutureWei, GenXP, Guangdong University of Technology, Hyperledger Foundation, LF Edge, OpenSDV, the Open Voice Network, and Veriken.

The focus on open libraries and standards is key, with efforts to use Apache- or MIT-type licensing or Creative Commons. Already underway, the initial work is focusing on generating a glossary to help define the metaverse. This highlights both how nascent the buildup to the metaverse actually is and the importance of industries coalescing around a common understanding and vision for the metaverse’s future. The OMF’s current goal to see basic interoperability standards within the next 18 months is admirable and is more likely to reach wide support within the enterprise/industrial metaverse as opposed to consumer. Beyond defining the metaverse, the OMF is subdivided into eight foundational interest groups that include users, transactions, digital assets, simulations and virtual worlds, artificial intelligence, networking, security and privacy, and legal and policy. To reach their goals, the OMF will also work with other groups, including the Metaverse Standards Forum (started by the Khronos Group).

The CTA missed an opportunity to focus on foundational elements such as standards and interoperability; these essential steps should have been emphasized at CES 2023.   

When services such as AltspaceVR shut down (or had a weaker presence at a show like CES), it is easy to view these outcomes as indictments against a viable metaverse—or at least an emphasis on how far away we are from reaching this future. But this way of thinking is too shortsighted. It would be akin to saying that the near collapse of the video gaming industry in the early 1980s meant there was no future for that industry or that the entire future potential of the smartphone market should be judged on devices and platforms that preceded Apple’s and Google’s solutions. Importantly, the metaverse—and this is particularly true of the consumer segment—is still very nascent and fragmented, and the consumer base is not ready to embrace many of the eventual transitions from 2D to 3D. This does not mean that this facet of the market will never get there, but it will take longer than the other half of the market (enterprise/industrial).

There’s a reason many XR companies have pivoted away from consumer to focus on enterprise. The same drivers and motivations exist for the metaverse—the commercial markets are simply further along in the adoption cycle, are more open to experimentation, and are already deriving value from these trial and deployments. For the consumer space it is best to focus on use cases and applications that bridge the gap between 3D immersive experiences and current markets such as interactive content (interactive video, live e-commerce, etc.). Until XR devices, digital goods, and virtual worlds reach broader adoption by consumers, the consumer metaverse will continue to see more cases like AltspaceVR. Standards and interoperability will go a long way, but at least the latter is viewed by many within the industry as far off for the consumer space.