Introducing the metaverse – weapon of mass disruption

A genuine game-changer

The term “new normal” is nowadays used so routinely that we might be forgiven for thinking world-changing innovation has become commonplace. In fact, breakthroughs that are truly capable of affecting almost every aspect of our lives remain relatively few and far between.

It could be argued that the most significant of recent decades have been the internet and the smartphone. Both have proven transformative on an enormous, enduring scale. Now, extending this trajectory, we are moving towards what is likely to be the next source of massive, technology-driven disruption: the metaverse.

Facebook founder Mark Zuckerberg has described the metaverse as “an embodied internet”¹. It will enable us to achieve all we can currently accomplish on our smartphones, tablets, laptops and so on – including shopping, socializing, gaming, live-streaming, reading and learning – in shared, fully immersive, virtual environments.

In other words, the metaverse will create a real presence, unlike 2D applications or a website. It will likely merge the physical world with the digital one and expand our sense of sight, hearing and touch – reality.

The metaverse already presents what may prove investment opportunities. In order to understand these, however, it is first necessary to appreciate the far-reaching potential of an innovation whose capacity to change this world will lie in its unprecedented ability to create others.

From idea to accelerant

The metaverse concept first surfaced in a science-fiction novel, Snow Crash, 30 years ago. The book’s author, Neal Stephenson, envisaged a 3D virtual space in which humans – in the form of avatars – could engage both with each other and with software. Similar ideas later appeared in works such as The Matrix and Ready Player One.

Reflecting Isaac Asimov’s maxim that the job of sci-fi is to “foresee the inevitable”, there have since been several notable milestones on the road to the metaverse’s realization. These include the emergence of games such as Second Life and Fortnite and the invention of cryptocurrencies and the blockchain* technologies that underpin them.

Alongside the continued march of tech, demographic forces are also fueling efforts to bring the metaverse to life. Members of Generation Z are especially likely to embrace the idea, with one survey suggesting many would like to “hang out” in a virtual game environment without even playing the game itself².

In addition, the COVID-19 crisis has accelerated a broader reassessment of how we interact. In the wake of lockdowns and other restrictions, many people are now much more willing to connect virtually in both personal and professional settings. This may further heighten the metaverse’s appeal and applicability.

Taking all this into account, we can see immediately that this is an innovation whose impacts are likely to be widely felt. As such, it bears, in our view, all the hallmarks of what is sometimes known as a “genesis trend”.

Significant shifts and multi-sector disruption

Emergen Research, a consultancy specializing in disruptive technologies, has reported that the metaverse market was worth almost USD48 billion in 2020. It has predicted this figure will rise to more than USD280 billion by 2025 and approximately USD 830 billion by 2028³.

To put it another way: this is a market whose value is tipped to go from under USD50 billion to nearly USD1 trillion in less than a decade.

Gaming might be among the most obvious beneficiaries. Some formative elements of the metaverse already exist within hit titles such as Fortnite, and the sector is increasingly employing technologies such as virtual reality (VR), augmented reality (AR) and artificial intelligence (AI).

Social media and video-conferencing are also likely to make full use of advances that deliver more immersive, intimate and collaborative experiences. For example, Snapchat already employs facets of AR, while the likes of Teams and Zoom offer only a foretaste of digital gatherings with unlimited attendance and monetized features such as VIP access.

The future is already here

E-learning, which has flourished since the advent of COVID-19, could also likely be enhanced by the metaverse – and, again, the transformation is already under way. For instance, South Korea’s Seoul Metropolitan Office of Education began using VR and avatars in online science courses during the pandemic.

Similarly, the metaverse is likely to propel the evolution of telehealth, making remote patient-doctor interactions more personal. One medical start-up, XRHealth, has already devised a virtual environment to provide support in areas such as pain management and physical therapy.

The entertainment industry is particularly ripe for “creative destruction”. By way of illustration, imagine a concert that entails no travelling, no queuing and a perfect, unobstructed, 3D view. Here, too, the future is to some degree already here, as shown when singers Travis Scott and Ariana Grande performed via their avatars on the Fortnite platform.

Finally, e-commerce should prove an arena for major disruption. The metaverse will allow shoppers to “try” products before purchasing them, while some companies are even developing branded items for avatars: Gucci recently sold a virtual bag for USD4,115 – more than the retail price of the physical equivalent⁴.

Each of these markets is set to grow as the metaverse takes shape. The value of the gaming sector in 2025 has been estimated at up to USD286 billion⁵; social media up to USD750 billion⁶; video-conferencing up to USD50 billion⁷; e-learning up to USD415 billion⁸; telehealth up to USD276 billion⁹; online entertainment up to USD447 billion¹⁰; and e-commerce up to USD20 trillion¹¹.

In our view this is a new normal that cannot be ignored

As has been widely reported, Mark Zuckerberg’s determination to “help bring the metaverse to life” is such that Facebook was renamed Meta in October 2021. “Over time,” Zuckerberg said in discussing the move, “I hope we’re seen as a metaverse company.”¹²

Yet it is not only Big Tech’s best-known luminaries that are committed to this goal. Many less high-profile players are chasing the same dream. Unity, a leading designer of game engines, has declared its intention to be “the 3D operating system of the world”¹³; other would-be architects and enablers have still to reveal themselves.

It is vital to note that, as with the internet, no-one will “own” the metaverse per se. Numerous contributors – from individuals to start-ups to global enterprises – will play a role in its creation and operation as it gradually crystallizes.

From this alone we can infer that the metaverse will happen. It will certainly not materialize overnight; it might even take many years to fulfil its extraordinary potential; but it will come about.

Crucially, we could also infer that the disruption it would bring is likely to be comparable to or even greater than the upheaval generated by previous genesis trends. As we have seen, it will encompass multiple sectors and be manifest throughout our day-to-day lives. This will represent a new normal in the truest sense – and one that, both as citizens and as investors, we cannot ignore.

Dr Henning Stein is Invesco’s Global Head of Thought Leadership and Market Strategy.

* Blockchain is a technical solution. It is a decentralized database that is mirrored in the network on a large number of computers. The name is derived from the fact that the data records are strung together in blocks, resulting in a "blockchain". With the blockchain, it is possible, for example, to carry out transactions without a central instance. This is already being used in payment transactions with cryptocurrencies. The goal is transparent and tamper-proof transactions.