Where Has the Metaverse Gone? Examining a Failed (and Costly) Trend

While several companies, including Meta, invested billions to make the metaverse work, these investments failed to pay off, and industry titans have moved on. Was it a case of failed incentives, or is it still too early to call it off?

Remember the Metaverse? We Do, Even if It Failed

The promise of an interconnected virtual world, where our alternate selves would work, play, and live alongside others in a doppelganger-like way, was once at the forefront of investment and innovation. The concept of the metaverse, first described in 1992, took form after the COVID-19 pandemic, when remote forms of contact gained relevance due to the challenges the human race faced during those troubled times.

One of the companies that took the metaverse banner was Meta, which pushed hard to bring these technologies to mainstream audiences, putting billions behind two pillars of this proposal: the Quest line of virtual reality headsets and its trademark virtual world, Horizon Worlds.

Companies like Sony, Disney, and even Microsoft followed Meta’s lead and also started putting out products catered to a metaverse-interested crowd, investing millions in these initiatives. For example, Sony acquired technology to broadcast sports into virtual reality venues, and Disney called it “the next great storytelling frontier,” creating a division directed to spin off these experiences.

The decentralized finance world was also fully behind the trend. In 2022, Dappradar estimated that $7.6 billion was invested in metaverse proposals, with relevant names like Animoca Brands investing billions in metaverse-centric funds.

Nonetheless, the novelty started to wear off quickly, with investments reaching less than $707 million from the start of 2023 until July of the same year.

Companies also started feeling the heat of a trend that failed to pick up, with Meta’s Reality Labs, its metaverse division, losing money quarter after quarter. Microsoft abandoned key metaverse divisions and a group focused on integrating virtual reality tech for industrial applications. Disney also terminated its metaverse group amid a wave of cost-cutting layoffs.

At the same time, a new trend with far more enticing results would rise. The surge of ChatGPT, one of the most revolutionary artificial intelligence products to date, showcased the technology, showing that investing in artificial intelligence (AI) rather than the metaverse could bring far more rewarding results.

Behemoths like Microsoft and Meta switched to AI, announcing a pivot to these new technologies. In March 2023, Meta founder and CEO Mark Zuckerberg stated that while the metaverse would remain “central” to them (it didn’t), their “single largest investment” was focused on advancing AI and integrating it into their products.

Billions flowed to AI to provide the necessary infrastructure to power these agents, which had immediate monetization opportunities. Microsoft co-founder Bill Gates directly touted AI vs. the metaverse, calling the latter “not as revolutionary” as the former.

By 2024, the future of the trend had been sealed, even if some initiatives remained active in a reduced form, with most companies abandoning the trend and chasing the AI bubble.

So, what happened to the metaverse? Analysts seem to agree that the industry overestimated the impact of its proposal, with the technology that would open the doors to this experience being expensive and clunky. Nonetheless, others argue that the experience of a digital side world with the benefits of alternative social contact still has the opportunity to grow, as long as the tech behind it evolves to become less invasive and more consumer-friendly.

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