“Nothing is more powerful than an idea whose time has come” – Victor Hugo

There has been considerable amount of attention among investors globally on the Metaverse, with companies today starting to articulate the way they envisage themselves living and playing in the space. In advanced visions of the Metaverse, many believe that augmented and virtual reality (AR/VR) technologies can be leveraged to facilitate interactions in a shared, immersive virtual world through the internet. Still, there remains considerable debate over the precise definition of the Metaverse, which is in our view a reflection of the relatively nascent stage of development that the Metaverse finds itself in currently.

While certainly not a new concept, we believe that there are a number of factors that have helped to catalyze an exponential increase in interest in the Metaverse. These include increased blockchain adoption, changes in social attitudes catalyzed by Covid-19, increasing acceptance of the subscription economy, and growth of low-code & no-code application platforms and Machine Intelligence (MI).

The creation of the Metaverse will likely weave together different sets of technologies and operating models. We think there are 7 layers of the stack as articulated by Jon Radoff (CEO of Beamable) that are essential core enablers of the Metaverse, and commercial opportunities do exist across the stack.

For instance, increasing usage of metaverse platforms can lead to stronger digital advertising demand. Real-life experiences in the Metaverse can also help to better monetize shopping intentions, while the popularity of the metaverse platforms among younger users is attractive given that this group will gradually become core spenders over time. In terms of commerce, most would be familiar with the Direct-to-consumer (D2C) concept. However, the next iteration of this could see new revenue streams involving Direct-to-avatar (D2A) or Direct-to-metahuman (D2M) models. Other business models could stem from the ability of game developers to elevate physical experiences into 3D social worlds.

We also believe opportunities exist across the wider hardware and infrastructure stack, in areas such as wireless VR headsets, infrastructure/semis, and eye/motion tracking technologies. PwC believes that VR and AR have the potential to deliver a USD1.5t boost to the global economy by 2030 as advances in this space help organizations create value and reduce costs.

With the development of digital environments from linear and transactional spaces to multidimensional, experiential, and interactive virtual worlds, tech-savvy individuals and the younger generation are spending increasing amounts of time in the Metaverse. We thus see digital assets (e.g. in the form of virtual fashion and NFTs) helping to enable such consumers with new ways to purchase, trade digital goods and adopt multi-versal identities.

While the potential of the Metaverse is vast, we also believe that there are noteworthy challenges and risks worth monitoring, and these include areas such as data security & privacy, interoperability across different metaverses, regulatory risks, and the potential for an acceleration of the demographic divide