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Is the metaverse a passing craze, or is it a permanent phenomenon

A stakeholder of Meta described the company’s significant investments in Web3 technology, which is dominated by 3D immersive virtual worlds, as “very risky”

Mark Zuckerberg’s metaverse wagers are surrounded by uncertainty. Recently, a Meta shareholder described the company’s massive investments in Web3 technology, which is primarily defined by 3D immersive virtual worlds, as “very frightening”

During the company’s earnings call for the third quarter of 2022, an analyst asked if Meta’s metaverse experiments were increasing user engagement and if the metaverse opportunity was “developing in accordance with the company’s expectations.” Zuckerberg stated that despite the fact that many may disagree with this expenditure, it would be an essential step in the development of the future of technology.

“It would be a mistake for us to not focus on any of these areas, which are going to be fundamentally important to the future…and it’s some of the most historic work that we’re doing that people are going to look back on decades from now and talk about the importance of the work that was done here,” stated the founder, CEO, and chairman of Meta Platforms. The Wall Street Journal said that Horizon Worlds, the company’s primary consumer metaverse offering, has disappointed users.

Meta’s unwelcome attempt to construct the metaverse may have far-reaching implications on the metaverse and Web3 ecology, but interest in it has waned over the past few months. In the past two years, a significant portion of the web3 and metaverse hype cycle was fueled by capital investments in that domain.

A decade of slack monetary policy and almost unrestricted capital led to a surge in risk-taking and capital. Salone Sehgal, the founding general partner of the gaming and interactive media-focused venture capital fund Lumikai, asserts that investors frequently seek out new platforms and technologies to generate a high return.

“In the last 12 months, with globally the cost of capital changing, funds pulling back capital from riskier bets, a lot of the public market companies coming under pressure and cutting allocations has meant that fundamentally risk appetites have changed. As a result, the risks of building the metaverse, the risks of building the blockchain are now becoming much more apparent, impacting people’s appetite,” explains Sehgal.

1Lattice (formerly PGA Labs) director Praneet Singhal adds that investors are becoming increasingly aware of the risks associated with the widespread adoption of the metaverse, especially after Meta lost half of its value due to rebranding and massive layoffs.

Investments in VR, AR, and virtual worlds have declined in recent quarters over the past year,” says Singhal, “but significant transactions are still occurring.

Is the metaverse a passing fad or a sound investment? Analysts disagree. Deloitte forecasts that India’s 2035 metaverse economic impact will range from $79 billion to $148 billion, or 1.3% to 2.4% of GDP. The estimates are based on a young, technologically savvy population that is more willing to explore virtual worlds, a large pool of tech talent that can offer digital labor to the metaverse, and corporate support.

Infosys and Tech Mahindra have subsidiaries in the metaverse. According to Deloitte analysts, India’s language, religion, and entertainment can lend a distinct flavor to its metaverse products.

According to the co-founder and managing director of Primus Partners India, Devroop Dhar, 11% of Web3’s IT talent is located in India. Dhar stated that the metaverse is “extremely sustainable” and that 5G will increase its adoption.
Everyone is now aware that the metaverse has practical applications. Initial adopters in India. Numerous corporations and conglomerates are using it for massive employee engagement efforts. Food places, jewelry brands, and even the automobile sector have adopted this strategy. It is no longer a question of whether we should address the metaverse, but rather what can be done and how it can be helpful. According to Dhar, 5G will enable more of this.

Lumikai’s Sehgal doubts. Can conglomerates develop rapidly and recruit sufficient expertise to design such futuristic technologies?

“Many of these conglomerates are publicly listed. If these are bets which are not very ROI positive, I won’t be surprised to see some of this capital being rolled back and projects being called off over a few quarters or so. For the metaverse as a persistent virtual world to be a reality, we need to solve for interoperability, concurrency, and scalability, which are still some years away from being solved. Meta is struggling to achieve any kind of basic fidelity in its 3D world.

If you look at its quality, it looks like it was programmed and produced in 2010 as opposed to in 2022,” says Sehgal. India has low Web3 penetration as well. Despite substantial investment in consumer-facing experiences and play-to-earn games, the core customer group has not expanded beyond early adopters and enthusiasts. Also, gaming is popular in India because 95% of the gaming industry is driven by mobile gaming, which is sometimes free to play, as Sehgal notes. “Affordability, frictionless access, and accessibility of Web3 games are all current challenges. Investment in Web3 games also requires the use of tokens and the creation of wallets which require both financial sophistication and serve as financial barriers to play.”

The founder of Lumos Labs, Kaavya Prasad, is thrilled. In the 1990s, according to Prasad, immersive gaming introduced the metaverse. The concept has simply shifted.

Dhar adds, “If you really look at this concept of metaverse/virtual world, around 2003 is when we had this game launch called Second Life which is a precursor conceptual-wise to what is metaverse today.” To reach such a young market, objective or utility-driven metaverse platforms are the most effective.

“Objective or utility-driven metaverse will start the trend of the mass adoption for the metaverse. We are too early for general purpose metaverse which Meta is attempting to build,” stated Prasad. There are still numerous metaverse debates, but only time will reveal its future.

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About MahKa

Is the metaverse a passing craze, or is it a permanent phenomenonMahKa loves exploring the decentralized world. She writes about NFTs, the metaverse, Web3 and similar topics.

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