It wasn’t long ago that the global business community was transfixed by the metaverse and web3, the buzzy hypothesis that the next generation of the internet would give rise to a collective, persistent, virtual reality built on a blockchain-based foundation. Now, another kind of reality is settling in: many of the high-flying concepts and companies that drove this vision have coming crashing down to earth.
Crypto exchange FTX’s outsized implosion has garnered equally outsized headlines. But the crypto meltdown is much bigger than FTX. More than $2 billion in digital currency was stolen this year, mostly from loosely regulated decentralised finance or “DeFi” start-ups, according to The New York Times. And after peaking in November 2021, the value of crypto assets fell by 73 percent over the next 12 months, according to data from CoinGecko.
Meanwhile, NFTs, many of which only a year ago were selling for thousands or tens of thousands of dollars, have seen average values collapse. NFTs of “The Kiss” by Gustav Klimt, for example, which art lovers paid more than €1,800 (about $2,050) for, are now worth a sliver of their purchase price following an 87 percent crash in value. And, increasingly, NFT owners worry about the future of their digital assets if the platform they acquired them from goes bust. As for digital fashion, beyond gaming environments, it’s worn by virtually no one.
All-in betting on the metaverse by corporations has also proved perilous. Meta (née Facebook) has seen its value crash by 70 percent since rebranding itself a metaverse company, with its Horizon Worlds beta falling wildly short of expectations.
Indeed, the barrage of bad news has been so intense that one could be forgiven for believing the metaverse was nothing more than a pandemic-fuelled fever dream. After all, it was the pandemic that galvanised our collective imaginations around the idea of stitching a range of technologies together to create a world beyond the physical. A shiny new reality where lockdowns, social distancing and mask-wearing need not be a concern. A world where, unlike mind-numbing Zoom meetings, we could meet and interact online in a more natural, personal and immersive way. A place where, for brands, retailers and consumers, the store is never closed, and the shelves are never empty. One with endless new streams of products, experiences and, of course, revenues.
But that was then. Fast-forward to today and the metaverse generates more eye-rolls than excitement. Gone is the frenzy, gone is the fervour and gone is the firehose of investment.
Welcome to the Trough of Disillusionment, a key phase in what Gartner calls the Hype Cycle, a model based on the historical pattern that technologies typically follow as their proponents target commercial viability and mainstream adoption.
This pattern begins, according to Gartner, with an “innovation trigger”: a social or commercial need or insight that spawns a range of new technologies. These early experiments are followed by a raft of new concepts leading to a period of product development, market trials and promotion, all of which serve to pique, and often inflate, consumer expectations. It’s at this point — as Clayton Christensen, author of “The Innovators Dilemma,” notes — that many new technologies fall short of expectations and many pioneering companies suffer early stumbles.
Today, according to Gartner, almost all metaverse technologies are either approaching, in or on their way through the trough. Consequently, many executives will be inclined to focus their attention elsewhere as urgency around the metaverse wanes.
Ironically, however, it’s exactly at this point in the hype cycle when we should begin paying closer attention. This is the point at which venture capitalists sharpen their pencils and tighten their purse strings, where start-ups make painful pivots and engineers and developers go back to the drawing board. It’s where new market entrants and new opportunities appear. And ultimately, it is where we begin to see useful and commercially viable products emerging.
Indeed, some of the technologies that it will take to build the metaverse and web3 have already progressed well into the next phase of their development, The Slope of Enlightenment, where a host of new and emerging technologies and protocols will support their further development. New form factors for VR will make the headsets of today seem as clunky and impractical as the first three-pound (1.4 kilogram) “mobile” phones of the 1980s. Advancements in graphics will make virtual reality indiscernible from the real thing. 5G networks will allow for faster frame rates and lower latency within virtual experiences. Blockchain technology, often regarded as inseparable from crypto, will stand on its own, finding applications across myriad aspects of our lives. And of course, we’ll see new efforts to both stabilise and commercialise digital currencies. NFTs may find more sustainable applications in the form of smart contracts across everything from consumer goods to music and print publishing. All of this and more will unfold over the next five to ten years, pulling us toward a burgeoning metaverse economy, which according to McKinsey & Company, will be worth over $5 trillion a year by 2030.
So, while it may seem a good time to sit the metaverse out, it’s relatively certain that within a decade or two we will all be engaging with it, in whatever form it eventually takes. It may resemble some of the more fanciful concepts we see today. But we’ll also engage with the metaverse, both personally and professionally, in ways that will be far more pragmatic and useful. In the fashion retail industry, the metaverse will offer incredible innovations in enterprise management, product design, supply chain efficiency, employee recruiting and training, not to mention the profound implications for consumer experiences.
Brands like Nike, Gucci and Coca-Cola and others have already placed significant bets on such a future and will likely enjoy a healthy advantage over their competitors for having done so. Not because all their investments will necessarily be correct but rather because the learnings they produce will be rich. While it may sometimes seem fiscally prudent to observe tech revolutions from the sidelines, there’s simply no such thing as being fashionably late for the future.
Indeed, if history and the predictable nature of the hype cycle are any indication of what’s to come, the time to keep a watchful eye on the metaverse is right now.
Doug Stephens is the founder of Retail Prophet and the author of three books on the future of retail, including the recently released ‘Resurrecting Retail: The Future of Business in a Post-Pandemic World.’