Meet the metaverse: creating real value in a virtual world

Meet the metaverse: creating real value in a virtual world

Welcome to metaverse. Now, where are we exactly? Imagine for a moment the next iteration of the Internet, seamlessly combining our physical and digital lives. It’s many things: a gaming platform, a virtual retail spot, a training tool, an advertising channel, a digital classroom, a gateway to entirely new virtual experiences. As the metaverse continues to be defined, its potential to unleash the next wave of digital disruption is clear. In the first five months of 2022, more than $120 billion was invested in building technology and metaverse infrastructure. That’s more than double the $57 billion invested in all of 2021.

Now McKinsey has taken an in-depth look at the potential of the metaverse, polling more than 3,400 consumers and 450 top leaders globally in its latest report, “Creating Value in the Metaverse,” which was launched this week in Vivatech In Paris. The report aims to better understand the value of the metaverse, how widely it is adopted, where the greatest pull can occur, and what companies can do now to capture value. We spoke with senior McKinsey partners Eric Hazan and Larina Yee, both lead authors of the report, about the potential and momentum of this virtual world.

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Larina Yee and Eric Hazan

How do you know metaverses?

Rena: What is exciting is that the metaverse, like the Internet, is the next platform in which we can work, live, connect and collaborate. It will be an immersive virtual environment that connects different worlds and societies. There will be generators and alternate currencies that you can buy and sell things with. It will have a lot of Web3, gaming, and AR components, but it will be much, much bigger than that.

Eric: At its simplest, the metaverse consists of feeling immersed, real-time interaction and user agency. Consumers and businesses are experimenting with the early metaverse for everything from social networking to fitness, commerce, virtual learning, and other everyday activities. Like any technology, the metaverse is neither inherently good nor bad. This will be what we make of it, and we can learn from previous eras of dramatic technological change.

Why do you suddenly feel like you’re in the spotlight?

Rena: The metaverse is early and new and that means there is a lot of creative freedom in how it evolves. But there are also a lot of uncertainties and challenges like data privacy and cyber security that need to be addressed. In practice, you have a very diverse set of use cases across industries. The complexity and excitement of the technology that underpins the metaverse is a complete source of freshness for innovation.

Eric: There are similarities with the move to Web 2.0 in 2004 that were sparked by social networks and user-generated content. At the time, people were busy imagining idealized visions of consumer control and the democratization of the Internet. There is a lot of excitement about the potential that this technology holds, but the computing power is not yet there to make the metaphor of people’s imaginations possible. However, billions of dollars are pouring into every corner of the metaverse infrastructure to help get it there. This ranges from back-end technical enablers like engines, blockchain, and hardware to platforms and virtual worlds. Across the board, capital is flowing to make progress.

What do consumers think of it?

Eric: We surveyed more than 3,400 consumers around the world and found that two-thirds are excited about taking everyday activities into the metaverse, especially when it comes to connecting with people, exploring virtual worlds, and collaborating with distant colleagues. Nearly 60 percent of consumers would prefer at least one activity in the immersive world versus the physical alternative. Even more surprising, 79 percent of active consumers in the metaverse have made a purchase.

And what about executives?

Rena: Executives often don’t agree much, but our research shows that they overwhelmingly agree on one thing: 95% of them believe the metaverse will have a positive impact on their industry. About a third of them believe the metaverse can make a significant difference to how their industry operates, and a quarter believe it will generate more than 15 percent of corporate revenue in the next five years.

How big is this opportunity?

Eric: We expect the economic value of metaverses to rise significantly. Its appeal extends across genders, geographic regions, sectors and generations. Consumers are open to adopting new technologies; Companies are investing heavily in the development of the metaverse infrastructure; And brands that experiment in the metaverse get positive feedback from consumers. Our bottom-up view of consumer and enterprise use cases suggests they could generate up to $5 trillion in impact by 2030.About the size of the Japanese economy, the third largest in the world.

How can reverse drive sustainable and inclusive growth?

Eric: There is an opportunity to reimagine public services and infrastructure in the metaverse. This opens new avenues for the provision of public services such as education, health care, job creation, and the planning of community spaces. We’re already seeing this, for example, with the Seoul government, which plans to spend at least $32 million on a metaverse ecosystem to improve city services, planning and management, and support virtual tourism. Overall, one of the big challenges will be to ensure that the talent base in the public sector is well equipped to prioritize for the greater social good and work with technology providers to make that happen.

Rena: There is much hope for the metaverse as an inclusive environment for creators, suppliers, and consumers. You can think of access and inclusion in the metaverse economy as something not for the few but for the many. This creates space to help democratize opportunities such as learning, development, and education. Removing geographical barriers opens doors to access in new and exciting ways.

What broader risks and impacts should leaders plan for?

Eric: How you think about digital trust in the metaverse remains to be determined. But there are pressing challenges to consider. First, there will be a need to reskill a portion of the workforce to take advantage of metaverses rather than compete with them. Stakeholders will need to build a roadmap to ensure that the metaverse is ethical, safe, and inclusive. This likely means creating guidelines around issues such as data privacy, security, ethics, physical safety, sustainability, and fairness. There are a lot of hopes and possibilities here, as long as these challenges are taken into account along the way.

What does McKinsey do for clients in this field?

Rena: We conduct research to understand, share, and help companies demystify both the potential and challenges of the metaverse. We also help companies experiment and build businesses. We help them with strategy, technology, and digital trust – not just how to conceptualize an idea for metaverse, but how to stand it up and get it working.

Finally, what’s the one thing every executive should be doing about the metaverse right now?

Rena: Be open about some of the potential applications for your business. You have a long term mindset. This is developing. You are not planning to invest in this quarter, you are planning a long term trend.

Eric: It’s a good idea for companies and executives to dip their toes into the metaverse experience to get a better understanding of what it entails. There is no avoiding the fact that if you want to understand consumers and the opportunities that may be available to your organization, you need to be familiar with metaverses. The best way to explore business leaders is to become users of the metaverse themselves.

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