It is safe to say that the hype surrounding the metaverse has dissipated, while for some there was never justified hype to begin with. Initial indications pointed at the metaverse being a trillion-dollar business in 10 years, and some major companies jumped at the possibility, looking to build their solutions ahead of time. But now these companies are quietly pulling back on this endeavour, in favour of other opportunities.
While the promise of the metaverse still remains, consumer interest has yet to catch up to the believed hype and financial benefits that many saw. Two large tech companies, Meta and Microsoft, have invested a lot of money into mixed reality, specifically augmented and virtual reality (AR/VR) technology. Now, though, it appears that these investments are being shifted to other spaces, especially artificial intelligence.
Companies Shifting Away From The Metaverse
Microsoft had been working on its HoloLens, a mixed-reality headset designed to bring augmented and virtual worlds together. The technology had some pretty heavy backing. In 2018, Microsoft signed a $480m USD partnership with the US military to provide 100,000 HoloLens headsets for military training. This was a controversial move and one that upset the majority of the team working on the technology within Microsoft.
While controversial, the underlying belief remained: mixed reality systems were capable of creating highly realistic worlds. The US military saw this as a way to better prepare their soldiers, providing real-world training in a safe environment.
Microsoft themselves saw HoloLens as the future of workplace collaboration irrespective of location. The entry point, however, was very high, with HoloLens 2 costing $3,500 USD. Work was about to begin on HoloLens 3, but this appears to be over. Recent reports have suggested that, of the 10,000 jobs that were recently cut at Microsoft, this number included the whole development team working on the HoloLens. Microsoft has used the money set aside for HoloLens to invest in OpenAI, the company that created ChatGPT.
Meta, the name Facebook rebranded too to highlight its focus on the metaverse, has invested $10b into its metaverse ambitions. In fact, Reality Labs, the division responsible for metaverse projects within Meta, has reported a cumulative loss of nearly $24b USD over the last two years. It now appears that Meta is quietly shifting all resources responsible for the metaverse into new projects. As with Microsoft, these teams are moving into roles working on Meta’s AI solutions.
In a Facebook post last month, Meta CEO Mark Zuckerberg, announced this move and the focus on ‘turbocharging’ their work on AI:
All of this makes perfect business sense, as AI has dramatically evolved in the last few months, and is positioned to reshape companies in the future. AI has rapidly become an arms race, with every tech company frantically scrambling to develop a solution to compete in this space.
But what does this mean for the future of the metaverse? The likes of Fortnite have successfully developed metaverse-esque worlds for people to explore. Startups like Roblox, Decentraland and Metapolis have started building the framework of interactive worlds to explore. But we are yet to glimpse the fully immersive, virtual experience that entertainment has depicted. With two of the biggest companies pulling out of the hardware space, is this the end of the metaverse of Snowcrash and Ready Player One?
To predict what the future could look like in this space, let’s explore another recent technical evolution. One that has reshaped human behaviour, changing the way people consume content. In a way, this is what some saw in the potential of the metaverse. But, despite big-brand backing, an innovator in this new space of video streaming failed to capture an audience. While the streaming service is full of competitors now, Yahoo was actually one of the first to test this space. Through a series of interesting choices, and an inability to evolve based on consumer behaviours and trends, Yahoo failed where others succeeded. There are similarities between the potential of the metaverse, and Yahoo’s attempt to build their streaming service, Yahoo Stream.
Case Study – Yahoo Stream
Obviously, the streaming space is now inundated with competition, but one platform saw the opportunity very early on but failed to capitalised on being first. This is the small rise and dramatic fall of Yahoo Stream. In 2013, Yahoo started an on-demand streaming service built on TV shows, movies, and webisodes. Streaming was still in its infancy at this time, with the only real competition coming from YouTube, Hulu, and Netflix, which were still finding their place.
To build hype, Yahoo bought the rights to the TV show Community and promised to continue the series after it has recently been cancelled by NBC. The show had developed a small but passionate following, but had seen diminishing viewership numbers, leading NBC to move on from the show. This cult following promised to deliver a built-in audience to Yahoo Stream. In addition, they greenlit original shows such as Sin City Saints and the animated series Tom Hanks’ Electric City.
In addition to original content, Yahoo also partnered with companies such as Disney and ABC to access their content across Yahoo Stream. Combining this with Yahoo’s site, at the time, bringing in a billion users globally, the potential of Yahoo Stream was huge. History, though, shows this was not the case, with Yahoo Streams closing down in 2015, less than 5 years after launching.
Why Did It Fail?
There were a few reasons behind this. One of the main reasons this struggled to succeed was to do with consumer mindset and Yahoo’s inability to perceive new technological advancements. The diversification of media and broad audience Yahoo sought to covet, meant that Yahoo meant something different to each user. For many, it was a place to search for information, check emails, or check the news. But it was not a portal to consume videos, especially TV shows or movies. This was the curse of an established brand looking to change consumer engagement with something that sits outside of the brand. This was compounded by limited marketing to build awareness of Yahoo Stream.
In some ways, Yahoo Stream was a victim of technological advancement. While a push to change consumer understanding of the new Yahoo product could have helped build more consideration, Yahoo’s inability to evolve with technological trends further added to the struggle. Yahoo Stream was built as a desktop-first user experience. At the time, desktop usage was high, although mobile was already beginning to shift user behaviours. Connected TV would still be a few years away from reshaping how people engage with streaming, but consumer research needed to be done to understand consumer behaviours and trends. A desktop-first strategy was not a strong approach to building viewership of longer-form content.
But perhaps the biggest reason appears to be a lack of commitment on Yahoo’s behalf to invest in content. Netflix had said they were looking to invest $6b USD in original content in 2016. Hulu spent $160m USD just to get the streaming rights to Seinfeld. By comparison, Yahoo invested a total of $100m USD through the duration of Yahoo Streams on content. This lack of investment resulted in a minimal content library, something that struggled to capture consumer attention and usage.
What Learnings Can Be Taken From This?
There is no denying that Microsoft and Meta invested heavily into their metaverse projects, something that Yahoo failed to do with their streaming service. Where many admitted hesitation towards the metaverse, Microsoft and Meta doubled down, investing heavily. While investment was remarkably high, other factors have led to struggles with generating engagement with metaverse technology.
This is where the consumer mindset comes in. The possibilities of the metaverse are endless, but the biggest issue is currently a lack of desire from consumers to actually invest in the premise. This is probably the fatal flaw in Microsoft and Meta’s approach, they focused too heavily on the long term result, at the expense of the short-term interest. Companies were looking at the $10 trillion valuation of the future, and building to that despite a current lack of demand. This is not to say that the metaverse may be worth $10 trillion in the future. But Meta especially looked to build a solution to capture this revenue now, before audience appetite really even began.
While Yahoo was known as a diversified media company, Microsoft and Meta have built reputations around certain offerings. Microsoft, outside of gaming, is seen as a leader in workplace solutions. Meta has built a successful business on social media platforms. While both companies have looked to build metaverse solutions that align with their brand, they are both playing in relatively new spaces for them. This is especially true for Meta, which is not known at all as a hardware company.
Perhaps the biggest misstep in the metaverse journey is in the focus on technical capabilities. Yahoo struggled to build something that inspired consumers to explore it and did not seemingly understand the changing behaviours of technology usage. Both Meta and Microsoft focused rigidly on building AR/VR headset solutions, before building a world for people to explore first. This backward approach meant that those looking to try these headsets were met with very limited capabilities. This is not conducive to building excitement in the medium and helping capture consumer interest.
There is still hope for the metaverse. The possibilities of creating a living virtual world to explore will always capture people’s attention. But as some companies begin to pivot away from building the technology to enable full immersion, the infrastructure was never put in place to set it up for success. The rise of streaming provides a small glimpse into how innovation in the tech space can change consumer behaviour. Companies have tried to jump ahead to a time where the metaverse may be a huge part of our daily lives, but the desire is not there yet. More work needs to be done to prepare people for the potential metaverse future, but first, they need to address the mistakes that have been made. Streaming services have gone through a similar journey, and those that have failed have given the blueprints on how others can succeed.