The Metaverse Is Coming, and It Could Be Worth Trillions

Companies like Microsoft and even Ikea are laying the groundwork now.

While the precise shape and scope of the metaverse has yet to unfold, analysts expect the emerging, next-generation version of the internet to make a major impact on the global economy as it transforms numerous industries.

Leading technology firms and others, meanwhile, are laying the groundwork for what many envision as an immersive, 3D web blending physical and digital worlds. 

A group of companies including Microsoft, Wayfair, Qualcomm, Ikea, Adobe and Alibaba joined with standards organizations on Tuesday to announce a new Metaverse Standards Forum, hosted by software consortium Khronos Group, to coordinate development of common open protocols for building the metaverse.

“The metaverse that is coming into existence is a 3D spatial overlay of the internet. It continues the trend of making the internet more accessible and more natural for humans by making the interface to the internet indistinguishable from our interface to the real world,” one of the founding members, software company Nvidia, said.

“The metaverse will ultimately encompass all our activities and support them with applications. Just like standardization has been an important foundation for open knowledge sharing and rapid development in the web age, the same is true for the metaverse,” said Arno Hollosi, chief technology officer of another standards forum participant, Blackshark.ai, a geospatial platform company creating a “digital twin” for the planet.

Separately, Chinese multinational conglomerate Tencent Holdings announced to its staff this week that it has formed an extended reality, or XR, division to develop both hardware and software, Reuters reported, citing unnamed sources. The news service framed the move as Tencent’s bet on the metaverse idea and noted that XR comprises the technologies needed for the metaverse’s immersive experiences.

McKinsey & Co. reports that corporations, along with private equity and venture capital firms, invested more than $120 billion into the metaverse in the first five months of 2022 — more than half from Microsoft’s acquisition of video game company Activision Blizzard  — and that senior executives expect the emerging extended-reality sphere to generate more than 15% of corporate revenues in five years. Nearly 80% of consumers already active in metaverse environments have made a purchase there, according to the research firm.

The metaverse may generate up to $5 trillion in 2030 — “equivalent to the size of the world’s third-largest economy today, Japan. It is shaping up to be the biggest new growth opportunity for several industries in the coming decade, given its potential to enable new business models, products and services, and act as an engagement channel for both business-to-consumer and business-to-business purposes,” McKinsey suggests in a new report.

New and Evolving Space

Opportunities in the metaverse are likely to evolve over time, lawyers from DLA Piper wrote recently. Among other points, they noted:

“Mankind is only beginning to arrive at the event horizon of the metaverse. As we delve deeper, organizations and individuals will increasingly embrace its use and incorporate this foundational technology into their real-world existence,” the DLA Piper lawyers wrote, adding that legal and regulatory issues will grow with it.

$13 Trillion Market by 2030?

Given expectations for transformational growth in the metaverse, it’s no wonder that tech leaders, retailers and other companies are rushing to stake leadership claims. While McKinsey sees a possible $5 trillion impact by 2030, Citi expects even more.

Earlier this year, Citi predicted the metaverse’s total addressable market could reach $8 trillion to $13 trillion, with up to 5 billion users, by 2030. 

The bank, noting that a host of uses should increasingly become available in commerce, art, media, advertising, health care and social collaboration, based this forecast on the idea that the metaverse will be a large, “device agnostic” ecosystem accessible from personal computers, game consoles and smartphones.

Getting to the multitrillion-dollar market level will require infrastructure investment, Citi noted. “The content streaming environment of the metaverse will likely require a computational efficiency improvement of over 1,000x today’s levels,” according to the company. “Investment will be needed in areas such as compute, storage, network infrastructure, consumer hardware and game development platforms.” 

McKinsey’s report delved into the potential effects on various industries, forecasting a potential $2 trillion to $2.6 trillion market impact on e-commerce by 2030, up to a $206 billion contribution to the advertising market, a possible $125 billion impact in gaming and up to $270 billion in academic virtual learning.

“Companies already leveraging the metaverse may build lasting competitive advantages. Business leaders should develop a strategic stance by defining metaverse goals and the role they want to play; testing, learning and adopting by launching initial activities, monitoring results, and examining user behavior,” the firm suggested.

McKinsey also cited “urgent challenges” for companies, employees, consumers, content creators, developers and governments, noting that workers will need to be reskilled and regions will need to compete for talent and investments.

“The metaverse also has obvious societal implications,” according to the consultancy. “A variety of stakeholders will need to define a road map toward an ethical, safe and inclusive metaverse experience. Guidelines may also be necessary around issues including data privacy, security, ethics and regulatory compliance, physical health and safety, sustainability, and equity and fairness.”

McKinsey surveyed more than 3,000 consumers and 450 senior executives globally about the metaverse and found “significant excitement” about its potential.

Nearly 60% of consumers actively using current, early metaverse environments are excited about shifting everyday activities there, especially social, entertainment, gaming, travel and shopping, the firm found. Companies already are implementing marketing campaigns, employee learning, meetings, events and product design in the metaverse, McKinsey noted.

By 2030, McKinsey said, more than half of all live events could take place in the metaverse, and more than 80% of all commerce could be affected by consumer activities there.

Experts from economics consulting firm Analysis Group, who developed a forecast based on the evolution of previous breakthrough technologies, recently suggested that if metaverse adoption started this year, it could contribute $3.01 trillion in 2015 dollars, or 2.8%, to global gross domestic product in 2031. In the U.S., the metaverse could contribute $560 billion, or 2.3%, to GDP in 2031, the group calculated.

This projection aligns with existing industry projections, which range from $800 billion to $2 trillion for the next few years to longer-term forecasts for $3 trillion to more than $80 trillion, the analysts noted in a report released last month and supported by metaverse champion Meta, formerly Facebook. 

“Like mobile technology, the metaverse is expected to have far-reaching applications, with the potential to transform a wide range of economic sectors such as education, health care, manufacturing, job training, communications, entertainment and retail,” the Analysis Group said in a news release.

Early metaverse components in use now include augmented reality, virtual reality, mixed reality, blockchain and non-fungible tokens, the Analysis Group report added. “These technologies, which are expected to be the backbone of the metaverse and its offerings, are already being used around the world by businesses and creators. As users continue to adopt these technologies, their potential to transform society in unpredictable ways will only accelerate.”

McKinsey called the metaverse “simply too big to be ignored. It will have a major impact on our commercial and personal lives, which is why businesses, policymakers, consumers and citizens are well advised to explore and understand as much as they can about this phenomenon, the technology that will underpin it, and the ramifications it will have for both our economies and wider society.”

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