A reality check on the metaverse

Are we on the brink of a social media-level paradigm shift, or do expectations need to be brought back into the real world?


This story was originally published in the 2022 Spring issue of strategy magazine.

The metaverse is a divisive topic.

On the one hand, you have advocates like Mitch Joel, founder of brand and tech consultancy Six Pixels Group.

“The future of conductivity isn’t flat screens and phones in our pockets. We will absolutely have some form of technology that is three-dimensional or more virtual.”

Then you have the less-optimistic, like Johanna Faigelman, founding partner and CEO of market research firm Human Branding.

“There’s never been a moment in time that is more opposed to the creation of something like the metaverse. On paper, it looks like the worst possible idea to pursue right now.”

The story of the metaverse is similar to most emerging technology. There’s a mix of proponents who see new opportunities to reach consumers and naysayers who perceive it as nothing more than a novelty. And, as usual, the hype has obscured expectations of what’s possible, the risks to prepare for, or how many people will use it.

One reason it’s hard to set expectations about the metaverse is that the definition can be pretty vast, depending on who you talk to.

For some, it’s VR worlds like Horizon, the platform Facebook has been showing off in demos since its name change to Meta in 2021. For others, it includes non-VR worlds aligned with gaming, like Roblox or the crypto-adjacent Dencentraland. And then there’s those who include cryptocurrency, NFTs and other blockchain-powered assets under the “Web3” umbrella (which is a telling choice of phrase, as it suggests this technology will have as big an impact on society as “Web2” – the period when social media and apps became the primary ways people engaged online).

“The opportunity right now is to see what valuable engagement looks like, what your KPIs are and how to tie all of the different pieces together.”

Jason Alan Snyder, global chief technology officer at Momentum Worldwide, has a clearer definition for what makes a “metaverse.” He believes it needs to be persistent and in real-time – it never stops or pauses, and a limitless number of users can enter and exit as they please. It also needs to have an economy, and assets obtained from that economy need to be transferable – not just between different virtual worlds, but into the physical world – which is usually where things like NFTs and crypto enter the conversation.

Snyder believes those worlds will bring a sizeable shift, be it in terms of the way people connect, the size of the audience they attract and how marketers execute and measure their interactions with customers.

“A brand is a metaphor for a story, and a virtual story might be told differently than a physical one,” says Snyder. “The opportunity right now is to see what valuable engagement looks like, what your KPIs are and how to tie all of the different pieces together. As brand stewards, make sure whatever that story is resonates.”

Others are doubtful many people will see those stories. Sean Monahan, founder of NY trend forecaster K-Hole, says virtual reality’s audience size is currently limited to entertainment (like virtual concerts, tourism and parties) and industrial applications (think virtually operating machinery in a hazardous environment). Stephen Diehl, a software engineer and well-regarded blogger in tech circles, sees three areas where VR adoption could be most prevalent: gaming, teleconferencing and porn.

“Those are real opportunities, those are big industries,” Diehl adds. “But that’s not a paradigm shift. It’s not going to create a whole new market the way the iPhone did. It’s going to capture a portion of the Zoom market, a portion of the gaming market and a portion of adult entertainment.”

Diehl is even more skeptical about NFTs and cryptocurrency – other than crime, ransomware, gambling and sanctions evasion, anything they could be used for is better served by an existing, simpler tech.

But that’s an argument Joel pushes back against. “If people always thought that way, we wouldn’t have any innovation. We wouldn’t have Amazon because we had bookstores. We wouldn’t have cars because horses were already pretty fast.”

“There are real opportunities… but that’s not a paradigm shift. [The metaverse is] not going to create a whole new market the way the iPhone did.”

Monahan is a bit more open to NFTs, seeing them as a way for people to invest in a brand that’s more meaningful than zero-sum transactions like buying a product – similar to markets that already exist for sneakers and designer bags. However, Monahan doesn’t anticipate brand NFTs will replace or compete with other established lines of business.

Again, Diehl is less charitable. Even if a brand manages to imbue an NFT with the practicality of owning something cool for their avatar, he says NFTs and crypto still operate as unregulated securities. Someone can only benefit from buying one if they sell it after the price has inflated in an extremely volatile market – in other words, the only way someone comes out ahead is if someone else loses. Why would someone risk getting burned?

While Joel believes in the future of the metaverse, he says it will likely be five to ten years before any company delivers the fully immersive and pervasive version we’ve been promised. Given the current advertising opportunity is minor, and most would-be customers don’t have a headset, Joel says building a fully-fledged virtual experience now would be jumping the gun.

“I say this because the vast majority of brands are still struggling to move from being web-based to mobile,” he says. “How brands handle multi-formatted ads in social spaces is pretty indicative of their ability to be compelling in the virtual world.”

But that doesn’t mean brands shouldn’t experiment with what’s available today. Playing with the metaverse “plants a flag,” Joel says, and attracts talent who want to work for innovative companies, as well as ensuring capabilities are in place when/if the metaverse takes off. “Digital platforms, especially community-based ones, take time to build. In the ‘Web2’ world, brands that were slow to adopt seemed less trustworthy. Brands that got in there early understood the culture and fared much better.”
Meta mediatation

Which leads to the next question: are people actually going to use the metaverse?

Faigelman’s company Human Branding relies on expertise in applied anthropology and human behaviour in its work. Given the cultural change the metaverse promises, it is something Faigelman has explored extensively – and she has found a lot of barriers for it to clear.

First and foremost is timing. We are still emerging from a global pandemic. Video calls and hybrid work suggested to many that virtual environments are viable, but they were also adopted out of necessity and, quite frankly, people are sick of digital-everything.

“People want to hug each other, they want to go outside and roll around in the grass,” Faigelman says. And, as Monahan sees it, “Zoom fatigue is real, so why would putting a new screen in front of someone’s face be the answer?”

That “new screen” and its considerable price could be another barrier, though Snyder doesn’t see it that way. While you may need a VR headset to access some metaverse experiences, others can be accessed through gaming consoles people already own, and not every NFT runs for thousands of dollars. However, Faigelman foresees a social divide forming if people who can access the best tech get to set the tone and profit the most.

Monahan sees another issue. “There’s been attempts at VR since the 80s, and you start to wonder if it hasn’t scaled not just because of the price point, but because the experience is boring,” he says. “Even today’s headsets only deal in visuals and sounds, when reality has way more to it. It’s presented as a fully fleshed out, immersive technology, but when you use it, it doesn’t feel like that, and it’s missing all these other important sensory elements.”

“Digital platforms, especially community-based ones, take time to build. Brands that were slow to adopt [social media] seemed less trustworthy. Brands that got in there early understood the culture and fared much better.”

Hitting that truly immersive goal may also give people pause. Faigelman says successful innovations tend to be similar to things we’re already familiar with, but the metaverse is different enough that it could trigger people’s aversion to change. What some might see as immersive, others see as invasive and the next step to a pop-culture dystopia.

Then there’s the environmental cost. Every time an NFT or token representing the deed to virtual land is minted, a massive amount of energy is used. Even though the Etherium blockchain – one of the most popular – is changing the way it works, those changes will only bring its energy use down to that of a small town, instead of the country of Peru. And even if blockchain is taken out of the equation, the computing power to run an always-on virtual world is massive.

Faigelman also points out that, in most people’s minds, the metaverse is largely associated with Facebook and Mark Zuckerberg, neither of whom have sterling reputations among the general public. Or else, it’s associated with “crypto-bros” and NFT buyers with smoking monkeys as their profile pictures – people who tend to be regarded as modern-day Gordon Gekkos or internet trolls.

Which brings up one of the most troubling issues for the metaverse. In February, Buzzfeed News reporters tested content moderation in Horizon by creating a world littered with conspiracy theories and misinformation about the COVID-19 pandemic and 2020 U.S. presidential election. Similar content would be automatically flagged on Facebook and Instagram – and get a site blacklisted by brand safety tools – but the Meta world continued even after it had been reported by multiple people who had access to it. It was only taken down once a reporter went through a Meta PR channel.

The experiment showed that AI-powered tools currently supporting (already spotty) content moderation on social media and brand-safe placements on websites won’t work in the metaverse. Buzzfeed’s Emily Baker-White pointed out that there’s no way to moderate users without constantly recording their activities – a privacy-violating practice in a privacy-sensitive time.

But there are other ways in which brand safety cannot be resolved by taking the tools that exist online today and applying them in the metaverse.

In December, Nina Jane Patel, a VP at immersive tech company Kabuni Ventures, published a Medium story detailing how, within moments of signing onto Horizon, she was virtually groped and verbally assaulted by a group of male avatars, describing the psychological effects as being similar to real-life abuse. (Meta has since created default “personal boundaries” for avatars in an effort to deter virtual assault.)

Molly White, tech lead at HubSpot, pointed out in an article that, once you bring blockchain into the mix, its decentralized and permanent nature creates even more issues. If someone is harassed in a blockchain-powered metaverse, that violation is stored on the blockchain forever. Same goes for someone playing a video of something like revenge porn.

To bring it more explicitly into the brand world, imagine if you couldn’t delete one of those absent- minded “brand fail” tweets. What’s more, tokens, once minted, cannot be refused – so if someone sends an NFT of white supremacist literature to a brand, that association lives on the blockchain forever.

And then there’s simple data security: companies are already susceptible to hacks and data breaches in today’s world, so how will they protect customers’ personal data when it is stored on the blockchain and potentially accessible by everyone?

Faigelman says all of the above is especially important to Gen Z, who are more attuned to social issues, highly knowledgeable about the risks of new technology, and at an age where they want in-person interactions the most. They are also the first generation to grow up online – millennials joined social media blissfully unaware of the brain-poisoning wave of online arguments, harassment and misinformation to come, but Gen Z see what they could be walking into with open eyes. Given that younger generations are usually a major force in pushing new technology to mass adoption, resistance among Gen Z removes a significant point of traction.

But, “none of that means it won’t reach mass adoption,” Faigelman says, it could just slow down the rate at which it happens. “Human beings are not always great at being moral compasses for ourselves. We all realize this is potentially opening up a Pandora’s box of potential, both the negative ones and the amazing new experiences that we’ve never thought of before.”

People are social creatures, and Faigelman says new opportunities for socialization almost never get rebuked. That depends on whether there are enough initial users to make everyone else feel like they are “missing out,” but if it happens, social connection could be the catalyst. And there are good reasons for some to want to try the metaverse, like people with disabilities who have an easier time socializing or traveling virtually.

“Human beings are not always great at being moral compasses for ourselves. We all realize this is potentially opening up a Pandora’s box of potential, both the negative ones and the amazing new ones.”

Humans are also creatures of habit: if they regularly hang out virtually, it’s an easy jump over to a virtual concert or a grocery store, and that’s when it moves away from being a novelty.

While the metaverse has stumbling points, Joel says that’s exactly why brands should start learning now to understand their risk tolerance. Bets are expensive – from hiring talent to buying equipment and virtual plots of land – so now is the time to learn how comfortable
they are making them.

Just because people adopt a new technology doesn’t mean their issues with it go away. The fact that people have social media accounts doesn’t mean they’ve stopped trying to make the companies improve their harassment problems. People buying snacks from a company whose operations have an environmental impact doesn’t mean customers won’t keep pushing them to reduce their carbon footprints.

For brands that are eager to explore Web3 because they don’t want to miss the boat, it’s imperative to not make the same mistakes as when they were rushing to catch-up with Web2.