s the metaverse the future of the internet? A Globe journalist steps inside to find out

Some analysts say we will spend much more time in the metaverse in the years ahead. But what’s the appeal? The Globe’s Joe Castaldo suits up and gets lost in the Decentraland and Horizon Worlds platforms

In the metaverse, I saw things that were strange, confounding, depressing and intriguing – and once, even beautiful.

I went to a dance party at a virtual club, where dozens of people in the form of cartoonish avatars were bumping, grinding and throwing dollar bills in the air. I made virtual coffees for people who could not actually ingest said beverages. I popped by a job fair, where only cryptocurrency and metaverse firms were hiring.

I found sleep rooms, softly lit spaces with beds and pillows for quiet contemplation – but also cuddling, as avatars held one another and murmured. I heard about Jesus at a virtual megachurch, meditated among digital trees and attended a group discussion on the purpose of life.

What is the metaverse? A look at NFTs, virtual real estate and how companies are investing in the digital world

But the question I was most interested in – whether at a Dolce & Gabbana digital fashion show with anthropomorphic cats for models, or exploring a desolate virtual Wendy’s restaurant – was simply: What are we doing here?

It’s an important question, as some analysts contend we will spend much more time in immersive constructed lands in the years ahead. The metaverse is an elastic term, but think of it as encompassing any virtual world in which you can explore, shop, play games, socialize or even work. Some require a virtual reality headset, while others can be accessed with just a laptop.

Roblox, the wildly popular kids’ gaming platform, has retroactively been labelled as part of the metaverse, as have Fortnite and Minecraft. Some people argue the metaverse will not exist until you can port your digital identity across different worlds – which might not ever happen – and what we have now is a precursor.

Mark Zuckerberg for one, thinks of the metaverse as a singularity. “It’s about a time when basically immersive digital worlds become the primary way that we live our lives,” he said recently on a podcast. His company is betting on it, changing its name from Facebook to Meta (formally, Meta Platforms Inc.) and releasing a VR platform called Horizon Worlds. (The company’s VR division lost more than US$10-billion last year.)

Decentralized worlds are also emerging that are run by users, not private companies, who vote on proposals affecting how each operates. Such lands have their own cryptocurrencies and marketplaces for digital clothing and accessories for avatars. If so inclined, you can buy digital property, build on it, and rent it out or sell advertising space.

That land, along with any clothing purchased for your avatar, are technically non-fungible tokens (NFTs), and transactions are recorded on a blockchain. Lately, a virtual world called Decentraland has attracted a variety of companies eager to test the digital waters.

Consultants are salivating. JPMorgan Chase & Co. estimates the metaverse will represent a US$1-trillion annual market. Research giant Gartner Inc. projects 25 per cent of people will spend at least one hour a day in the metaverse by 2026 for work, shopping or entertainment. PwC is telling business leaders that “getting started early can help make sure your company won’t be left behind.” Accenture warns executives that if they ignore it, they “will soon be operating in worlds defined by others.”

To that end, fashion retailers such as Tommy Hilfiger and Forever 21 are selling NFT clothing, Ariana Grande has staged digital concerts, and companies are setting up virtual offices and stores. Digital land prices are surging. In one world called Decentraland, land parcels are selling for tens of thousands of dollars; one prime parcel is currently listed for more than US$1-million.

“It’s crazy, man,” said Eric Klein, chief executive of a Canadian firm called MetaSpace REIT that is accumulating land and works with companies on branded experiences. “We have four times the demand from brands simply e-mailing us. We’re not even doing outbound marketing.”

The hype is fuelling corporate FOMO. “Business leaders and boardrooms around the world are now asking themselves, ‘What is my metaverse strategy?’” according to JPMorgan’s recent metaverse report.

The authors have ideas: The metaverse will “massively expand access to the marketplace” for emerging economies, workers in low-income countries can get jobs at Western firms without relocating and retailers can set up virtual stores to serve millions. Some people, such as singers and DJs, can earn a living there – the “gig workers of the metaverse,” the report calls them. Live events, be they sports or musical concerts, can bring in huge audiences at a fraction of the traditional cost.

It’s worth noting that much of that has been happening for years without the metaverse. A cynic might argue the very word itself is a convenient label lumping together hyped technologies – virtual reality! blockchains! NFTs! – that have yet to be widely adopted so as to appeal to gullible investors and brands that are deathly afraid of irrelevance. Through this lens, the metaverse seems less like the future and more like a slapdash marketing gimmick.

But when faced with a potentially revolutionary idea, it’s worth considering how to respond: Embrace it? Dismiss it and crack jokes? Or, at least, try to see the potential? And so your correspondent endeavoured to suit up, strap in and get lost in the metaverse.

With more than 160 virtual worlds operating today, by one count, it’s hard to know where to begin. Some are generating more headlines than others. HSBC and PwC’s Hong Kong division both bought plots in one called the Sandbox, and Snoop Dogg erected a virtual estate to throw members-only parties, among other activities. (A party pass can be yours for about US$900.) In January, Warner Music Group announced plans to build a concert stage in the Sandbox (“the equivalent of beachfront property in the metaverse”) for digital shows.

My entry point was Decentraland, a digital world that launched in February, 2020, that can be accessed through a desktop computer. It had about 50,000 daily active users as of earlier this year and its own cryptocurrency with a market cap of US$3.5-billion. Companies ranging from General Motors Co. to Estée Lauder Cos. Inc. have experimented with advertising installations, Samsung Electronics Co. Ltd. unveiled a store of sorts, and JPMorgan built a lounge where you can admire a pixelated portrait of CEO Jamie Dimon.

Decentraland is one of the platforms looking to capitalize on the metaverse. Joe Castaldo takes you on a short tour of Decentraland which, by contrast, uses a regular web browser.

THE GLOBE AND MAIL

After signing up, I made an avatar that resembled a Playmobil-like version of myself, named him JBomb and was transported to a plaza where a handful of users milled around. In front of me was a set of billboards listing continuing events – DJ sets, dance parties and NFT giveaways. Users could switch on their microphones to talk to one another (I heard many plaintive unanswered cries of, “Hello?”) or use a text chat.

Decentraland is organized like a city, with roads, neighbourhoods and an array of buildings. The graphics feel dated, with cartoonish figurines and grainy, polygonal buildings. It was the first sign that between metaverse hype and reality, there is a chasm large enough to fall into.

One afternoon, I took a tour with Andrew Kiguel, co-founder and CEO of a Toronto-based company called Tokens.com. Among other things, it has a subsidiary called the Metaverse Group that buys virtual land, builds on it and leases space to firms looking to plant a flag. So far, the company has bought parcels in 10 different realms and values its portfolio in the eight-figure range.

In Decentraland, Mr. Kiguel appeared as a bearded figurine in a checkered shirt and an eye patch. He chose the name Milo, after his dog. We walked through a neighbourhood called Crypto Valley, where the company had assembled a tower that looked like something out of a 1950s sci-fi movie. It was lit by spotlights, with the word “Tokens.com” rotating in the night sky.

“We may eventually sell the naming rights,” Mr. Kiguel remarked. I noticed that next door someone had built a marketplace to peddle erotic anime NFTs. “You can’t choose your neighbours,” Mr. Kiguel said, “but we also have Binance.” Indeed, the crypto exchange had a building across the road.

As we strolled along a promenade with superfluous benches (avatars cannot sit down), he mentioned Decentraland is made up of 90,000 land parcels, half of which can be developed. “In five years, if there’s millions of people using this world, those parcels are going to be worth a lot of money,” he said. “These brands are all looking for virtual storefronts, and they have to come to us.”

A report from PwC recently stated the obvious: Digital real estate is risky, since none of these worlds has proved to have any staying power. Still, Tokens.com secured tenants for its tower, where it will construct digital office space. Renno & Co., a Canadian law firm specializing in digital assets, will be among them.

Renno co-founder Toufic Adlouni said one reason is to gain experience. “It’s hard to give legal advice on something you don’t fundamentally understand,” he said. Prospective clients could wander in, too, though no one at the firm will keep office hours. Instead, Mr. Adlouni sees it as another social-media platform that can be checked occasionally, like LinkedIn.

For all the hype, Decentraland seemed strangely deserted a lot of the time. Crowds only formed when there was some kind of event, such as a recent Metaverse Fashion Week. Some designers staged digital runway shows, and a Tokens.com subsidiary established a luxury shopping district – it paid US$2.5-million for the land last year – where Dolce & Gabbana, high-end Italian fashion house Etro, jeweller Jacob & Co. and others set up branded stores to sell a mix of physical and virtual clothing. Tokens.com also helped design a Forever 21 store. (Costs vary, but typically range from $20,000 to $75,000 for a store, and perhaps a cut of any sales.)

I took JBomb to Dolce & Gabbana one morning and found the same anthropomorphic cats from its fashion show inside, modelling a few grainy-looking garments. I clicked on a puffy, neon-lit jacket adorned with the D&G logo, and a pop-up appeared asking if I wanted to leave Decentraland to go to an outside website, which seemed to call into question the purpose of the metaverse in this transaction.

What is the metaverse? A look at NFTs, virtual real estate and how companies are investing in the digital world

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Evangelo Bousis, the co-founder of a luxury fashion house called Dundas, which recently opened its own virtual pop-up store, told me there might only be some overlap between Decentraland users and those who buy his clothing. Ordinarily, Dundas sells $5,000 minidresses, and has outfitted Beyoncé and Rihanna. “It’s very premature,” he said. “The more we normalize it, the more this is in our customers’ faces, and the more they take part in the metaverse, the easier this will become for everyone.”

The goal is not to make money yet, but to experiment. Forrester Research Inc. contends that, at best, companies can hope to snag some headlines. Dan Reitzik is happy to help with that. His Vancouver-based firm, TerraZero Technologies Inc., owns land worth about $5-million in a handful of worlds and runs a lending business to stake other developers. It’s not cheap: Interest rates are between 15 per cent and 20 per cent.

Ahead of the Super Bowl, TerraZero worked with Miller Lite and its ad agency to build a bar in Decentraland. The watering hole was lined with Miller Lite cans and outfitted with a mechanical bull, but that wasn’t quite enough. “We said, ‘Why don’t we give people a chance to watch your first Super Bowl commercial inside the metaverse?’” Mr. Reitzik recalled. “And they said, ‘This is fantastic.’”

The ad, which poked fun at Miller Lite’s bid for attention, played inside the bar, a concept that was ridiculed by some people. “Perfect for anyone who thought, ‘Man, I love commercials, but I wish I had to work harder to access them,’” comedian Stephen Colbert said on The Late Show. Mr. Reitzik didn’t mind, especially because the gambit was successful, he argued: Visitors spent an average of 20 minutes in the bar. “Those people will never forget Miller Lite as long as they live,” he said.

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Angling for something more immersive, I donned an Oculus headset, which is made by Meta, and plunged into Meta’s Horizon Worlds, a social virtual reality app with 300,000 users. It launched on an invitation basis in 2020 and opened widely to Canadian and American users last December, which makes Meta somewhat late. Microsoft Corp. bought a very similar VR platform in 2017.

I designed yet another cartoonish avatar, though this time it had no legs. (It turns out legs are difficult to track in VR.) I then found myself in a courtyard with bulbous green trees under marshmallowy clouds, like the set of a children’s show. I could move by walking around my kitchen, or with two hand-held controllers.

‘Metaverse’ is a buzzy name attached to existing ideas like shared social spaces where you interact with others via avatars. Companies like Meta and Microsoft see a huge future for work and play in shared virtual and augmented reality environments. Will the metaverse be the future of the internet? The Globe’s Joe Castaldo explains.

THE GLOBE AND MAIL

I saw a few torsos float past, all of whom were behaving like aliens plunked into new bodies, trying to figure out how they work and gleaning social norms. One avatar came up to my face and gestured for a hug, while others just wanted a fist bump.

One afternoon, I visited a virtual coffee shop and met Kit Lane, a 64-year-old in Minnesota. During the depths of the COVID-19 pandemic last year, her daughter bought her a headset and she’s signed in every day since. “I’m so much of an introvert when I came here a year ago that I barely had a voice,” she said. She meant that literally. Ms. Lane spoke in hushed tones and was difficult to understand. Wanting to connect with others, she found a voice therapy coach – in VR, no less.

Ms. Lane is drawn by the creativity of people who build different environments. Meta includes tools for anyone to construct their own worlds – a house, a beachfront or a club called Hot Girl Summer, which was bereft of people, hot or otherwise, when I visited.

“I prefer the quiet places,” Ms. Lane said, including one of her own. She took me to a grassy knoll under a night sky she had been working on. An eel-like creature undulated through the air above us. Ms. Lane is an artist by profession, and has created objects for others on the platform, though she lost some friends when she made a goat-headed deity for a virtual Satanic church.

When Horizon Worlds widened access in December, she explained, new users had different ideas about what to do in virtual reality. Mainly, they built a lot of bars. I visited some, including one called Grown Up’s. About 20 people were inside, all talking loudly in my headset. It was not unlike the chaos of early internet chat rooms, only I could grab a virtual drink or a lighter to fire up a joint, both which seemed like empty gestures.

Later, I went to an open mic night where the crowd talked over a performer meekly telling jokes. I finished the night at a house party and was solicited by a guy pitching a passive income scheme.

Meta has recently taken steps to monetize its VR platform, saying it will allow creators to sell “digital goods, services, and experiences” through the platform, helping them earn a living. The revenue model is similar to what exists on many gaming platforms already.

Roblox Corp., which now has a stock market value of more than US$17-billion, has a thriving internal economy based partly on the sale of virtual goods. Second Life, a simulation game that launched way back in 2003, has an annual GDP of about US$650-million, according to JPMorgan. For its part, Meta plans to charge a 30-per-cent “hardware platform fee” and then 25 per cent on the remainder.

Brands are already starting to move in. Wendy’s, for example, unveiled a virtual restaurant, a sterile recreation of a real-world location, where there’s not much to do beyond take in the Wendy’s branding. I floated inside and clumsily grasped at a hamburger left sitting on the counter.

Nearby, a woman held court about vaccines. She was unvaccinated and healthy, she explained to the small group around her, but everyone she knew who got the shot had fallen ill. It was about then, listening to this dubious vaccine diatribe at a digital fast food restaurant on a virtual reality platform created by one of the world’s most problematic technology companies with one of its headsets attached to my face that I began to have doubts about this whole metaverse idea.

Mr. Arshad has made about 15 worlds since January (each takes about 20 to 30 hours) and is bombarded with requests. Although it’s a hobby, his creations feel richer than anything else in Horizon Worlds.

He was reluctant to meet in virtual reality, preferring to speak over the phone. His environments are designed for solitude. “I want to be able to go in this place alone,” he explained, “and enjoy it like how I would enjoy a movie, in silence.”

For the metaverse to become mainstream, it needs people. Unfortunately, people are not that interested. A recent poll by Forrester Research found that among people who understand what the metaverse is, just 34 per cent of consumers are excited by the idea. Less than a third believe it will be good for society.

The most enthusiastic supporters are marketing executives: 76 per cent of those surveyed by Forrester plan to allot part of their budgets to the metaverse this year. The study estimates that less than half of us will ever become metaverse users, and that adoption will be limited to those who are intensely into gaming and social media.

That we’re discussing the metaverse at all is somewhat strange. Decentraland hearkens back to Second Life, which is still going strong after nearly two decades, while consumer VR headsets have been available for years. So why is all of this hailed again as the next big thing? Perhaps it’s the pandemic, which forced most of us to socialize virtually. It also helps that Meta, one of the most influential technology companies in the world, has proclaimed it so, fuelling a hype cycle. (When the company changed its name to Meta, the value of Decentraland’s cryptocurrency surged more than 500 per cent.)

Matthew Ball, a venture investor who launched a metaverse ETF on the New York Stock Exchange, told me part of the reason is that the technology to create immersive worlds is maturing. “We’ve had a good idea of exactly what technologies it involves for decades, but actually having the technology to do it has really just come together in the past five years,” he said.

Mr. Ball also emphasized it’s too early to write off the metaverse, even if the experience is unfulfilling today. “There’s a common Silicon Valley adage that basically says the next big thing often starts out looking like a toy,” he said. The Wright brothers’ airplane barely made it off the ground. Before Facebook, Mark Zuckerberg made a website to rate the hotness of university students.

Today is like the dawn of the internet, Mr. Ball and others contend. Thirty years ago, few could have predicted how this strange thing called the World Wide Web would permeate every facet of our lives. Who is to say, then, what that erotic anime NFT marketplace will beget?

If it all sounds too absurd, remember that there are large, functioning metaverse platforms today that are not just for kids or brands. Zwift, for example, is a popular cycling and running app with about four million registered users who compete against one another in virtual worlds. Zwift has the equivalent of its own digital currency, and its CEO told Barron’s recently he wants to provide tools for developers to create their own worlds in which to compete.

Our jobs could prove to be another entry point. Meta has also released a VR app for meetings and collaboration, and Microsoft already has a similar application called Mesh. Ifcorporations widely adopt VR, especially in an era of remote and hybrid work, employees could desire such technologies at home, suggests a Forrester report. (There are big unknowns with this thesis, too, including whether these applications allow employees to be more productive, and whether after two years of Zoom meetings, workers want another layer of digitization.)

There is a generational aspect at play, too, advocates say. Kids obsessed with Roblox and Fortnite will want immersive digital experiences as they grow up. Already, digital-only fashion companies are building credibility with young people. “The metaverse has its own brands that are metaverse-native, and they matter more than traditional, in-real-life brands,” said Janine Yorio, CEO of a digital landowner and developer called Everyrealm. Sneakers from RTFKT, a digital fashion company, are more coveted than the virtual kicks made by Adidas, she pointed out. One pair sold for US$10,000.

Such digital assets are becoming signifiers of status. “People want to hold a certain NFT, like Bored Apes, because it brings them a certain level of class, or they want to buy a fancy pair of shoes for their avatar,” Eric Klein of the metaverse company MREIT said. Since every transaction is recorded on a blockchain, everyone can see how much those digital shoes are worth, too. “People are going to judge you not on your social media, but on what’s in your digital wallet,” he said.

There were, though, moments of beauty. Ms. Lane took me to a spot called Totoro’s Bus Stop, a recreation of a scene from a 1988 Japanese animated film, My Neighbor Totoro. We stood on a dirt road surrounded by trees as rain fell from the sky. As depicted in the movie, a girl sheltered under an umbrella, a sleeping child on her back. Next to her stood Totoro, a rotund, hamster-like creature. It felt strangely peaceful.

The builder turned out to be Sheharzad Arshad, a 38-year-old creative director and illustrator in Toronto. After Mr. Arshad purchased a headset, he went about fulfilling a childhood fantasy of inhabiting his favourite movies. He rewatches films on Netflix, pausing on scenes that resonate with him so he can study the details.

For Ryan Schultz, the widespread interest in the metaverse is a little weird. “My obscure, niche hobby has suddenly gone mainstream,” he told me. A reference librarian with the University of Manitoba, he spends a few hours every week strapped into a headset or exploring desktop-based worlds, and has been blogging about it for years.

Mr. Schultz finds the speculative nature of the digital land rush in some worlds off-putting. “People are investing in this basically as a flex and as a boast to their friends that they can afford these artificially limited items,” he said. Businesses with virtual office space, meanwhile, are likely spending money on a “really fancy three-dimensional brochure.”

He’s seen much of it before. Corporations flocked to Second Life when it took off in the 2000s. Coca-Cola installed soft drink machines, Toyota set up a car dealership, American Apparel built a clothing store, and IBM established an island for employee recruitment and training.

It wasn’t long before the corporate enthusiasm died. “Nobody came to visit these locations, because the people who were already in Second Life didn’t care,” Mr. Schutlz said.

He understands the appeal of virtual worlds, though. When he first discovered Second Life, he spent hours there each day. Away from the computer, he has jokingly called himself an “overweight, divorced, gay librarian with diabetes.” At 58, he feels his body growing older, and he’s struggled with depression so bad he’s taken leaves from work. “I kinda suck at this whole reality business,” he wrote on his blog.

In Second Life, Mr. Schultz loved building avatars – angels, supermodels and a Na’vi from, well, Avatar. There was solace in becoming someone else. During the pandemic, he’s met his social needs through virtual reality, and a mental-health app became a lifeline. “I can put on my headset, join a group, and use cognitive behavioural therapy techniques to work through issues and problems, and it’s extremely powerful,” he said. “You feel like you’re really present.”

For those of us who are not already immersed, such moments are likely a long way off. I searched high and low for meaning and connection in the metaverse, but mostly found empty branding experiences, a speculative frenzy around digital assets, and people who were just as curious as I was to find out what this was all about, and were still searching for answers.

But given the relentless enthusiasm of those trying to turn the metaverse into some kind of reality, there will be plenty of chances to try again, for better or worse.

Quelle:

https://www.theglobeandmail.com/business/article-metaverse-virtual-reality-decentraland-horizon-worlds/