What is the metaverse, and why is it worth so much money?

The word 'metaverse' is becoming almost inescapable, especially for those who peruse technology and games-related headlines.

Most recently, Facebook has been making big noises about transitioning from a social media company to a metaverse one. Meanwhile other companies have raised significant capital -- such as Epic Games securing $1 billion -- towards similar ambitions (Epic even stated in court earlier this year that Fortnite is not a game, it's a metaverse).

Jon Radoff, CEO of Beamable and formerly mobile developer Disruptor Beam, has attempted to map out the companies that have either expressed an interest in the metaverse, or at least could be argued are connected to it, which is extensive to say the least.

With the term already in danger of overuse after these opening paragraphs alone, it's time to question why so many major companies across multiple industries are investing so heavily in a concept some might write off as science fiction.

"The metaverse is to virtual worlds as a website is to the internet"

Herman Narula, Improbable

Indie developer Rami Ismail sums it up to us rather nicely: "The idea of creating an alternative world in which everyone has to use your currency, play by your rules and everyone wants to promote their brands is really appealing to rich people. I mean, I guess we are talking about Fortnite after all."

But this feature would be too short if we just accepted the "Because money" rationale behind the rise of the metaverse. So let's take a deeper dive into what it is these companies are actually trying to achieve, and why games developers see themselves at the forefront of these efforts.

Novaquark, the developer behind user-generated MMO Dual Universe, is so dedicated to the concept that it even refers to itself as a metaverse company. General manager Sébastien Bisch describes the metaverse in much the same way most people envisage it: a single, persistent virtual environment shared by everyone on the planet. The go-to pop culture references are The Matrix or Ready Player One's Oasis if you want a shorthand for what that might look like.

"We believe that the metaverse will be the place where all forms of entertainment and media eventually converge, a gateway where they can be consumed," Bisch explains. "We also believe that the metaverse will be an inherently social place where social media and online discussion groups might eventually migrate as well."

Earlier this year, US-based HiDef raised $9 million for its own metaverse project. Founder and chief creative officer Jace Hall paints a picture of the metaverse of something virtual that interacts with reality, rather than replaces it -- a platform that eliminates the distinction between online and offline.

"For example, whether you spent time working a McDonald's in-game at a virtual mall or McDonald's down the street from your house becomes irrelevant, because the money/value you earned is exactly the same. Literally the exact same currency," he says. "Spend it offline. Spend it online. Order a pizza online, it is delivered offline. Order a pizza offline, get it delivered online.

"Reality is the metaverse, the metaverse is reality. Same thing. It's just what location do you want to spend your time in and at what moment? Consequences of action both online/offline are similar if not identical (beyond physical). Everything interfaces with everything."

Herman Narula, CEO of tech firm Improbable, maintains the metaverse is a more "nebulous concept," instead suggesting it has become a term for more sophisticated virtual worlds that connect a much higher number of people.

"A highly connected environment with lots of interactive players and complex simulation creating rich experiences, something more than a game but less than the real world," he says. "The metaverse is to virtual worlds as a website is to the internet."

He admits the analogy breaks down because not all concepts can flow easily between different virtual worlds. The example he gives is whether a player in a Harry Potter virtual world would want to encounter Master Chief. He instead suggests that, unlike the singular internet we have, there would be many metaverses for people to choose from.

"The idea of creating an alternative world in which everyone has to use your currency, play by your rules and everyone wants to promote their brands is really appealing to rich people"

Rami Ismail, indie developer

But we already have multiple virtual worlds. Every MMORPG, battle royale, shared world shooter, or creation game like Minecraft and Roblox can allow people to explore a digital environment together, so what elevates the metaverse above what currently exists?

Bisch observes that video games mostly offer a limited type of virtual experience, one focused around set mechanics such as shooting or driving. He adds that even the biggest video games with the largest audiences don't truly connect those players together in a unified experience -- it spreads them out across servers.

"Take the concerts that happen in Fortnite," he says. "Yes, these were the same for everyone, but two friends who attended them on different servers were technically not able to share them at the same time, in the same virtual place.

"Very few games have tried to propose a unified, persistent game world for all players, and when they did, the scalability was extremely limited with a cap to the number of players able to play in the same area."

So far, there seems to be a lack of consensus on what the metaverse could actually be, but investors seem to agree there's big money in it. Narula likens it to the formative stages of the internet, and the initial reactions of the dot-com boom investors and first consumer evangelists.

"[They] can sense there is something important about virtual worlds and the metaverse because people spend so much time playing games and increasingly, playing games online," he says. "There is an expectation that wherever people spend their time new aspects of society, culture and economy will follow.

"I think this is a correct intuition but much like the early dotcom era, our analogies from the past can only be imperfectly applied to this new medium."

Ian Hambleton, CEO of UK developer Maze Theory, believes the pandemic has also accelerated interest and investment in the metaverse; not only is there the increased time spent in gaming's virtual worlds, there's also been an increased need for ways to connect with other people online, especially with the rise of remote working.

"I feel like people look to the metaverse to replace 'in real life' social interactions and experiences, but with those expectations they are probably not quite satisfied with what we have now"

Ian Hambleton, Maze Theory

"I feel like people look to the metaverse to replace 'in real life' social interactions and experiences, but with those expectations they are probably not quite satisfied with what we have now," he says.

Maze Theory's own ambitions for the metaverse involve what the studio refers to as 'story living': immersive narrative experiences, such as its Peaky Blinders and Doctor Who VR games. But VR itself -- which fictional works often depict as the entry point into the metaverse -- highlights a key technical challenge of building such a system.

"From a hardware perspective, people will have lots of different entry points and capabilities," Hambleton says. "So how do you create a world rich enough to feel transformative, but populated enough to gain real traction? Even if you take the current VR landscape, the number of concurrent users is challenging. Additionally, within gaming, there are a massive amount of technical challenges to creating persistent worlds that evolve."

Ismail observes that there are many technical challenges to overcome before a metaverse could ever be feasible: "So much of creating immersion in games right now is creating acceptable shortcuts and boundaries for behaviours that people have in real life -- for now, we don't even have a 'metaverse'-esque input and output method.

"Walking is already an almost impossible challenge, with giant walking cages being built to let people move around - that's just one input vector... I don't even understand how they walk in the Oasis."

He continues, citing how much effort and resource it takes to simulate a mostly static version on Earth in Microsoft Flight Simulator, or the struggles to create a virtual reality environment where players can't immediately put their head through a wall. Other developers point out the current limits to the number of players that can connect simultaneously, the language and culture barriers, the internet infrastructure and its inequalities between developed and less developed nations, plus the latency factor that affects any connected experience.

"The main barriers are 'everything besides voice communication,'" Ismail says. "Even if you remove the VR aspect, most games we play now are very clearly defined in what is possible -- the freedom comes from 'emergent' mechanics or behaviours. To create anything resembling a real-life situation, you'd need something that's the Dwarf Fortress of Dwarf Fortresses."

And Hall suggests the biggest challenges might not even be technical. While those may be solved with time, funding and innovation, he says the real challenge will be the use of proprietary platforms and "business models that only focus on extracting value from the user into the publisher instead of a more mutually beneficial equation."

"'Walled gardens' appear to be fundamentally anti-meta in the macro sense," Hall says. "More and more, users seem to be realising the value that they generate and represent. They are demanding recognition and reward for their contributions. As a result, the aforementioned barriers might be overcome in time because it will be good business to do so. We are already seeing some of the pressure mounting and turning into lawsuits. Change feels afoot, and it should be step-by-step."

Beyond the specific barriers that need to be overcome, there has been skepticism among some of the industry's higher-ups. Most notably, Take-Two CEO Strauss Zelnick said earlier this year he believed talk of metaverses refers to nothing more than what Rockstar Games has already built with the online versions of Grand Theft Auto and Red Dead Redemption, and dubbed the term itself a buzzword.

"If you take metaverse, [special-purpose acquisition companies], and cryptocurrency, put them all together, in five years, will any of this matter? I'm not sure that it will," he told investors during an earnings call.

"There's a lot more wanting it to be true... than there is actual demand in the market or tech and ability to make it happen"

Mandisa Washington, CUNY Brooklyn College

Narula likens this attitude to the famous 1995 Newsweek article that labelled the internet as just a fad. He adds: "Much like the early internet there will be a lot of misdirected hype towards the wrong use cases. In addition, tools, technology, business models and consumer awareness all need to catch up before virtual worlds really take off but it is happening incredibly quickly."

Bisch agrees, adding: "Some believed that social media would be a fad and that it wouldn't revolutionize the way we consume content and information; the evolution of mobile computing was also met with skepticism. Time proved these doubters wrong.

"We've never consumed as much virtual content and had as many virtual experiences as we do today. But this content and these experiences are fragmented, only accessible and connected via the primitive form of the metaverse that is the internet. The metaverse is the next step of how we will access and consume these virtual experiences, one that binds them all together."

However, Mandisa Washington -- a mobile developer from CUNY Brooklyn College -- is less convinced, equating the metaverse with flying cars and Star Trek's holodeck: "There's a lot more wanting it to be true... than there is actual demand in the market or tech and ability to make it happen."

She notes that while the prize "seems very sweet indeed to investors," it's the inherently fickle consumers that must be won over. After all, ultimately they are the ones who decide what does and doesn't become popular. And in a world where we already have the internet, any attempt at a metaverse "had better bring something truly revolutionary, not only to the gamer's table, but to grandma's as well."

"We've been here before," she says. "Social media platforms like Facebook and Twitter -- and MySpace and Second Life before them -- have collectively invested billions into trying to make themselves indispensable and unavoidable. I think where they've been successful is in emerging markets, where they can essentially follow AOL's old model of positioning themselves as the 'gateway to the internet.'

"But in more mature media markets, or in countries like China, with barriers to newcomers and well-established competitors in the social space, I just don't see how any one company plays its siren song loudly enough to be heard over the din."

She also suggests that, for all the experience developers have in creating virtual worlds, any metaverse that does take off might not originate from the games industry.

"Video games are very much a 'You must be this engaged to participate' situation, which generally requires some combination of access, money, time, and equipment," she says.

"Video games are probably our 'roughest' communication medium, in terms of how smoothly and intuitively people are able to consume it. Language barriers aside, books, music, film/TV, and oral forms of communication are generally so seamless that people need relatively little instruction or prompting to be able to consume -- and potentially produce & manipulate them. By contrast, games literacy is just nowhere close to that level of intuitiveness. Even among self-described gamers, you can readily see how much impact prior exposure/training has, rather than genuine intuition, by simply providing a different input style than a person is used to -- say, swapping a Wii remote for a footpad DDR controller.

"This is an ongoing challenge for game devs, to be sure, but I see it as an insurmountable barrier to any hope of a game-based metaverse."

"Some believed that social media would be a fad, the evolution of mobile computing was also met with skepticism. Time proved these doubters wrong"

Sébastien Bisch, Novaquark

The increased investment, and Radoff's sprawling metaverse map, also indicates another challenge that may be near impossible to overcome: competition. While there will be some collaboration, most companies investing in creating the metaverse will inevitably seek the dominant position so often depicted in science fiction. Again, whether it's The Matrix or Ready Player One's Oasis, there's usually one metaverse the world becomes immersed in -- something that Ismail believes we should avoid.

"Almost everything about the Oasis is the worst-case-scenario of the idea of metaverse," he says. "Everything has collapsed into one monopoly that is apparently brand-licensed with everything, the interface is a helmet so I'm unsure how it works, and even if you ignore all that now you have to do a fetch quest in a more brutal online version of EVE Online."

Hall insists that no one entity would own the metaverse, just as no one owns the internet, while Hambleton points to the competition over other transformative technologies.

"Normally they start out as a series of successful experiments and start-up businesses that do pretty well," he says. "Then one or two big players become the dominant ecosystem and take over. And the network effects of these top dogs knock everyone out. [That's] probably quite a realistic vision.

"Taking social media as an example, there were all sorts of quite successful front runners -- MySpace, Bebo, Friendster but over time Facebook and WeChat in China have become the dominant players."

Narula brings it back to his theory of multiple connected virtual worlds rather than a single metaverse, and again points to how people engage with the ones that currently exist as proof of why a metaverse is inevitable.

"It is my belief that we underplay how invested people are in the life of the mind," he concludes. "In one sense, we are already living in mental virtual worlds. Gaming has been quietly fulfilling humanity's needs for decades in this mental life. Far from being 'just' entertainment, gaming structures, play and goal-oriented models all help deliver the essentials for psychological health and well-being of an individual.

"In gaming, people are actively growing, striving to overcome challenges and creating new experiences which ultimately fulfills as a whole. The needs being fulfilled are universal and innate and include the need for competence, autonomy and relatedness. And that is the promise of the metaverse, that these human needs will find greater fulfillment."