Not so long ago, the global business community was fascinated by the metaverse and the web3, the buzzing hypothesis that the next generation of the Internet would give rise to a collective and persistent virtual reality built on a foundation based on the blockchain. Now a different kind of reality is setting in: many of the high-flying concepts and companies that animated that vision have collapsed.
The outsized implosion of crypto exchange FTX has made equally outsized headlines. But the crypto crash is far bigger than FTX. According The New York Times. And after peaking in November 2021, the value of crypto assets fell 73% over the following 12 months, according to data from CoinGecko.
Meanwhile, NFTs, many of which only a year ago were selling for thousands or tens of thousands of dollars, have seen their average values plummet. The NFTs of Gustav Klimt’s “The Kiss”, for example, for which art lovers paid more than €1,800 (about $2,050), are now worth a fraction of their purchase price after an 87 drop. % of their value. And, increasingly, NFT owners are worried about the future of their digital assets if the platform they acquired them from fails. As for digital fashion, beyond game environments, it is worn by virtually no one.
The all-in bet on the metaverse by companies has also proven perilous. Meta (née Facebook) has seen its value plummet 70% since rebranding itself as a metaverse business, with its Horizon Worlds beta plummeting short of expectations.
Indeed, the deluge of bad news has been so intense that one could be forgiven for thinking the Metaverse was nothing more than a pandemic-fueled fever dream. After all, it was the pandemic that galvanized our collective imagination around the idea of stitching together a range of technologies to create a world beyond the physical. A shiny new reality where lockdowns, social distancing and mask wearing needn’t be a concern. A world where, unlike mind-numbing Zoom meetings, we could meet and interact online in a more natural, personal and immersive way. A place where, for brands, retailers and consumers, the store is never closed and the shelves are never empty. One with endless new streams of products, experiences, and of course, revenue.
But that was then. Fast forward to today and the Metaverse is generating more stares than excitement. Gone is the frenzy, gone is the fervor, and gone is the fire hose of investing.
Welcome to the Trough of Disillusionment, a key phase in what Gartner calls the Hype Cycle, a pattern based on the historical pattern that technologies typically follow when their proponents target commercial viability and widespread adoption.
This model begins, according to Gartner, with an “innovation trigger”: a social or business need or idea that engenders a range of new technologies. These early experiments are followed by a series of new concepts leading to a period of product development, market testing and promotion, all of which serve to pique, and often inflate, consumer expectations. It’s at this point – as Clayton Christensen, author of “The Innovators Dilemma” notes – that many new technologies fall short of expectations and many pioneering companies suffer early stumbles.
Today, according to Gartner, almost all metaverse technologies are approaching, in, or crossing the trough. Therefore, many leaders will be inclined to focus their attention elsewhere as the urgency around the metaverse wanes.
Ironically, though, it’s exactly at this point in the hype cycle that we should start paying more attention. This is the time when venture capitalists sharpen their pencils and tighten their purse strings, start-ups make painful pivots, and engineers and developers go back to the drawing board. This is where new market entrants and new opportunities arise. And eventually, this is where we start to see useful and commercially viable products emerge.
Indeed, some of the technologies it will take to build the metaverse and web3 are already well advanced in the next phase of their development, The Slope of Enlightenment, where a host of new and emerging technologies and protocols will support their further development. New form factors for virtual reality will make today’s headsets as bulky and impractical as the first three-pound (1.4 kilogram) “mobile” phones of the 1980s. Advances in graphics will make virtual reality indistinguishable from reality. 5G networks will enable faster frame rates and lower latency in virtual experiences. Blockchain technology, often seen as inseparable from cryptography, will stand on its own and find applications in myriad aspects of our lives. And of course, we will see new efforts to stabilize and commercialize digital currencies. NFTs can find longer-lasting applications in the form of smart contracts in everything from consumer goods to music and print publishing. All of this and more will unfold over the next five to ten years, leading us into a booming metaverse economy, which McKinsey & Company predicts will be worth more than $5 trillion a year by 2030.
So while this might seem like a good time to sit on the Metaverse, it’s relatively certain that within a decade or two we’ll all be engaging with it, whatever form it ultimately takes. It may sound like some of the fanciest concepts we see today. But we’ll also engage with the metaverse, both personally and professionally, in a much more pragmatic and helpful way. In the fashion retail industry, the metaverse will deliver incredible innovations in business management, product design, supply chain efficiency, employee recruitment and training, not to mention profound implications for consumer experiences.
Brands like Nike, Gucci and Coca-Cola and others have already placed significant bets on such a future and will likely enjoy a healthy advantage over their competition for doing so. Not because all their investments will necessarily be correct, but rather because the learning they will produce will be rich. While it can sometimes seem financially prudent to watch technological revolutions from the sidelines, there’s simply nothing to be fashionable late for the future.
Indeed, if history and the predictable nature of the hype cycle are any indication of what’s to come, now is the time to keep a watchful eye on the metaverse.
Doug Stephens is the founder of Retail Prophet and the author of three books on the future of retail, including the recent “Resurrecting Retail: The Future of Business in a Post-Pandemic World”.