The metaverse hype bubble has popped. What now?

Remember the metaverse? The technology was the subject of a hype explosion, beginning in late 2021, when the company formerly known as Facebook rebranded itself as Meta, made a big investment in virtual reality and augmented reality. Mark Zuckerberg declared those technologies the “next chapter for the internet” and "the next chapter for our company too.”

By now, we were all expecting to be wearing Oculus headsets, piloting legless avatars floated in virtual worlds of dragons, robots, and spaceships.

Instead, here we are in a new world of tech austerity—massive layoffs the tech industry. Meta is now proclaiming efficiency is the future of tech.

So the metaverse is dead, right?

Wrong. The hype bubble has collapsed. But the metaverse is growing.

“Metaverse platforms are growing slowly but steadily, and hiring commensurately,” says Wagner James Au, who follows metaverse development on his long-running blog as an analyst and journalist, and author of the upcoming book, Making a Metaverse That Matters: From Snow Crash & Second Life to A Virtual World Worth Fighting For.

Metaverse platforms grew by 15 million users year-over-year in the first quarter of 2023, to 520 million monthly active users (MAUs), according to a report from the analyst firm Metaversed. That includes 149 platforms either live or in development, mostly browser- based but with some using virtual reality VR goggles.

And that’s just the prominent platforms with strong usage in the US and Europe, Au notes.

It doesn’t include mobile-based Garena Free Fire, mostly played in Southeast Asia and South America, and enjoyed by about 10% of the population of the whole planet—700 million quarterly active users .

Despite layoffs in the tech industry overall, metaverse platforms are hiring. Not by a lot— just 800-plus job openings, Au says. But it’s still positive growth, as the tech industry overall sheds jobs by the tens of thousands.

Some 120 companies are working on metaverse technologies, which includes digital twin and Internet of Things data integration, avatars and identity, interface hardware such as haptics, holography, spatial audio, and augmented reality, according to a report by S&P Global Market Intelligence.

Metaverse investment transactions topped $24 billion, with the biggest investments going to Meta Platforms, Epic Games, Infinite Reality, and Roblox Corp., according to S&P Capital IQ Pro.

Why the backlash?

So why the metaverse backlash? Exaggerated expectations, Au says.

“It’s not been explosive growth. That’s how it’s been—these platforms keep sustained growth. The Silicon Valley assumption is that there’s going to be 100x growth, so we have to hire like crazy. That doesn’t apply to metaverse platforms,” he says.

As an example of the backlash, the Financial Times published an article this month, in which journalist Jemima Kelly asked, “Whatever happened to the metaverse?”. She answers the question: “… nobody seems to want it.”

Even Meta chief executive Mark Zuckerberg is walking back the hype, saying recently that the metaverse is “not the majority of what we’re doing.” The company is now focused on efficiency, cutting 11,000 jobs, with possibly thousands more to come. Its Reality Labs business unit, which makes Meta Quest VR headsets, lost $13.7 billion last year, Kelly notes.

Microsoft, another leading voice advocating the metaverse vision, announced it was laying off 10,000, including much of its Hololens business unit, core to its metaverse plans. The company said in a statement to Fierce Electronics that it doesn’t comment on “specific staffing details,” but “remains committed to the industrial metaverse.” The company made similar statement of commitment in a blog post Feb. 2.

Apple is believed to be developing an augmented reality headset since 2015, though that project launch has reportedly been delayed numerous times, most recently to June. Whenever the product does launch, it’s expected to be a blockbuster for Apple, and metaverse advocates hope it will jet-propel the category the way Apple redefined the smartphone.

Headsets aren’t the future

Despite major investments in headsets, that’s not the mainstream future of the metaverse, says Au. It’s not the present either: Successful metaverse platforms including Roblox, Fortnite and VRchat, are largely accessed by phones, tablets, game consoles, and PCs.

Screen-based platforms are likely to be the mainstream future of the metaverse, Au says. On a phone or other screen, you can shift your attention rapidly between the metaverse environment and the real world. Virtual reality requires 100% attention. “You’re literally wearing something where you can’t see the world around you,” Au says. VR headsets in development reportedly include cameras that will display the outside world, but that’s not the same as actually seeing the world with your own eyes.

Headsets are unsafe, there’s a social stigma, they’re expensive—Meta’s latest Oculus headset is priced at $1,500—and the battery life is short.

Matthew Ball, a self-described metaverse optimist, tech venture capitalist, and writer, describes the staggering technology, social, and economic difficulties of building a virtual reality headset in a lengthy blog post: "Why VR/AR Gets Farther Away as It Comes Into Focus"

Despite the burst hype bubble, hundreds of millions of people are using the metaverse now—mostly on screens, but some using VR headsets. And there’s more to come.

In its metaverse report, 451 Research defines the technology as “the long-term vision for the next phase of the internet, which will feature a single, shared, immersive and persistent 3D virtual space where humans interact with one another and with data, enhancing the physical world as much as replacing it.”

“The metaverse will become as popular as social media is today, in the long run,” says Ian Hughes, analyst with 451 Research, a part of S&P Global Market Intelligence. But change will be incremental.

He compares metaverse adoption to the mainstream adoption of videoconferencing over the past three years. Videoconferencing is more metaverse-like than a conference call. And the emerging technology of light field displays, which allow desktop displays of 3D objects without special glasses, will further drive the metaverse mainstream.

Big business is on board

Big business is getting behind the metaverse for commercial and industrial applications.

Microsoft is building metaverse capabilties on its Teams collaboration tool, using the company’s Mesh platform on Azure, and deployed the technology at the World Economic Forum meeting in Davos in January. That gave the world’s most powerful people experience with the metaverse, Hughesn otes.

Siemens and NvIdia are working together on Nvidia’s Omniverse metaverse platform to build a virtual factory, in which to train autonomous robots. Similarly, people will be able to work in virtual reality to explore the ergonomics and efficiency of. prototype factory floor. Companies will be able to combine metaverse technologies with Internet of Things and digital twins to track assets over their entire lifespan.

And Accenture made a. big consulting investment in the metaverse, buying thousands of headsets, Hughes notes.

On the consumer side, the metaverse is popular with a surprising age split—teens and 20s, then 40s, 50s, and seniors, Au said. Seniors in particular enjoy Second Life, despite the platform’s difficulty of use and high technology requirements.

These age groups are experimenting with trying on different identities, which is enabled by the metaverse, with its imaginative avatars, Au says.

And that suggests another problem with Meta’s approach. In addition to investing heavily in headsets, which are niche products, Meta ties its metaverse to Facebook profiles, which are in turn tied to people’s real-world identities. That’s not what most users are primarily interested in, Au says.

Users turn to the metaverse to form communities, including anime fans, gamers, and furries. The popular platform VRChat has a big nightclub rave scene, and widespread social games.

Yes, despite the burst hype bubble, the metaverse is growing—incrementally, but steadily.

Eventually, we may all find ourselves living part of our lives in virtual worlds.

Mitch Wagner is a veteran tech journalist and formerly executive editor of Light Reading and InformationWeek.