Welcome to the metaverse. Now, where exactly are we? Imagine for a moment the next iteration of the internet, seamlessly combining our physical and digital lives. It’s many things: a gaming platform, a virtual retail spot, a training tool, an advertising channel, a digital classroom, a gateway to entirely new virtual experiences. While the metaverse continues to be defined, its potential to unleash the next wave of digital disruption is clear. In the first five months of 2022, more than $120 billion have been invested in building out metaverse technology and infrastructure. That’s more than double the $57 billion invested in all of 2021.
McKinsey has now taken a deep dive into the potential of the metaverse, surveying more than 3,400 consumers and 450 senior leaders globally in its recent report, “Value Creation in the Metaverse,” launching this week at VivaTech in Paris. The report aims to better understand the value of the metaverse, how broad adoption could be, where the greatest traction might take place, and what businesses can do now to capture value. We spoke with McKinsey senior partners Eric Hazan and Lareina Yee, both lead authors on the report, about the potential and momentum of this virtual world.
How would you define the metaverse?
Lareina: What’s exciting is that the metaverse, like the internet, is the next platform on which we can work, live, connect, and collaborate. It’s going to be an immersive virtual environment that connects different worlds and communities. There are going to be creators and alternative currencies that you can buy and sell things with. It will have a lot of the components of Web3 and gaming and AR, but it will be much larger.
Eric: At its most basic, the metaverse consists of a sense of immersion, real-time interactivity, and user agency. Consumers and companies are experimenting with the early metaverse for everything from socializing to fitness, commerce, virtual learning, and other daily activities. Like any technology, the metaverse is neither inherently good nor bad. It will be what we make it, and we can learn from previous eras of dramatic technological change.
Why does it suddenly feel like it’s in the spotlight?
Lareina: The metaverse is early and new and that means there’s a lot of creative freedom in how it evolves. But there’s also a lot of skepticism and challenges like data privacy and cybersecurity that need to be addressed. Practically, you have a very diverse set of use cases across industries. The complexity and excitement of the technology that underpins the metaverse is a whole source of renewal for innovation.
Eric: There are similarities to the transition to Web 2.0 in 2004 that was sparked by social networks and user-generated content. Back then, people were busy imagining utopian visions of consumer control and the democratization of the internet. There’s a lot of excitement about the potential this technology holds, but the computing power isn’t there yet to make the metaverse of people’s imaginations feasible. That said, billions of dollars are flowing into every corner of metaverse infrastructure to help get it there. This ranges from back-end tech enablers like engines, blockchain, and hardware devices to platforms and virtual worlds. Across the board, capital is flowing in to make advances.
What do consumers think about it?
Eric: We surveyed more than 3,400 consumers around the world and found two-thirds are excited about transitioning everyday activities to the metaverse, especially when it comes to connecting with people, exploring virtual worlds, and collaborating with remote colleagues. Almost 60 percent of consumers prefer at least one activity in the immersive world versus the physical alternative. More surprisingly, 79 percent of consumers active in the metaverse have made a purchase.
And how about executives?
Lareina: Executives often don’t agree on very much, but our research shows they overwhelmingly agree on one thing: 95 percent of them believe the metaverse will have a positive impact on their industry. About a third of them think the metaverse can bring significant change in how their industry operates, and a quarter of them believe it will generate more than 15 percent of corporate revenue in the next five years.
How big could this opportunity be?
Eric: We expect the economic value of the metaverse to rise exponentially. Its appeal spans genders, geographies, sectors, and generations. Consumers are open to adopting new technologies; companies are investing heavily in the development of metaverse infrastructure; and brands experimenting in the metaverse are getting positive feedback from consumers. Our bottom-up view of consumer and enterprise use cases suggests it could generate up to $5 trillion in impact by 2030—about the size of Japan’s economy, the world’s third-largest.
How can the metaverse drive sustainable and inclusive growth?
Eric: There’s an opportunity to reimagine public services and infrastructure in the metaverse. This opens new avenues to providing public services like education and healthcare, creating employment, and planning community spaces. We’re already seeing this, for example, with the government of Seoul, which plans to spend at least $32 million on a metaverse ecosystem to improve city services, planning, administration, and support for virtual tourism. Overall, one big challenge will be making sure the public sector talent base is well equipped to shape priorities for the greatest social good and to work with technology providers to make that happen.
Lareina: There’s a lot of hope around the metaverse as an inclusive environment for creators, providers, and consumers. You can think about access and inclusion in the metaverse economy as something not for a few but for many. That creates a space to help democratize opportunities like learning, development, and education. Removing geographical barriers opens the doors to access in exciting new ways.
What risks and broader implications should leaders plan for?
Eric: How you think about digital trust in the metaverse is still to be defined. But there are urgent challenges that need to be considered. For one, there’s going to be a need to reskill part of the workforce to take advantage of, rather than compete with, the metaverse. And stakeholders will need to build a roadmap to make sure the metaverse experience is ethical, safe, and inclusive. This likely means creating guidelines around issues like data privacy, security, ethics, physical safety, sustainability, and equity. There’s a lot of promise and potential here, so long as these challenges are taken into account along the way.
What is McKinsey doing for clients in this space?
Lareina: We’re doing research to understand, share, and help companies demystify both the potential and the challenges of the metaverse. We’re also helping businesses with experimentation and business building. We help them on strategy, technology, and digital trust—not just how to conceive of a metaverse idea, but how to stand it up and operate it.
Finally, what’s one thing every executive should be doing about the metaverse right now?
Lareina: Be open-minded in terms of what some of the potential applications for your business might be. Have a long-term mindset. This is evolving. You’re not planning for an investment this quarter, you’re planning for a longer term trend.
Eric: It’s a good idea for companies and executives to dip their toes into the metaverse experience to get a better sense of what it entails. There is no avoiding the fact that if you want to both understand consumers and opportunities that may be available to your organization, you need to be familiar with the metaverse. The best way for business leaders to explore is by becoming metaverse users themselves.
Original post: https://www.mckinsey.com/about-us/new-at-mckinsey-blog/meet-the-metaverse-creating-real-value-in-a-virtual-world