The metaverse paradox: Why the industry needs standardization

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Rolf Illenberger, Chief Executive Officer, VRdirect

• The metaverse will define the next technological era, characterized by more intuitive ways to interact with technology such as through virtual reality.
• However, advancements in metaverse technology are largely being driven by Big Tech, which also created ‘walled garden’ ecosystems.
• The industry must increase efforts to enable standardization in order to create a seamless experience for enterprise users and others.

As we approach a new technological era, you can’t help but get excited about the promise the metaverse offers.

The metaverse is poised to replace the current technology era that thrives on interaction between humans and technology-facilitated by smartphones, which are essentially a small display with processors tucked in our pockets. And although smartphones are essential for many of us, they are still rather artificial in terms of how we interact with them.

Instead, the metaverse will be characterized by more intuitive ways for humans to interact with technology. Earpods will bring voice and music directly to our ears, virtual reality (VR) and augmented reality (AR) – or combined XR – devices will allow for visual input directly to our eyes, and voice recognition will enable us to talk and have conversations with the technology around us.

Technology will even be able to recognize gestures and derive information from contextual input, like entering a room, as well as allow for haptic feedback enabled by gloves and full-body suits.

The metaverse will slowly replace the smartphone

Together with the necessary enhancements in our network backbone of 5G, Cloud and Edge computing, this will set the stage for the metaverse to gradually replace the smartphone by improving and replacing one service with another with a more natural interaction between human and technology – thereby ultimately creating a seamless experience between the virtual and real world.

So the metaverse is not just a technology, but rather the future world in which we all will live, reshaping everything humans do, be it socializing, working, travelling, learning, communicating and so on.

Understanding this is the first step towards being able to shape the metaverse, and note that in using this kind of definition, Web 3.0 is essentially a synonym for the metaverse.

For enterprises, this means adapting many of their current processes, operations and businesses to the metaverse future. The sooner they embrace this new world, the better prepared they will be.

The relevance of this transformation is reflected in the amount of investment poured into developing the underlying technologies – XR, voice, blockchain and so on – by the biggest (tech) companies of our time.

Big Tech driving advances but at what cost?

Yet, while the efforts of Big Tech companies drive the advancement of technology, performance and design, the key players in this domain are also building walled garden ecosystems – or horizontally integrated ecosystems to use a more scientific term.

These horizontally integrated ecosystems are basically copying the Apple ecosystem of the smartphone era, characterized by one player controlling the entire value chain within a specific market segment, from hardware to operating system, to apps and services, and (the rules of) commercialization.

Here some examples of these metaverse ecosystems:

Meta: Meta Quest headsets (formally known as Oculus), Meta Quest Store, and social VR applications like Meta Horizon Worlds, as well as other Meta apps (supported by Facebook, IG and WhatsApp reach).

Bytedance: Pico headsets, Pico App Store and Pico Apps (supported by TikTok reach).

HTC: HTC headsets and HTC Vive App Store.

Sony: Sony PlayStation VR headset and PlayStation Store (supported by Epic Games, which is partly owned by Sony).

Other big tech giants lining up to enter the arena include Foxconn, which has invested in VR hardware manufacturer XRSpaces, and Valve, which operates the leading VR platform Steam VR and is rumoured to be developing its own headset.

Meanwhile, Apple, which just announced a headset for early 2023; Microsoft, which has already acquired Blizzard to gain metaverse expertise and audience; and Google are expected to join the group of metaverse ecosystem operators and will likely integrate their own services with their already existing ecosystems from the smartphone era (Apple), their office suite (Microsoft) or Web 2.0 dominance (Google).

The result of these efforts will be – at least in the mid-term future – a highly-fragmented market of competing ecosystems, provided and operated by the biggest tech companies of our time, fighting for market dominance in the next-technology era.

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As a matter of fact, these players have very limited incentives to establish and support compatibility and interoperability between their ecosystems, which contradicts the idea of those who hope for a truly interconnected, interoperable, yet decentralized concept of a metaverse. One that will not be controlled by the companies that have gained their market power by controlling the Web 2.0 world.

For many of the above players, interoperability will likely be limited to complying with their rules, if any third-party app or service provider would like to integrate with their respective ecosystems.

However, it shall be noted, that there are already initial attempts to facilitate a so-called “open metaverse” by establishing common standards to enable information exchange and interoperability through initiatives like the Metaverse Standards Forum or the World Economic Forum’s Defining the Metaverse initiative.

Many enterprises face the metaverse paradox

For many enterprises, this constitutes a paradoxical market situation. On one hand, they are committed to the benefits of using the metaverse and ready to roll out supporting technologies like AR and VR for use cases ranging from internal training and other HR-related use cases, as well as internal communication to external sales, marketing and customer support use cases.

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What is the World Economic Forum doing about the metaverse?

Experts believe that the metaverse will come to represent the next major computing platform, transforming consumer experience and business models across industries.

Fashion brands are one example. Over years, apparel companies have perfected the design, manufacture, and distribution of clothing to anticipate consumers’ wants and needs in line with seasonal changes. But today, most of their revenue is surpassed by the $3bn worth of sales of digital cosmetic items in Fortnite, which have a cultural significance that extends far into the physical world.

This is one of the economic opportunities of the metaverse – the possibility to “assetize” digital content, creating a framework of digital ownership for users. If it is replicated at scale and across sectors, then entire industries will be reshaped by changes to their traditional value chains.

However, the promise relies on the advancement of several key technologies, including augmented, virtual and mixed reality (collectively known as XR), as well as blockchain, connected devices and artificial intelligence. How should these be governed in a way that promotes their economic upsides while protecting individuals’ safety, security and privacy?

The World Economic Forum is bringing together leading voices from the private sector, civil society, academia and government to address this precise question. Over the next year, it will curate a multistakeholder community focusing on metaverse governance and economic and social value creation.

It will recommend regulatory frameworks for good governance of the metaverse and study how innovation and value creation can be strengthened for the benefit of society. Updates will be published on the World Economic Forum website on a regular basis.

On the other, the highly fragmented and in most parts incompatible market set-up creates a high level of uncertainty among enterprise decision-makers as to which hardware/ecosystem is the best bet for a large-scale roll-out or, better said, the least risk of taking a wrong decision. Currently, this is the main roadblock preventing many large enterprises from engaging in large-scale roll-outs of metaverse-related technology.

Hence, in order for enterprises to move from detached pilot projects to metaverse technology that is integrated with standard operations, the industry has to increase efforts to enable standardization for metaverse content creation and distribution, as well as information exchange and facilitate interoperability – or maybe just allow for “links” as we know them from Web 2.0 to start with – to integrate different apps and service and create a seamless metaverse experience for enterprise users.