The start of 2023 has proven to be shaky for the metaverse, but what is holding it back?

The metaverse buzzword has been inescapable in recent years, shimmying its way into almost every industry, and particularly dictating the way in which fashion brands are beginning to approach young consumers. From digital collection drops to virtual store openings and immersive online environments, the sector has been explored in almost every way seemingly possible, but as such a new concept, the limitations it presents can be hard to overcome.

While for small brands the online world can be a costly and time consuming avenue to venture into, larger players are hoping to grasp whatever they can of the market share in a bid to define its future. However, size doesn't necessarily mean success, as exhibited in the struggles of big scale tech firms which have recently been making some significant U-turns in their metaverse plans.

Over one year on from Facebook’s rebranding to Meta as part of its renewed metaverse focus metaverse, the social media giant has been faced with a series of ongoing challenges both in its corporate strategy and with the project itself. Next to yearly multibillion dollar losses and thousands of job cuts, Meta’s efforts in the virtual realm are also yet to see a return in investment due to a lack of widespread adoption and criticism over the quality of its virtual world. Additionally, its strategy to fund the metaverse initiative has sent its shares on a downward spiral, plummeting 70 percent in the past year. Shares only saw a boost last week, rising 25 percent after passing consensus estimates in its recently released Q4 results.

Similarly large-scale tech giant Microsoft also partially reversed plans regarding its metaverse ventures, announcing that it would be shutting down its virtual social reality platform AltspaceVR and laying off 10,000 employees. Instead, the company stated it would be shifting its focus towards artificial intelligence (AI) through a billion dollar partnership with research company OpenAI. Microsoft initially acquired AltspaceVR in 2017, noting that the reasoning behind the move was to integrate virtual reality (VR) experiences into its own teams. While live, the platform hosted user-generated spaces and live virtual events, such as concerts by global performers such as Pitbull and Mix Master Mike.

Industry experts express hesitancy towards the metaverse

But why is it that these big players can't seem to get a firm foothold on the digital world? As such a fresh concept, it's natural that technical limitations will come into play, but for billion dollar companies this aspect may not be entirely the issue. It also seems even those fully immersed in the industry are sceptical about the metaverse’s future. Ahead of the Game Developers Conference in March, the organisation published its 11th annual State of the Game Industry report, through which the organisation revealed the results of a survey of more than 2,300 game industry professionals to capture the sentiments of the sector going into 2023.

In the report, when asked which company was best positioned to deliver on the promise of the metaverse, 45 percent of respondents opted not to select a company and instead stated the concept of the metaverse would not deliver – a sentiment that had increased by 12 percent since last year. Reasons cited for their scepticism were an unclear definition of what exactly the metaverse was, and a lack of substantial interactivity, referencing a possible absence in approachable social aspects – namely that there aren’t enough other users to connect with in these digital worlds.

From a consumer perspective, inaccessible price points are also playing into this hesitancy. This particularly rings true for VR headsets. While the Meta Quest 2 headset retails typically for around 399 dollars and the Sony Playstation VR for around 299 dollars, the HTC Vive Pro 2 sits at just under 800 dollars, making the metaverse largely inaccessible for many users, especially now against a backdrop of skyrocketing inflation.

However, some platforms solely dedicated to their own metaverse worlds do appear to be doing something right, namely Epic Games’ Fortnite and open world gaming platform Roblox, which each received 14 percent and 5 percent, respectively, of votes from the State of the Game Industry report’s respondents. Roblox had also reported a successful year in 2022, stating that 1.8 billion total avatar items had been sold on the platform, for which it pointed to major brand activations with the likes of Gucci and Tommy Hilfiger to be the driving force behind such a figure.

So, what keeps bringing users back to these types of platforms? Notably, the most popular virtual worlds heavily rely on the gamification of experiences. While Fortnite itself is one large-scale open world game, in which users can also customise their avatars, Roblox takes it one step further, allowing players to make their own games alongside participating in default or branded experiences. The platform also puts an emphasis on opening up its creator community to the outside world, involving young creators in its development process and providing creation tools to encourage participation.

Gamification and cultural relevance drives engagement

This additionally contributes to deepening cultural relevance among consumer groups, with younger creators naturally understanding the target market and seamlessly connecting with them. This is further reflected in the collaborations and events hosted on the platforms which are often created alongside notable figures, like Ariana Grande’s Fortnite concert or Mariah Carey’s Christmas Roblox experience. However, once again digital fashion is a prominent factor here too. Such events also provide an incentive for users to return, as do many of these platforms’ play-to-earn models – a blockchain-based format where players can collect in-game currency or NFTs as they play.

The impact of these features can also be seen in the engagement rates experienced by another open world platform, The Sandbox. In the beginning of October 2022, the site counted just over 600 active daily users, according to research by DappRadar – however, the legitimacy of that data was refuted by The Sandbox, which noted that these figures were based solely on transactions linked to DappRader. The analytics firm later stated that the site’s marketplace had actually seen a sudden spike towards the end of the same month, with the number of transactions of NFTs used in the world increasing by 474 percent. The spike could be attributed to the launch of over 90 experiences held as part of its Alpha Season 3 initiative, including one that was virtually attended by Paris Hilton, albeit in avatar form. The Sandbox then reiterated its user count in a post on Twitter, in which it stated it actually had 39,000 daily users.

For fashion brands hoping to get into this fast developing sector, these factors are imperative to consider. Companies must opt for a platform that is both relevant for their consumer group and supportive of their approach to digitalisation. Many have taken to hosting one-off events that often allow for open involvement, while others provide tools that enable product creation and marketing opportunities.

However, large scale players are still yet to be discouraged. This year, Apple revealed plans to release three sets of VR headsets, including a glasses-style design that uses augmented reality (AR) overlays. Meanwhile, despite its rocky foundations, Meta’s CTO Andrew Bosworth recently said the company would continue to invest heavily in the virtual world over the coming year through long-term research efforts, supportive hardware, gaming experiences and initiatives created by its metaverse division, Reality Labs. As 2023 proceeds, the way in which these players approach the metaverse and its potential audience will be imperative to their survival in the sector. As platforms prioritising gamified experiences lead the way, offering consumers a purpose and attractive incentives, can large-scale tech giants keep up?