Billy Huang runs a metaverse advertising agency. Well, he definitely runs an advertising agency. And not so long ago, that agency did attract a suite of established brands hungry to cash in on the untold potential of the internet’s newest, immersive, virtual frontier.
But given the year’s events, Huang’s now thinking about dropping the “m” word.
“Maybe now that the metaverse terminology has died down, we do need a little bit of rebranding,” Huang told Decrypt.
Huang’s firm, Insomnia Labs, spent 2022 guiding companies like Under Armour and L’Oreal through Web3 experiments ranging from NFT-infused ad campaigns to DAO subsidiaries. And while those endeavors have borne some fruit, they’re a far cry from fully launching brands into a futuristic realm of digital existence that, not too long ago, appeared poised to redefine the human experience.
What went wrong?
Last October, Facebook reoriented its entire, gargantuan enterprise towards dominating virtual worlds, changing its name to Meta to prove that commitment. The months following saw massive inflows of venture capital into metaverse startups. Metaverse platforms witnessed huge spikes in traffic. In the spring and summer, the metaverse dominated discourse and graced magazine covers; by the fall, “metaverse” was shortlisted as a finalist for Oxford English Dictionary’s Word of The Year.
A few months later, though, the hype had all but collapsed, as had the populations of metaversal worlds. All attention was ripped away by the billion-dollar dominoes falling in the broader crypto space. Oxford’s Word of the Year, perhaps fittingly, ended up going to “goblin mode,” an online term for unapologetically greedy and slovenly behavior.
According to experts like Huang, the problem comes down to user adoption. The metaverse promised to onboard millions to a new vision of the internet. But even those that ventured in haven’t stuck around.
“For the most part this year, we have recommended very few metaverse campaign activations, and for good reason,” Huang said. “The users are not there.”
Why haven’t they shown up? Brycent, a prominent Web3 gaming creator and influencer, thinks far too many metaverse platforms and investors conflated the novelty of virtual hangout spaces (think digital parks and offices) with actual use cases for metaverse technology.
“If there's just a place called the metaverse where we sit and do nothing but hang out and talk, that's no better than sitting in Discord,” Brycent told Decrypt. “That’s Club Penguin.”
When the metaverse seized the world’s imagination earlier this year, digital crowds flocked to check out metaverse platforms like The Sandbox and Decentraland. Users shelled out hundreds of millions of real dollars for virtual land plots in those worlds. In February and March, Decentraland averaged 50,000 daily visitors, according to the company. But that figure soon thereafter plummeted by over 80%.
“It doesn't really matter how many users you can drive to the landing page,” said Huang. “They're not going to convert, and they're not going to stay, because they're not going to see the value.”
That’s not to say, though, that immersive online spaces won’t be able to unlock new kinds of value and utility. They already have.
Josh Rush, co-founder and CEO of Surreal, a virtual event platform, has seen great success this year shepherding companies into the realm of immersive digital advertising. Earlier this year, Surreal launched a pop-up metaversal experience for Flipkart, the Indian e-commerce giant.
The event was a smash success. Half of the users spent an hour in the space, an unheard-of retention rate for advertisers; the event’s purchase conversion rate was 400% higher than standard advertising campaigns.
The thing is, Rush wouldn’t tell you that event took place in the metaverse. It was held in a self-described “microverse,” a site built specially by Surreal to achieve a targeted objective for its client.
“That’s not Sandbox or Fortnite or Roblox,” Rush told Decrypt. “It's something that a company built with a specific intent to market and hopefully sell something that people found valuable.”
Microverses like Surreal’s offer a vision for the future of virtual spaces in stark contrast to that of platforms like The Sandbox, which have long imagined the metaverse as a traversable constellation of many different metaversal platforms, each their own virtual neighborhood, all interconnected.
Tiny metaverses like the ones being built for major brands at Surreal are, by definition, incompatible with that dream. They are not interoperable, meaning they do not connect to any other platforms or sites. They are not virtual neighborhoods so much as they are virtual pop-up castles.
Despite this, Sébastien Borget, COO and co-founder of The Sandbox, sees the success of small virtual platforms with tailored functions as beneficial, not antithetical, to the proliferation of a universal metaverse.
“We're seeing a growing number of worlds, for different targets, niche audiences, and different platforms, which is positive,” Borget told Decrypt. “Having just a few large worlds—centralized or not—would not be healthy towards the construction of that vision [of a unified metaverse].”
But Surreal’s Rush has no interest in contributing to a unified digital playground called “the metaverse.” Rather, he sees the future of the space as a constellation of many walled-off metaverses, or microverses, each with tangible objectives and customized utility.
“We have seen the pendulum swing away from million dollar investments in [platforms like] The Sandbox, where people aren’t really spending any time and there's really nothing to do, to microverses where companies can set up really engaging 3D experiences that can run as part of promotions or even be used by other elements of the business,” said Rush.
Trends in the nascent world of metaverse gaming appear to be pointing the same way.
Web3 games like Axie Infinity rocketed to dominance last year, fueled by a “play to earn” model that incentivized users to participate in the game’s online world by offering them financial rewards. While Axie generated billions of dollars in NFT trading volume in 2021, the platform’s token crashed soon thereafter, calling the entire play-to-earn model into question.
Brycent still believes gaming and Web3 are immensely promising bedfellows. But he thinks previous Web3 gaming endeavors failed when they tried to use games as a means to advance some universal concept of the metaverse, as opposed to leveraging Web3 tools to advance individual videogames.
“You can't come in and just focus on tokens and floor prices, you’ve got to focus on storytelling, on creating incredible IP and incredible experiences,” Brycent said. “Because if you don’t, there’s no reason for any gamer to switch over.”
In this sense, Brycent also sees the future of the metaverse not as one communal utopian virtual space, but as a constellation of projects—here, great video games—boosted by NFT integrations and other blockchain-based applications.
“The metaverse is the next generation of video games,” Brycent said. “Games and ecosystems with their own IP, that's where I think we're gonna see this sort of thing thrive.”
Such a reading of the metaverse’s state-of-play may bode far better for the world’s existing powers than for Web3’s native idealists and disruptors. If the metaverse is a means, not an end—if metaverse commerce boils down to branding, and metaverse gaming to storytelling—then what’s to stop corporations who’ve mastered those forms from expanding their dominance into the virtual realm?
“Web2 companies are at a major advantage,” conceded Brycent. “You're going to see Disney, Nintendo, all these major game companies come in and say, ‘Alright, we're just gonna add blockchain technology on the backend, our gamers aren’t gonna know the difference, and we're gonna create amazing experiences.’”
Such a replication of Web2 power structures in Web3 would be a sad state of affairs for metaverse dreamers like Decentraland’s Creative Director Sam Hamilton.
Hamilton admits that his platform has taken a hit in the last few months, thanks to a metaverse hype cycle that he wishes never happened in the first place.
“The eyes of the world came on us too soon,” Hamilton told Decrypt. “Honestly, we probably would have liked to have had another couple of years to improve the products before we got to that stage [of exposure], but it is what it is.”
Hamilton thinks these are only temporary setbacks, though. He’s unshaken in his conviction that years from now—in a decade, if that’s how long it takes—humanity will inevitably shift to an all-encompassing, virtual existence in the metaverse. And he’s doing everything he can to ensure that, when that day comes, Decentraland will have built the foundations of that digital world in a manner that prevents it from falling—like the physical world—into the hands of hyper-centralized corporations.
He concedes that Decentraland’s still-steady core following of around 10,000 people is an ideologically-motivated group that’s sticking around more for the theoretical promise of the metaverse than for tangible perks likely to attract average internet users.
“The people who’ve stayed, they’re brought together by philosophies. They want to see the internet move in a different direction,” Hamilton said. “Most people don't really care about decentralization though.”
Hamilton can’t wait for those masses to change their priorities.
“The truth is, by the time they do care, it will probably be too late,” Hamilton said. “So we have to maintain that philosophy, and we have to fight that battle, even though it makes our job harder.”
Corporate-dominated, isolated microverses may well spell the immediate future for commerce and gaming in Web3, but Hamilton says he’s playing the long game.
“If you projected the metaverse onto cinema, we're still in the days of silent movies,” he said. “We've got so many decades of innovation and invention ahead of us until we get to blockbusters like Star Wars.”
The thing is, silent movies packed theaters too.