The growth of business on the Metaverse

What is the Metaverse? Wikipedia describes the Metaverse as a loosely defined term referring to three-dimensional virtual worlds in which users represented by avatars interact. Most can agree that it is yet another example of the significant impact that technology is having on our daily lives.

What does the Metaverse mean for business? If leveraged correctly, it can provide a virtual platform where businesses and consumers can interact before selling a product or service. It would be a virtual space where consumers could sample a product/service before purchasing it. Will this gain momentum, and how will it disrupt traditional business models?

Growing popularity

Many business leaders adopt a wait-and-see approach when faced with the question of technology’s impact on their business. This approach was commonplace during the growth of social media.

In 2022, LinkedIn (the world’s premier business social media platform) had 571 million global LinkedIn users and 174 million LinkedIn Premium subscribers. Granted, this is a far cry from Meta’s (formerly Facebook) 3 billion user base; however, the power of LinkedIn is outside its users; it’s how they interact. Statistics show that LinkedIn sales navigator is becoming the leading business tool for prospecting worldwide.

Given the above information, how popular will the Metaverse be when it comes to doing business in the future? Let’s consider a few statistics from global data and business intelligence platform Statista:

• The projected value of the Metaverse market in 2024 is expected to reach US$275.5 million (global);
• This market is anticipated to experience a steady annual growth rate (CAGR 2024-2030) of 40.72%, resulting in a projected market volume of US$2,139.0m by 2030. It is worth noting that South Africa is a part of this growing market segment;
• Looking at the number of users in the Metaverse market, it is expected to reach 22.5m users by 2030; and
• In 2024, the user penetration rate of the Metaverse is estimated to be 12.0%, but it is projected to increase significantly to 34.9% by 2030.

A report by McKinsey points out that it is hard to escape the Metaverse. The emerging virtual world is the driving force behind the internet’s evolution, and consumers are increasingly seeking more immersive experiences and demanding the ability to interact with products and brands before making a purchase. That enthusiasm has the potential to drive $5 trillion in value creation by 2030, and leading companies are actively experimenting with metaverse commerce in everything from home and food to fitness and apparel.

Where to start?

If consumers already know what they want at the intersection of virtual and physical retail, the McKinsey article points out that it is up to companies to evolve their strategies to capture growth and long-term value.

But how do they go about this? Personalising the customer journey is a good starting point. The McKinsey article points out that there are a few important things to note:

• Consumers appear less interested in more futuristic offerings. Consumers are more willing to pay for product offerings that tie back to the physical world in some way than for purely virtual ones. For example, in the fashion and beauty category and in the home category, consumers ranked virtual events and virtual homes in the bottom two use cases; and
• Consumers want real-world applicability. They are also less excited about products or services in the Metaverse that don’t connect to their daily real-world activities. For example, about 30% of consumers attributed their lack of interest in fitness-specific use cases to a lack of interest in the same application in “real life.” Instead, they favour use cases such as “at-home try-ons” that bridge the physical and digital world.

Real-world cases

Metaverse platforms have the potential to transform how, when and where companies interact with their customers, as extended reality platforms enable businesses to deliver new experiences and provide information in new ways. An article by techtarget.com provides more insight into this.

A ski resort, for example, could create a virtual guide for skiers as they move down the mountain, delivering personalised information in real-time to enhance the skiers’ experience. Or, a tour company could provide a persistent immersive experience in the virtual realm overlaid with the physical world to inform tourists as they move through new destinations, for instance, bringing historical events to life in old cities.

Companies could also offer potential customers alternative shopping experiences. For example, automakers could provide test drives in an extended reality setting.

McKinsey points out that when the company asked consumers which use cases they were most likely to try or pay for in the Metaverse by retail category (from fashion and beauty to food and fitness), across categories, consumers generally expressed greater interest in experiences and products that augment existing real-world experiences, even when they had to pay for them.

The McKinsey report adds that while this may change with growing metaverse understanding, adoption, and technology, there’s an immediate opportunity for companies to ease consumers into their metaverse offerings by connecting the physical and digital worlds.

Where to from here?

As with most technology-related topics, there is a lot of uncertainty about the impact the Metaverse will have on companies, particularly given the rapid nature of technological change. However, it would be imprudent for companies to ignore Metaverse completely. Look at how social media has benefitted business operations. As Wayne Gretzky once famously said: skate to where the puck is.

A better approach would be for companies to look at what needs to be done to stay ahead of technological change:

• the McKinsey report points out that companies must thoroughly understand who their consumers are and where they are in their metaverse journey. Depending on the consumer demographic and psychographic profiles, their understanding, level of adoption, and interest level in the Metaverse may vary. Their desire to bridge the physical and digital worlds may vary by category, use case, age, psychographics, and more. Identifying your target consumers and their metaverse preferences will help determine metaverse priorities;
• identify priority use cases and build consumer-first offerings. Priority use cases will vary by retail category. Conducting a deep dive into priority use cases for your category (or categories) will help prioritise metaverse experiments and product offerings. It will also help uncover key consumer concerns about your category in the Metaverse, which can provide powerful insights into product development and resource prioritisation; and
• the McKinsey report adds that companies must test and learn, expanding high-adoption use cases where available. While navigating uncharted territory, organisations can still take a test-and-learn approach to product development through rapid experimentation, reprioritisation, and agile operations. This can include increasing high-adoption use cases that show promise for consumer adoption, crowdsourcing product development ideas from across the organisation in a grassroots manner, and running metaverse offerings with different profitability expectations than other parts of your core business during the product validation period.

These steps will help you adapt to the future impact that the Metaverse will have on your company.