The post-Lehman Brothers tech industry was a bright star in an otherwise gloomy economy. Buoyed by record-low interest rates (which, in effect, translated into a near-limitless supply of investor capital), startups and unicorns alike could spend lavishly, hire aggressively, and pursue new opportunities and ideas that were deeply ambitious—if not fundamentally speculative in nature.

Unfortunately for the tech sector, the good times wouldn’t last forever. The post-pandemic rate rises were a brutal wake-up call, forcing companies to reevaluate their head count and strategic direction. Ideas once viewed as potential game changers are now seen as an axe-worthy extravagance. Perhaps none more so than the metaverse.

Mark Zuckerberg, the CEO and founder of Meta (née Facebook), practically bet the farm on the idea that people would eventually replace their browsers with immersive 3D virtual worlds. Not only did he change his company’s name, but under his direction Meta also reportedly spent nearly $100 billion on metaverse research and product development.

Other companies—from fellow tech giant Microsoft to retail behemoth Walmart—followed suit, investing money and developer time into their own metaverse efforts. But as the grim new economic realities are biting and artificial intelligence absorbs massive amounts of venture capital, many are reversing course, prompting the tech commentariat to ask whether the metaverse is on its last legs.

There’s a fundamental problem with these questions: It presumes the metaverse—as a viable segment of the digital economy—was alive in the first place.

AN IMPOSSIBLE POSTMORTEM

According to McKinsey, metaverse companies attracted $120 billion in funding during the first half of 2022 alone—a figure that’s more than double the total investment during 2021. Over the past few years, some of the world’s leading technology companies (not just Meta and Microsoft but also Nvidia, Unity, and Tencent) announced ambitious metaverse projects.

Industry analysts—some of the most sober-minded people in the game—made bold proclamations about the future trajectory of the metaverse, with Gartner predicting that a quarter of all people would spend at least one hour in the metaverse by 2026. Virtual worlds would become a part of daily life, it said. Places where you’d work, socialize, and shop.

But those predictions and investments don’t necessarily translate to adoption. For metaverse companies, the grim reality is that adoption remains elusive. According to documents obtained by The Wall Street Journal, Meta’s flagship product, Horizon Worlds, saw its user base contract by a third in 2022.

The Journal also found that Decentraland and The Sandbox, two well-known metaverse platforms emphasizing digital currencies, reportedly had fewer than 1,000 daily active users by late 2022. It’s worth noting that the companies both dispute these figures, although the user numbers they provided in their rebuttals are still vanishingly small. Decentraland reported roughly 60,000 monthly active users (MAUs) in September 2022, whereas The Sandbox claimed 201,000 MAUs.

Where the real figures lie is ultimately immaterial. They don’t change the unhappy fact that the metaverse is far from becoming a mainstay of everyday life, as Zuckerberg promised in Meta’s 2021 Connect event. Virtual worlds, he said, would be a “successor to the mobile internet.” A “game changer” that would be a net positive to “society and the economy,” unlocking new business opportunities and creating a highly flexible workforce that can work from anywhere. And though he may be right, he isn’t right now.

THE DEATH TOUCH OF HYPE

If the metaverse has a standard bearer, it’s Zuckerberg. Nobody has invested more, risked more, or evangelized harder than he has. His excitement during the 2021 Connect event was palpable, as he gushed about the countless ways metaverse technology would shape our working and personal lives.

In retrospect, this was a mistake. Zuckerberg presented a vision of the metaverse that wouldn’t be realized for years—or perhaps decades.

He outlined use cases that, while theoretically possible, were contingent on the existence of a vast user base to support them. Businesses won’t invest in experiences for a platform that’s, as The New York Times put it, “sad” and “lonely.” Similarly, users are unlikely to sign up for a platform bereft of users and content, especially when doing so involves buying an expensive VR headset.

There’s a certain irony in Meta’s struggle to overcome the network effect—the same phenomenon that ensured its decades-long dominance in the social media realm and prevented the emergence of any real competition.

Unlike many of its competitors—platforms like Decentraland, which targeted the cryptocurrency enthusiast niche, itself a vanishingly small segment of the population—Horizon Worlds targeted everyone. But despite its promises of “immersive” experiences, it couldn’t quite match the standards set by conventional interactive media products. Horizon Worlds drew comparisons to a “2008 Nintendo Wii game,” with many mocking the disembodied and weirdly misshapen avatars of its players.

Zuckerberg isn’t the most effusive or charismatic character. Still, he was an undeniably effective hype man for the metaverse, pushing the concept into the wider consciousness and inspiring a flood of new investment and product development. But that didn’t translate into adoption. Arguably, it hampered it. Without a cogent vision or product strategy for the metaverse, the tech industry rushed to try and shoehorn the concept into anything and everything—ultimately meaning that “metaverse” stood for very little.

Consumers were sold a promise of something that didn’t exist, and likely wouldn’t for some time. Their expectations didn’t match reality. So, they left. They complained. They shaped the discourse surrounding the metaverse, with their discontent creating a branding problem that—although legitimate—is kryptonite to the future survival of the metaverse.

HOW TO SAVE THE METAVERSE

The metaverse is “a fad” and a “failed pseudo-tech experiment that nobody really wants.” It makes “no sense.” It’s not just “a joke” but a “naive joke.” It’s “bullshit.”

These quotes, taken from a handful of major technology and news publications, should paint a picture of the current sentiment toward the metaverse. Conceptually, it lacks credibility with the masses. An expensive disaster. An imagining of the future that ultimately missed the mark.

But here’s the thing: The same criticisms don’t apply to the technologies that underpin the metaverse. As it turns out, people really like collaborative open worlds, as evidenced by Fortnite’s estimated 80 million monthly players. VR has made a name for itself as a tool for work and play, with IDC estimating 10.1 million headset shipments in 2023, reaching more than 20 million by 2026.

It’s just the word metaverse that has become toxic. So why are we still using it? Phrases like virtual worlds or immersive worlds convey the same meaning but lack the stigma of the original term.

And these are arguably better descriptors. According to one 2022 study of U.S. consumers, only 16% of people understand and can explain the metaverse. By contrast, anyone can understand the meaning of “virtual world.” You don’t really need to explain anything. For most tech-literate people, they get it. And it doesn’t overpromise. It doesn’t infer anything about a new economic paradigm, or radical changes to how people work. As terminology goes, it’s almost engineered to avoid hype.

We shouldn’t overlook the importance of good product design, either. A significant component of the hype surrounding the metaverse is that it could serve a practical purpose for businesses and teams. Its loudest evangelists promised that over time it could become a hub where commerce and work happen.

That promise was based on the presumption that businesses who established a presence within the metaverse would build that functionality—either in response to a growing community of users or in the hope that it would attract them.

In reality, companies were reluctant to invest time and money into the metaverse without guarantees of adoption. Although some businesses dipped a tentative toe into the metaverse’s waters, many have since scaled back or discontinued their efforts in response to low user numbers, or as a consequence of the industrywide belt-tightening seen at the end of 2022 and throughout 2023 so far.

Much of this turmoil could have been avoided by treating the metaverse—or virtual worlds—as any other product, one based on a previously identified need, with an aim to solve previously unsolvable problems, or in a way that was superior to the existing alternatives.

The metaverse was treated as a “nice-to-have” rather than a solution. If we want it to survive, we need to start thinking of it as a tool for building new applications and new places to live, work, and play. Now that the market noise has died down, maybe the metaverse can get a real chance at life.