Meta is betting hard on the metaverse, but new research suggests the future of the internet may be found in China and not in Menlo Park.
This may surprise some tech watchers. The Facebook-owner has made a huge song and dance about becoming the world-leader in all things metaverse, even changing its name to reflect this push.
Meta describes the metaverse as the next stage of social interaction. Research firm GlobalData defines the metaverse as a virtual world where users share experiences and interact in real-time within simulated scenarios.
Despite Meta’s efforts, Menlo Park has had a bad year so far. Its shares are down more than 50%, worse than many other tech companies suffering on stock exchanges this year.
Meta founder Mark Zuckerberg is being mocked almost every time he appears and Facebook users are at an all time low. Last week’s drag queen event in London left much to desire on behalf of Meta’s technology.
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Zuckerberg’s ambitions of a virtual world is a way to save the company he founded in his dorm room. However, his metaverse dream is still a long way off.
Americans just haven’t jumped on the metaverse train yet, despite all the hype. In a study carried out by DEPT, only 16% of people in the US understood what the metaverse actually was.
JP Morgan noted that consumer adoption of the metaverse in China has been slow too, especially since Beijing banned cryptocurrencies last year, which is a key component in the West’s idea of what Web3 will look like.
Despite this the investment bank’s researchers argued that a number trends will enable of Chinese internet companies will be able to profit as the metaverse develops.
Gaming and social networks will succeed
JP Morgan’s analysis of the metaverse in China said Bilibili, Tencent and NetEase were the most primed to make money during the development of the metaverse due to their aspects in gaming and social networks.
It comes after JP Morgan predicted that China’s online game industry could grow from $44bn to $131bn.
Analysts Daniel Chen and his team wrote in the report: “Development of mobile internet and AI in the past[ [five to 10] years suggests that a company’s competitive advantage in one part of the tech ecosystem is often more important in determining long-term value creation to shareholders than which part of the ecosystem the company operates in.”
Business becoming increasingly digitalised
The analysts predict the “metaverse will likely double digital time spent” from the average of 6.6 hours, which they say will cause companies to generate more revenue from individual users.
The total market for business software and services in the metaverse will be around $27bn, JP Morgan estimates.
The researchers noted the potential profiting of Tencent’s video conference app Tencent Meeting as well as Yaotai, a virtual meeting room created by NetEase.
Tencent will also benefit from virtual item sales through managing “China’s largest social network Weixin/mobile QQ”, analysts said.
Meanwhile analysts pointed out that the “high user engagement” for Bilibili “will enable it to capture rich monetization potential in [value added service]/virtual item sales in the long run.”
There are still many hurdles to overcome
Despite the optimistic view, the researchers admitted: “We think ‘perfect form’ of the metaverse could take decades to achieve.”
Adding that they “believe there are various technological obstacles to overcome.”
In the report, analysts noted that virtual reality devices in their current form are too heavy to be used for long stretches.
As well as this, they said that metaverse content and capabilities of cloud computing are still limited.
Time will tell if businesses in China will benefit from the development of the metaverse, but it’s clear more work needs to be done in order for Zuckerberg’s vision to come true.
GlobalData is the parent company of Verdict and its sister publications.