The metaverse has been making waves as the next big thing in digital media for months. Spearheaded by Mark Zuckerberg’s vision of an interactive virtual world, it’s still in its early stages. However, its potential is arguably on every tech-head’s mind as we usher in 2023.

Research firm GlobalData defines the metaverse as a virtual world where users can share experiences and interact in real-time within simulated scenarios. Its core technologies are vast, but mainly include virtual reality (VR), artificial intelligence (AI) and augmented reality (AR).

“Although the metaverse is in the early stages of development, it has the potential to be the next mega-theme in digital media,” GlobalData analysts write in a report, “the metaverse could transform how people work, shop, interact, and consume content.”

Despite still being a hot topic, the number of VR and AR deals carried out in 2022 plummeted from $18.9bn across 311 deals in 2021, to just $5bn across 283 this year.

As VR and AR are key technologies to the metaverse, it points to a decrease in investment and interest in the large-scale vision.

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Metaverse predictions say artificial intelligence is going to take centre stage

As Meta and other technology giants like Microsoft continue to invest millions into metaverse spaces – experts believe AI will play a crucial role in the development throughout 2023.

It comes as the total amount of investment in the AI sector fell in 2022, totalling just over $67bn with 3,187 AI deals, according to data extracted from GlobalData in December. That's down from the $127.1bn injected into AI projects in 2021.

The fall of AI deals as well as the collapse of VR and AR investment this year could be linked to the overall implosion of the tech sector. Due to market uncertainties caused by a combination of factors – including energy shortages, Vladimir Putin's war in Ukraine and the aftershocks of the pandemic – tech stocks have plummeted this year.

Investors have responded to the volatility of the market by tightening their purse strings. The wave of easy money startups enjoyed over the course of the coronavirus crisis is over.

With the flow of capital crashing down to a trickle, businesses like Meta have been forced backtrack on investments done during the heydays of Covid-19. As a consequence, they've had to lay off tens of thousands of employees. It's been a bloodbath.

Despite the buzz around the metaverse 12 months ago, interest in the sector has dropped in tandem with Meta bleeding money and tech stocks looking wobblier by the day. A glance at the number of global Google searches for the word "metaverse" over the past year shows have fallen to a fifth of its all-time high.

Some analysts have even warned that the cumulative effect of all these factors is that a metaverse winter is coming.

It's against this background that we reached out to experts, market stakeholders and innovators to find out how they believe the metaverse will evolve in 2023.

Chris Doughty, head of immersive experiences, Seymourpowell

AI is going to take centre stage in 2023. Developers will start to make use of AI and machine learning to produce new, more efficient ways of rendering virtual worlds – which ultimately results in more realistic user experiences. But not only that, having the ability to build virtual realities more effectively in the first place will empower developers to go a step further in their projects and explore all sorts of creative outputs.

AI will unlock fresh creative ideas by removing the usual limitations of human capabilities. It has the potential to expand and redefine what creativity means, leading to an explosion of new virtual experiences.From a hardware standpoint, we're going to see some game-changing launches in the new year.

Qualcomm has already released the specs for the upcoming next gen AR headsets and it looks like the technology is getting tantalisingly close enough to finally be able to deliver on the hype.

There’s also the possibility of Apple finally announcing their entry into the headset market. That, coupled with the expectation that these new devices are going to be slimline and fashionable – shifting from 'headsets' to ‘wearables' – only hints to the fact that virtual worlds are here to stay, whether people like it or not. This, in turn, will drive more companies to adopt immersive technologies for business cases.

At Seymourpowell, for example, some of our clients have gone from questioning what the metaverse is to proactively enquiring about a metaverse vision for their brands. There’s no doubt we’ll be having more of these conversations in the coming months and years.

Chris Charman, managing director, LEAD Consulting

With growing interest in Web3 and metaverse technology, the priority for 2023 should be defining what it is and its use cases for both businesses and consumers. Currently, the concept of the metaverse is a collection of different Web3 technologies loosely packaged together, from [VR] to cryptocurrency. Much of the conversation in the space is focused on technology rather than utility and this needs to be addressed in 2023.

VR has developed quickly with some of the most visually exciting technology out there, but I don’t think that it will integrate as a [VR] metaverse or have real benefits for the majority of businesses and marketers in 2023, even if Meta might say otherwise. 

We will see specific tech developments having an impact in 2023, like NFT technology embedded into smart contracts. But legacy business models (lawyers billing on an hourly basis) will likely make widespread adoption of such technology slower than it should be. 

Crypto had a tough year in 2022, with the recent FTX scandal and ongoing Binance instability, trust in the already maligned space is waning. Further to this, instability in the wider economy is likely to have impacts on retail and business investors alike making 2023 another rough year for crypto.

Due to worsening economic conditions, I think it’s unlikely that the metaverse will have a noticeable impact on legacy businesses in 2023, betting on unproven technology just won’t be considered. 

I expect that a number of Web3 based businesses will innovate in 2023, and this will have a significant impact in the years following the recession. Tough economic times often lead to innovation, but this will only bear fruit in the longer-term. 

Leo Gebbie, principal analyst of connected devices, CCS Insight

Meta opens physical stores in at least 10 major cities by 2023. As the company seeks to ignite interest in its Portal hardware, [VR] devices, and its eventual [AR] devices, Meta opens more stores following its first venture in San Francisco in May 2022. It also seeks to partner with existing retailers to demonstrate the technology more effectively in primary locations to articulate the value of the metaverse and reach the mass market with Meta devices.

Through 2027, the battle to own the [VR] and [AR] arena produces friction between Google, Meta and Microsoft. We expect the initial [VR and AR] landscape to be fragmented because of a lack of standards and portability for apps and services, meaning that big tech companies must seek to house developers. Much like with the smartphone, Apple defends its platform through tight interoperability between hardware and software. This leaves its rivals to spar for the rest of the market.

By 2025, Meta launches a [VR] headset controlled by an inbuilt neural sensor. Currently, most headsets come with handheld controllers, but there are efforts to transition away from these to make devices more user-friendly. Using the technology acquired with neural interface company CTRL-labs in 2019, Meta ships a headset without any controllers at all as it implements neural sensing along with other body-sensing technology like hand-tracking.

Andy Whitehurst, chief technology officer, Sopra Steria

The foundation for the metaverse and the age of augmented and virtual reality will continue to be built in 2023. While there’s lots of talk around gaming, socialising and shopping in the metaverse, we often overlook the practical businesses applications it could support. 

The metaverse itself acts as a digital twin to our universe and our day-to-day reality. In theory, organisations could simulate different operational scenarios in the metaverse as well, changing inputs and observing subsequent outputs, which they can test until a positive outcome has been reached. This could be anything from transportation and logistics, to manufacturing, and even system-based processes like recruitment.

Ultimately, these digital twins can help businesses visualise every aspect of a planned project or live operation allowing for missteps to be identified, processes to be optimised and operational costs reduced. The metaverse can also allow remote workers to interact and collaborate with one another without the need to travel to the office, providing more of a face-to-face feel than video calls.

Ben Goertzel, developer, Sophiaverse

In 2023, it is likely that metaverse developers will come to understand the crucial role that [AI] plays in the success of the metaverse. Without AI, the user experience in the metaverse may not be as rewarding.

As competition between metaverse developers increases, some virtual worlds may struggle to attract a significant number of users. AI can help to alleviate this issue by providing a more engaging and personalised experience for users. 

One potential solution to the issue of underpopulated metaverses in 2023 may be the use of AI-powered non-player characters. These characters can help to create a sense of activity and community in virtual worlds, making them more appealing to users. The initial excitement of being one of the first few users in a new metaverse may quickly fade if the platform is underpopulated.

However, the presence of AI characters that are capable of building, conversing, creating art, and participating in economic activities can help to transform a desolate virtual world into a vibrant and engaging environment.

In order to give people bespoke experiences in the expanding metaverse frenzy in 2023, it will be crucial for AI technologies to be combined with [VR] and blockchain technology. There will probably be an increase in financing as the metaverse gains popularity, which can be used to create the essential technology.

The entire potential of the metaverse can be achieved by using AI efficiently, leading to the development of dynamic, immersive digital environments that coexist with the actual world.

Alberto Anaya, vice president of sales, strategic accounts and chief of staff, Qwilt

Following Facebook's name change to Meta Platforms in October 2021 and its decision to focus on "bringing the metaverse to life", the term metaverse became mainstream, and a lot of hype was created around it, particularly at the beginning of 2022. These metaverse continuum transformation waves are trends that will continue and crystalise during 2023. 

VR headsets will emerge as the 10th generation of video game consoles following PlayStation 5 and Xbox Series X/S. Meta Quest 2 is already being promoted as the game console for this Christmas and Sony will release its VR2 headset in February 2023.

AR to enhance in stadium experiences, following the lead from Fifa+ Stadium experience during the World Cup in Qatar. Tournament organisers, sports clubs and broadcasters alike will start providing new real-time AR applications initially experienced on mobile phones to enhance the in-venue viewing experience.

There will be an increasing surge on edge computing demand, traditionally there have not been many internet applications demanding the use of edge computing for its lower delivery latency to end users, or the amount of data it can offload from the rest of the network, other than video and web delivery. With the advent of real-time AR, VR streaming and cloud gaming, edge compute capacity demand will increase substantially, becoming a must have for telco access networks.

Matt Littler, founder, ARK Immersive

I think for me as a VR filmmaker, next year is about the realisation of the next generation of VR headsets and the metaverse.

If you’re looking for a cinema analogy - this is like when film went from hand crank silent movies, to motorised 35mm perforated film canisters. 2023 marks the moment we go mainstream (some would argue we’re already there, but people were happy with silent movies, until the ’talkies’ came along).

The next generation of VR headsets present us with a staggering level of user data and interactivity. VR filmmaking is about surmounting obstacles. We’ve managed to overcome the frustrating theme of users feeling sick whilst in VR experiences. We have the beginnings of a refined cinematic language and we’re moving away from hobbyists and enthusiasts to professional production teams like mine. We’ve moved towards more robust codecs for distribution too. 

We have even managed to get the capture right. In 2023, cameras like the Inst360 Titan and Kandao Obsidian Pro will capture at resolutions close to what the human eye sees - but the one thing holding VR film back is the playback device. We’re so used to HD and 4K that now, anything less than crystal clear, feels like a let down. The displays on the next generation of VR headsets (and hopefully the Apple device due next year) will offer clarity that lets me, as a producer, realise my content to its full potential for the first time. But this goes deeper.

Suddenly, we have headsets capable of that final milestone of tricking humans into believing what they are seeing, but as we include more and more tech into these devices, they will become exponentially more powerful in 2023. 

With eye tracking (which we’re seeing brought in now slowly), we can tell not just that someone watched our content, but exactly what they looked at, and for how long - so for advertisements this is going to be a great metric at their disposal next year.

Also, these same sensors can look at pupil dilation - and so gauge desire, fear, and even excitement. More metrics we can harness and use as producers of content for both advertisements and entertainment, the better.

Another metric we can monitor in 2023 is heart rate and the variability, so we can look at the overall picture of our health, stress levels, and even cardiovascular responses. I’m not a social scientist but there are a myriad of ways we can manipulate content with a real time feedback loop to the user.

Imagine advertisements that know when to serve us the perfect glass of ice cold Coca-Cola? Or a horror movie that knows just when our fear is peaking. Dynamic content is possible in VR, and maybe sooner than you think in 2023.

Tom Hedges, tends analyst, GWI

To create a truly open world means to create an environment for self-expression. In fact, people have been using online worlds like Second Life to create new personalities, express themselves differently and build their own environments almost since the inception of the internet. It will be important for brands and metaverse operators to offer that same freedom of expression as this exciting technology continues to develop.  

This is particularly important to the LGBTQ+ community, who want to have customisable avatars and the ability to live their lives and express themselves as they see fit. Physical appearance of avatars is of particular importance to those identifying as LGBTQ+, with 75% saying this is important to them and a further 67% suggesting other characteristics, such as age and gender are critical.

It’s also important to note we’re already seeing a certain amount of self-exclusion from the metaverse. For example, while 50% of women prefer to spend their time online, only 37% say they're interested in metaverse and only 14% of disabled people have expressed a desire to get involved. 

For brands and companies heading into 2023 and considering how best to deploy metaverse technologies, making sure they’re able to offer users anonymity, independence and safe spaces to experiment and interact in new ways will be critical.

Patrik Wilkens, VP of operations, TheSoul Publishing

2023 is set to be a year of technological evolution across platforms, which will bring with it new opportunities for revenue generation. The bravery to experiment with new technologies will see brands reap the rewards from Gen Z and gaming audiences, who are amongst the first to adopt new platforms and technologies.

Brands are already experimenting with new platforms and tools to market their products. This will accelerate in 2023, with social commerce, VR fitting rooms and metaverse catwalks all being explored as demand for personalised shopping experiences grows.

GlobalData is the parent company of Verdict and its sister publications.