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Will AR/VR Launch the Fully Immersive Metaverse?

The convergence of the AR and VR could create a trillion-dollar market around “the next chapter of the internet” — and it’s already starting.

Tue Nov 01 2022

6 Minutes

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Key takeaways:

  • The augmented and virtual reality industries are growing exponentially, with significant overlap as both mature to enable a more fully immersive metaverse.
  • Web2 tech giants, including Apple, Google, Meta, and Microsoft, have invested heavily in virtual ecosystems and the hardware needed to support them.
  • Virtual worlds have vast potential, as their decentralized approach opens opportunities for creators and investors to benefit more directly from their growth.
  • While a number of technical challenges remain in building a truly immersive metaverse, macro trends and upcoming announcements regarding hardware stand to benefit investors.

Introduction

The metaverse and augmented and virtual reality are some of the world’s fastest-growing industries, with a growing intersection that will foster a new paradigm for how we work, play, and socialize. The next few months will be key to that convergence, as major announcements — including the launch of Meta’s latest VR headset, the expected Apple AR/VR headset and related augmented reality glasses — are on the horizon.

Explosive growth

AR, VR, and the metaverse have concurrently experienced explosive growth.

Starting on the consumer end of VR, the success of Meta’s Oculus has cemented the technology’s role in gaming applications. The industry’s approximately $30 billion market is expected to reach more than $400 billion over the next decade on the back of not only consumer adoption — which led the AR/VR market to nearly double in 2021 — but also growing favor from enterprises.

Metaverse land NFT sales volume.

AR, in particular, has seen early enterprise success in multiple fields, including health care and prop tech. With Apple’s smart glasses on the horizon, the adoption of AR modalities should rise sharply in the coming years.

Meanwhile, “Metaverse” landed the No. 2 spot in the race for the 2021 Collins “Word of the Year,” outpaced only by NFT. While the catchy term hit the limelight only recently, the technology and broader societal shift toward its use will be lasting. The metaverse market is also expected to rise dramatically, from around $40 billion to nearly $1 trillion by the end of the decade.

There are very few trillion-dollar industries in the world today, so what’s the metaverse’s path toward reaching that lofty mark?

The AR/VR, metaverse convergence

Over the next decade, the metaverse is poised to become a ubiquitous technology platform, with the potential to encompass everything from gaming to work. As Microsoft CEO Satya Nadella puts it, the metaverse won’t be just something that a company builds — it “is here, and it’s not only transforming how we see the world but how we participate in it – from the factory floor to the meeting room.”

The key to unlocking the metaverse’s potential will be its ability to capture fully immersive experiences with the help of AR and VR technology. This intersection will transform the early 2D virtual worlds into highly immersive ecosystems with opportunities that we have only just begun to imagine.

As such, it will take vision to capitalize on that potential. Investing in a parcel of land or other virtual assets in worlds like Otherside, Decentraland, or The Sandbox, is not just an investment in their present state but one in a digital realm that could shape the future of how humans work, socialize, and game.

With the transition toward a more 3D metaverse in the next few years, it’s easy to see its potential as an epicenter for immersive VR concerts, gaming, and other robust social experiences online.

Incumbent companies like Meta and Roblox have already announced their ambitions of capturing significant market share in this oncoming 3D immersive AR/VR metaverse. While this is exciting for the broader industry, it could lead to the redundancy of many of the same problems that plagued web2 platforms.

While these platforms have billions of users, they are centralized and give virtually no ownership back to their creators. The virtual worlds created by centralized platforms will likely represent a more closed segment of the metaverse projects like Roblox, Fortnite, and Horizon Worlds. These will offer more curated experiences and likely still hold tremendous value but will be more limited in terms of interoperability and opportunities for outside investors and creators to benefit.

By leveraging both fungible and non-fungible tokens, web3 metaverse platforms are able to buck that trend and create additional value and opportunity for early investors and creators who work to build them. NFTs allow for an egalitarian metaverse to form by providing users with virtual property rights encoded on the blockchain.

Virtual land NFTs give their owners provenance, allowing them to show proof of their ownership, and also previous owners (just as people may buy physical real estate because a beloved celebrity once lived there, one could imagine metaverse travelers placing a premium on properties owned by their favorite virtual DJ).

Virtual land also gives owners proximity. Parcel's research team has observed that virtual real estate is still coupled with the ideals and logic of traditional real estate. With the token axiom “Location! Location! Location!” holding true in the metaverse too: a virtual property in a popular metaverse neighborhood closer to fun activities or intriguing business opportunities is oftentimes more valuable than one in the far-flung reaches of a little-known virtual world.

Parcel's Research Team defines buyer personas, and who is buying land in the metaverse, using on-chain activity:

As AR and VR technology integrate into these platforms, and their role in your day-to-day life become more and more apparent, where you are in the metaverse will begin to matter even more.

Over 200+ brands, ranging from luxury retailer Gucci to Big Four financial consulting firm PriceWaterhouseCoopers, have purchased land in various virtual worlds, spawning a digital Manhattan of sorts where the primary value driver of a given land parcel is what and who it is next to.

The enhancement of interoperability amongst metaverses takes this even further. Imagine entering into an immersive AR/VR experience where you can compete for virtual wearables by playing in an ICE poker tournament in Decentraland before seamlessly transitioning to watch a Snoop Dogg concert in The Sandbox.

The integration of AR/VR presents a different set of experiences for users.

In Superworld, you can purchase a digital equivalent of a real-world land plot before integrating various AR elements to make it your own. Ever dream of owning the Taj Mahal … or a virtual version of your favorite childhood park? You now potentially could, for a price. Those ties to real-world properties represent fascinating opportunities for profit: Imagine walking down the Vegas Strip and being able to purchase both physical-world novelty items and virtual-world NFT replicas together. In the Over virtual world, OVER Lands holders can earn yield by publishing geographically specific augmented reality experiences.

Somnium Space has created an open social VR world compatible with Oculus Quest hardware. Somnium features its own in-world economy with tokenized in-game assets and land parcels, offering users true ownership of their digital belongings within the Somnium metaverse.

Although ownership of digital land provides opportunities as both an asset and for income generation (e.g., renting it out for virtual events), it is not a prerequisite to participate in all that the metaverse has to offer. Users can still participate in virtual events and collect in-game assets without owning a digital land NFT in a given metaverse.

What obstacles still remain?

Over the last few years, AR/VR hardware has improved dramatically. Headsets are now widely available at affordable prices, down from around $6,500 (~$10,000 adjusted for inflation) in the 1990s to under $300 today. Haptic suits, eye tracking, and motion platforms push the boundaries further toward complete immersion.

While hardware has reached new heights, software and networking are still catching up. Raja Koduri, VP of Intel’s accelerated computing systems and graphics group, remarked at the RealTime Conference last December that we will need to see a 1000X improvement in computational infrastructure.

A huge opportunity in its infancy

While a truly immersive metaverse experience may be a few years away, there are still significant opportunities in the short term.

Six ETH-based worlds, which represent 90% of the total market cap of virtual real estate.

The average cost of metaverse land parcels jumped nearly tenfold in 2021, but this investor activity came from 25,000 unique crypto wallets. With an estimated 360,000 unique holders, that's just a 7% penetration rate into the NFT market. One billion people are predicted to own crypto by the end of 2022. Billions of people will soon have the technical capacity to follow their favorite brands into the metaverse.

The last time a tech giant announced AR/VR hardware — Meta's Oculus Quest 2 — it correlated with an explosion in digital land sales. With a couple of big announcements on the horizon, those who invest now are likely to benefit most from the coming convergence.

Visit www.parcel.so to explore VRE on our Marketplace.

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