Metaverse’s rise and fall — 4 lessons for marketers

Remember when the metaverse seemed ready to revolutionize our lives? Mark Zuckerberg rebranded his company as Meta to champion its vision and consumers invested thousands on virtual real estate within Snoop Dogg’s Snoopverse. NFTs, envisioned as building blocks of the metaverse, turned decentralized marketplaces such as OpenSea into gold mines.

Those days are gone. With NFT values crashing and investor interest shifting to generative AI, the metaverse has lost its allure. What lessons can marketers draw from the metaverse’s rise and fall?

Understand consumer signals

At one point, the rise of the metaverse seemed unstoppable, and data supported this viewpoint. In 2020, IBM reported that the COVID-19 pandemic accelerated the shift to digital commerce by five years. Economists and consumer behavior experts predicted a burgeoning stay-at-home economy.

Businesses took notice. Companies across various industries explored how to stake their claim in this interconnected digital economy. Nike created virtual sneakers and Gucci and Balenciaga launched virtual fashion lines. Concerts, art exhibitions and business meetings started taking place within the metaverse. What once seemed like science fiction quickly turned into a promising reality with seemingly limitless potential.

For a while, this made sense. Virtual concerts by Ariana Grande and virtual meetings through avatars felt like engaging ways to interact in a world adapting to remote living during the pandemic. But shopping on Amazon is not the same as attending an office meeting through an avatar. The former was already ingrained behavior that accelerated during the pandemic. The latter amounted to a novelty that didn’t sustain itself.

When the pandemic subsided and in-person experiences returned, people reverted to pre-COVID habits and routines, such as attending live concerts. Then the meteoric rise of generative AI refocused everyone’s attention elsewhere, making the metaverse seem like a fleeting trend.

A lack of clarity creates confusion

From the outset, no unified understanding of the metaverse existed. In a 2020 essay, venture capitalist Matthew Ball described the metaverse as a fully functional economy where “individuals and businesses will be able to create, own, invest, sell and be rewarded for an incredibly wide range of ‘work’ that produces ‘value’ recognized by others.”

This definition is ambitious and complex. Ball added that a fully functional metaverse needed to be interoperable, meaning one could seamlessly move their avatar from Fortnite to Roblox to Facebook and beyond.

However, it wasn’t long before any digital technology enabling digital living was labeled “the metaverse.” Virtual reality, which had existed for years, suddenly became part of the metaverse. NFTs and cryptocurrencies, seen as components of a digital economy, also became part of the metaverse.

The problem arose when VR didn’t explode as predicted; its failure became synonymous with the metaverse’s failure, even though consumers enjoyed components of the metaverse (such as Roblox). When NFTs collapsed, the metaverse was perceived as collapsing although it was always meant to be more than just NFTs. This lack of clarity created an untenable perception problem.

Put experience first, technology second

Meta bet heavily that consumers would flock to its VR-powered metaverse, Horizon Worlds. Roblox took a different approach, leading with experiences delivered through immersive gaming. Meta prioritized technology (and continues to do so) while Roblox emphasized user experience. Meta erected a barrier to its Horizon Worlds metaverse: virtual reality. Roblox did not.

As a result, by 2023, Horizon Worlds had only 200,000 monthly active users, far short of Meta’s goal of 500,000. Meanwhile, Roblox reported impressive gains in its user base despite an uncertain economy and continues to achieve solid growth.

Only when Horizon Worlds began offering meaningful experiences—VR concerts with artists such as Blackpink, for instance—did it gain any traction. Even so, Horizon Worlds remains a niche experience, while Roblox has become a household name, especially among Gen Z.

Perception Is reality

So, is the metaverse really dead? Not exactly. According to Matthew Ball’s original definition, the metaverse is still in its infancy. Now that the hype is over, the metaverse now has a chance to evolve into its intended vision.

Featured in AdAge