There's been no shortage of investment: total global venture dollar volume for augmented reality (AR) and virtual reality (VR) was 185 billion dollars in Q4 2021. But as 2022 draws to a close, industry investment has plummeted. Q3 2022 reported a global venture dollar volume of only $81 billion — a 53% year-over-year decrease. Investors that showed excitement about VR technology are now cautious about where they put their money, as expected developments in the extended reality (XR) world fall short.
The metaverse is one of these disappointments. A major prospect for VR, this virtual world represents the next iteration of the internet where users “enter” the web instead of just being “on” it. Despite global marketing hype, the metaverse is currently far from the sprawling digital landscape it was proposed to be, forcing investors and entrepreneurs to wonder what’s next.
A June 2022 report from the Pew Research Center explores the possibilities of the metaverse and practical prospects for reality technologies. To understand the global disappointment, let’s take a look at the AR/VR industry: what went wrong and what we can expect for the future.
Meta is the biggest investor in VR technology
Meta (the company previously known as Facebook) has spent $36 billion in Reality Lab costs and expenses in 2022. In spite of these high costs, the division dedicated to developing Meta’s virtual reality technology reported just $5.3 billion in revenue.
Testers of Meta’s virtual world expressed great disappointment. The graphics are reminiscent of pre-2000s animation. Avatars don’t have legs or shadows. The Oculus 2 headset, meant to bring users into the metaverse, is ineffective at tracking below the waist and has shown no actual changes to office culture or workflow despite recent promotions. After Meta’s Q3 report at the end of October, investors pulled more than $89 billion from the company’s market capitalization.
Apple’s approach to XR
Apple is another major investor in XR technology with two main projects in the works: an AR/VR headset and AR glasses.
The headset is equipped with high-resolution OLED displays and features the same high-power processing chips as the Mac Air. Apple even announced the creation of a new operating system for its reality technology, rOS. rOS will focus on gaming, video streaming, and video conferencing. However, Apple has reported issues with overheating, software, and the headset’s camera, and have continuously pushed back the product release date.
Apple’s glasses will be drastically different than the headset, rooted more in AR than VR; but significant developments aren’t expected anytime soon. Though Apple hasn’t reported major layoffs like other big tech companies, the general industry decline — and lack of a development ecosystem — puts into question all prospects for reality technology.
The real prospects for reality technologies
Amid nervous speculation on the possibilities of the metaverse, the Pew Research Center released its report The Metaverse in 2040 — a compilation of several hundred expert opinions on the likely future evolution of AR and VR. Here are three of the most important takeaways on realistic prospects for XR.
The Metaverse won’t be the Matrix
Despite the marketing hype, society won’t be a cyberpunk dystopia by 2040. According to the report, 46% of expert respondents said that, “by 2040 the metaverse will not be a much-more-refined and truly fully-immersive, well-functioning aspect of daily life for a half billion or more people globally.” To support a global community in a virtual world, the metaverse would need significant improvements to software, user interfaces, and hardware. According to these experts, issues with bandwidth and network latency are likely to persist well into the 2040s.
The remaining 56% of respondents said that the metaverse will meet these standards; however, the overwhelming majority of opinions expect increased, but not total, adoption. The new digital reality is likely to experience slow adoption due to concerns about exacerbated 'surveillance capitalism', new or amplified forms of harassment and discrimination, and the spread of misinformation.
Kevin Werbach, a UPenn professor and author of “The Blockchain and the New Architecture of Trust,” noted, “Virtual worlds and immersive online spaces will continue to develop in significance, but 500 million people won’t be living in ‘the metaverse’ in any more meaningful way in 2040 than 2022.”
AR technology will be more popular than VR
Augmented reality technology has more use cases rooted in real life than virtual reality technology, making it the popular choice for XR development. According to Pew, most people want to incorporate the digital into their daily life, not to live in the digital. Many will find VR too removed from “real-life” to fully invest in it.
Louis Rosenberg, CEO of Unanimous AI, predicted that, “the transition from mobile phones to AR hardware will begin in the middle of the 2020s and will be complete by 2035, possibly sooner.” Apple is already fulfilling this prediction. Its AR products are rumored to replace the company’s star product, the iPhone, showing just how invested the major tech player is in XR.
There will be two versions of the metaverse
Many experts agreed on one thing about the prospects for VR and reality technology: there will be two versions of the metaverse — one advancing industry, and one capitalizing on users.
XR is projected to play a major role in job training in the healthcare industry. Surgeons will be able to simulate complex procedures that are normally costly and dangerous. Hospitals will refine diagnostic testing to identify problems early on, reducing fatality odds for aggressive diseases. Elizabeth Hyman, CEO for the XR Association, stated in the Pew Report, “[T]he Children’s Hospital Colorado is using XR to help to change the pediatric hospital experience for the better…[with] distraction and pain management, reducing the need for anesthesia and physical therapy.”
The gaming and entertainment industries are also projected to benefit from prospects for VR. Gamers will enter fully-immersive worlds, amplifying their playing experience, and game companies will likely experience a hiring boom as they require specialized workers to transform 2D games.
The other side of the metaverse won’t be as benevolent. Meta’s revenue plunge this year, largely due to Apple’s introduction of app-tracking transparency (ATT), illustrates the importance of user data in modern advertising and how reliant many companies are on that information.
Many Pew expert respondents expressed fear of companies becoming increasingly manipulative in attracting and retaining users. Platforms are likely to increase user pleasure by diving deeper into reward-based learning. The more dopamine released through usage, the more companies will solidify addiction loops while gathering human data.
Navigating the future of XR technology
While the metaverse is not likely to be the fully-immersive virtual world equipped for our digital twins in the next two decades, there will definitely be prospects for reality technology in healthcare, training and inventory, entertainment, and product engineering and design.
Entrepreneurs, marketers, and companies should focus on refining the daily-life use cases for XR/AR. As Jacquelyn Ford Morie, chief scientist at All These Worlds, says in the Pew report, “[The metaverse] must go beyond games and entertainment to provide what each and every person needs… It must offer value to its participants and not simply treat them as money sources. If it has to make tons of money for companies and the top 10%, it is doomed to be niche-driven and not a true evolution of humanity.”