The Matrix returns to our screens following a near 20-year hiatus. The next installment of the movie franchise plugs an older Keanu Reeves back into the mind-bending virtual world that gave us "bullet time" and compelled all your friends to tell you: ‘‘I know kung fu!’

However, this time around, the gap between fantasy and reality may not be as wide as it was in the early "noughties," when some people still used physical telephone lines to connect to the internet and the coolest mobile you could get was a Nokia.

Technology firms are already betting big on the so-called "metaverse." While it’s unlikely that the metaverse will require you to save humanity (as Keanu did in the fictional Matrix), it could end up being as significant a leap forward as the internet was back in the 1990s.

What is the metaverse?

There’s no single agreed definition for what the metaverse is. Some people see it as a sort of "Web 3.0" that will connect people, spaces and assets in the physical world. For others, however, it’s a fully virtual world where you can work, play, shop, go to concerts, watch a movie or just hang out.

Back in October, the company formerly known as Facebook said it would hire some 10,000 people in Europe over the next five years to build a metaverse platform. In fact, it’s such an important part of the corporate strategy that Facebook changed its name to Meta Platforms. It has also been experimenting with a virtual reality (VR) meeting app called "Workplace" and a social space called "Horizons" — both of which use avatars, or digital representations of users.

Meanwhile, Microsoft, which helped launch the personal computer revolution with its Windows operating system, is also looking to build an enterprise metaverse, which will initially focus on developing a virtual office.

What will help create the metaverse?

According to the venture capital investor, Matthew Ball,1 there are seven so-called metaverse "enablers":

  • Compute – companies that enable and supply computing power to support the metaverse

  • Networking – companies that provide real-time connections, high bandwidth and data services to consumers
  • Virtual platforms – companies developing and operating immersive (often 3D) digital simulations, environments and worlds for users and businesses
  • Interchange tools and standards – companies that build tools, protocols, formats, services and engines that enable computer systems and software to exchange and use information (interoperability), plus companies that create, operate and improve the metaverse
  • Payments – companies supporting digital payments and operations, including services that allow the exchange of fiat currencies (e.g. US dollars) for cryptocurrencies (e.g. bitcoin), along with pure-play digital currencies and financial services
  • Content, assets and identity services – companies that design, sell, resell, store, provide secure protection and financial management of digital assets (such as virtual goods and currencies), as well as those working on user data and security
  • Hardware – companies involved in the sale and support of physical technologies and devices used to access, interact with, or develop the metaverse

Further breaking down the metaverse…

You can also separate the metaverse into: consumer and enterprise; and software and hardware.

Software includes virtual platforms or metaverse gateways. There are two formats here, although both are equally applicable to social and gaming:

  • Centralized – a closed system that is owned and governed by a company (e.g. Fortnite, Minecraft and Roblox). Online gaming may be the entry point, but Fortnite and Roblox2 have also hosted virtual concerts. User stickiness (i.e., time spent within the environment) and experience immersion are driven by content such as virtual product launches. In Korea, Naver’s "Zepeto" has "SNS," which boasts K-pop, or Korean pop music, as an attraction. In September, Zepeto hosted a virtual autograph signing with a pop group BLACKPINK that attracted some 46 million fans
  • Decentralized – this is closer to some people’s idealized metaverse, consisting of an open decentralized platform where users can even own digital assets (e.g., non-fungible tokens3 (NFTs) supported by blockchain technology) that have a real value in fiat currencies. Two of the more popular platforms are "Decentraland" and "Sandbox," which use their own cryptocurrencies called Mana and Sand, respectively.

Meanwhile, hardware may include the equipment you need to visit these virtual worlds, such as Oculus headsets, network infrastructure to support cloud storage, physical data centers and powerful computer chips.

Where are the opportunities?

We’re still at an early stage of development and there will be many potential development pathways for this technology. But we see Asian opportunities in:

  • Hardware – we see access to virtual platforms moving away from mobile devices and laptops, towards headsets and glasses, as VR headset costs fall and the quality of a virtual experience improves. Asian companies will play a role in the supply chain and assembly of these devices
  • Infrastructure support – the importance of latency,4 along with image quality and real-time rendering, will require more powerful chips, more cloud storage and edge computing. This, in turn, will increase demand for semiconductor chips, capital expenditure on the cloud, servers, components and data centers (DCs), particularly edge computing and edge DCs. All this should be positive for companies in parts of the server and networking supply chains
  • Virtual platforms – We expect growth in both centralized and decentralized platforms over the next five to 10 years, as key internet players, brands and gaming platforms invest to stay relevant and connected with younger consumers. We are also likely to see advertising dollars extend more into the digital space in terms of brand building, as well as an increase in content to enrich consumer experiences through events — such as virtual concerts. This should favor owners of gaming intellectual property (IP) and entertainment IP, such as movies and music. Content creation is key.
  • China – China likely to operate its own ecosystem. If the government allows market dominance, certain companies with the right mix of a social and games platform, cloud infrastructure and multiple IPs across many categories including music, games and entertainment to be a major player in this space.
  • Korea – Korea is another Asian leader, given that Naver’s Zepeto has some 240 million users. Naver is also an IP and content powerhouse with its entertainment businesses including K-pop, webtoons and games. The country's government5 supports the establishment of a metaverse alliance. Big and established brands are also creating digital products and advertise on the Zepeto platform.

We expect the metaverse will grow and develop into something that would have been considered pure fantasy only two decades ago. This journey promises to change the way we interact with the world around us, just as the internet did when it first appeared.

So, like the fictional characters in The Matrix, why not choose the "red pill (rather than the blue)? It may end up changing your life.

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  1. The Verge, "Roblox, explained," July 7, 2021.Opens in new window
  2. NFTs allow people to own digital intellectual property – art, audio or video clips – that’s protected by blockchain encryption.
  3. Latency is the delay between a user’s action and a web application’s response to that action – often referred to in networking terms as the total round trip time it takes for a data packet to travel.
  4. Computing that’s done at or close to the source of data to boost speed.
  5. The Diplomat, "South Korea's approach to the Metaverse," November 2, 2021.Opens in new window