This article first appeared in Digital Edge, The Edge Malaysia Weekly on December 25, 2023 - January 7, 2024

When Meta, formerly known as Facebook, diverted its metaverse ambitions in March 2023 to focus on artificial intelligence (AI), it raised the question of what is the future of the virtual platform.

The metaverse is still growing, with its biggest players developing it and utilising newer technologies like AI itself.

“It’s like comparing [Meta’s move with] Microsoft being huge into AI [and so, asking if the latter will] actually pivot from their fundamental software offerings,” says Jason Low, CEO of local metaverse developer Virtualtech Frontier.

Tech players view the rise of AI not as the death of the metaverse but rather as a pivotal development in its early stages.

Aditya Singh, senior manager at Kiya.ai — an Indian digital solutions provider — says, “The metaverse is currently in its infancy, characterised by rapid evolution and fluctuations in expectations. While it may experience periods of hype and subsequent adjustments, it’s crucial to highlight that the metaverse is still in its early stages with significant untapped potential”.

Jason likens the current state of the technology as being in a similar spot to when social media was gaining popularity in Malaysia more than a decade ago. “Back then, businesses were hesitant about investing in digital platforms like Facebook and Google. Similarly, we are now witnessing a parallel phase with the metaverse, where businesses are not yet accustomed to allocating funds to this digital venture.”

Around the world, the metaverse continues to grow. In South Korea, the metaverse economy was valued around US$200 billion in 2022, and is “estimated to grow into US$300 billion (RM1.4 trillion) by 2030”, says Jessy Kim, CEO of Vision Venture Partners, a private equity firm that supports South Korean start-ups.

Vision Venture Partners and its parent company Vision Creator have invested in 34 venture companies in South Korea, the US, China and Australia, in the fields of AI, smart medical devices, insurance technology, semiconductors and the metaverse.

Kim uses Zepeto, powered by a South Korean IT conglomerate Naver, as an example of the metaverse’s growth and success, with more than 200 million users globally. She also notes that globally, the North American market has embraced the metaverse most readily, but Asia-Pacific markets are picking up the pace rapidly.

Citing a McKinsey’s forecast, director of digital creative content at the Malaysia Digital Economy Corporation (MDEC), Mohan Low, says the metaverse has the potential to grow to US$5 trillion in value by 2030, with e-commerce as the largest economic force with a potential of US$2.6 trillion.

To take advantage of this potential growth, MDEC launched the Pemangkin IP360 Initiative in September to push national investment and development opportunities for Malaysia-based creators and studios to establish the country as a leading metaverse hub.

“The initiative has received RM12 million in government allocation and the funds will be used to run incentive programmes aimed at advancing the metaverse and XR (extended reality) programmes,” says Mohan.

One of the reasons for this push for the metaverse in the digital economy is because the metaverse as a virtual space can act as a way to level the playing field between smaller and larger companies that will then be bound not by capital, but by creativity.

“By fostering a level playing field, the metaverse becomes a bustling marketplace where small and medium enterprises (SMEs) can captivate audiences with immersive experiences, ensuring that innovation knows no constraints,” says Mohan.

Kim concurs. South Korean start-ups in sectors such as theme parks, education and gaming have utilised the metaverse and their revenue is growing. “Net profit is not huge, but it is profitable.”

“Overall, the current venture investment market is quite frozen due to the high interest rates, thus return on investment currently should not be as good as before.” Kim explains that their portfolio companies in the area of metaverse are growing, with the net asset value of investment also increasing.

The metaverse is, at its core, a digital space to be utilised. Either by companies to communicate, create virtual markets to sell products and services or for consumers to explore. With the metaverse industry still on the rise, it leads to the next question of who is using it.

In South Korea, industries such as theme parks, entertainment, advertisement, exhibition, media marketing, education and gaming use the metaverse extensively, says Kim.

In its 2022 “Tech Trends in Digital Content” report, MDEC indicated an increase in participation in the metaverse, as a platform on which animation, games and other digital content increasingly emerge and converge.

“Fortnite, a gaming metaverse platform by Epic Games, has an average of 239 million monthly players with a peak of 15 million players in a single day,” says Mohan.

Another popular gaming platform is Roblox, a metaverse platform where developers can create their own experiences within. Currently, it has 9.5 million developers and hosts over 50 million experiences. The Mechamato Robot Battle gaming experience on Roblox alone has drawn 3.4 million visits.

It may seem that the metaverse is primarily focused on video games, given the virtual world and avatar creation. However, the platform’s true utility extends beyond gaming.

“A multitude of industries, particularly those emphasising experiential marketing and AI integration, are showing a notable interest in the metaverse,” says Aditya. “They recognise the potential of leveraging its immersive capabilities as a powerful tool for redefining customer engagement.”

Mohan adds: “The metaverse represents a multifaceted digital realm with applications across various industries.”

For example, local metaverse platform Colorverse partnered with Tourism Malaysia, WebTVAsia and Prodigee Asia Talent to launch Let’s Go MRXD (Season 2) in the metaverse in October.

This project allowed users to create travel vlogs for viewers to explore Malaysian landmarks such as the Penang Bridge and Cameron Highlands while also offering activities including mini games, meet-and-greet sessions and contests.

Innoveam Sdn Bhd, another local tech company, uses the metaverse to develop 3D simulations and replicas for testing and proof-of-concept work for industrial applications such as oil and gas companies.

Jason’s company, Virtualtech Frontier, has its own platform, Mitoworld.io, which works as a no-code metaverse platform and has amassed nearly 3,000 users from around the world. Mitoworld.io has been used for the marketing and advertising sectors to gamify campaigns or create virtual exhibitions.

“We have [also] been getting a lot of interest from the training and education sector,” he says, “A lot of people are interested in having a virtual onboarding [or] training session that simulates real life situations.”

Kiya.ai’s metaverse platform, Kiyaverse, appeals to a sector not often talked about: banking. Kiyaverse aims to allow online banking, portfolio checks and consultations to occur on an encrypted virtual space, or even to view other banks using the platform.

“Kiyaverse integrates digital payments, identification, open commerce and more, reflecting [the] local ethos and culture across the globe. Initially targeting the global banking and finance industry, the platform has expanded to serve various sectors,” says Aditya.

Tackling this challenge of awareness is something metaverse providers and supporters acknowledge must be handled on various levels.

The concept of the metaverse dates back to Neal Stephenson’s 1992 novel, Snow Crash, and was first implemented in the 2003 video game, Second Life. Despite two decades of development, metaverse platforms face a significant challenge in terms of awareness, and addressing this gap is a crucial task for metaverse providers and supporters.

“There should be more use cases so people can understand [the metaverse] more directly,” says Kim, citing examples of holograms based on AI virtual services for hotels, museums and shopping malls and the creation of virtual avatars of deceased celebrities to hold concerts.

By using these real, easy-to-understand cases, people will be able to comprehend the point and potential of the technology when explaining to someone why they use the metaverse.

Aditya, on the other hand, believes we need to “regularly [showcase the] diverse applications of the metaverse in various sectors such as finance, education and government”. By illustrating the practical benefits of the metaverse, it can relate to consumers on how it directly benefits them.

Beyond business uses, Mohan believes that governments also play a crucial role in raising metaverse awareness.

“Implementing comprehensive campaigns to educate the public on various use cases, benefits and potential economic contributions can illustrate the concept and showcase its relevance in different aspects of daily life,” he says.

Many players within the metaverse industry see the virtual world as an inevitable part of the market’s future. Much like how social media and the internet changed commerce, the metaverse will become commonplace as digitalisation grows and its uses extend to more industries.

“Generative AI [is] expected to revolutionise content creation and elevate immersive experiences within virtual worlds. The coming years hold great potential, fuelled by the increasing interest in generative AI,” says Aditya, who sees emerging new technologies such as generative AI as ways the metaverse platform can grow further.

“We anticipate a deeper integration of AI technologies and metaverse platforms, paving the way for more dynamic and enriched virtual environments. While predicting the exact trajectory of technology adoption is challenging, the metaverse’s long-term potential looks promising,” he says.

Mohan agrees, seeing potential in the two technologies growing side by side.

“It is essential to recognise that AI and the metaverse are not mutually exclusive. In fact, there is a significant synergy between the two. AI technologies can enhance and drive further growth in the metaverse by enabling more sophisticated virtual environments, personalised user experiences and advanced interactions.”

The integration of the two also has the potential to unlock new possibilities like enhanced content creation, realistic simulations and improved user engagement, Mohan adds.

This is why MDEC sees the metaverse as a frontier worth investing in to drive its creator economy growth and foster creativity. The agency is collaborating with the Ministry of Communications and Digital on the Digital Creative Technology Blueprint, a five-year road map aiming to foster a conducive, inclusive and competitive digital content ecosystem in Malaysia.

“In 10 years, MDEC envisions the Malaysian metaverse landscape to undergo transformative growth, becoming a multifaceted platform that extends beyond entertainment. The Malaysia animation and game IPs (internet protocols) driven traffic is anticipated to expand its influence into key sectors such as tourism, education and commerce, fostering interoperability and seamless integration.”

It is hoped that widespread access to the metaverse in the future will drive inclusivity across demographics and industries to bridge the digital divide and provide equal opportunities for Malaysians, adds Mohan.

“The combination of mobile accessibility, government initiatives and the evolving digital landscape suggests that the metaverse has the potential to be adopted by the public, much like social media platforms.”

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