South African companies blow millions on metaverse hype

Many South African companies are blowing money on the metaverse, not because of its potential, but because they fall victim to the hype.

The hype started last year when Facebook CEO Mark Zuckerberg rebranded the company to Meta Platforms as part of a strategic plan to create a metaverse.

“Meta’s focus will be to bring the metaverse to life and help people connect, find communities and grow businesses,” he said.

However, a year later, Meta’s Horizon Worlds metaverse, its flagship consumer offering, is falling short of expectations.

Horizon Worlds is a free virtual reality online video game developed and published by Meta Platforms.

It features a collection of interactive virtual spaces, or worlds, where users appear as avatars that can interact and shop.

It sounds good on paper, but there is no demand for what Horizon Worlds offers and the project is struggling to achieve its goals.

The Wall Street Journal reported that the metaverse suffers from glitchy technology, uninterested users, and a lack of clarity about what it will take to succeed.

Citing internal statistics, the report revealed that only 9% of virtual spaces built by creators are ever visited by at least 50 people. Most are never visited at all.

“Most visitors to Horizon generally don’t return to the app after the first month, and the user base has steadily declined,” The Wall Street Journal said.

Another peek into demand for the metaverse came from The Sandbox, a virtual world based on blockchain.

Coindesk reported that The Sandbox only had around 500 daily active users. Such a low user count would be shocking, considering it is raising funds at a more than $4 billion valuation.

Yat Siu, the co-founder of Animoca Brands, the majority owner of the digital game, highlighted that CoinDesk only looked at blockchain transactions.

Siu claimed that The Sandbox has more than 200,000 monthly active users. However, even this number is very low.

The same scenario is playing itself out in South Africa, with big corporates spending money just to claim they are part of the metaverse.

In February, MTN said it was the first African company to enter the metaverse by purchasing land in the Africarare-operated Ubuntuland.

Africarare made its debut in South Africa in October 2021 and promoted itself as the first African Virtual Reality metaverse featuring digital land.

MTN said it owns 144 plots of virtual land with an area of 144 square meters.

In September, Nedbank followed MTN by securing a 144-square-meter village in Ubuntuland to establish its presence.

Nedbank proudly announced it was the first African financial services organisation to enter the metaverse.

Not to be outdone, Mr Price announced its entrance into the metaverse by launching non-fungible tokens (NFT) artworks in a competition.

Terms like the metaverse, blockchain, and NFTs sound futuristic and do a great job of impressing executives.

However, there is a problem. Apart from the companies building metaverses and the consultants making money from punting them, no one is interested.

An investigation by the technology publication MyBroadband revealed that Ubuntuland was a wasteland with no activity.

It also found that it was not possible to buy a plot in Africarare’s Ubuntuland through the channels described on its website.

So, while MTN and Nedbank have a presence in Ubuntuland, no one is there to notice.

It raises the question of why large corporates like MTN, Nedbank, and Mr Price allocate resources to dubious metaverse projects.

To answer this question, Daily Investor spoke to executives with insights into what is happening behind the scenes.

They said consultants promote the metaverse as the next big thing, although they can seldom describe what it is and how it will work.

New technology terms, like the metaverse, are often invented and hyped by consultants or companies trying to sell their services or products. 

Many corporates fall into this trap out of fear of being left behind. The argument is, “my competitors are doing this, and they must know something we don’t”.

It creates a positive feedback loop, with everyone jumping on the bandwagon because everyone else is doing the same.

Despite the tremendous hype around the metaverse, it is challenging to answer a fundamental question – what problem does it solve?

Not only is it unclear what problem the metaverse solves, but it is also uncertain what is meant by the metaverse in the first place.

Every commentator and player uses some existing technology to claim it is the metaverse, like virtual reality, augmented reality, or blockchain.

Most metaverse players point to online gaming as what the metaverse could be. Meta’s Horizon Worlds is a good example.

However, it is unclear how 3D or VR graphical user interfaces will solve other use cases, such as social engagement or shopping.

For consumers to adopt a new technology, it must create a better user experience with a lower cost of engagement. This is not the case with the metaverse.

The reality is that most people who think the metaverse is the next big thing have not tried to use a metaverse environment for any extended period.

The technology is immature – let alone expensive – and the fact that it removes any contact with the physical world leads to several challenges, including side effects such as nausea.

So, while companies are spending millions to say they are part of the metaverse, it remains an unproven technology failing to gain consumer support.