Metaverse doesn’t need Virtual Reality or Web3

Metaverse does not need virtual reality or web3

The metaverse does not need virtual reality or web3, but they may help
A common myth about technology is that it constantly, magically, gets
better over time. It does not. It takes smart engineers, cutting-edge
facilities and most importantly, investment – real capital from real
companies – many of which are betting their future on the commercial
success of their inventions.
The first virtual reality (VR) headset was created in 1968 by Ivan
Sutherland.1 The term ‘metaverse’ first appeared in a novel by Neal
Stephenson in 1992.2 And blockchain technology (now used to create
assets like Bitcoin) was first proposed by cryptographer David Chaum
in 1982.3 These three are often ideated as the future of the internet,
but in fact, conceptually at least, they are old technologies.
All three are arguably yet to hit mainstream adoption, even if they
have achieved mass media coverage. Whenever a wave of hype
emerges for one of them – particularly virtual reality, which saw
its previous wave in 2016 – a lack of mainstream adoption is often
excused with the explanation that its ‘technology is not quite ready
yet’.4 In other words, with technical improvements, the mass market
would buy and use these products in earnest.
Deloitte surveyed 4,160 consumers in the UK about their ownership of
virtual reality headsets, their attitudes to web3, and their knowledge
of the metaverse. The barriers to growth for these, it turns out,
are not technical limitations related to computing, network or user
interfaces. Instead, what these technologies lack, in the mind of many
consumers, is a clear purpose. This challenge will not be solved with
better displays and faster chips.

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The metaverse does not need virtual reality or web3, but they may help

Content is crucial if virtual reality is to be a success
Virtual reality is experienced via a head-mounted display which encloses
a user’s vision to ‘immerse’ them in content. That content may be video or
a digital environment of rendered textures like a video game. In 2021, 11.2
million VR headsets were sold worldwide, according to IDC.5
In the UK, 8% of people claim to have access to a VR headset (see Figure
1). This is the same proportion as in 2021. VR adoption and daily usage
have increased over the years, but at a very slow rate. The notable
exception to this is 2019, which saw a spike in access and daily usage. Beat
Saber, still the most popular game on some VR platforms, launched in
2019, and sold over a million copies by March of that year.6 This is probably
not a coincidence.
Which, if any, of the following devices do you own or have ready access
to? When was the last time you used each device? Was it within the…?
[last day]

8%

8%

7%
6%
5%

19%
13%

14%
2018

2019
Access to a VR headset

2020
Used in the last day

14%

2021

18%

2022

Not used in the last day

Figure 1. Access to a VR headset stalls, but daily usage nudges upwards
Weighted base: All respondents aged 16-75 in 2022 (4,161), who have access to a virtual
reality headset (350)
Source: Deloitte Digital Consumer Trends, UK, Apr-May 2022
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The metaverse does not need virtual reality or web3, but they may help

In contrast, smartphone access is 92% and daily usage is 91%, and laptop
access is 78% with daily usage of 64%. Virtual reality headsets remain a
long way from ubiquity.
Consumers without a headset (92%) have a strong consensus as to why.
Four in ten of them simply claim that they are not interested in VR (see
Figure 2). Budget is a key consideration for others, with a quarter (25%)
claiming headsets are too expensive, and a fifth (20%) claiming that they
would rather spend money on other devices. For the latter, a key theme
seems to be a preference to use other devices for the same activities. It
may be that for socialising, people prefer a smartphone; for gaming they
prefer a console and for work they prefer a PC. Around one in ten (9%)
prefer other devices for online activities and almost a fifth (19%) prefer to
interact with people in the real world.
Again, this comes back to purpose. Virtual reality is often posited as a
future intrinsic technology – a jack of all trades. But in reality, it probably
needs to start by complementing, not replacing, the great technologies
that people already use.

4

The metaverse does not need virtual reality or web3, but they may help

Which of these reasons best describe why you do not own a Virtual
Reality headset?
43%

Not interested in VR
25%

VR headsets are too expensive
20%

Would rather spend money on other devices
Prefer to interact with people in the real world

19%

Do not know enough about VR

17%

Prefer to use other devices for online activities

9%

Not enough content for VR
Motion sickness using VR

7%
6%

VR headsets look silly

5%

VR headsets are uncomfortable to wear

5%

Never heard of VR
Other reason
Don’t know

2%
3%
4%

Figure 2. Most people who do not have VR, simply aren’t interested

Weighted base: All respondents who do not have access to a virtual reality headset and aged 16-75
in 2022 (3,811)
Source: Deloitte Digital Consumer Trends, UK, Apr-May 2022

For VR to become mainstream, frequency of use is crucial. Of those with
a virtual reality headset, more than half (51%) had not used it in the last
month. In this group, almost half claim they have not had time (47%, as
shown in Figure 3). In other words, they have not made time. VR seems to
be regarded like a games console – a luxury device to be used in free time,
not an intrinsic part of everyday productivity and consumption. A subset
of people may also have been put off by bad experiences in the past:
19% claim to have motion sickness, 8% claim headsets are uncomfortable,
and 2% think they look silly. And inactive VR owners also bemoan a lack of
content: 15% say there is not enough, and 11% are bored with the content
that exists.

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The metaverse does not need virtual reality or web3, but they may help

To be successful, VR clearly needs a catalogue of compelling, repeatable
experiences. It also probably needs a network effect, with rich social
experiences that encourage friends and colleagues to adopt headsets, as
utility increases along with the size of the user base. Software developers,
however, may not yet see enough potential for return on investment to
create, iterate, and support content over time.
Which of these reasons best describe why you have not used your
Virtual Reality headset in the past month?
47%

Not had time to use it
19%

Motion sickness using VR
Not enough content for VR

15%

Not interested in VR

15%
14%

Prefer to use other devices for online activities

11%

Bored of the VR content that exists
VR headsets are uncomfortable to wear
Prefer to interact with people in the real world
VR headsets look silly
Other reason
Don’t know

8%
7%
2%

11%
2%

Figure 3. Inactive VR owners bemoan a lack of content

Weighted base: All respondents who have access to a virtual reality headset but did not use it in the last
month and aged 16-75 in 2022 (113)
Source: Deloitte Digital Consumer Trends, UK, Apr-May 2022

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The metaverse does not need virtual reality or web3, but they may help

The metaverse will not wait for virtual reality to catch up
One thing is certain: the metaverse is ambiguous. Companies tend to
define it in a way that inflates the importance of their own strengths
and, therefore, several definitions exist. Indeed, a service provider might
define it as the next big cloud platform; a productivity company might
see it as the future of work; a gaming company might envisage the next
generation of play. Generally speaking, however, a metaverse is a rendered
digital world in which a person can control an avatar and interact with the
avatars of others.
In the three decades since the term was coined, it has mostly been a
niche, unknown concept. But the concept of a metaverse has been thrust
into mainstream media in the past year.
How familiar are you with the concept of the metaverse?
6%
63%
31%

30% of those who
have heard of the
metaverse claim to
“know nothing about it”

Heard of the metaverse
Never heard of the metaverse
Don’t know

Figure 4. Almost two thirds of people have heard of the metaverse

Weighted base: All respondents aged 16-75, (half sample – sample B) aged 16-75 in 2022 (2,078)
Source: Deloitte Digital Consumer Trends, UK, Apr-May 2022

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The metaverse does not need virtual reality or web3, but they may help

Almost two-thirds of people have heard of the metaverse (63%, as shown
in Figure 4). But of those nearly half know nothing about it. It may have
been prominent in the media, but many people may not have read about
it in detail. Familiarity with the metaverse is also skewed by demographic.
Men are 27% more likely than women to have heard of the metaverse,
and people with household income above £75,000 are 32% more likely to
have heard of it than those below £30,000. This skew toward males and
wealth suggests that the concept of the ‘metaverse’ is yet to effectively
reach people outside of the bubble of the tech industry, which itself skews
in this way.
The metaverse (or rather some metaverses), unlike virtual reality, have
seen fast adoption by certain groups. For example, the online game
Roblox – which could be considered a metaverse depending on your
definition – attracts more than 50 million daily active users.7 People are
willing to gather, socialise, play and spend money in virtual worlds, even if
they are using flat-screened devices to do so. Clearly, the metaverse is not
dependent on virtual reality headsets, nor will it wait for them to catch up.

8

The metaverse does not need virtual reality or web3, but they may help

‘One metaverse’ would require web3, but if it lacks a
purpose, siloed metaverses will prevail in the near-term
Web3, an umbrella term for blockchain-based assets like cryptocurrency
and non-fungible tokens (NFTs), is often cited as crucial to the future of
the metaverse.8 In theory, using a blockchain ledger as a certificate of
authenticity, instead of one company or platform having that right, would
allow digital assets to transcend different metaverse siloes. For example,
a set of rare digital sneakers bought in one metaverse, if recorded as an
NFT, could move between virtual worlds, with blockchain as the bridge.
Consumers are still hesitant on web3, however. Only one in five (19%)
know at least a “fair amount” about cryptocurrency, and one in ten (11%)
know at least a “fair amount” about NFTs (see Figure 5). Of people who
have heard of these assets, 70% claim they are unlikely to own them in the
next year, with 59% being concerned about scams and 52% concerned
about the lack of regulation. Therein lies one big challenge for web3:
whenever it makes headlines, it is often for the wrong reasons.
Before today, how much, if anything, did you know about the following?
42%

40%

32%

18%
13%
6%

16%

8%
4%

3%

3%

Cryptocurrency (e.g. Bitcoin, etc.)
Know a lot
Know a fair amount
Know just a little

5%

Non-fungible tokens (NFTs)
Heard of but know almost nothing
Never heard of
Don’t know

Figure 5. Almost half of people have not heard of an NFT
Weighted base: All respondents aged 16-75 in 2022 (4,161)

Source: Deloitte Digital Consumer Trends, UK, Apr-May 2022

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The metaverse does not need virtual reality or web3, but they may help

For any of this to matter, assets which transfer between metaverses need
to have utility in more than one place. If all of the equipment, trophies,
badges, clothing and certificates from one metaverse are effectively
meaningless outside of that bubble, then there is no need for the bridge
to exist. Hypothetically, if you could tokenise a Pokémon, and take it
outside of the core game, how much value would it have? Inside the
game, it can battle, breed, swim and fly. Outside of the game, it is a digital
paperweight. If there is no purpose, then the ‘interoperable metaverse’ or
‘one metaverse’ may not make sense, and siloed metaverses will prevail.
Siloes may not be as exciting, but they may end up the more lucrative and
sensible environments to build – and they do not necessarily need web3.
“The metaverse amplifies existing legal issues and raises new ones.
Centralised metaverses, such as those focused on games, tend to
engage consumers in a controlled space and operate within familiar
legal frameworks. For example, users purchasing a virtual accessory
are likely to understand its use will be within tightly prescribed
parameters. Decentralised metaverses, which incorporate web3 (such
as NFTs) are more challenging, as users may expect virtual assets to
be portable. However, those assets are governed by inconsistent and
often unclear terms, and the lack of technical standards can result in
limited interoperability between metaverses.
For the user, social interactions in virtual worlds can feel realistic,
inviting scrutiny from policymakers and regulators focused on online
safety. An increased legislative focus on children online will also
require platforms to assess or verify the age of users. And collection
of personal data – such as eye movement within a VR headset – will
require informed consent under data protection laws, and a clear
understanding of who is controlling that data at any given time.
Finally, as content is key, clear contractual parameters are required
to frame how intellectual property is used, whether user-generated
content is permitted, and how illegal/harmful content is managed.
Amid all of this, metaverse builders, content owners and brands must
ensure they have a risk assessment and risk management framework
in place to avoid costly mistakes, both reputational and financial, in
an increasingly regulated space.”
The legal take: Andrea Leonelli, Consultant, Deloitte Legal

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The metaverse does not need virtual reality or web3, but they may help

The bottom line
Arguably, early metaverses already exist. Young people in particular are
flocking to them. Not because they want to replicate and replace realworld activities, like meetings or exercise. But because a metaverse allows
them to have experiences, social and competitive, that are outside of the
norm. Sandbox games like Roblox and Minecraft, for example, actively try
not to look like the real world. They have blocky character models, and
cartoon-like styling. Their purpose is to allow young people to meet more
frequently than they can in real life and do things they can’t in real life.
Virtual reality and web3 need to play a role that enhances a metaverse,
not become a pre-requisite for it. Crucially, that role has little to do with
faster chips, better displays or other technical progress… it will depend
on purpose.
For example, a multi-platform metaverse, which allows people to connect
via smartphone and PC, as well as VR headset, might provide a benefit to
immersed VR users. This could be precise control of sight lines, or simply,
fewer outside distractions to detract from the experience. In retail, some
companies are exploring ‘virtual commerce’, which could be a digitally
rendered twin of a store for users to explore from home. Crucially, these
experiences cannot be limited to VR only, and must be able to succeed
as a flat-screen experience, on a laptop, against the extremely convenient
e-commerce storefronts that already exist.
Similarly, a metaverse that has some blockchain-based assets, but does
not fundamentally need them, would be appealing to both the cryptoadvocate and the crypto-despiser. It probably requires that users can
buy, sell and trade NFTs without the need to use cryptocurrency (see
how platform Dapper does this for NBA Top Shots9), or in some cases,
without needing to know that the digital asset they own is even an NFT
at all. Web3 might also unlock potential for business: if platforms partner
on NFT and digital goods standards, asset interoperability could reinforce
customer stickiness.
Virtual reality and web3 are clearly not needed for a metaverse to be
lucrative. If metaverses are to succeed, they may not wait for virtual
reality and web3 to catch up. But if implemented with purpose, those
technologies could play a role in making a metaverse into a ‘better-verse’.