The Metaverse – A year to forget

Down but not out.

• A rotten year for The Metaverse has one more gift to give which is the cancellation of the Pico 5 headset which is one of the most popular devices for developers which will create yet another slowdown in the emergence of The Metaverse.
• Pico is ByteDance’s VR subsidiary which has produced 4 versions of the Pico headset has cancelled the 5^th version and laid off a lot of staff after the Pico 4 sold far less than expected.
• This is not a big surprise, as shipments of Metaverse devices have pretty much halved this year and there is no clear picture as to when or even if there will be a recovery.
• There is nothing particularly special about the Pico but because it competes directly with Meta, content that is popular in Western markets is not available on the Pico.
• This combined with the generally weak market caused by higher interest rates, inflation and cost of living problems, is what lies behind the cancellation, but this also has an unwanted side effect.
• The Pico is popular with developers of Metaverse hardware and software because it is by far the easiest platform to work with.
• Like the Quest, Pico is based on Android, but it is far more open than the Quest where Meta limits access to some of the hardware and certain functionalities within the headset.
• This is why many developers who use The Metaverse often prefer to develop using the Pico even if they intend to offer their software on the Quest.
• Pico is not abandoning VR completely and appears to be ready to release an updated Pico 4 as well as directing its energies into a much higher-end product.
• This is just another dent in what has been a rotten year for The Metaverse but just because it is down, this does not mean that it is out.
• Of all the forthcoming technologies, The Metaverse is still the most likely candidate to disrupt the smartphone, although this is unlikely to begin anytime before 2028 or 2029 at the earliest.
• Cancellations like this and a market that halves will only serve to delay the take-off of the Metaverse as well as slow the development of the ecosystem around it.
• Hence, my 2028 / 2029 potential mass-market take-off looks increasingly risky should the malaise persist into 2024 and 2025.
• The market reception of the Apple Vision Pro in 2024 will play a role here as it could trigger renewed interest in The Metaverse despite the very low volumes that it is likely to sell.
• I suspect that this is the main variable that is likely to affect sentiment towards The Metaverse in 2024 as the market for devices is unlikely to recover although I do think that it will flatten out.
• The Metaverse remains uninvestable at the moment as all of the cited players currently earn most of their revenues doing something else which is unlikely to change any time soon.
• I am keeping an eye on Roblox and Unity as potential plays for the Metaverse, but both of them remain too expensive and their shares look set to stagnate or decline for a while yet.