Ian Hughes
Senior Analyst,
TMT Research,
S&P Global Market Intelligence
ian.hughes@spglobal.com
Sudeep Kesh
Chief Innovation Officer,
S&P Global Ratings
sudeep.kesh@spglobal.com
This is a thought leadership report issued by S&P Global. This report does not constitute a rating action, neither was it discussed by a rating committee.
Published: November 7, 2023
The metaverse is an ongoing evolution of our real-time online interactions at work and play.
Generative AI provides a path to creating rich and immersive 3D content for metaverse environments.
No one company or platform will be delivering the metaverse, which covers industrial and enterprise applications with commercial and social implications.
Technology hasn’t quite caught up to the metaverse’s potential for improving human interconnectedness and emulating physical processes, but the enablement of its use cases will inevitably bear advancements in technology and computing power.
S&P Global defines the metaverse as the long-term vision for the next phase of the internet, which will feature a single, shared, immersive and persistent 3D virtual space where humans and machines interact with one another and with data, enhancing the physical world as much as replacing it. While many people will have taken on board the basics of avatars in a virtual space, the concept of the metaverse, and some of the implementations today, go far wider. For example, the metaverse affects industrial applications through the development of digital twins, in which entire factories and processes can be built in digital form before physical construction, saving time, money, and resources. Industrial deployment of digital twins includes their use in accurate, virtual simulation environments to train staff and autonomous robots before a facility goes live.
Digital twin: A term typically used to describe the real-time collection of data, for example from a process, machine or building. This often includes a 3D model, location, and spatial information that can then be used in other digital applications to understand or manage the physical version of the process, machine or building. Digital twins have evolved from the need to combine multiple internet of things (IoT) sensor data readings into a contextual representation of the whole. "Digital twin" is also used to describe a digital-first design, in which decisions, simulations and even training can be performed before a physical build is produced. This digital design then becomes an operational digital twin mirroring the physical build.
Metaverse applications also support enterprise collaboration and communication within hybrid working environments. Using metaverse technologies, workers can break free of video squares and use virtual spaces and objects to communicate and work dynamically with colleagues. In the business-to-consumer space, brands, entertainers, and even colleges and universities are using the metaverse to facilitate interactions with virtual products, mass shared performance events, and online courses and tutorials. These applications and experiences do not exist in a single application. However, standards and requirements for interoperability between platforms will continue to bring the vision of a single metaverse closer to reality.
A common misconception is that participating in the metaverse requires constantly wearing a virtual reality (VR) or augmented reality (AR) headset. In reality, users will be able to access applications in multiple ways, suited to their needs and the context, just as we have multiple means of interacting with electronic media today. Being fully immersed in a virtual world application via a headset may sometimes be the best experience for either total immersion (VR) or adding digital information to the physical world (AR), while, at other times, the preferred tool may remain a smartphone.
This is not the first time the metaverse has received lots of enterprise interest. The previous wave was between 2006 and 2009, before the ubiquity of smartphones and the massive uptake of social media. In that wave, many use cases were explored and found to be useful and interesting, but the technical and social drivers for adoption were not there. Now we have many more connected devices, broader access to wi-fi, 5G cellular networks, and cloud and streaming services. People routinely shop, bank, socialize, and game online, and we even have hybrid working patterns catalyzed by the pandemic. All of these factors are raising questions on how we can better interact online, be it with digital content or one another.
The metaverse also offers important use cases that could reduce society’s deleterious effects on the environment. Namely, metaverse technologies and the ability to “digitally meet” friends, family, and co-workers offer a path to disrupt air travel, which accounts for 4% of human-induced global warming. The ability to communicate in a way that sufficiently proxies in-person interactions remains some way off, but it is achievable through a mix of technological and socioeconomic advancement, as long as two main issues improve. First, the technology needs to provide a smooth, seamless experience to enable the subtleties of human communication. Second, we need to reduce the “digital divide,” where access to internet connectivity remains largely the province of the developed world.
On the first point, we have found firsthand while working through the COVID-19 pandemic that enabling workers to effectively execute their duties remotely requires intention, care, and diligence. From physical paradigms, such as eye contact, to the need for higher bandwidth to support video and audio quality capable of transmitting the subtleties of body language and tone, there is a gap to address. However, in the same relatively short period, we’ve seen a rise in camera technologies that follow eye contact, audio technologies for noise reduction, and virtual backgrounds for privacy, among others, which help mitigate some of these factors. Machine learning and artificial intelligence technologies would likely provide pattern recognition capabilities to enable material advancements and further close the gap.
On the second point, it is imperative to recognize and address the digital divide, where the developed world has significantly higher levels of internet connectivity than the developing world and thus an imbalanced potential to benefit from internet-based technology. According to the Brookings Institution, internet penetration is 89% in Europe, over 80% in the Americas, and 70% in the Arab states, compared with 61% in Asia and 40% in Africa. These gaps expand when combined with factors such as gender, age, and rural versus urban populations.
Why does this matter? The metaverse offers a promising way to close geographical gaps and enable more effective digital communication between friends, family members, colleagues, teachers and students, and individuals across a variety of other relationships, provided that the digital infrastructure and technology will support it. Further, advancements in generative AI could improve expansion into imaginative worlds beyond the physical world we live in, supporting both human creativity and better inclusion of people from all walks of life.
Additionally, advancements in technologies that support the metaverse as well as the “hyper-analytical” functions of machine learning and artificial intelligence will invariably lead to advancements in computing technologies, such as quantum computing. Excitingly, the computational benefits offered by quantum computing could be used to analyze patterns more effectively in the physical world to enable virtual experimentation on physical processes. Nuclear power is a promising example. Many experiments in nuclear power generation have stalled due to safety concerns and cost considerations, but effectively emulating these experiments in digital form may indeed mitigate some of those concerns, leading to advancements in physical nuclear power processes. Such advancements could significantly improve conditions in the current energy and climate crisis.
2022 and 2023 have been particularly eventful years in certain branches of artificial intelligence. While much of AI and machine learning, such as in industrial predictive maintenance or medical imaging, has been hidden away from broad public attention up to now, the general online population has suddenly been able to engage with large language models (LLMs) via interfaces such as OpenAI’s ChatGPT and Google’s Bard to ask questions and receive all kinds of textual content in response. This development was accompanied by the rise of generative AI for images, with the likes of DALL-E and Midjourney leading the pack. AI-driven image generation can create a vast array of images in any conceivable style from text prompts or other images. Some search engines have started to implement this technology. If, for example, a user can’t find the image they are looking for, the search engine may use generative AI capabilities to create a similar one. The power of this type of text generation, image generation, and even code generation is creating a stir across industries. Like the metaverse, generative AI has the potential to affect every interaction we have with digital content and with one another.
The metaverse needs new forms of content to operate. Typically, these are 3D objects and environments, animations, spatial sounds and physical interactions. Much of this is well understood in the games industry, but this $200 billion industry is busy doing its own thing. So how can enterprises and general users create their own content, spaces, products, and experiences? Many virtual world applications have building and scripting tools that work well for designers and programmers, but generative AI is making inroads into the creation of 3D virtual objects from text or 2D image prompts. This will enable anyone to create rich and interesting experiences in otherwise complex 3D environments. If a team leader wants to hold a meeting in a memorable location--say, at the base of a giant waterfall in the jungle--they will be able to do that, just by describing it. If a plant manager wants to convincingly simulate a catastrophic equipment failure in a factory to rehearse evacuation procedures, they will be able to do that, too. It is not just visuals AI is helping with. Some service providers already offer non-player characters or chatbots that use LLMs, combined with a character description and motivation, to generate avatars that act and respond to prompts. In a game or social application, this type of avatar might talk about the latest news in any given area. In an educational metaverse application, it might enable students to chat with a figure from history about their experience of a past event.
Conversations about the supposed death of the metaverse or its purported replacement by technologies such as generative AI provide press headlines, but the metaverse marches on regardless. The metaverse is a wide-reaching concept, and so is AI. They are not “one and done” developments, and it’s worth keeping an eye on them as they continue to intersect and evolve. Further exploration of various AI use cases in the metaverse can be found in this article.
What is the metaverse? The metaverse describes the evolution of the web from 2D to 3D. Importantly, the metaverse encompasses real-time interactions among people and between people and data, on any type of device. It is not solely about virtual reality headsets.
I thought the metaverse was dead. The metaverse is a direction of travel for online real-time interactions. Some applications or approaches rise and fall over time, and some get more press and attention than others. However, industrial use cases for the metaverse offer significant efficiency and environmental impact savings, and enterprise metaverse applications are being deployed and refined to better support remote and hybrid work. Meanwhile, the game industry, where much metaverse technology originates, is not going away anytime soon.
What does the metaverse do? Among other functions, it adds a sense of place and space to online interaction that is missing from other types of digital experiences. The metaverse concept brings more of our human abilities and strengths to the way we interact digitally. Computers and networks have evolved around flat screens, keyboards and webcams, and we have had to adjust to the requirements of the technology. Eventually, metaverse technologies will enable us to interact online as we would in the physical world, enhanced by the benefits of digital information available to us.
How does generative AI affect the metaverse? Almost anyone can now use online tools to create content for social media or even web pages. Photos, short videos, and text are the primary content filling our screens and are relatively easy to create, though they still require some talent to do well. The metaverse is about 3D spaces, places, objects, animations, and immersive experiences, which are harder to create from scratch. Generative AI is already affecting the creation of images and text, but it is also being used to create metaverse 3D content, making it more accessible and mainstream to generate and customize shared online experiences.
