Women on beach

Navigating beyond the hype: the metaverse, take two

While some companies are losing faith in the future of the metaverse, others are looking at metaverse technologies in a new way. 

In brief
  • Despite the waning hype, the metaverse and its potential uses are still relevant.
  • Early stage adoption based on narrow and practical use cases is taking shape in specific industries.
  • Concrete use cases will form the foundation of future success.

In 2022, the term “metaverse” sparked excitement across technology and cultural domains. This digital realm, characterized by immersive experiences and interconnected virtual environments, generated widespread anticipation. However, as the initial fervor subsides, a shift is occurring. The once-enthusiastic atmosphere has tempered, replaced by cautious skepticism (sometimes sarcasm) and a sense that the initial excitement has diminished. Discussions that once centered on ambitious visions of a digital utopia have evolved into more measured conversations, prompting inquiries into the continued relevance and utility of the metaverse within a post-hype context.

We will examine the rise of metaverse excitement, explain the dip in its fervor and delve into the underlying factors that lend credence to its future importance. From historical tech trends that have followed similar trajectories to signs of maturation and evolution within the metaverse ecosystem, we will uncover the tapestry of reasons that fortify the metaverse’s relevance. Moreover, we will address the challenges that have contributed to the decline in hype, emphasizing that while the path might be more complex than we first thought, the rewards remain as compelling as ever.

Revisiting the metaverse definition: what’s in a name?

A common understanding of the metaverse is elusive, but theorist and venture capitalist Matthew Ball defines it as “a persistent and interconnected network of 3D virtual worlds that will eventually serve as the gateway to most online experiences, and also underpin much of the physical world.”1


While we see some walking away from the word “metaverse” altogether, preferring terms like “spatial computing” or simply referring to an “encompassing extended reality,” metaverse news today is driven less by what it is and more by how it’s accessed. Recent announcements focus on new augmented reality (AR) and virtual reality (VR) hardware, which improve the interface of how we operate within an immersive world (whether AR or pure virtual world), rather than new enabling use cases or grappling with the idea of being “present” in a virtual world. 


This shift in focus is giving way to a new reality — the idea that instead of talking about the metaverse as a place, we are focused on a set of technologies that form the basis of the future of the digital experience. These future experiences are likely to be enhanced through generative AI (GenAI). They’ll be immersive in nature, built with the aid of gaming engines, such as Unreal, and include elements of Web3 to enable new business models. Over time, creator platforms, virtual worlds, discreet experiences (including games) and even traditional websites may coalesce to deliver on the elements of former metaverse definitions. This vision will take time to evolve in an iterative and non-linear fashion as advancements in 3D rendering, AR/VR and GenAI emerge.


From a B2B standpoint, it’s still useful to continue using the term metaverse (for now) as a way to categorize use cases and potential value creation for digital experiences. Along these lines, the EY organization makes a distinction between three broad metaverse categories: industrial, social and enterprise.




Simulating complex systems, such as physical machinery or facilities, with the experiential metaverse layer on top. The concept of digital twins is predominantly associated with the industrial metaverse, though not exclusively. Virtual representations for product development and medical training, for example, also fall into this broad industrial category.

An extension of current social media, this category includes multiplayer online gaming and community-building platforms, social and creator spaces, and the integration of immersive tech like VR and AR into common social applications. This broad category can span everything from the Pokémon Go AR+ experience to Meta’s Horizon Worlds, a multi-player virtual platform.

Companies will leverage immersive technologies to enhance productivity, connect with customers, and provide learning platforms for internal and external constituents. The most-talked-about use cases here are around new employee onboarding and environments such as Microsoft Mesh, which hopes to inject a layer of immersive presence into online meetings. 

In light of these evolving dynamics, it’s clear that the metaverse should be viewed not merely as a singular place or world but as a collection of technologies that enable distinctively enhanced digital experiences. Organizations in pursuit of metaverse investments are shifting away from super-trendy metaverse utopia concepts to a more pragmatic focus on the use cases that the metaverse technologies enable, and they’re prioritizing user-centric value and use cases rather than the all-encompassing concept of “the Metaverse.”

The hype’s retreat: understanding the ebb and flow

The metaverse’s journey commenced with a wave of technological advances, ranging from innovative VR worlds to the seamless fusion of digital and physical realms. This initial surge was further amplified by media outlets and influencers, including notable companies and celebrities who painted the metaverse as the herald of a new era. They envisioned a realm where human interaction, entertainment and commerce would undergo revolutionary transformations, and the endorsements of high-profile celebrities only added to the burgeoning metaverse narrative’s allure. We saw concert promoters, art fairs and businesses shifting previous in-person events to the metaverse as a way to both experiment with the technology and replace the physical connection we temporarily lost during the pandemic.

This euphoria was eventually met with a sense of disillusionment. The collision of expectations with the practical limitations inherent in a nascent technology cast shadows on the seemingly boundless horizon. Issues like technological bottlenecks, the fragmentation of virtual spaces, and mounting concerns about privacy and security started to challenge the metaverse’s once-unquestioned potential. It became increasingly clear that while the metaverse was promising, it was not a quick fix for every challenge or desire. Eventually, the venture capital world found a new darling, GenAI, and the interest in funding metaverse projects waned.

This journey is marked not only by technological peaks and troughs but also by its integration into the world of business and the persistent hurdles of technology bottlenecks. As we delve deeper, we will explore how the metaverse is finding its footing in the business world. Furthermore, we will examine how CEOs are navigating the metaverse’s complex landscape, where pragmatic use cases often overshadow the grander vision. Finally, we will scrutinize the critical technology bottlenecks of privacy concerns and hardware limitations, highlighting the intricate balance required to ensure a secure and seamless metaverse experience across diverse devices and contexts.

Business bottlenecks: looking for easy wins

The metaverse, characterized by its immersive experiences, is gaining traction among businesses and service providers. In a recent report, the analyst firm HFS identified the most developed metaverse services in areas like employee experience (EX), customer experience (CX) and digital twins. This analysis acknowledges the metaverse is not just a destination — it comprises metaverse technologies forming the foundation of a new immersive CX and user experience (UX). These services are now moving beyond experimental stages and integrating seamlessly into larger enterprise operations. This marks a significant step in realizing the metaverse’s potential within the business world.

Adding to the complexity of this landscape, CEOs have yet to fully embrace the broader metaverse vision. They remain more convinced by nearer-term, relatively simpler use cases and the benefits of blockchain and AR/VR technologies than by the imperative to broadly invest in the metaverse. This perspective further underscores the evolving narrative surrounding the metaverse, highlighting the need for both visionary thinking and a realistic understanding of the challenges that must be overcome to fully unlock its transformative potential.

Technology bottlenecks: privacy concerns and hardware

One of the most prominent technology challenges facing the metaverse revolves around privacy concerns. While some metaverse experiences don’t necessarily require collecting significant biometric data, such as open browser-based metaverse platforms or any custom-built experiences not requiring headsets or peripherals, oftentimes metaverse technologies necessitate the collection of substantial personal information, such as eye tracking or facial recognition. While this data is crucial for delivering immersive experiences, it raises valid concerns about individual privacy. Biometric technologies, such as voice and facial recognition, serve as powerful tools for enhancing immersion and personalization. However, they also amplify the risk of identity theft and unauthorized data access. The storage and transmission of sensitive biometric data within the metaverse pose substantial security challenges. Striking the delicate balance between providing a captivating user experience and safeguarding individuals’ personal information is an ongoing challenge that must be addressed to gain user trust and ensure the metaverse’s sustainable growth.

Another significant metaverse challenge lies in hardware limitations, particularly in achieving a seamless cross-device experience. The metaverse envisions a world where users seamlessly transition between smartphones, tablets, laptops, VR headsets, AR glasses and other devices. However, the reality is marked by limitations in hardware performance, network bandwidth, battery life, ergonomic comfort and compatibility across these diverse platforms. Users often encounter difficulties switching between devices or accessing the same content and services consistently. The fragmentation of hardware ecosystems further complicates this issue. Overcoming these challenges necessitates standards that help support interoperability and reduce friction, such as identifying ecosystem gaps regarding marketplaces (including data, software, 3D assets, simulations, physical models) and digital twins and coordinating with Metaverse Standards Forum Domain Groups on requirements and technical aspects to ensure expectations from the industrial ecosystem are met (e.g., network KPIs, asset management, real/virtual world integration, cybersecurity and identity). Achieving a harmonious cross-device experience is essential to realizing the metaverse’s full potential and expanding its user base.

Metaverse signs of long-term viability

While the metaverse’s initial wave of enthusiasm has experienced a retreat, the journey is far from over. According to a study sponsored by Nokia and EY, the industrial metaverse is creating substantial business value — 80% of early adopters say use cases tested will have a significant or even transformative impact, and only 2% of respondents see the metaverse as a buzzword or a fad.2 Recent advancements and investments in enabling technologies offer a promising path forward.Innovations such as the next generation of mixed-reality / virtual reality headsets and mixed reality collaboration platforms as well as continuous efforts to enhance building blocks of the metaverse, underscore a commitment to address limitations and improve the metaverse’s user experience. These enablers serve as harbingers of a renewed era of possibility, where the metaverse’s potential can be reimagined and actualized.

These trends are also part of a natural evolution of content and how marketers and web developers push the envelope to create new experiences. Exclusively read-only content in Web1 gave way to interactive multimedia in Web2. E-commerce drove the need for tools and visuals that made the internet a place to shop and socialize. Armed with new tools and tactics made possible with game engine technology and VR/AR headsets, the online experience will naturally progress to one where immersion is first welcomed, then expected as websites evolve. Developers, with new toolsets in hand, will push the envelope until websites as we know them may serve as metaverse footholds ready to be connected to each other through Web3 technology.

Recent market activity

The Fidelity Metaverse ETF, which, according to its description, is “designed to reflect the performance of a global universe of companies that develop, manufacture, distribute, or sell products or services related to establishing and enabling the Metaverse,”3 jumped more than 50% from an all-time low in October 2022 to July 2023, showing a sign of fast recovery marked by strategic moves from key players in the tech and gaming industry. OpenAI, for instance, recently made headlines with its acquisition of Global Illumination, a gaming company renowned for its AI-powered 3D virtualization capabilities. This acquisition holds the promise of a future where foundation models can be trained on individual content, opening doors to a metaverse where users, embodied as trained-bot avatars, can seamlessly exist in multiple locations concurrently. The closure of Microsoft’s acquisition of Activision Blizzard, while clearly a game changer for the gaming space, also portends more activity for Microsoft in immersive tech and strengthened its ability to develop the combination of 3D Mesh components and Teams into an immersive collaboration tool. Investment in the metaverse’s foundational infrastructure is also gaining momentum, with NVIDIA and game engine vendors at the forefront of these efforts. These developments underscore the metaverse’s potential as a transformative force, inviting innovation and collaboration from various corners of the tech and gaming industries.


Current building blocks of the industrial metaverse

In this evolving landscape, AR is starting to take center stage as it overlays digital information onto the physical world, accessible through smartphones, tablets and head-mounted displays. companies like Volvo Group are forging collaborations with organizations like PTC, giving rise to applications such as the Emergency Response Guides app. This tool aids first responders in swiftly identifying potential hazards, greatly enhancing safety and efficiency. In a parallel realm, VR immerses users in computer-generated environments through headsets or room-sized setups. While the practicality of exploring industrial facilities in VR might be limited, it provides a secure training space for front-line workers, allowing them to practice complex operations before venturing into the real world. This not only mitigates risks but also elevates their competence levels. Furthermore, the digital transformation fueled by computer-aided design (CAD) has significantly minimized drafting time and costs over the course of five decades. It facilitates the creation of precise models for both architectural structures and manufactured products. Today’s CAD tools extend beyond 2D drawings, incorporating mathematical capabilities rooted in real-world physics. Examples include finite element analysis for modeling machine structures and computational fluid dynamics for simulating aerodynamics, heat flow and weather patterns. Lastly, the Internet of Things (IoT) plays a pivotal role, seamlessly converting sensor data into digital information, thus enabling real-time monitoring and management of various devices and systems. Together, these interlocking building blocks are establishing the foundation for the industrial metaverse, where the physical and digital realms converge to drive efficiency, innovation and safety across various industries.


Drawing parallels: early internet’s trajectory and the metaverse

From the heady days of early internet adoption to the initial excitement surrounding the internet in the 1990s, the trajectory is a familiar one. The initial surge of promise is often followed by a period of recalibration — a time when unrealistic dreams encounter the reality of technological constraints.

In the late 20th century, the internet emerged as a transformative force with the potential to reshape communication, commerce and society at large. Media outlets hailed the internet as a revolutionary concept that would usher in an era of boundless possibilities.

The “dot-com bubble” of the late ‘90s further magnified the hype, leading to inflated expectations and unsustainable business models. When the bubble burst, it resulted in a wave of skepticism, with many doubting the internet’s long-term viability. After the dot-com bubble burst, Jeffrey Cole, director of the Center for the Digital Future at USC Annenberg, said that “in spite of the bubble burst, a failure of the internet could not be farther from the truth.”4

The gradual spread of broadband internet, improved user interfaces, and the rise of Web2 technologies and mobile devices breathed new life into the digital landscape with the advent of social media platforms, online marketplaces and interactive applications rejuvenating interest in the internet.

This historical perspective sheds light on the metaverse’s current trajectory. Just as the early internet faced periods of unrealistic dreams and subsequent recalibration, the metaverse is navigating a similar path at the moment. The evolution of AI and natural language processing serves as a testament that transformative technologies often mature over extended periods. As Greg Kahn of GK Digital Ventures notes in a recent interview with Venture Beat “The metaverse will take more time. After all, we’ve been talking about AI and natural language processing for over a decade now. So [ChatGPT] is not quite an overnight success.”5 Ironically, most metaverse thought leaders were predicting that the technology would take at least a decade to mature, perhaps attempting to moderate (with limited success) the often “irrational exuberance” observed at the peak of metaverse fever.

Furthermore, industry leaders like Jeetu Patel, EVP and GM of Security and Collaboration at Cisco, propose a shift in perspective: Rather than viewing the metaverse solely as a virtual universe for people to congregate in, the focus should shift to how metaverse technologies can be harnessed for critical use cases, enhancing immersive experiences for both consumers and businesses.6

In essence, the parallels between the early internet’s trajectory and the current state of the metaverse underline a universal truth: technological innovation is marked by phases of exuberance and recalibration before maturing into wide adoption. Understanding these patterns allows us to approach the metaverse with a sense of realism, appreciating its potential while acknowledging the need for time, refinement and meaningful applications to truly shape our digital future.

Optimizing immersive solutions: a strategic perspective

In this ever-evolving realm of immersive experiences, a discerning approach is paramount. Firms should evaluate each technology and concept with a keen eye, always mindful of how they align with their unique goals and requirements. For instance, while headsets are not obligatory, they can notably enhance the immersive quality of the experience for specific use cases. Similarly, avatars, while not essential, have the potential to elevate shared experiences by infusing them with a sense of presence and identity.

The trajectory of the metaverse, akin to the early days of the internet, reveals a familiar pattern of initial fervor followed by a phase of recalibration as technology confronts reality. Although this initial euphoria has been tempered by practical challenges, such as technological limitations, privacy concerns and hardware issues, there are promising signs for the metaverse’s long-term viability, with notable investments and steady advancements in enabling technologies. Recent market activities, like OpenAI’s acquisition and innovations in AI and robotics, suggest a future where users can easily generate immersive experiences and seamlessly exist in multiple locations. Additionally, the industrial metaverse, powered by AR, VR, CAD and IoT, is enhancing efficiency and safety across industries. Drawing parallels with the early internet’s trajectory reminds us that transformative technologies take time to mature.


A more pragmatic view of the metaverse as a set of technologies that can combine to create new digital experiences in industrial, social and enterprise spaces will allow companies to experiment and make progress without the requirements for massive projects with questionable ROI. Focusing on how the technologies of GenAI, AR/VR and Web3 can elevate experiences will provide an incremental platform to add value.

Yoon Sung, Associate, Financial Services, Ernst & Young LLP and Isabella James, Associate, Financial Services, Ernst & Young LLP  contributed to this article.  


It’s crucial to approach the metaverse realistically, acknowledging where and how we will access it, appreciating its potential while seeking refinement and meaningful applications. A combination of practical use cases and the natural evolution of digital experience is likely to drive the development of the metaverse during this post-hype period.

Related articles

How next-gen technologies will elevate the car buying experience

In collaboration with Mastercard, the EY Financial Services Innovation team envisions the future of car buying leveraging Web3 and the metaverse.

Is the future of your tech stack built on the foundation of your people?

Senior leaders often show reluctance to adopt emerging technologies and communicate poorly with others, an EY survey shows. Find out more.

How artists help EY teams keep humans at the center of the metaverse

How to reimagine a metaverse workplace with humans at the center.