Metaverse tokens burst onto the world stage on a tidal wave of enormous promises and mind-boggling figures. Experts trumpeted Total Addressable Market (TAM) figures like five billion users and $13 trillion dollars and the world’s largest publicly-traded social network, Facebook, changed its name to Meta and guided over $15 billion in metaverse expenditures. It has since actually spent that sum.
Speculators enjoyed big returns on rapidly appreciating plots of land in Decentraland, The Sandbox, Earth2, or NFT Worlds and metaverse builders marketed each of their virtual worlds as the next big thing.
Of course, as is the case with so many hyped crypto sectors, away from the fanfare and bright lights, metaverse adoption has achieved barely a fraction of its marketers’ promises.
Active usage rates are dropping rapidly and the value of most virtual land has plummeted, with average trading volumes for parcels down 98%. Some properties have created flurries of activity with branded events, incentivized gameplay, or sponsored performances, however, these promotions cannot make up for the fatal weakness of the metaverse: dismal user engagement.
Active users and value drop throughout 2022
Speculation drove most of 2021’s surge in virtual land prices. Investors were snapping up plots and then not doing anything with them and many ended up holding a property that no one even wanted to visit.
The small number of active users didn’t help matters. Users simply don’t stick around with very little to do outside of events organized by developers.
According to DappRadar, Decentraland earns an average of 654 unique wallet actions per day. Using different math, Decentraland estimates Daily Active Users (DAUs) to be around 8,000. The project also says it sold a notable number of in-world items like wearables and emotes. Decentraland acknowledges that DAUs have dropped since 2021 but says the number of core users is still healthy.
For perspective, Decentraland’s token, MANA, is valued at $1.1 billion, or $137,000 per DAU.
The Sandbox’s proprietary token, SAND, has dropped 87% since the start of the year. Investors have introduced brands like Atari and The Walking Dead to the metaverse, and it earned some traffic from its Alpha Season events. However, users barely even bothered outside Alpha Season. On average, the Sandbox earns a dismal 605 unique wallet actions per day. Even after increasing this DAU using the same math as Decentraland above, SAND is still valued above $100,000 per DAU.
Even Facebook can’t save metaverse tokens
Since Facebook rebranded to Meta, it’s spent $15 billion building its metaverse, Horizon Worlds.
However, The Wall Street Journal has interviewed a number of Meta employees who have branded their own project unusable. It estimates that metaverse registrations are 300,000 people shy of the company’s 2022 goal. It also estimates that a majority of worlds built by creators are never visited by anyone other than their creator. Just 10% earn visits from more than 50 people.
In the middle of September 2022, metaverse vice president Vishal Shah expressed frustration with Horizon Worlds’ current state. He sent a memo telling employees that they need to use the rest of the year to “ensure that we fix our quality gaps and performance issues before we open up Horizon to more users. … The simple truth is, if we don’t love it, how can we expect our users to love it?”
Meta could have learned from its failed efforts with its multi-billion dollar Diem (formerly Libra) stablecoin project: Launching a successful digital asset ecosystem isn’t as easy as it looks. It gets perilous if employees can’t even enjoy it enough to use it themselves.
Across the world, metaverse projects are retreating from overhyped promises. Speculators realize that their undeveloped plots cannot hold value forever. Virtual events might get brief attention, but not even a big name like Meta can prop up a house of cards.