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From hype to disillusionment: Metaverse’s rise, apparent fall and green shoots

By Michael Jacobides, Katie Round, Francois Candelon


This case study critically examines the evolution of the metaverse, interrogating its ascendancy, its perceived decline and the nascent indicators of its resurgence. Beginning with the concept’s origins in science fiction, it tracks the metaverse’s evolution through advancements in gaming and the growing interest of Big Tech, which saw potential in this convergence of virtual reality (VR), augmented reality (AR) and mixed reality (MR). The narrative captures the initial exuberance as investors and companies raced to stake their claim, buoyed by forecasts of a new era of digital interaction and economic activity.

Looking at the nature of the sector and the ecosystems it fostered, the case considers what drove inflated expectations and subsequent market corrections. It explores the sobering challenges that faced the metaverse: technological limitations, user disillusionment and a harsh economic climate that eroded speculative investments. It discusses the strategic shifts by key players, from pursuit of domination to focused niches and smart partnerships, and the downsizing or redirection of metaverse initiatives in response to the market’s reality checks. It also identifies emerging signs of vitality in the sector. It highlights how the integration of generative AI (GenAI) and targeted applications in gaming are rekindling interest, suggesting a potential pathway out of disillusionment.
The case also provides the opportunity to track the emergence of multiple partly overlapping ecosystems and allows students to focus on the different roles and monetisation approaches that ecosystem participants take. It further allows us to see the upsides and downsides of more centralised ecosystems (like those driven by Big Tech) and more decentralised ecosystems (such as Web3) and consider how the ecosystem orchestrators try to leverage their strengths. The case can also be used to consider in what ways orchestrators benefit more broadly.

Learning objectives

  1. Understand the basic concepts underlying the metaverse/metaverses and what drove inflated expectations, including technological limitations, user disillusionment and poor ecosystem management, and look at the silver lining of the metaverse due to GenAI.
  2. Map ecosystems and the “ecosystem architecture” by looking at how different types of ecosystems emerged and how they had a different set of rules, roles, relationships and connections.
  3. Study monetisation strategies in a digital context, where benefiting financially is not trivial, and consider how ecosystem orchestrators try to leverage their strengths.
  4. Gain insight into the different approaches ecosystems take and appreciate the pros and cons of more centralised versus more decentralised ecosystems, considering issues of fairness and efficiency and their trade-offs.
  5. Understand how ecosystems partly compete for customers and complementors but also how they can (though often do not) support each other in creating value.


Publication Date: April 2024
LBS Case Code: CS-24-018
Subjects: , , , , , , , , , , , , ,
Geography: ,
Pages: 15
Format: pdf