Metaverse could drive up profits — but most businesses may not be ready to invest yet
70% of companies are investing less than 5% of their technology budgets in 2023 into metaverse, while 27% have not invested into metaverse at all, a KPMG report showed.
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The metaverse has a great potential to drive up business profits but there’s a lack of proven success for companies to pour big money into it now, showed a survey by KPMG.
“For [tech, media and telecom] companies, this poses the classic investment dilemma: where and how much to invest, to avoid being blindsided by a metaverse pioneer, but also to help minimize the chance of ploughing funds into projects that become redundant,” said Mark Gibson, TMT leader for KPMG U.S., in the report.
The metaverse refers broadly to the concept of a digital world where people live, work and play, and interact with one another as avatars through virtual reality platforms.
The KPMG survey showed that 60% of TMT executives think metaverse can drive revenue and profits and lower operating expenses as transactions shift from physical to virtual. They believe it can also improve customer satisfaction through interactive experiences, the survey showed.
But a similar proportion acknowledged that, despite the metaverse’s potential, it still needs further refinement and development, said KPMG.
“The majority of TMT executives taking part in our survey feel that the metaverse is several years from becoming a thriving commercial ecosystem,” said the report.
Most of the global companies polled — or 70% — are investing less than 5% of their technology budgets in 2023 into the metaverse, and 27% have not allocated any funds to metaverse.
The report took into account responses from 767 tech, media, and telecom executives at companies that earn more than $250 million revenue annually. The firms were from 13 different countries and five continents.
Yet to see success
Many in the tech, media and telecom sector want to see evidence of greater metaverse usage before making significant investments, the KPMG report said.
According to 40% of respondents surveyed, there is a lack of successful use cases to show a return on investment for the metaverse.
TMT executives surveyed remained skeptical about the viability of metaverse, with 27% saying it is “an unattainable pipe dream” and 20% describing it as “a fad that will never live up to its hype.”
Close to 50% of the respondents revealed their companies are either “watching and waiting” or assessing long-term business value before making major investments, said the report.
In fact, Meta executives have previously admitted that “many products for the metaverse may only be fully realized in the next 10 to 15 years.”
Meanwhile, Disney reportedly cut its metaverse division as part of layoffs announced last week. The company had never explicitly outlined its metaverse plans.
“Suffice it to say our efforts to date are merely a prologue to a time when we’ll be able to connect the physical and digital worlds even more closely, allowing for storytelling without boundaries in our own Disney metaverse,” Disney’s former CEO Bob Chapek said during its 2021 earnings call.
Not ready
Many of KPMG’s survey respondents say their companies are underprepared for the metaverse.
“The biggest barriers to investing in and embracing the metaverse are lack of technology to support experiences, high cost of development, and a dearth of appropriate employee skills,” said KPMG.
About half the respondents said there is lack of proper technology to support the metaverse, while 50% said the high cost to develop metaverse is preventing their companies from fully investing in and embracing a strategy.
Less than half, or 49%, noted that their companies lack employee skills to run the metaverse.
“There’s also a high potential upside in terms of ROI on outcomes such as higher employee retention — which has become a critical strategic objective for many companies — and other similar enterprise applications,” the KPMG report said.
Microsoft CEO Satya Nadella leaves after attending a meeting with Indonesian President Joko Widodo at the Presidential Palace in Jakarta, Indonesia, on April 30, 2024.
Willy Kurniawan | Reuters
Microsoft on Tuesday said that it’s laying off 3% of employees across all levels, teams and geographies.
“We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace,” a Microsoft spokesperson said in a statement to CNBC.
The company reported better-than-expected results, with $25.8 billion in quarterly net income, and an upbeat forecast in late April.
Microsoft had 228,000 employees worldwide at the end of June, meaning that the move will affect thousands of employees.
It’s likely Microsoft’s largest round of layoffs since the elimination of 10,000 roles in 2023. In January the company announced a small round of layoffs that were performance-based. These new job cuts are not related to performance, the spokesperson said.
One objective is to reduce layers of management, the spokesperson said.
Last week cybersecurity software provider CrowdStrike announced it would lay off 5% of its workforce.
In January, Microsoft CEO Satya Nadella told analysts that the company would make sales execution changes that led to lower growth than expected in Azure cloud revenue that wasn’t tied to artificial intelligence. Performance in AI cloud growth outdid internal projections.
“How do you really tweak the incentives, go-to-market?” Nadella said. “At a time of platform shifts, you kind of want to make sure you lean into even the new design wins, and you just don’t keep doing the stuff that you did in the previous generation.”
On Monday, Microsoft shares stopped trading at $449.26, the highest price so far this year. They closed at a record $467.56 last July.
WATCH: Microsoft will continue as the best performing mega-cap stock in 2025: D.A. Davidson’s Gil Luria
Hinge Health co-founders Gabriel Mecklenburg (left) and Daniel Perez (right).
Courtesy of Hinge Health
Hinge Health said in a filing on Tuesday that it plans to raise up to $437 million in its upcoming initial public offering.
The digital physical therapy startup filed its initial prospectus in March, and it updated the document with an expected pricing range for its Class A common stock of $28 to $32 per share. Hinge said it plans to sell about 13.7 million shares in the offering.
Based on the number of Class A and Class B shares outstanding after the offering, the deal would value the company at $2.42 billion in the middle of the range, though that number could be higher on a fully diluted basis.
Hinge, founded in 2014, uses software to help patients treat acute musculoskeletal injuries, chronic pain and carry out post-surgery rehabilitation remotely. The company was co-founded by CEO Daniel Perez and Executive Chairman Gabriel Mecklenburg, who have both experienced personal struggles with physical rehabilitation.
Three weeks after Hinge filed its initial prospectus, President Donald Trump announced a sweeping tariff policy that plunged U.S. markets into turmoil. That volatility has caused several companies, including online lender Klarna and ticket marketplace StubHub, to delay their long-awaited IPOs.
Hinge is forging ahead anyway, and a second digital health startup, virtual chronic care company Omada Health, filed to go public on Friday. Both IPOs will be closely watched by the digital health sector, which has been mostly devoid of public offerings since 2021.
During its first quarter, Hinge said that revenue climbed 50% to $123.8 million, up from $82.7 million during the same period last year. Hinge reported $117.3 million in revenue during its fourth quarter, up 44% from the same period in 2023.
The company plans to trade on the New York Stock Exchange under the ticker symbol “HNGE.”
Hinge has raised more than $1 billion from investors including Tiger Global Management and Coatue Management, and it boasted a $6.2 billion valuation as of October 2021, the last time the company raised outside funding. The biggest institutional shareholders are venture firms Insight Partners and Atomico, which own 19% and 15% of the stock, respectively, according to its prospectus.
WATCH: IPO window likely to open in first half of 2026: PitchBook
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