After years of hype, optimism about the business potential of the metaverse has waned considerably, with companies including Meta, Microsoft, and Tencent Holdings Ltd. all cutting back on the metaverse division. - Credit: Lifestylememory on Freepik
Just a few years ago, tech fans were cheering Niantic Inc, the maker of the hit game Pokemon Go, as proof of the huge and growing commercial potential of the metaverse. But now, after the lackluster debut of another augmented reality game, Niantic looks like a different situation — with more evidence of the metaverse's huge and growing business woes.
On May 9, the San Francisco-based compact software maker launched Peridot, a free-to-play mobile pet simulation game that aims to merge the digital and physical worlds into what the company calls a "real-world metaverse." After downloading the Peridot app, players hatch a unique Dot and name their new digital pet. Using the phone's camera lens, the game superimposed a person's pet on any real-world scene the user pointed the phone at, for example, a patch of grass in their backyard. There, "little dots" can run around the yard on their phones, chase tennis balls, dig for food, and interact with objects around them as they gain ability and growth.
Despite a lot of the cute hairballs and some catchy visuals, the game has landed in a whimpering way so far. A week later, amid a barrage of negative app store reviews, Peridot launched from May 9 to May 13 and had generated 675,000 downloads, according to research firm Sensor Tower. Some critics complain that its augmented reality technology is unstable and quickly drains the phone's battery life. There have also been criticisms of the game's monetization strategy around breeding spots. The game has a rating of 3 out of 5 on Google's Play Store.
Joost van Dreunen, a lecturer at NYU's Stern School of Business, said: "The lukewarm response and low downloads give a clear understanding of the passion for blending the virtual and the real.
Niantic downplayed those concerns and expressed confidence in Peridot and the public's appetite for augmented reality (AR) games. Company spokesman Mark Van Lommel said: "Peridot may be the world's first mobile game to be played entirely with AR technology, and we're just getting started. "While initial demand exceeded our expectations, we didn't expect Peridot to become an overnight hit, but rather saw it as a long-term project that demonstrated the potential of AR and experimental game design."
Questions about the future of the "real-world metaverse" have been surrounding Niantic for years.
In 2016, shortly after divesting from Google, Niantic received a major culture shock with the debut of Pokemon Go, a mobile game in which players wander the real world to catch digital Pokemon that appear on their phones. Niantic says the game has been downloaded more than 1 billion times. According to Sensor Tower, it has earned $6.6 billion (RM29.95 billion) in revenue.
At first, Niantic's success with Pokémon Go seemed to herald a bright future for the sci-fi-inspired industry. In the years that followed, Niantic became the darling of the biggest movers in this emerging space as augmented reality and virtual reality (VR) games were reinvented as part of the broader "metaverse." Based on the concept that everyone will soon socialize, work, and business in an interconnected virtual reality, executives from Meta Platforms Inc., Microsoft Corp., Unity Software Inc, Alphabet Inc, Nvidia Corp and various Web3 companies have collectively invested billions of dollars in the space.
According to Crunchbase, Niantic went on to raise more than US$770 million (RM3.4 trillion) and acquire several technology companies. The company went on to release about a dozen mobile games that combined the basic power of augmented reality on phones with mature characters from other companies' pop entertainment universes, from Harry Potter to the National Basketball Association. Peridot is the company's first original intellectual property.
In 2021, as Silicon Valley's excitement about the metaverse reached a fever pitch, Niantic launched Lightship, a creative platform that allows any game developer to follow in the company's footsteps and create "real-world metaverse" apps in the style of Pokémon Go. CEO John Hanke said Lightship will "set a pattern for AR" and help spur adoption of AR glasses, a technology he has always championed.
But two years later, Lightship's impact on the gaming industry was minimal. So far, most of the resulting games struggle to find users. Only 50 applications are currently being developed using Lightship. To date, only one has received more than 100,000 downloads on Android. Developers are more enthusiastic about Niantic's 2022 acquisition of 8th Wall, a web-based augmented reality platform that forms the basis for more than 2,500 commercial applications, from WebXR experiences at Disneyland Paris to Moët-Hennessy virtual concierge services.
Meanwhile, Niantic's own AR games have achieved similarly modest results. Seven years after its launch, Pokémon Go remains the company's only truly successful game besides Ingress, which was released in 2012 when Niantic was still under Google's umbrella. In 2021, the company shut down its second most popular game, Harry Potter: Wizards Unite, which CEO Hanke called "mediocre."
Niantic's Van Lommel also noted that Pikmin Bloom, which works with Nintendo, has a "strong and very active community." Last month, the company announced and began testing Monster Hunter with Capcom.
Many Pokémon Go fans choose not to use the game's augmented reality features – something that some Peridot players have also requested. Van Lommel said the company "was surprised and delighted to see a lot of Peridot players feel about how their Dots really feel, especially their ability to recognize and interact with real-world environments, and this type of moment can only happen in AR." He added that "Peridot is designed to be played for only a few minutes at a time, rather than for long periods of time like most other games," noting that players can adjust their settings to "improve device performance in AR-quality swaps."
Niantic's struggles reflect the downturn facing the broader industry. After years of hype, optimism about the business potential of the metaverse has waned considerably, with companies including Meta, Microsoft, and Tencent Holdings Ltd. all cutting back on the metaverse division. AR and VR products remain a niche across the market – both as smartphone apps and specialized devices. According to NPD Group, sales of VR headsets have even declined in 2022. In 2022, Meta lost $13.7 billion (RM62.18 billion) on AR and VR. At the beginning of 2023, few gamers bought Sony's new PlayStation VR 2. In February, Microsoft laid off employees working on Hololens AR headsets.
"People may be hesitant to adopt this technology because with a phone, you can put it away and go outside to see your plants without worrying about there will be AI ads for that plant," said Quinn Myers, author of Google Glass.
At the beginning of 2022, Niantic laid off 8% of its employees and canceled four projects.
"It seems that Niantic, like almost every other tech company in the world, is harder to spot problems than anyone thought," said Matthew Ball, CEO of venture capital firm Epyllion and author of Metaverse. "The timeline for AR glasses and VR is longer than expected. The bar for releasing a minimum viable product to the masses is much higher. "
The high price of the product may also hinder mainstream adoption. Meta's Quest 2 mixed reality headset costs $400, while its next-generation Pro headset costs $1,000. Bloomberg reports that Apple's upcoming mixed reality headset could cost $3,000.
Last year, Niantic announced that it was working with Qualcomm to create what it calls an "outdoor AR headset" and released some preliminary renderings. So far, few details have emerged, but Van Lommel said the company continues to work on the reference design and will work with other companies to produce the product. In a recent demo, Niantic's developers said the company has always hoped that Peridot will one day be available on AR headsets.
But after Peridot's struggle, the case for mass adoption of AR looks even more far-fetched.
Ben Arnold, a consumer technology industry analyst at NPD, said: "These products are hard to make, the technology is hard to produce, and it's hard to make games with a 3D experience.