In real life, Hitsuzi is a 32-year-old Japanese government employee who lives alone in a suburb north of Tokyo. He usually comes home from work around 8 p.m., eats a ready meal, and then, starting around 10 p.m., the fun begins. He puts on a set of VR goggles that transport him to a great gilded hall built in the clouds, where he chats and games with friends from all over the globe into the early hours of the morning.
In the virtual world, Hitsuzi interacts with his friends not as a 30-something office worker but in the form of his avatar: a purple-haired girl sporting a pair of cat ears and a black mini dress.
He says he spends every evening on VRChat, a virtual platform, chatting with other users from a variety of countries and attending virtual gatherings such as DJ events.
“It’s different from talking on the phone because you can see your friend’s face and gestures, and you feel that they are actually there,” Hitsuzi, who asked to use a pseudonym, told Nikkei Asia.
He even sometimes falls asleep with his VR goggles on, alongside his friends in the virtual world. The clunky goggles keep him from sleeping well, he complains, but it is worth it for the feeling of togetherness. Sleeping in virtual reality “doesn’t recover my physical health, but it helps my mental health because I don’t feel lonely,” he added.
Hitsuzi is among a rapidly growing population across Asia that spends much of its free time in the metaverse—defined as any type of collective, three-dimensional, virtual shared space where users are able to interact with one another’s avatars (digital personas).
In some Western markets, the metaverse saw a boom in interest during the pandemic, but virtual reality lost out once actual socializing became readily available again. In some Asian markets, notably Japan and South Korea, however, it is still going strong.
Investors in the US have pulled back after the disappointing experience of Facebook, which renamed itself Meta in 2021 and rebranded as a metaverse company, where its users would eventually occupy a 3D infinite universe known as Horizon Worlds.
Horizon Worlds has proved unpopular, especially with investors, who sold off Meta stock. The company’s Reality Labs business unit—responsible for metaverse-related operations—lost almost USD 25 billion between October 2021 and June this year, according to company reports.
At the company’s annual Meta Connect conference in September, Meta founder Mark Zuckerberg mentioned the metaverse only a handful of times. “AI” has become his new buzzword.
“Meta has quietly distanced itself from the metaverse over the past year or so, and the term was barely used at Connect,” said Leo Gebbie, principal analyst at CCS Insight. “This was unsurprising, as the term had become the subject of ridicule among consumers and large sections of the technology industry.”
However, Asia remains a bastion of metaverse interest. Last year, countries in Asia accounted for roughly 40% of business for The Sandbox, one of a number of companies that offer tools to build virtual worlds using blockchain.
“Excitement for the metaverse in Asia is incredibly strong and [has been] leading the growth of The Sandbox over the past 12 months,” said co-founder and chief operating officer Sebastien Borget in an interview with Nikkei.
While interest in the metaverse is subdued in Western markets, Borget said, Hong Kong, South Korea and Japan are The Sandbox’s top 3 territories. The company just finished a metaverse project with McDonald’s Hong Kong called McNuggets Land. Thailand, India and Singapore are also “especially engaged,” he added.
Akihiko Narita, COO of Cluster, a Japanese company that designs virtual spaces mainly for business events, says business has never been better and that his company’s metaverse-based corporate event operations will generate a record profit this fiscal year.
Cluster raised RMB 5.3 billion (USD 35 million) in May from venture capital investors like Sparx Asset Management and SBI Investment. “We were impacted by the positive energy from the whole [metaverse] market,” Narita told Nikkei.
Takuma Iwasa, CEO of Shiftall, a Japanese manufacturer of VR equipment such as goggles, admits the industry has not lived up to the hype it generated during the pandemic. But demand from “hard-core fans” is booming, and the company is experiencing 30% to 40% annual sales growth, he said.
“[The] metaverse was at the peak of its hype one or two years ago,” Iwasa told Nikkei. “It has died down since then, cast aside by generative AIs and other new technology.” But hype aside, the market is “actually growing, and entering a period of popularization.”
Several studies conducted last year found that Asia is expected to lead metaverse investment in the coming years due to demography—most of the world’s young people live in Asia—and technology. The leaders in rolling out 5G, which has the bandwidths necessary for 3D immersive environments, are China and South Korea.
Deloitte estimated in a study published last November that the metaverse could add up to USD 1.4 trillion to Asia’s GDP by 2035.
“While there have been a lot of cyclical changes in the past year, we have to assume that in the longer term, these would be exactly that—cyclical,” said Duleesha Kulasooriya, managing director of the Deloitte Center for the Edge, based in Singapore. “The investments in the underlying technologies and demands from the next generation of users should result in those numbers by 2035.”
In many parts of the Asia-Pacific region, physical cities are starting to acquire digital twins.
One of the highlights of a visit to Metaverse Seoul is the opportunity to meet Mayor Oh Se-hoon, who can be found in his office, helping digital visitors with a limited slate of tasks: either suggest a policy idea or give him a high-five.
Launched in January at a cost of KRW 2.1 billion (USD 1.5 million), Metaverse Seoul only had 644 daily users last month but is undaunted, with plans to have a fully functioning digital version of the city up and running by 2026. The Seoul Metropolitan Government says it is the first city in the world to offer public administrative services in virtual reality.
The platform also offers counseling services for minors and tax consulting services for small business owners. People can visit palaces and riverside parks in the virtual city.
“We hope that Seoul becomes known as the city that broke the boundaries between reality and virtual spaces, while providing the best quality of public services,” said Jihyun Kim, director of the Seoul Convention Bureau and a member of the Metaverse Seoul team.
And it is not just Seoul. Virtual Osaka, a computer-generated mashup of the Japanese city’s tourist spots, including the historical Osaka Castle, has been created for the 2025 World Exposition.
Meanwhile, the bustling Tokyo neighborhood of Shibuya has a digital twin that is gearing up for its virtual Halloween party at the end of October.
Even whole countries are developing twins. The Pacific island nation of Tuvalu is looking to create a metaverse version as rising sea levels threaten to submerge its physical self. Tuvalu Foreign Minister Simon Kofe told the COP27 climate summit last November it was time to look at alternative solutions for his country’s survival, and these included Tuvalu becoming the first digitized nation in the metaverse.
“Our land, our ocean, our culture are the most precious assets of our people,” he said, “and to keep them safe from harm, no matter what happens in the physical world, we will move them to the cloud.”
Making a metaverse living
As the metaverse grows, it is increasingly becoming not just a place to interact with other avatars but a parallel world where users can own property or work for cryptocurrency wages.
Rey Familaran has been making a living playing games online since the pandemic, when thousands of his fellow Filipinos, forced to stay indoors due to anti-COVID restrictions, were caught in a metaverse gaming wave.
Back in 2021, a little-known NFT game, Axie Infinity, took the gaming world by storm, particularly in the Philippines. Created by a Vietnamese entrepreneur, the game allowed players to own and trade virtual property and earn in-game cryptocurrency, which they could cash out in local currency.
During the game’s heyday, Filipinos were reportedly earning enough to live on just from playing the game, with some treating it as their main source of income. Familaran, 31, exited the game when the value of Axie’s in-game coins, Smooth Love Potion, started falling in 2021. In March 2022 the game was hacked and hundreds of millions in cryptocurrency was stolen.
By then, Familaran told Nikkei, he had already spent roughly PHP 300,000 (USD 5,280) to buy and play his way into Axie, making at least PHP 700,000.
Nowadays, Familaran plays X-Heroes: NFT War, which nets him around USD 90 monthly, and only when his gameplay merits entry into the game’s leaderboards. He spends two to three hours daily playing the game, having started in September 2022.
He says metaverse gaming is still recovering from a bubble of cryptocurrencies and other online assets, which popped in 2022, leading to broad declines in the value of most online assets throughout the year.
“Metaverse games have weakened as of late,” Familaran said. “Maybe it’s because cryptocurrencies have not recovered their value.”
The cryptocurrency crash has indeed hit the metaverse hard. All digital assets such as non-fungible tokens (NFTs)—unique digital representations that can be bought and sold—and even virtual real estate are down from last year.
However, many expect that the cycle will again see an upswing. Ultimately, some believe that a combination of blockchain technology, cryptocurrency and NFTs will lead to a successor to the internet, a 3D virtual “web 3.0” such as the one detailed in the 1992 book Snow Crash by Neil Stephenson, which gave the metaverse its name.
But technology is still a limitation. As Guannan Lu, an analyst at Forrester, explained in emailed comments, “We’re years away from the actualization of the internet’s 3D layer of interoperable and interlinked immersive environments.”
Richard Barnes, director of communications at Unity, a 3D and VR games company, said in emailed comments, “We think of the metaverse as the next generation of the internet that is always real-time, mostly 3D, mostly interactive, mostly social, and mostly persistent. Today, 2% of websites meet this definition.”
However, a hodgepodge of projects with 3D immersive components is showing the way to what the metaverse could one day be, given enough bandwidth and the right business plans.
In fact, millions in Asia are already using metaverse platforms of some sort. Kulasooriya of Deloitte argues the continent has 1.3 billion mobile gamers. This gives the region the biggest mobile player base worldwide—the perfect “gateway” into the metaverse, he told Nikkei.
As for interest in metaverse gaming specifically, Wagner James Au, author of the 2023 book “Making a Metaverse that Matters,” estimates there are at least 150 million active users of metaverse platforms across Asia, not counting China.
China, Au says, “has the largest addressable market but also the most risks,” and investors are wary of entanglements there due to a government-led campaign against gaming addiction that has hit the share prices of some of the biggest Chinese internet companies.
Events in cyberspace
With the exception of die-hards like Hitsuzi, most users still do not visit the metaverse on a daily basis. Developers hope they will, however, venture into the virtual world for exclusive events and attractions. Digital Osaka, for example, boasted 100,000 visitors in one day at a live-streamed comedy show in 2021. The daily figure now averages around 500, according to the city of Osaka.
“It’s hard to attract people [to the platform] without hosting many events,” an Osaka city official said. The local government handed over operations to a consortium of private companies in 2022, in an attempt to hold a higher number of more attractive events. “It was difficult for us to cover the running cost [of events],” he added.
Narita of Cluster says one of the chief attractions of the metaverse in Japan is its compatibility with the country’s ubiquitous cartoon landscapes, many of which have caught on around the world. The metaverse has an “affinity with intellectual property like anime or manga,” he said.
Cluster plans to use popular Japanese IP to produce attractive virtual events overseas. It has already worked on big projects with the likes of Pokemon and Disney.
“We aim to become the No.1 metaverse for people in the age range of 15 to 20,” Narita said, predicting his company will eventually overtake Roblox and Fortnite, two leading metaverse companies.
Similarly, in South Korea, metaverse companies have an affinity for K-pop, an industry that is expected to generate more than USD 20 billion from events globally by 2031, according to an estimate by Allied Market Research.
“The entertainment sector shows big interest in the metaverse for their business, often cooperating with tech firms,” Jung Yoon-hyuk, an associate professor at Korea University’s School of Media and Communication, told Nikkei in an interview discussing the popularity of metaverse concerts and advertising gimmicks in K-pop.
K-pop idol Lisa of the hit girl group Blackpink, for example, has become a virtual brand ambassador in Bulgari world, a fully immersive online space to buy Bulgari products.
K-pop labels are venturing into the metaverse with virtual celebrities, virtual fan-meets and music releases on metaverse platforms. In March 2022, Blackpink’s virtual avatars held a fan event on an avatar-based social media network, and 46 million users reportedly attended the event to receive digital autographs from the group’s members.
Aespa, a Korean cross-metaverse band that features four members with their own virtual counterparts, in 2022 set a record by landing a single in the top three of the Billboard 200 less than two years after debuting.
While metaverse technologies are not yet mature enough to stream rich content like concerts to large audiences synchronously in real-time, these early experiments show potential.
Shiftall, the Japanese hardware maker, sees a huge opportunity in the emerging industry. The company targets heavy VR users, with products such as hands-free controllers that allow players to eat and drink midgame, and harness-like sensors that track one’s full-body movements.
“Using VR in the metaverse is like golf or fishing,” CEO Iwasa said. “It’s not for everyone, but there are lots of die-hard fans.”
Additional reporting by Yifan Yu and Dylan Loh.