Interviewer: Yang Won-seok, Senior Consultant l Deloitte Insights Editorial
| The following is an excerpt from Deloitte Insights 2022 No. 23 'Invitation to the Metaverse: A Land of Opportunity.' The report can be downloaded and accessed at Deloitte Insights (https://www2.deloitte.com/). |
LG Uplus is planning to launch a metaverse platform targeting office workers, the MZ generation (born in the early 1980s to the early 2000s), and infants early next year. Unlike existing open platforms at home and abroad that are open to all demographics, the plan is to launch platforms targeting specific demographics (such as 'U+ Virtual Office' and 'U+ Kids Zoo'), which is a distinctive feature. While continuing to advance the platform before full launch, LG Uplus leads with a strategy of 'focusing on customer experience' with customized content that considers user characteristics.
This interview covers the overall metaverse industry, LG Uplus's metaverse business vision, management strategies, and digital customer experience with Jeong Su-heon, Vice President and Consumer Division Head, and Lee Sang-yeop, Executive Managing Director and CTO (Chief Technology Officer) of LG Uplus. ⓒDeloitte Insights
Metaverse Vision and Entry Strategy
Q. Please introduce the organization related to LG Uplus's metaverse business development.
A. Web 3.0 fields including the metaverse are strongly tech-driven in nature, and it is important to fuse multiple technologies rather than a single technology and apply them to services. Currently at LG Uplus, we have organized a team that proactively explores and experiments with practical service models that can innovate customer experiences alongside securing related technology within the CTO, to prepare for future business development. The Service Incubation Lab under the CTO is discovering customer-perspective scenarios and experimenting with customer responses to create services used in everyday life, and the Next-generation Technology Lab is proactively discovering and verifying promising technology elements. When we tried to implement the metaverse, we found it wasn't completed in one go, but required a process of creating, receiving customer feedback, and revising multiple times. We have adopted the way startups work, and projects validated through early prototypes are proceeding with agile organizations built for completion.
Q. Please introduce the vision and business model of the metaverse platform being planned and developed by LG Uplus.
A. LG Uplus is paying attention to the metaverse as a technology that can change customer experience in the future market, and we want to create services used in everyday life, popularize them, and grow them as new businesses that will become future revenue drivers. We define the metaverse as an extension of living spaces containing future customer experiences. Going forward, all customer experiences that occurred in reality will move to the metaverse, and therefore it is very important to make customers feel real value and expanded experiences within the metaverse. At Uplus, we judged that providing interactive experiences within the metaverse is most important to realize this, and to make this a differentiating factor, we are focusing on providing customer experiences such as connection, collaboration, and hands-on experience. We also plan to design avatars and spaces to match activities. Through these efforts, we want LG Uplus's metaverse to deliver various experiences like reality to customers while simultaneously providing experiences that surpass reality.
Looking at the metaverse from a business perspective, community elements that have the attribute of connecting and being active together with others in digital space are strong. When mutual relationships are formed between users and a sense of solidarity develops, a loyal user base is secured, and naturally the frequency of service visits and dwell time increase, making expansion into a platform business easier. Also, various revenue models can be integrated through this.
While the major revenue models of mobile services are subscription fees, paid sales, advertising, and brokerage commissions, the metaverse has a virtual economic system where virtual goods are traded within virtual space, enabling various attempts such as digital item trading, brand collaboration, and creator ecosystem building. In particular, since NFT (Non-Fungible Token) technology makes it possible to assign ownership and scarcity to digital content, not only virtual goods trading but also various transactions linked to physical goods can be attempted.
Q. You are planning and developing a closed metaverse platform rather than an open platform like Zepeto or Roblox — what is the difference from ordinary platforms?
A. For the popularization of the metaverse, creating killer apps is important. When you experience the metaverse services available on the market, there are many cases where customers, after creating avatars, don't know what to do in the metaverse space. We focused on practical uses that enhance the value of the metaverse.
Therefore, going beyond simply creating spaces and avatars with 3D graphics, we want to differentiate through practical activities that can provide new customer experiences in those spaces. For this reason, rather than entering the market by creating an open platform, we want to enter the market through specific target-oriented metaverse services. Going forward, we plan to first focus on services that provide practical customer experiences to target customers, such as the Kids Zoo and Virtual Office, and if we secure meaningful customer traffic, we judge that expansion to a family segment or evolution into a platform that can accommodate various services will be possible.
Market and Technology Outlook
Q. How fast do you think the trend of increasing domestic and foreign metaverse platform users will grow going forward? How do you anticipate meaningful inflection point criteria?
A. Customers are using metaverse services for purposes such as social activities, digital asset trading, and gaming activities, and the user base is also limited mainly to the α generation and Z generation. There are still limitations such as complex usage procedures and operating methods for widespread diffusion. However, as time passes, we expect industrial value to form through the appearance of killer apps with increasing technical maturity and business experience, and the provision of immersive experiences through new devices.
Looking at Nielsen Korea's app user statistics by age and gender (as of May 2022), among metaverse services, the proportion of Roblox users is 7-12 years old (61.7%), 13-18 years old (6.9%), male (52.3%), and female (47.7%). Roblox has a user proportion in their teens reaching 60-70%. It cannot be denied that metaverse platforms are still platforms centered on teenagers rather than all age groups.
To create meaningful inflection points for these metaverse platform users, it must transform into a platform that not only teenagers but all age groups can use. For that, 3D graphic technology that provides immersion needs to develop, and multi-access technology that allows multiple people to be in one space simultaneously, and content that can resonate with various age groups must be added. Finally, if productive activities like meetings and conferences are also supported, I think various age groups will be drawn in, creating a new inflection point.
Q. How do you estimate the domestic and foreign market size for the metaverse platforms by field being planned and developed by LG Uplus, such as U+ Virtual Office, U+ Kids Zoo, and Moonr NFT? What is an achievable target scale?
A. The global market size of the metaverse and NFT can be confirmed, but in an emerging tech field where technological development is ongoing and new market participants are appearing, we don't see much meaning in market size. However, since the flow of the metaverse and Web 3.0 providing new customer experiences is occurring, and Roblox, Zepeto, OpenSea, and others are recognized for high corporate value, we forecast that the metaverse and Web 3.0 will establish themselves as major future trends. Rather than creating a blueprint and deploying the business to prepare for this future, we plan to start feasible metaverse NFT services using our company's assets and markets, and develop by securing customer responses and business experience.
Regarding achievable targets, I also don't think it's the stage to present specific numbers yet. When we made a prototype at Uplus, we confirmed that unlike existing mobile services, metaverse services require 3D interactive experience provision, so continuous optimization for spatial direction and customer usability is most important. For now, we want to focus on securing service completeness and customer usability.
Q. When do you expect the full-scale popularization of the metaverse to begin? Do you think the technological enablers needed for popularization at this point are sufficiently in place? (e.g., device performance and form factor (HMDs, etc.), 5G, cloud computing). What are the main causes of delays in the bloom period? (e.g., lack of killer content, device price, device performance, device form factor, 5G network penetration, regulations, etc.)
A. The technological enablers of the metaverse (3D graphics, multi-access, AI, devices, cloud computing, etc.) are judged to have reached a level that can be popularized through games, especially MMO-RPGs and VR/AR games. The prevailing opinion is that game industry development tools (3D Engine, multi-access servers (game servers)) have become the driving force of the IT systems that develop the metaverse and are likely to continue leading.
Using these game development tools, game companies and competitors are attempting to build their own metaverses to preempt the market, but they are not significantly different from the game worlds already developed in games.
First, just like the internet, users need to be able to freely access virtual reality through ultra-high-speed mobile communication networks, regardless of location, through various devices (PCs, smartphones, HMDs, AR glasses, etc.). However, currently there are device constraints in freely accessing virtual reality.
In the case of HMDs (Head Mounted Displays), it is still difficult to satisfy the 'freely' condition due to issues of size and usability, but there is a possibility that Apple will release a Glass-type HMD next year that has somewhat resolved this problem.
In the case of mobile devices (smartphones, tablets), access is possible regardless of location, but constraints due to battery and heat generation issues in rendering the virtual reality world are not being resolved. However, it is expected to be a problem that will someday be resolved through advances in 3D engines and hardware.
In the case of PCs, there are almost the same problems with batteries and heat generation as mobile devices depending on hardware specifications. This too could be resolved through advances in 3D engines and hardware. In addition, technologies for providing virtual reality indistinguishable from reality include hologram and pseudo-hologram devices, but products that can be commercialized do not yet exist, and pseudo-holograms have constraints of device price and space.
And, to naturally provide control within the metaverse, devices for using the virtual world from the real world are evolving according to methods of expanding user experience through interaction with the virtual world (output) and collecting augmented information (input). For expanding user experience, changes are occurring from desktop environments like PCs or laptops to mobile environments using nomadic devices like smartphones, to VR/AR HMDs and haptic devices for augmented reality. Accordingly, interface device technology related to haptic devices is also continuously evolving.
However, the constraint of current devices is not the main obstacle to the popularization of the metaverse. The metaverse currently appears to be in a stage where the bubble has disappeared and actual business models are being built, and popularization is expected to occur with the emergence of killer content.
Q. What is the function of NFTs in closed metaverse platforms?
A. We expect that as the metaverse expands, NFT demand will also grow, and ultimately the metaverse and NFTs will be combined. For example, items collected by metaverse users through experiential activities can be issued or traded as NFTs, and it is judged that customers will be able to display and show off their collections and communicate with community members in the metaverse space using NFTs they have purchased. That is, NFTs are expected to serve as a link between virtual world and real-world experiences and as a means of securing interoperability with other metaverse platforms.
Currently, Uplus is in the stage of demonstrating what kind of communities NFTs will form and whether they have high scalability.
Uplus issuing its self-developed IP (Intellectual Property), the 'Moonr' character, as an NFT was also an attempt to verify the possibility of community. In fact, users holding Moonr NFTs are voluntarily participating in community activities, and users are actively communicating about Moonr on Discord and Twitter and participating in 'viral' activities to let others know about Moonr. It is creating a very strong and voluntary community even if small in scale. Ultimately, I think such communities will ultimately move to the metaverse space.
Going forward, there also needs to be a place to show off NFTs, and the metaverse will be the optimal space for that.
Also, since the metaverse has a virtual economic system where virtual goods are traded within virtual space, various attempts are possible such as digital item trading, brand collaboration, and creator ecosystem building. In particular, since NFT enables the assignment of ownership and scarcity to digital content, not only virtual goods trading but also various transactions linked to physical goods can be attempted.
Q. Do you forecast that domestic and foreign metaverse channels will be integrated or linked in the future? Or do you think mergers and acquisitions between similar channels will occur actively?
A. Since the metaverse has a strong media character, vertical metaverse platforms that accommodate various tastes and purposes are expected to emerge, and I think mergers and acquisitions to gain market dominance is a fully possible scenario.
However, at the current stage, differentiation between each platform and competition to secure users are expected to take priority.
Regarding metaverse channel integration or linkage, avatar interoperability that allows free movement between different metaverses with a single avatar, and NFT asset interoperability that links NFTs issued by the corresponding platform so they can be used in other platforms, are forecast to be attempted first in the market. Discussion of standardization regarding interoperability between metaverse platforms has only just begun, and we expect standardization to occur going forward.
Q. From a technical standpoint, Deloitte views the metaverse as a convergence technology and defines the 5 essential technology elements as (1. Spatial Computing, 2. 3D Engines & Digital Twins, 3. Virtual Production, 4. AI & Digital Humans, 5. Digital Assets & Identity). Among these, which technology elements are you particularly focused on securing capabilities in?
A. From a technology standpoint, the metaverse is not a single technology or component technology but has a strong character of new digital technologies being fused and realized as services: (1) 3D graphics technology and multi-access technology widely used in games, (2) AR/VR technology capable of creating realistic and immersive content, (3) AI as an interface technology, (4) Web 3.0 technology used in building virtual economic systems of the virtual world.
Therefore, since all technologies cannot be possessed, we view discovering partner companies with promising technologies and fusing technology as a service as the most important competitiveness.
Customer Experience Value Provided by the Metaverse
Q. What benefits and meaning do you think social activities in a virtual world through avatars (characters) provide to users?
A. I think it is an entity that represents the real me and allows experiencing things different from reality. For example, in the case of a virtual office, going to work in the virtual office as an avatar, having small talk with colleagues, and having meetings seems to increase a sense of belonging and provide the value of working together. LG Uplus plans to implement integrated communication such as chat and voice, avatar conversations, and other communication methods happening in actual companies in the virtual office, along with collaboration tools and functions such as AI meeting notes that can improve work efficiency despite being a virtual space.
In fact, when we made an in-house beta test by prototyping the virtual office, there were responses that a sense of belonging was felt. Since anyone sitting together can talk at any time, conversations with team members increased, and we received positive feedback that expressing through avatars leads to more active expression than being the real me in reality.
Q. What service planning are you doing to attract users comparable to major SNS such as Instagram, TikTok, and Facebook for metaverse platforms like U+ Virtual Office and U+ Kids Zoo?
A. Rather than immediately expanding as a platform, we want to focus on providing optimal services to customers. For example, just as KakaoTalk started as a messaging service and as users expanded, it evolved into a platform, we also plan to increase users while advancing services. For this, we want to make services close to customers based on data by service.
Also, if each service is connected to each other, I think it will be possible to evolve into the Uplus metaverse platform.
Q. I understand that platforms like U+ Virtual Office and U+ Kids Zoo are customized platforms targeting specific age groups and demographics. What services are you planning to provide to deliver special customer experiences to main target users?
A. The virtual office we are preparing aims to provide a new communication experience that combines only the advantages of 'emotional exchange' from face-to-face meetings and 'participation without space-time constraints' from non-face-to-face meetings, utilizing metaverse technology elements tailored to the changed work environment of the hybrid work era. Customers of the virtual office are office workers and companies practicing hybrid work. In a situation where colleagues are physically separated, the most important and urgent problem is the disconnection of communication. Various collaboration solutions emerged as temporary measures due to COVID and are being utilized, but video conferencing like Zoom is mostly focused on official reports of specific people at specific times, and text message-type collaboration tools like Slack remain in sequential and one-way communication of unilaterally leaving text. We want to provide not only emotional exchange through conversation with colleagues but also communication experiences that provide important motivation and understanding of context when working. Accordingly, unlike Zoom video conferencing, customers can create avatars like playing online games and naturally converse with colleagues through small talk, and through non-verbal communication experiences (avatar gestures, emojis, etc.) strengthen different fun and bonds among colleagues. Also, ideas can be shared using simultaneous annotation, laser pointer, and sticky note functions, and discussed content can be reconfirmed and accurately recorded through the AI meeting notes function. I think this is clearly differentiated experience provision from existing services like Zoom and Slack, with a new communication experience and more efficient work experience than reality.
For U+ AI Kids Zoo, we need to look at the digital consumption patterns of the Alpha generation. Their places of experience have started moving from reality to digital and then to the metaverse, and the Alpha generation (born from the early 2010s to the mid 2020s) is responding most actively to these changes. When the metaverse is utilized in the education field, I think it can provide unique opportunities in experiential, social, educational, and communication aspects. Among these, we saw the value provision of learning while playing with friends as important.
U+ AI Kids Zoo is an experiential learning metaverse service where children access a virtual world, realistically experience activities with AI friends/online friends, naturally learn, earn rewards, and achieve goals. Through this service, we want to provide children with the fun of experiencing together with other friends online, experiential learning through play, and the spirit of inquiry and sense of achievement through rewards and growth. For this, we provide various experience spaces that children like and want to experience, and various gamification elements including quizzes and quests related to each experience space and cooperative problem-solving with friends. Also, children can ask AI NPCs (Non-player characters) that follow their avatar around like pets about things they don't know or have free conversations, enhancing learning effects, and can enjoy various fun elements using AI conversational technology such as the last word game with AI NPCs, English word quizzes, and translating what they say into English. We also plan to provide experiences where the metaverse expands by linking with offline channels. We aim to create a supreme customer experience gap in all channels, both offline and online.
Q. What technologies and infrastructure are there for enhancing LG Uplus metaverse platform's digital customer experience (DCX)?
A. To differentiate the metaverse, we must be able to provide the comfort of interaction in virtual reality. That is, a natural interface is needed. The interaction possible for users within the metaverse is done through their avatar, and how to control the avatar becomes an important factor. Since the act of turning on a camera itself may have personal privacy issues, we conducted an avatar lip sync PoC (Proof of Concept) to control avatars only with voice, secured the technology, and are currently applying it to the avatar builder.
Additionally, we are researching adding an emotion control function that extracts emotions from voice to control avatar facial expressions. Also, avatar control using cameras is in progress. Furthermore, we are continuously exploring next-generation remote controller technology to naturally provide avatar control.
The element that most greatly affects reality in digital is ultimately the economic element, and if virtual reality activities are linked to the real economy, it will be recognized as the metaverse by users. For 3D assets, we will provide easy and aesthetic tools for creating digital content (assets) of spaces and avatars. We are securing technology to provide advertising within the metaverse and measure its effects, and plan to provide it to various metaverse services.
Q. In terms of customer experience, what value do you expect the metaverse to provide?
A. Uplus defines the metaverse as an extension of living spaces containing future customer experiences. Going forward, all customer experiences that occurred in reality will move to the metaverse, and therefore it is very important to make customers actually feel real value and expanded experiences within the metaverse.
At Uplus, we judged that providing interactive experiences within the metaverse is most important to realize this, and to make this a differentiating factor, we are focusing on providing customer experiences such as connection, collaboration, and hands-on experience. We also plan to design avatars and spaces to match activities. Through these efforts, we want LG Uplus's metaverse to deliver various experiences like reality to customers while simultaneously providing experiences that surpass reality.
Q. What features and entertainment elements will you add to encourage users to continue using the LG Uplus metaverse platform?
A. I think the important user metrics for metaverse services to be maintained and expanded as sustainable businesses are long dwell time and frequent visit frequency. We are considering various features to increase dwell time and visit frequency. We are thinking a great deal about how to implement the reward system applied in games along with customer values such as virtual experiences, collaboration, and the joy of doing things together through the metaverse. Like a startup, I think it's important to accumulate business experience in the way of building, fixing, and verifying.
Q. Do you also have plans to create a platform that can be utilized in various ways for B2B services? If so, what are they?
A. Of course we are considering B2B as well. As one example, as part of specific target-oriented metaverse services, we are also collaborating with a well-known domestic university to build a metaverse for college students. In the case of Sookmyung Women's University, in 2021 we implemented the university festival as a metaverse for COVID-year students as an event. The response was positive, so from this year it has been in continuous operation.
Metaverse-Related Business Strategy
Q. Are you pursuing partnerships or mergers and acquisitions with hardware, software, content, and application (platform) companies? If so, what synergy effects are you expecting?
A. It's difficult to disclose now, but we are comprehensively considering in various ways how to collaborate with and invest in capable companies to secure capabilities and create synergy. However, it is not yet the stage of considering mergers and acquisitions or partnerships.
Q. Are you pursuing entry into overseas markets for the metaverse platform? If so, what difficulties are you facing in this process? How is collaboration with global partners proceeding?
A. Global expansion is something that must be considered for expansion into a platform. However, currently we plan to secure meaningful data such as subscriber base, visit frequency, and dwell time targeting domestic customers, and then consider expansion into a platform and global entry.
For example, for the virtual office, we plan to conduct an open beta domestically within the year, and if companies with overseas branches have demand, we think we could bring the timeline forward.
Regulations
Q. Are you preparing in advance for metaverse industry regulation due to the potential for various side effects and problems from social/ethical aspects?
A. The metaverse is more sensitively prepared regarding security because various customer data is exposed in real time through avatars. As it is a newly emerging field that has never been experienced before, it is necessary for government agencies and major companies to think together and make efforts through consultative bodies. Uplus will also actively consult with related companies in various fields including security and prepare to protect customer information.
Other/General
Q. What cooperation with domestic and foreign startups are you planning for the advancement of your company's metaverse technology and service activation?
A. From a technology standpoint, the metaverse is not a single technology or component technology but has a strong character of new digital technologies being fused and realized as services: (1) 3D graphics technology and multi-access technology widely used in games, (2) AR/VR technology capable of creating realistic and immersive content, (3) AI as interface technology, (4) WEB 3.0 technology used in building virtual economic systems of the virtual world. Therefore, since all technologies cannot be possessed, we view discovering partner companies with promising technologies and fusing technology as a service as the most important competitiveness. Uplus also anticipates collaboration with startups possessing diverse technologies with an open attitude.
