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Tencent joins the metaverse race with the “extended reality” division

Chinese internet giant Tencent has created an “extended reality” division that will develop hardware and services for the metaverse, according to Reuters news agency. The move is Big Tech’s latest bid to lay claim to the metaverse, with Meta, Microsoft, Apple and TikTok developer ByteDance all making bets that virtual and extended reality is the future of user interfaces.

It comes as a number of organizations, including Microsoft, Meta and Unity, are launching a new Metaverse Standards Forum to improve interoperability.

Analysts expect most Big Tech giants to announce metaverse strategies this year. (Photo by alvarez/iStock)

Tencent’s extended reality division was created last year, insiders told Reuters, but has so far been “shrouded in secrecy”. The unit will eventually have 300 employees, they said, despite an ongoing cost-cutting campaign at the company.

Reuters reports that Tencent’s extended reality division is working on a headset, marking its first foray into hardware, as well as software. A source said the split was a “passion project” of Tencent founder Pony Ma, who described the metaverse as a “fully real internet”.

The new division is headed by Li Shen, chief technology officer of Tencent’s games division, and will sit within the company’s Interactive Entertainment group.

Tencent gave an indication of its metaverse plans last November, when CEO Martin Lau told investors that there are “multiple routes” to market access, including through interactive games and social media. “We have a lot of technological building blocks and capabilities that will allow us to approach the metaverse opportunity,” Lau said.

The company has also registered more than 20 metaverse-related trademarks for its various applications in China.

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Tencent’s investment in the metaverse is more than just a “me too” strategy, says Jared Klee, analyst at Futurum Research. “Tencent has a strong track record of funding early stages and getting them done, so I don’t think it’s just ‘fear of missing out’, but more of a serious investment fit for purpose. the scale at which the company operates,” said Klee Technical monitor.

Tencent is the largest video game publisher in the world, with successful titles such as League of Legends and PUBG Underground. But it also provides enterprise IT services, including cloud computing and AI, and financial services. Klee expects Tencent’s metaverse strategy to focus on games first and then expand to other areas.

“They probably won’t see that it’s a standalone thing, but a natural evolution after playing games, working in a hospital and other situations. The goal is probably how to extend the existing work in the metaverse, though the game is likely to be the first to adopt it.

Tencent’s large customer base – its WeChat social messaging app is the most widely used in the world – will bolster its metaverse ambitions, according to Steven Dickens, another analyst at Futurum Research. “With WeChat and its ubiquitous deployment in China, the company is well positioned to bring any XR technology to a huge user base.”

Klee and Dickens are surprised by the company’s venture into the hardware business. “I’m not convinced that Tencent wants to be a hardware company,” says Dickens. “If I were Tencent, I would experiment with the hardware to see what the requirements are, but then I would become hardware-agnostic.”

Facebook’s parent company Meta has been the most vocal in its commitment to the Metaverse, with founder Mark Zuckerberg effectively betting on the company’s future, but many other tech giants have played in the Metaverse. Apple and ByteDance, for example, are developing virtual reality headsets.

Much of that investment so far has been in video games. When Microsoft acquired World of Warcraft publisher Activision Blizzard earlier this year, CEO Satya Nadella said the game “will play a key role in the development of metaverse platforms.”

A recent report from global consulting firm McKinsey predicted that global spending on the Metaverse will reach $5 billion by 2030. McKinsey surveyed active consumers in the Metaverse and found that 79% had made some sort of purchase at course of the past year. The most common form of payment was in-game purchases, with 47% of respondents.

Part of the metaverse’s promise is that users will be able to move their avatars, identities, and other digital assets between virtual spaces. Until now, however, companies have largely developed their metaverse strategies in isolation. But the perspective of interoperability in the metaverse took a step forward this week, with the creation of the Metaverse Standards Forum, which aims to develop interoperability standards for the new technology paradigm.

Project backers include Adobe, Alibaba, Autodesk, Epic Games, Huawei, IKEA, Khronos, Meta, Microsoft, NVIDIA, Qualcomm Technologies, Sony, and Unity. The Forum includes existing standards organizations such as the Web3D Consortium, the World Wide Web Consortium, and the XR Association (XRA).

“The Metaverse will bring together diverse technologies, requiring a constellation of interoperability standards, created and maintained by numerous standards organizations,” said Neil Trevett, president of Khronos, a consortium that develops interoperability standards for 3D graphics and who “hosts” the Forum. .

“The Metaverse Standards Forum is a unique place for coordination between standards bodies and industry, with a mission to foster the pragmatic and timely standardization that will be essential to an open and inclusive Metaverse,” he said.

Klee expects most Big Tech companies to announce or start planning metaverse strategies in the coming months, due to the potential size of the market. But there is still a long way to go before living and working in the metaverse, he adds.

“We have to be realistic about the deadlines,” he says. “We are clearly on the recovery [and] we did not cross the downswing where we are disappointed with the first version. It’s real, the ball is on and we are witnessing material investments that will make it possible to succeed. We won’t live in the metaverse for very long.

Read more: Virtual worlds, real money: why big companies are investing in the metaverse

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