VIEWPOINT2023

W E B 3 & M E TAV E R S E —THE RISE OF THE NEW
INTERNET & THE INDIAOPPORTUNIT Y
The next wave of digitization

AUTHORS
Barnik Chitran Maitra

Metaverse and Web3 are often used as umbrella

Albert Meige

terms for the next generation of the Internet, andThomas Kuruvilla

the transformation they signify presents both aFabian Sempf

challenge and an opportunity for India. While someremain skeptical, we believe Metaverse and Web3

Pankaj Mannwill lead the frontiers of the next wave of digital

Harsh Parekh

adoption for Indian industries. This Viewpoint

Sanchit Sachdeva

explores the market potential of this next version

Rick Eagarof the Internet across different industries in India
and gives an overview of the early use cases tested
by industries in India and across the globe.

ARTHUR D. LITTLE

VIEWPOINT

UNDERS TANDING
BE YOND THE HYPE

For its part, Web3 is the umbrella term for the

For many, the term “Metaverse” first entered theirAlongside the Metaverse, the operation of

consciousness when Facebook changed its namewhich it partly enables, Web3 will transform theto Meta in late 2021. At the time, many people

Internet’s power structure and way of working

assumed it was merely a passing trend focused(see “Web3 Basics for Telecoms & Media”). Figure 1

on gamers and younger audiences, with little orillustrates a future version of the Internet that is

no relevance to them or their businesses. In fact,

more immersive and decentralized, while showing

Web3 and Metaverse now are poised to transform

how the new decentralized and immersive

industries and the way of working of the Internet,

element will coexist with the way we see theproviding new opportunities across telecom,

Internet today.

next generation of the Internet, underpinned bydecentralization and token-based economics.

media, and other sectors as well as threats tocompanies that fail to adapt.

W E B 3 A N D M E TAV E R S E
ARE POISED

Future of the Internet
While the Metaverse and Web3 are often
mentioned in the same breath and they areclosely connected, they do not mean thesame thing. Arthur D. Little (ADL) defines theMetaverse as “the future version of the Internet,

TO TR ANSFORM
INDUSTRIES AND
T H E W AY O F W O R K I N G
OF THE INTERNET

blending the frontiers between reality andvirtuality, at the convergence of immersive
spaces, social and collaborative experiences,and the creator economy” (see ADL’s Blue
Shift Report “The Metaverse, Beyond Fantasy,”

Figure 1. Future version of the Internet

underlying technology

which comprehensively covers the Metaverse’s

The Blue Shift Report (“The Metaverse, Beyond

structure, technology, and use cases).

Fantasy”) defined a six-layer Metaverse
framework. Figure 2 illustrates the underlying

Figure 1. Future version of the Internet

technologies that will build the future of Web3
and Metaverse on the experience continuum.

High

We have described this framework in detail inEnter Metaverse
Industry
automation

Web3 & Metaverse

Decentralization

Hollywood” and “The Metaverse: What’s in It for
examine the applications and use cases that have

Web2 & lessimmersive Internet

Web2other Viewpoints (see “Once Upon a Time in
Telcos?”). For the purposes of this Viewpoint, weCollaborative
workspace

Sense of immersion
Low

Defining characteristics &been built on these principles and adopted bymultiple companies and startups.

Web3
High

Source: Arthur D. Little

2

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY
Source: Arthur D. Little

1

ARTHUR D. LITTLE

VIEWPOINT

Figure 2. Technologies & characteristics of Web3 & Metaverse in the experience continuum
Figure 2. Technologies and characteristics of Web3 & Metaverse in the experience continuum
Decentralized finance(DeFi) & cryptocurrency
Adoption of Defi withcryptocurrency in circulation

Immersive spaces
3D environments from gaming as well as
simulations & digital models fromindustry (digital twins, etc.)

Central bank digital currency (CBDC)
Provides the same experience of
cryptocurrencies without private
cryptocurrency risks

Decentralization
No single authority of governanceWeb3 &
Metaverse

Collaboration platforms
Facilitate remote collaborative work

Powered by

NFT
Digital assets representing
wide range of unique tangible& intangible items

Creator economy
Leveraged todesign/sell physical& digital assets

Tokenization
The conversion of physical & digital assets
into digital units that can be bought & soldSocial experiences
Increasingly enabled

Immersiveness vs. decentralization

DAO
Rule-based governance of organizations

Immersion

Decentralization

Source: Arthur D. Little

Indian use cases
Source: Arthur D. Little

Particularly in the media sectors, prominent use
cases are driving the faster adoption of Web3 andMetaverse. Content creators are looking to Web3
to monetize directly from the user, bypassing theaggregators. As an example, music-label company
T-Series has partnered with Hungama, a digital
media entertainment firm, launching HeftyVerse
to facilitate the sales of newly released music as

For example, Apollo Hospitals is using theMetaverse for patient consultations pre- andpost-operation, as well as for training its staff.

2

Maruti Suzuki has launched EXPOVerse during
Auto Expo 2023 in India for remote users toexperience their cars. And Union Bank has
launched Uni-Verse, a virtual lounge used tointeract with their customers digitally and provide
them information about their financial products.

well as snapshots from movies and art as nonfungible token (NFT) collectibles.
We defined the evolution of the Internet aroundthe sense of immersion found in the Metaverse
and the extent of decentralization of Web3 inFigure 1. Similarly, we map the prominent Indian/C O N T E N T C R E AT O R S
ARE LOOKING TO WEB3T O M O N E T I Z E D I R E C T LY
FROM THE USER

global players and the use cases in Figure 3. By
their nature, Web3 applications are decentralized
and are accessible from anywhere around theglobe. As a result, players like 3D virtual world
marketplace Decentraland (which is not from
India) are also included in Figure 3.

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

3

ARTHUR D. LITTLE

VIEWPOINT

Figure3. Emerging uses cases by Indian/global players
Figure 3. Emerging uses cases by Indian/global players
High
Consumer &enterprise
Metaverse

Enter Metaverse

Sense of immersion

VR-basedtraining

VirtualloungeMetaverse
governance
Decentralized
investing

Virtualmarketplace

Virtualshowroom
Virtualtry-onVirtualeventsLow

Industrial
Metaverse –Industry 5.0

Content
monetization

Asset
monitoring

Capitalallocation

Web2

Decentralized
autonomous
organizations

Supplychain
mgmt

Digitalcurrency

Asset tokenization

NFT &tokenization

Assessmentbased donation

Conditional
financing

Decentralization

Web3

DeFi

High

Source: Arthur D. Little

Source: Arthur D. Little

Another prominent global Metaverse and Web3

A lot of brands globally have built their presence

use case that is applicable for India is in Industry

across Metaverse spaces to engage their

5.0, where digital twins of large physical assets

consumers in more immersive experiences. In theare built and controlled remotely. Some digitalnext generation of the Internet, the Metaverse

twins can be viewed in an immersive world, while

will evolve to become what websites are today.

3others can be viewed on existing screens. In suchcases, workers on-site can leverage augmented
reality (AR) for their work on the ground, whilebasic monitoring and diagnosis can be done with
precision remotely. As a global example, Siemens
has collaborated with Nvidia to create digital
twins of wind farms across the country thatcan be monitored remotely. The companies also
used additional artificial intelligence (AI)-based
simulations to further improve the operations.
Such adoption of digital twins will disrupt

Barriers to adoption
The key barriers in India to the adoption of highly
immersive interactive environments are low
Internet speed, network unreliability that causes
lags and packet loss, and the high cost of AR/
virtual reality (VR) devices. Despite these barriers,
ecosystem players must push for wider adoption
by building use cases and applications for a more
immersive user experience.

power plant operations, transmission lines, gas

In the future, AR will replace screens at apipelines, and other infrastructure assets locatedcost similar to screens today (across devices

in the most remote parts of the country.

like TVs, laptops, smartphones, etc.). With

E-commerce marketplace Flipkart, is testinga marketplace for more immersive interaction
between consumers and brands through its
Flipverse. It displayed the products of 13 brands
in Flipverse and during the virtual interaction,
users earn Supercoins — virtual coins that canbe redeemed for discounts.

the right talent and maturity, companies
will build high-quality virtual worlds, just as
they build websites today. The Metaverse will
become critical for each industry, business, andgovernment — just as websites are today. We
will see adoption from workspaces, educational
institutes, healthcare operations, government,
and media. In preparation, industries should focus
on building real tangible business on Metaverses
to avoid what happened with the dot-com crash.

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

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ARTHUR D. LITTLE

VIEWPOINTA THRIVINGS TAR T- UP ECOSYS TEM

Similar to the global outlook, adoption of Web3

In India, start-ups have been at the forefront of

The crypto crash of 2022 forced the ecosysteminnovation when it comes to building digital use

to reconsider DeFi’s viability. The final nail oncases and business models.

the coffin for DeFi came with the FTX crash,

Across the key levers of the Metaverse and Web3,
incumbents control the CAPEX and asset-heavy
infrastructure of Web2, and they will continue toprovide infrastructure for Web3 and Metaverse
adoption. The top layer of the framework — theexperience continuum — drives Metaverse

and Metaverse in India is driven by gaming, social
media, and decentralized finance (DeFi) players.

when millions of dollars were written off by FTX’s
institutional investors. The cryptocurrency crashwill shift the focus away from DeFi, but overall
Web3 has a lot to offer besides cryptocurrencies.
Rising investor confidence

usage for corporates, consumers, and industries.

The recent investments outlook in the IndianAs Metaverse adoption and virtual use cases

Web3 and Metaverse space is robust. According toincrease and more digital interactions become

our research, ~US $840 million of investor money

VR-based, the boundaries of virtuality and reality

was invested in this sector across the last eight

will continue to blur.

quarters ending December 2022 (see Figure 5).

Start-ups are building in the experience

The investment trend is in line with the global

continuum layer and in the enabler segment,
which helps foster the ecosystem and includes
blockchain platforms and decentralized
autonomous organizations (DAOs). Figure 4 sharesa broader landscape of Indian start-ups acrosseconomic outlook, where cost of capital increased
and investments dried up globally. Given thepotential in India and its relatively stableinflation, we expect the investment outlook
to improve in 2023, with more investments

the experience layer and enabler segments, where

happening in this sector.

start-ups are making virtual games, developing

The Indian regulatory environment issocial media apps, developing platforms inpropelling start-up founders to set up their

the education
sector,building&blockchain
Figure 4. Start-up
ecosystemof Web3
Metaverse
infrastructure, and more.

bases in Singapore and the Middle East, where
government regulations are more lenient.

Figure 4. Start-up ecosystem of Web3 & Metaverse

Experience
continuum

Enablers

Infrastructure

Allows users to experience usages & businessmodels across virtuality & reality

Human-machine interfaces, extended reality,
blockchain platforms & DAO providers

The physical layer (network, computing & storage)
ensuring immersion, interaction & persistence

GamingSocialMedia
Education
NFTs
CryptoInfrastructure is a CAPEX-heavy business,where start-ups are not present

Source: Arthur D. Little

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

5

Figure 5. Flow of investor money in India (US $ million)

ARTHUR D. LITTLE

VIEWPOINT

Figure 5. Flow of investor money in India (US $ million)
567

120

52

48
39

5

9

1%
9%

Metaverse services
Crytpo-focused10%

NFT-focused80%

Blockchain-focused

4

Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23

FY22-23

Source: Arthur D. Little

With leading cryptos losing their value in 2022,
Source: Arthur D. Little

investments in the space dried up, and investors
are losing trust in crypto-based applications.

A MULTI- BILLION - DOLL AR
OPP OR TUNIT Y FOR INDIA 5

As new technological capabilities emerge toWith the rise of use cases and global adoption ofenhance the virtual world, start-ups offering

Web3 and Metaverse, these technologies will have

Metaverse services will gain traction in India.

an enormous impact on the global and Indian

As the funding outlook improves in 2023,
investors are keen on funding blockchain tech,which will in turn aid in the adoption of Web3.
The majority of funding themes in India are
centered around infrastructure enablers. For
example, blockchain platform-based Polygon
received a total funding of more than $450

economies. In fact, according to ADL analysis,
the Metaverse is poised to become a ~$13 trillion
opportunity globally by 2030. Based on growthestimates by the World Bank, the global GDP willreach $160 trillion by 2030, with about 8% of that
contributed from Web3 and Metaverse. Global
forecasts put Indian GDP at $10 trillion by 2035.

million, and 5ire, a blockchain-based network

There are several factors that point to India’s

for interoperability and cross-chain transfers,

strong position for Web3 and Metaverse adoption,

received total funding of $221 million, rather thanas outlined below.

that funding going toward end applications like
NFTs and cryptocurrencies. As a result, investors
are promoting start-ups across the experience
continuum and enablers cohorts to build
infrastructure and create new business models.

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

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ARTHUR D. LITTLE

VIEWPOINT

Indians are becoming digital-savvy

Indians are paying digitally & shopping online

In recent years, smartphone penetration andWhile the e-commerce penetration in India retailInternet access in India have increased to coveris only 11% (half that of global penetration), withalmost 50% of the population (see Figure 6). In theincreased disposable income and the expanded

last five years, multiple Chinese manufacturers

offering of products and services by start-ups inhave launched products in the $100-$200 category

Tier 1 and Tier 2 cities (e.g., the Bharat Market),and smartphone usage has penetrated the price-

we expect the e-commerce penetration to growsensitive rural areas of the country. Adoption isin the future. Globally, India has emerged as andriven as well by cheaper voice data rates.

example for digital payments adoption driven by
the convenience of a unified payment interface.

Accessing virtual worlds requires AR/VR devices,
the current prices of which will limit India’s
Metaverse adoption in the consumer segment. In

INDIA HAS EMERGED
AS AN E X AMPLE FOR
D I G I TA L PAY M E N T S

addition, AR/VR devices currently on the market
are bulky and not comfortable for prolonged use.
Apple’s foray in this space with a lightweight, easyto-use device is expected to disrupt the industry

ADOPTION

much the way iPods disrupted the music industry.
Indian consumers are price-sensitive, and cost is amajor impetus for adoption of new devices. Thus,
the introduction of local and Chinese low-cost
consumer electronic players (e.g., Boat, Noise,
Xiaomi) in the AR space will allow consumers toaccess these devices at significantly lower cost,further driving Metaverse adoption.

Figure 6. Market drivers for digital penetration

Figure 6. Market drivers for digital penetration
Global

92%
73%

63%

67%

US

74%

China

64%

48%

India

AR/VR market in India (US $ billion)52%$ 3.2 bn
+15%

Internet penetration

Smartphone penetration

35

23%

18%

15

23%
11%

E-commerce penetration

13
5

Real-time transactions per capita+18%$ 1.1 bn

$ 0.5 bn

2022

2027

2035

Internet penetration: % of population using Internet, Smartphone penetration: % of population using smartphones, E-commerce penetration:

Internet
penetration:
percentage
population using
Internet
e-commercetransactions
asofpercentageof theretail market, Real-time digital transactions per capita: annual number of real-time digital transactions
Smartphone penetration: percentage of population using smartphones
per personpenetration: e-commerce transactions as percentage of the retail market
E-commerce
Real-time digital transactions per capita: annual number of real-time digital transactions per person
Source: Arthur D. Little

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

Source: Arthur D. Little

6

7

ARTHUR D. LITTLE

VIEWPOINT- Increased awareness and understanding ofIndia market opportunity forWeb3 & Metaverse

Web3 and Metaverse among industry leaders

According to ADL analysis, the Web3 andMetaverse market opportunity in India is
expected to grow at ~42% CAGR from $6 billion
in 2025 to $200 billion by 2035 (see Figure 7). This
growth will be driven by several factors, including:- Technology advancements- Availability of skilled talent- Clarity on government regulations- Investment by venture capital into start-ups

THE WEB3 AND
M E TAV E R S E M A R K E T
Figure 7. The Web3 & Metaverse opportunity of India
Figure 7. The Web3 & Metaverse opportunity of India
OPPORTUNIT Y IN INDIAI S E XofP E C T E D T O G R O W
Sector-wise breakdown
Web3 & Metaverse opportunity
Web3 & Metaverse opportunity
FROM $6 BILLION TO$200 BILLION
Energy
11%

200
CAGR

Finance

42%

15%

37%

Retail$200 bn
Automotive

ty of India

9%8%
Healthcare

6
2025

2035

11%
Telecom

9%
Media

Sector-wise breakdown of
Web3 & Metaverse opportunity
7

Source: Arthur D. Little

Energy11%

Finance

15%37%

Retail$200 bn
Automotive

9%8%Healthcare

11%
Telecom

9%Media

Source: Arthur D. Little

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY
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ARTHUR D. LITTLE

VIEWPOINT

CONCLUSIONCAPTURING THE OPPORTUNIT Y

C O M PA N I E S A R E A C T I V E LY A N A LY Z I N G
THE WEB3 ECOSYSTEM FOR THE MOST
AT T R A C T I V E O P P O R T U N I T I E S

Although uncertainties and questions around Web3and the Metaverse remain, companies in India andacross the globe have begun to identify and prioritize
opportunities. Companies are actively analyzing theWeb3 ecosystem across technologies, use cases,
and industries to build potential business models
and go-to-market strategies for the most attractive
opportunities. The technologies will be transformative,
and companies should not be caught unprepared. To
meet the challenge, we share some imperatives for
India to capture Web3 and Metaverse opportunities.
Imperatives for investors- Set up dedicated expert teams in Web3 andMetaverse. Develop novel investment themes
and provide guidance on business model
innovations and opportunities.

- Establish accelerator programs. Independently
or in partnership with leading incumbents, set
up accelerator programs to incubate early-stage
start-ups.

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

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ARTHUR D. LITTLE

VIEWPOINT

Imperatives for corporates- Launch a sandbox for fostering innovation.
Identify and build on the relevant use cases foryour core product offering to benefit from Web3
and Metaverse adoption.

- Form partnership strategy. Support and partnerwith start-ups and accelerators to solve industrywide problems and drive efficiencies within yourorganization.
Imperatives for start-ups- Evangelize use cases and benefits to build theecosystem. Identify and test the niche Web3 andMetaverse use cases among early adopters to leadthe ecosystem.

- Build products for the e-commerce market. The
e-commerce Bharat marketplace (beyond Tier 1 andTier 2 cities) offers huge total addressable market
and growth opportunities.

- Build in India for the globe. Build products with
global reach in mind, taking inspiration from thesuccess of Indian IT services and software-as-aservice products.

- Work with corporates to establish B2B

partnerships. Benefit from the financial stability
and industry know-how of corporate partners whileproviding them with access to innovative products
and services.

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

10

ARTHUR D. LITTLE

VIEWPOINT

Imperatives for regulators
Globally, countries like South Korea, UAE, and China
have invested in the Metaverse with both capital andeffort. In India, a governmental vision for the Metaversethat supports the ecosystem and accelerates its
adoption focuses on:- Enacting proactive regulation. Government
could encourage and support ongoing efforts
in building the Metaverse and proactively craft
regulations to drive standards and policies toensure the legal basis for safety, privacy, asset
ownership, interoperability, competition, andinnovation.

- Incentivizing infrastructure investments.
Current capacity planning in the infrastructure
layer is insufficient to reap the full benefitsof the Metaverse. Infrastructure investments
must be controlled and managed to incentivize
investments in the infrastructure layer.

- Providing subsidies for AR/VR devices.
Particularly for education and healthcare, theindirect benefits of using the Metaverse aretremendous for society. Government can facilitate
faster adoption by subsidizing a portion of the cost.

WEB3 & METAVERSE — THE RISE OF THE NEW INTERNET & THE INDIA OPPORTUNITY

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