South Korea has emerged as a fertile ground for metaverse innovation over the last 12 months. Several innovative projects have been undertaken by the public sector, accelerating the growth of the domestic market. Seoul, in January 2023, introduced a digital version of itself in the metaverse. The project was funded by the government and included a total investment of US$1.6 million. Private players, including tech giants and banking firms, have also undertaken various metaverse-related projects over the last few quarters.

According to TechInsight360, Metaverse industry in South Korea is expected to grow by 38.1% on an annual basis to reach US$10,725.9 million in 2023. To further support the development of the metaverse sector, South Korea announced an investment of US$51 million in March 2023. The government, in South Korea, is looking at the metaverse as a potential growth engine and the Metaverse Fund of US$51 million is dedicated to innovative projects in the segment. The Ministry of Science and ICT has declared its support for the Metaverse Fund by announcing an investment of US$18.1 million.

• Through the Metaverse Fund, the government intends to facilitate mergers and acquisitions of different businesses in the expanding ecosystem. The investment from various government organizations is motivated by the growing interest of leading technology firms in the metaverse.

• Amid the current funding winter and fading global interest in the metaverse market, local projects are finding it difficult to raise venture capital and private equity funding. Consequently, in addition to facilitating mergers and acquisition deals, the government is also seeking to offer support to domestic metaverse-related firms to enable them to compete with global players.

The investment by the Ministry of Science and ICT will support 13 new projects in the areas of healthcare, education, and tourism. These projects are leveraging metaverse to improve public services in South Korea.

The education sector has already seen widespread usage of the metaverse in South Korea. Pohang University of Science and Technology is undergoing a remarkable transformation into a metaverse. The prestigious educational institution has set its sights on digitizing its classrooms within this virtual realm, with the intention of offering courses in a captivating cyberspace environment. This ambitious endeavor seeks to merge technology and education, providing students with an innovative and immersive learning experience within the metaverse. To achieve its objective, the institute has announced that it will invest US$300,000 every year in equipment and program development. Furthermore, the institute has allocated US$500,000 for developing metaverse classrooms.

The metaverse ecosystem has been expanding very rapidly in South Korea. Naver and SK Telecom, two tech giants in the country, have garnered widespread adoption for their respective metaverse platforms, Zepeto and ifland. These platforms are not just growing in the South Korean market, but globally as well, including in Southeast Asian countries and the United States.

• In May 2023, SK Telecom added another service to its metaverse platform ifland, known as if home. The new service enables users to create and build their virtual homes, based on their personal style and taste using a number of different items, including furniture, home appliances, wallpaper, and others. Furthermore, users can also share their daily lives, interests, and thoughts by posting messages on a frame, which can be placed anywhere in the virtual home.

With the ability of social interaction in the virtual home, SK Telecom is building the next-generation social media platform, taking the competition to the likes of Facebook and WhatsApp. Furthermore, users can also use the if home space to meet celebrities and hang out with their friends. From the short to medium-term perspective, SK Telecom is expecting a growing number of brands to also use the if home service to interact and connect with their customers in South Korea and other global markets.

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Going forward, SK Telecom is planning to integrate e-commerce functionalities into its metaverse platform. The e-commerce capabilities will enable users to sell 3D content such as virtual items, non-fungible tokens, and tickets to various events.

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Like SK Telecom, Naver’s Zepeto is also innovating in the metaverse sector. The firm, in April 2023, entered into a strategic collaboration with KRAFTON on a new project named Migaloo. The two firms are establishing a joint venture, with a total investment of KRW 48 billion, and aim to launch the project in 2023.

• Migaloo will adopt a create-to-earn system, thereby enabling creators to produce works with the metaverse space, with other users purchasing and owning the works. The transactions are expected to be based on non-fungible tokens and blockchain, ensuring transparency.

Under the terms of the partnership, KRAFTON is set to secure a substantial 85% stake in the joint venture, with Naver Z retaining a 15% stake.

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South Korean metaverse-focused companies are also entering into strategic collaborations in the global market to further accelerate innovation in the segment. In a move aimed at expanding the realm of Web3 and the metaverse business, Dubai Multi Commodities Centre has forged a strategic alliance with metaverse-focused South Korean firms.

This collaboration seeks to drive the growth and development of Web3 technologies and metaverse initiatives. By joining forces, Dubai Multi Commodities Centre and the South Korean companies aim to harness the potential of this emerging digital landscape, fostering innovation and exploring new possibilities for businesses and individuals alike.

As part of the collaboration, the Dubai Multi Commodities Centre will leverage the expertise and know-how of South Korean firms to develop blockchain and metaverse-related services to create a new stream of wealth.

With the expanding global footprint of South Korean metaverse-focused firms, South Korea can emerge as the global hub for all things related to the metaverse over the next five to seven years. The dedicated fund announced by the South Korean government will also aid innovation in the sector from the short to medium-term perspective. Going forward, TechInsight360 expects the government to further invest millions of dollars more, to accelerate the growth of the sector over the next three to four years.

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