The metaverse has a great potential to drive up business profits but there’s a lack of proven success for companies to pour big money into it now, showed a survey by KPMG.

“For [tech, media and telecom] companies, this poses the classic investment dilemma: where and how much to invest, to avoid being blindsided by a metaverse pioneer, but also to help minimize the chance of ploughing funds into projects that become redundant,” said Mark Gibson, TMT leader for KPMG U.S., in the report.

The metaverse refers broadly to the concept of a digital world where people live, work and play, and interact with one another as avatars through virtual reality platforms.

The KPMG survey showed that 60% of TMT executives think metaverse can drive revenue and profits and lower operating expenses as transactions shift from physical to virtual. They believe it can also improve customer satisfaction through interactive experiences, the survey showed.

But a similar proportion acknowledged that, despite the metaverse’s potential, it still needs further refinement and development, said KPMG.

“The majority of TMT executives taking part in our survey feel that the metaverse is several years from becoming a thriving commercial ecosystem,” said the report.

Most of the global companies polled — or 70% — are investing less than 5% of their technology budgets in 2023 into the metaverse, and 27% have not allocated any funds to metaverse.

The report took into account responses from 767 tech, media, and telecom executives at companies that earn more than $250 million revenue annually. The firms were from 13 different countries and five continents.

Many in the tech, media and telecom sector want to see evidence of greater metaverse usage before making significant investments, the KPMG report said.

According to 40% of respondents surveyed, there is a lack of successful use cases to show a return on investment for the metaverse.

TMT executives surveyed remained skeptical about the viability of metaverse, with 27% saying it is “an unattainable pipe dream” and 20% describing it as “a fad that will never live up to its hype.”

Close to 50% of the respondents revealed their companies are either “watching and waiting” or assessing long-term business value before making major investments, said the report.

Tech companies from Meta to Disney have invested billions into the metaverse, but have yet to see solid success.

Meta’s metaverse unit posted an operating loss of $13.72 billion in 2022. The stock declined 60% in 2021 when CEO Mark Zuckerberg declared that metaverse will be the company’s future, and renamed Facebook to call it Meta. The company still relies heavily on advertising for its revenue.

One industry observer told CNBC that Meta stock popped after Zuckerberg de-prioritized metaverse.

In fact, Meta executives have previously admitted that “many products for the metaverse may only be fully realized in the next 10 to 15 years.”

Meanwhile, Disney reportedly cut its metaverse division as part of layoffs announced last week. The company had never explicitly outlined its metaverse plans.

“Suffice it to say our efforts to date are merely a prologue to a time when we’ll be able to connect the physical and digital worlds even more closely, allowing for storytelling without boundaries in our own Disney metaverse,” Disney’s former CEO Bob Chapek said during its 2021 earnings call.

Many of KPMG’s survey respondents say their companies are underprepared for the metaverse.

“The biggest barriers to investing in and embracing the metaverse are lack of technology to support experiences, high cost of development, and a dearth of appropriate employee skills,” said KPMG.

About half the respondents said there is lack of proper technology to support the metaverse, while 50% said the high cost to develop metaverse is preventing their companies from fully investing in and embracing a strategy.

Less than half, or 49%, noted that their companies lack employee skills to run the metaverse.

“There’s also a high potential upside in terms of ROI on outcomes such as higher employee retention — which has become a critical strategic objective for many companies — and other similar enterprise applications,” the KPMG report said.