THIS may come as news, but it’s likely you’re living in a dictatorship. Not Russia or North Korea, but rather online.

Mark Zuckerberg is the emperor of this digital country, which boasts 2.8bn citizens across its four regions – Facebook, Messenger, WhatsApp and Instagram. Although he controls most of the voting rights, he is a benign dictator. In return for collecting our data which allows him to target advertising more precisely, he lets us live there for free.

All is not well in Zuckerberg’s kingdom, though. The population is declining as younger citizens move to more exciting destinations. Chinese-owned TikTok, for example, has more than one billion users, each spending an average of 14 hours a month there. And companies like Activision Blizzard – recently bought by Microsoft for nearly $70bn – are capturing the hearts, minds and wallets of gamers seeking solace from Covid-19 lockdown virtually.

These changing habits – and Apple’s crackdown on data collection via Facebook’s platforms – caused the company’s share price to halve from its all-time high last year.

In response, Zuckerberg, under the new auspices of Meta Platforms Inc, has committed more than $10bn a year to the ‘metaverse’ – a vision for the third age of the internet that follows Web 1.0 (defined as browsing centrally created content) and Web 2.0 (user-generated content). Here is a virtual world where you can connect with people, via your avatar, in a digital environment that can feel just like real life.

Retailers from Amazon to Tesco envisage us browsing virtual shopping aisles and even fashion houses Gucci and Louis Vuitton have announced plans to sell virtual clothing via ‘non-fungible tokens’ (or NFTs). $54bn of these virtual goods were sold last year alone.

Education, healthcare, and the arts, from gallery tours to pop concerts, are all potential applications. Technology consultant Gartner believes one-in-four of us will spend at least an hour a day in these virtual environments.

The attitude of many businesses is summed up best by Gucci boss Francois-Henri Pinault, who said: "We are in an extremely early stage…nothing is certain; it might fizzle out. But the philosophy of the group, rather than wait and see, is to test and learn."

Virtual reality provides opportunities beyond the technology industry. Companies in all sectors are adopting new platforms and content, while remaining mindful that the internet’s first two iterations saw huge disruption to incumbent business models and the emergence of new businesses which now dominate our lives. Commercial success will partly be to do with technology and partly to do with the experience consumers will enjoy.

We overlook unintended societal problems at our peril. Recent whistle-blowers have revealed how Instagram is damaging teenagers’ mental health, while the World Health Organisation now recognises video game addiction as an illness.

Governments, regulators and law enforcement are struggling to keep up and for now, one thing seems certain: if they continue to deploy a ‘wait and see’ strategy in the face of companies whose every instinct is to ‘test and learn’, their fate is a perennial game of catch-up.

Stuart Dickson is a Senior Investment Director at Adam & Company