The metaverse is coming. It will be a digital world where we’ll meet online through virtual reality (VR), augmented reality (AR) and video. It will be a place for working, learning and interacting.
Facebook (now rebranded as Meta) [FB] CEO Mark Zuckerberg has described the metaverse as “the successor to the mobile internet”. But how can we expect it to evolve over the coming months and years?
Facebook has already taken tentative steps towards the adoption of the metaverse by opening up Horizon Worlds to the public in the US and Canada. The app allows users to create digital avatars, interact with each other and build games together. Zuckerberg said on the company’s third quarter 2021 earnings call in October that Facebook Reality Labs will have spent a total of $10bn on AR and VR ventures in 2021 alone.
Morgan Stanley analyst Brian Nowak expects the metaverse to be an $8trn opportunity, but it’ll be some years yet before it’s known whether the investment will pay off.
$8trillion
Market size Brian Nowak expects the metaverse to attain
Novak wrote in a client note seen by CoinDesk that the revenue opportunity presented by the metaverse will occur over the long term, due to potential challenges regarding adoption and regulation.
In any case, Facebook is well positioned to make the metaverse a success, which means it will likely be “all upside and another layer cake of multi-year monetisation,” Novak added.
Snap
Another stock rated by Novak for exposure to the metaverse is Snap [SNAP].
Jefferies analyst Brent Thill told Yahoo Finance Live in October that Snap can claim to be closer to the metaverse than any product offering from Facebook.
“You can try on clothes and see how they match right now with these augmented reality lenses,” Thill said. “Snap is, in my opinion, way ahead of Facebook there. If you want to play the metaverse right now, I think Snap's a better way to play it. Facebook will get there” - Jeffries analyst Brent Thill, per Yahoo Finance
Earlier this year, Snap launched 3D Bitmoji, a feature that allows users to bring their virtual avatars to life, including customisable clothing. “You can try on clothes and see how they match right now with these augmented reality lenses,” Thill said. “Snap is, in my opinion, way ahead of Facebook there. If you want to play the metaverse right now, I think Snap's a better way to play it. Facebook will get there.”
Thill pointed out that Snap’s users were generally younger than the Facebook demographic. They make purchases using smartphones and are more likely to buy in the metaverse – especially fashion and accessories.
Bumble
An unlikely entrant into the metaverse could be online dating platform Bumble [BMBL]. On its third quarter 2021 earnings call, founder and CEO Whitney Wolfe Herd said the app’s BFF offering – which lets subscribers use the same swiping and matching algorithms for friendship instead of dating – will give the company an opportunity “to become a leader in the Web 3.0 world, which is all about community.
“[Already] built on blockchain technology, we believe [BFF] will enable a level of participation and empowerment that will make our mission come to life. In the near term, this means new engagement, participation and creator models.”
Ultimately the product is designed to offer higher personalisation, possibly through communities, virtual goods, and experiences, added Herd.
Although those ‘experiences’ haven’t been developed yet, Bumble is looking at ways to integrate Web 3.0 and the metaverse into a future BFF relaunch.
Growth prospects
The metaverse as a term and concept may have become popular overnight, but it will be a long time before it is built.
“[While there’s plenty of hype around the metaverse] it’s an important concept for investors to understand when thinking about the longer-term growth prospects” - Bernstein internet analyst Mark Shmulik, per Barron's
In a note to clients reported by Barron’s, Bernstein internet analyst Mark Shmulik argued that while there’s plenty of hype around the metaverse, “it’s an important concept for investors to understand when thinking about the longer-term growth prospects.”
Shmulik added: “While a fully functional, seamless persistent metaverse isn’t happening any time soon, metaverse-like features and advancements in how we connect with technology and the internet are already under way and driving modest, incremental improvements.”
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