The world of immersive technology is undergoing a seismic shift as new innovations rapidly alter the digital kingdoms, we live in. One of them is the emergence of the “metaverse”, touted by Big Tech as the inevitable future of the internet, according to Vijay Valecha, CIO at Century Financial, a prominent UAE financial consultancy firm.
For those who are unaware, the social media giant, Facebook, announced the change of its name to Meta on 28th October 2021, and Meta materials, a Canadian company that has nothing to do with Facebook saw its shares surge as much as 30% after-market, and finally ended with a 4.6% gain in regular trading Friday at $4.70 per share. Meanwhile, Facebook (now Meta) shares gained 2% to end the day at $324.
While the term metaverse might sound new to many, it’s essentially been around for over three decades. Passionate readers of famous books like Snow Crash or cinematic lovers of films like Ready Player One or The Matrix, know that the metaverse isn’t a new concept. It has been a theme in science fiction for decades. But soon, metaverse won’t be referenced purely in science fiction movies and books. It has already started attracting a lot of buzz in Silicon Valley and aims to become real.
But, what exactly is the metaverse? Where does it stand now and how will it look in a couple of years? How can interested investors capitalize on the investment opportunity in the metaverse?
The Metaverse: ‘An Embodied Internet’
The term metaverse is a combination of the prefix ‘meta,’ which means beyond, and ‘universe’. It generally refers to shared virtual world environments which can be accessed by people using different devices. Regarded as the next best thing in technology, the metaverse can be considered a digital space made more lifelike by combining virtual reality (VR) and augmented reality (AR). It can be regarded as an immersive world where millions of users, or their avatars, can slide in and out of a plethora of activities as they socialize, work, and play. It is expected to be the successor of the mobile Internet, similar to how Web 3.0 is expected to become the successor of Web 2.0.
Why is it taking off?
The concept has surged in popularity post the COVID-19 pandemic. As more people function remotely, there has been increased demand for ways to make online interaction more lifelike. Fans of the metaverse see it as the next stage in the development of the internet.
From Gaming to Concerts and E-Commerce
Video game platforms are the best representation of proto-metaverse worlds. Roblox, Epic’s “Fornite”, Niantic’s “Pokemon Go”, Facebook’s “Horizon” and Microsoft’s “Minecraft” all have grown organically to attract millions of users. Some like Roblox and Fortnite are expanding beyond games into other entertainment, social, and e-commerce applications.
Fortnite has held virtual concerts from the likes of Ariana Grande and Travis Scott, engaging millions of users. Last month, alternative rock group Twenty-One Pilots kicked off its latest tour in Roblox with a virtual concert. Besides, consumer brands such as Netflix (NFLX), Warner Bros., and others have created interactive virtual world experiences on the Roblox platform. The world’s biggest fashion companies such as Vans (VFC), Gucci have also experimented with making virtual clothing, which people’s avatars can wear in metaverse environments.
The metaverse is expected to transform every business and give birth to countless new entrepreneurship opportunities
When it finally launches, the metaverse will be much more than what it is today. Human beings will be virtually present with others and can move between virtual spaces using avatars and other digital items. As a result, it could also become an exciting area to invest in.
History has shown that new emerging technologies which transform major industries and radically impact society have often created enormous wealth-building opportunities. (e.g., Smartphones in the 2000s, 3G/4G networks). The rewards of investing in innovative tech stocks have been enormous, and the most evident example would be Tesla, with its share price skyrocketing from $90 in 2020 to $1200 in early 2021.
However, risks are equally high, as should the idea fail, it could result in massive losses. It is a common law of investing that the most rewarding opportunities are often the riskiest, and that is certainly the case with one of the upcoming sectors: Metaverse.
How to invest in the Metaverse
While much of what the metaverse is might still be vague, there are already opportunities for people to indirectly invest in the potential success of the metaverse.
One of the ways is by buying shares in publicly traded companies that are involved in the development of the metaverse.
- Facebook, or Meta, as it would be called now, is investing heavily in the metaverse. During a recent earnings call, the company said that it will invest $10 billion this year in Reality Labs to build the metaverse. It has already spent $2 billion on acquiring Oculus, which develops its VR products, and will continue spending millions each year on R&D.
- Snap will provide investors with exposure to both AR/VR and a glimpse of what e-commerce will look like in the near future. Snap is developing Spectacles to reach as many users as possible.
- Nvidia besides providing the usual CPUs, GPUs, and data centers, will offer the most crucial part, its Omniverse.
- Tencent(with its 40% stake in Epic Games) and Unity Software could provide the leading operating system for the metaverse, which could dominate the markets just like iOS and Android today.
- Roblox may be seen as a game, but ideally, it is a platform to build on, create with, and interact with others around the globe.
- Microsoft and Sony are both working on hardware (Xbox and PlayStation) but are also involved in the future of gaming through cloud computing. Sony has invested close to half a billion dollars in Epic Games, while Microsoft has Minecraft, which could be compared to Roblox. Besides, Microsoft sees Metaverse as a collaboration and business tool. Gaming stocks such as Nintendo, and Activision Blizzard will also be prominent.
Alternatively, investors can gain exposure to the expanding metaverse industry by buying a metaverse ETF. The Roundhill Ball Metaverse ETF (META), is an example of an ETF to invest in and reap the benefits of the metaverse. Roundhill Investment’s ETF provides investors with exposure to companies such as Microsoft, Roblox, Tencent, Unity, Amazon, and several others.
As the metaverse adoption popularizes, blockchain-powered metaverses that utilize NFTs, and crypto assets will also benefit. NFTs are digital assets that digitally represent a wide range of unique items such as art, in-game, and collectible items. While many metaverse platforms provide free accounts for people to join, trading of virtual assets on blockchain-based platforms requires cryptocurrencies. Several blockchain-based platforms require Ethereum-based crypto tokens, such as MANA for Decentraland and SAND for The Sandbox, to purchase and trade virtual assets. The cryptocurrency rallied to as high as $4.95 on 31st October 2021 from merely $0.89 on 28 October 2021 and is currently trading near $2.76 at the time of this writing. Meanwhile, SAND surged from $0.76 to as high as $2.45 during the same period. Currently, it is trading near $1.60.
Virtual world tokens
Virtual world tokens are nothing, but digital tokens linked to the virtual reality industry. An example of a virtual world token is the Metaverse Index (MVI) token (up by 40% in last 3 days), which provides holders with exposure to a range of tokens from crypto projects. In a sense, the Metaverse Index token acts like a metaverse ETF for the crypto markets.
Future of the metaverse
The metaverse is anticipated to be the next big thing after the internet which will create a virtual ecosystem for humans. Bloomberg Intelligence recently projected that the metaverse’s market size can reach $800 billion by 2024, while ARK Invest forecasts the revenue from virtual worlds could reach $400bn by 2025, up from approximately $180 billion in 2021.
Accounting and advisory giant PwC estimates VR/AR technologies to deliver a $1.5 trillion boost to the global economy by 2030, compared with $46.5 billion in 2019. It is unclear to what extent a true metaverse, which replicates real-life perfectly, is possible or how long it would take to develop. However, the next few years will likely be a crucial time for this niche as more developments can be announced by the companies that are participating in this disruption.