Wall Street analysts on the prospects of the metaverse

Metaverse-2022: Wall Street analysts on the prospects of the metaverse

“Metaverse” is perhaps the buzzword of late 2021. Facebook’s rebranding played a major role in popularizing this concept: In October, the largest social network was transformed into Meta, emphasizing the future direction of modernizing its infrastructure with the name. Thanks to Zuckerberg’s public relations, the development of virtual world concepts is becoming a priority for tech giants. Can’t you believe it? We understand. But in these companies’ third-quarter earnings reports, the word “metaverse” was mentioned nearly 450 times.

What is hidden behind the concept of metaverse? How promising is the new industry from an investment point of view?

industry of tomorrow

In the modern vision, the metaverse is the next stage in the development of the Internet, that is, a single digital space that unites the physical world with virtual and augmented realities. Within this “universe” you can do everything the same as in the ordinary world: communicate, shop, work, indulge in creativity. Real life savings can be spent in the metaverse. And vice versa.

Founder Microsoft Bill Gates believes that in the next 3 years, most online meetings will move to the metaverse and employees will interact with each other using VR headsets and digital avatars.

In December, Mark Zuckerberg’s Meta took another step toward launching a branded metaverse. Now Horizon Worlds – the current virtual reality project – is available for adults in the United States and Canada. And absolutely free. Meta speaks of an investment of 10,000 million dollars this year for the development of the metaverse.

This concept is familiar to crypto investors, mainly thanks to GameFi industry projects like Axies Infinity. Traditional financiers are only looking at the new industry. However, analysts are already seeing various revenue opportunities in the metaverse: technology development and adoption, entertainment, education, retail, and more.

v Morgan Stanley they believe that US consumers alone will spend around $8.3 trillion in the metaverse in the next few years. analysts bernstein estimate the potential of the new market somewhat more modest – at $ 2 billion. Kathy Wood – Executive Director ark invest – says the metaverse opens up multi-billion dollar investment opportunities and will impact every aspect of the economy in ways “we can’t even imagine yet.”

In an effort to discover how an investor can take full advantage of the potential of the metaverse, Insider surveyed analysts at the largest investment firms on Wall Street. Here’s what they had to say about the benefits and risks of investing in the industry of tomorrow.

BERNSTEIN: “The metaverse is evolutionary, not revolutionary… At least for now”

Mark Shmulik, head of analysis at Bernstein, called the metaverse a “natural progression” from the World Wide Web in a December blog post. With the advent of new technologies, the line between digital and physical reality will be completely blurred, and only then will it be possible to speak of a complete transition to a new era.

But don’t expect the full implementation of the metaverse to lead to the demise of mobile phones or laptops, says Shmulik. Already today, several elements of the infrastructure of future metauniverses have been created and are successfully working:

  • Means to access virtual reality through headsets: Search goal, HoloLens microsoft, apple watch from Apple;
  • virtual worlds Fortnite Y Roblox;
  • Applications Snapchat City Painter Y Niantic Pokémon GO.

According to preliminary analyst estimates bernstein, the infrastructure market for the metaverse could exceed $2 trillion, but the future growth rate cannot yet be determined.

«The moment is not yet known, because we are in an early stage of adopting the technology. In current realities, monetization in this area is practically absent.. But in the coming years, we may see the formation of new additional revenue opportunities in the metaverse industry, to be created in many markets.».

JEFFERIES: “The metaverse will begin its expansion with addictive gameplay”

analysts Jefferies led by Simon Powell, they believe that the metaverse may become “the greatest impact man has ever experienced” and lead to “the digitization of everything around him”. At the same time, experts clarify that more than 10 years can separate us from the full implementation of the project of the first metaverse.

Powell hopes that the metaverse will eventually be the focus of every aspect of our lives. And this process will be started by games, entertainment and social networks.

quote projects Roblox, Minecraft Y Fortnite, calling them the earliest examples of the making of the metaverse. Game developers – Activision Blizzard, Electronic Arts, Take-Two interactive software — are preparing to present their developments in this area in the near future.

Investors can “feel” the new technology and assess the opportunities that are opening up in blockchain-based games, for example, in Decentraland or Sandbox.

«The main innovation here boils down to the idea that assets created within the game can be taken out of the game and used elsewhere, both in the real and digital worlds.», Powell explains.

At the same time, the analyst opposes them to traditional online games, where internal values ​​are worth nothing outside of this type of project.

MORGAN STANLEY: ‘The metaverse has an $8 billion profit, but reaching that milestone won’t be easy’

Brian Novak – Head of Analytics Morgan Stanley – expects the main value of the metaverse for business to be the use of the virtual world as an advertising and e-commerce platform. In his opinion, only in the US this market can grow to 8.3 billion dollars. And very soon

Despite the incredible size of this market on a global scale, achieving leadership in the metaverse will not be easy, at least due to the powerful position of digital media and e-commerce platforms that are available to the inhabitants of virtual worlds in this moment.

«This suggests that most likely, any metaverse will have to work with other companies to encourage users to pass to their project… or find their own solution – a “killer” of competitors, so that people themselves want to pass to this metaverse. . In the end, we have to ask ourselves, what consumption problems for hundreds of millions of people can the metaverse solve?», Novak thinks.

The tightening of regulatory control, the high probability of loss of confidentiality – all this is difficult to write down as an advantage for the development of metaverses. Despite the growth in the number of users of social networks, the competition between them is intensifying, as the platforms are in a desperate fight for the audience of competitors.

At the same time, the problems of increasing the amount of advertising, monetizing everything and everything, insufficient protection against attacks by hackers and hackers are not solved in any way. Novak doubts that users will flock to metaverse projects, because exactly the same issues are in limbo there.

“If we look ten or more years from now, we can only say one thing: hundreds of millions of users will decide to place even more personal data on the Internet.», analyst predicts.

For those who nevertheless decided to invest in this industry according to the principle of “here and now”, Novak advises to pay attention to the recognized leaders among technology companies: Google, Meta, Plugin or Roblox.

Overcome growing pains

In other words, leading analysts from the largest investment firms agree that the metaverse industry has high investment potential. But investing right now isn’t practical for several good reasons:

  • imperfection of technologies;
  • regulatory uncertainty;
  • a lot of unresolved issues with cybersecurity, dominance of advertising, lack of effective revenue mechanisms.

At the same time, analysts allocate at least 10 years for the healing of the metaverses of all these childhood diseases. In the meantime, it is recommended to refrain from serious investments in this area. Or invest only in recognized industry leaders with the most diversified sources of income.

As a last resort, you can try to invest relatively small amounts in the GameFi industry – such an experience will provide at least a remote understanding of what exactly the metaverse can become in the future.

Responsible: Gartner, Sensor Tower, Bernstein, Jefferies, Morgan Stanley, PwC.