The metaverse is the next generation of the mobile Internet: immersive, virtual and interactive. Despite the existence of emerging versions, the technology is far from mature, and the lack of interoperability of systems is a major obstacle. Many companies will need to adapt their business models to be able to operate within an interoperable metaverse.
In general, investors overestimate the short-term impact of such technologies, which drives valuations, but underestimate their long-term impact on the competitive landscape.
More specific investment opportunities should appear from 2025, particularly in the experiences segment.
The race, in virtual space, towards the "metaverse" is on. What does this immersive online future hold in store for us, why is it important and where to find value? In the face of growing investor interest, we are evaluating the short-term excitement and the long-term opportunities.
When Facebook changed its name to Meta Platforms in October, the term “metaverse” shifted from geek vocabulary to mainstream. This growing interest reflects the intrinsic attractiveness of thematic investments, particularly in the technology sector. If the concept of metaverse has long-term appeal, we believe that we are still at the stage of "Media Overexposure ": a phenomenon already observed in the early days of 3D printing, at the various stages of 3G / 4G wireless technology. / 5G and for the “Internet of Things”. Yet while investors tend to overestimate the short-term impact of new technologies, they also tend to underestimate the long-term influence of such a drastic change on the competitive landscape as well. We take a look at the opportunities and likely impact below.
What Is Metaverse?
There is no single definition of the metaverse, a portmanteau word that associates "meta" ("beyond / after" in Greek), and "universe". This is a hypothetical iteration of the Internet. The most common description of the metaverse is a virtual reality (VR) space, that is, an alternate economy or alternate world where users can interact with each other in a persistent computer-generated environment. Users often appear as an avatar: an icon or digital figure that symbolizes them. We can access the metaverse with different technologies, for example computers or smartphones, but more often, and in an immersive way, with augmented or virtual reality (AR / VR) glasses. We advise investors curious about what a metaverse might look like to watch Steven Spielberg's Ready Player One movie.
One of the companies at the forefront of this concept is Meta Platforms (formerly Facebook). Its Virtual Labs division offers virtual reality headsets (Oculus Quest), which, from 2022, will integrate a new form of mixed reality based on face and eye tracking technology. The company also offers Development Tools (SparkAR) that help creators design new virtual experiences. The SuperNatural app, which is part of the Virtual Labs division and offers immersive virtual reality fitness with Oculus Quest, is therefore an interesting use case. It offers new exercises every day, supervised by authentic trainers, on the most beautiful sites in the world.
What Are The Pillars Of The Metaverse?
We illustrate opposite the seven levels necessary for the construction of the metaverse ecosystem. These include the basic infrastructure and necessary tools, including connectivity, computations, user interface and virtual environment. The 3D environment and geospatial mapping form the basis of extended reality (XR) which combines mixed, augmented and virtual reality. Most of the technologies needed to create this ecosystem already exist, but more are still being developed. In addition, many services will evolve to develop content (creators' economy), market it (commerce) and make it accessible (search). Ultimately, the metaverse will translate into experiences encompassing gaming, social interactions, shopping, teaching, and live events like sports and concerts.
There are still only a few experimental metaverse. The best examples concern video games such as Fortnite, in “free-to-play” (F2P) mode, or Roblox, whose platform is generated by its users. Both have some of the characteristics mentioned: they go beyond simple gaming by incorporating aspects such as virtual concerts or the purchase of digital assets. In these virtual cashless environments, blockchain technology and cryptocurrencies could play a key role. Non-fungible tokens (NFTs or digital tokens representing ownership of assets) built on blockchain technology could also create an interesting ecosystem for creating and monetizing digital content. They could, for example, confer the right to use works of art or own creatures created in the metaverse, paving the way for a new virtual economy. In this area, human creativity has virtually no limits.
Why Could The Metaverse Become Important?
The goal of the metaverse is to create an immersive experience intended to replace the mobile internet. Whether it's meeting, working, playing, learning, or shopping, metaverse will allow real-time content to be consumed through virtual experiences. The metaverse will not be a place where we share lived experiences, but a place where we live experiences together.
As the diagram below illustrates, the history of digitization has evolved from what our children would call the digital stone age (pre-Internet) to the World Wide Web (access to any content, anytime). everywhere), followed by the Internet of services, where the level of innovation has been boosted by an improvement in IT platforms which has enabled the development of electronic commerce, interactivity and productivity.
The next step was the rapid proliferation of smartphones, giving rise to the hyperconnected society and the viral spread of social media. Today, technology is no longer confined to our smartphones, but it is present everywhere, in the plethora of connected devices equipped with sensors (Internet of Things). The Internet has moved from a situation where humans speak to humans, to one where humans speak (or try to speak) to machines, and finally to a context where machines speak. to machines.
This development radically changes human relations. Sometimes technology doesn't just enhance our skills, but replaces us, as algorithms can perform specific tasks with surgical precision. With the potential advent of the metaverse, we find ourselves on the dawn of a new phase where interactions will once again take center stage, but in a virtual fashion.
What Are The Main Challenges of Metaverse?
As the technological bases are still evolving, no standard for interoperability between multiple metaverse has been defined. We believe this is a critical point, as consumers assume they will be able to move and share virtual assets and experiences across platforms without barriers, while developers intend to choose the right cross-platform tools. As they wish. In the future, we anticipate that many large-scale platforms will be forced to adapt their business models to be able to operate in an interoperable metaverse. Data privacy and security will also be crucial as a vast amount of potentially sensitive personal information comes into play. Other concerns relate to mental health, if virtual worlds lead users to shy away from responsibilities and interactions. of the real world.
How To Expose This Topic?
In the short term, investors tend to overestimate the impact of new technologies, boosting the valuation of the few "pure thematic stocks" that benefit from an influx of funds. The tangible results are generally disappointing, as deployment and implementation often turn out to be more complex and take longer than expected. The metaverse is certainly an interesting technological opportunity, but its tangible economic benefits are still distant.
Advances in developer tools and workflows are critical to creating metaverse content. We can imagine a world where it will be as easy to create content in the metaverse as it will be to establish an e-commerce site today. We often hear that the main obstacle in this area is the standoff between closed platforms and open platforms. Protected spaces or "walled gardens" solve some of these content creation problems because they are willing to offer everything to their users. Conversely, it is difficult to bring together all the necessary tools in a fully open ecosystem, at least during the early stages of development. It should be noted that the actors already present could have a head start in the design of the necessary tools and equipment.
From our perspective, the main areas of investment will actually be at the level of the companies that provide the pillars and tools supporting the metaverse infrastructure. Currently, these pillars and tools are used for other purposes, including digitization, cloud computing, artificial intelligence (AI) or video game graphics, which dilutes the thematic exhibition somewhat. Basic enough to begin with, the experiments will gradually become more sophisticated, but this entire phase will be characterized by heavy investments and low profits, as the lack of interoperability and standards will hamper widespread adoption by potential users.
We believe that the vision of metaverse and its economic benefits will not materialize as quickly as many hope, leading to the risk of disappointments and even price drops down the road. At this stage, we advise investors to exercise caution before allocating funds to this thematic, as returns will only appear in the medium term (over five to ten years) and the technological roadmap is still at a low point. very early stage, leaving many questions unanswered.
However, investors also tend to underestimate the influence of such technological upheavals on the competitive landscape. Even if they are not always noticeable, technological shifts are still significant. In the medium term (from 2025), the pillars of the metaverse should be mature enough to distinguish more specific / targeted investment opportunities, especially in the experiences segment. Given the still uncertain timing and following a standard S-shaped adoption curve, additional opportunities may materialize at this later stage. In the meantime, we recommend that potential investors in the Metaverse keep their feet on the ground.