A Beginner’s Guide to Investing in the Metaverse

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If you thought investing in the real world was complicated, then beware: Investors now also need to get to grips with the metaverse.

Facebook founder Mark Zuckerberg believes it’s “the next frontier for connecting people”, which is why he renamed the social media platform to Meta last year.

but what is it exactly?

The metaverse is “a virtual reality that can become an everyday reality,” says Tarik Chebib, chief revenue officer at Capital.com.

It’s the next phase in the evolution of the internet, where the physical world meets virtual and augmented reality (AR), he says. A place where “people interact in a shared environment made real through specialized virtual reality [VR] helmets, like Oculus, or glasses”.

Investors eager to embrace the new reality have an early advantage, with Bloomberg Intelligence predicting the metaverse will be worth $800 billion by 2024, Chebib said.

“The internet will end as we know it and the metaverse will totally reshape the global economy.”

Players are already interacting in alternate realities on fortnite and Robloxand it helps us visualize what the metaverse might look like, adds Chebib.

“They’ve already created worlds where people buy skins, avatars, and collect different things.”

The metaverse isn’t as new as it thinks, says Jonathan Tseng, principal analyst at Fidelity International.

“In 2003, an app called Second Life promised a new way of living virtually, using avatars to shop and socialize digitally. Big brands rushed to open virtual stores but it never attracted more than a million people,” says Tseng.

It seems overrated today, but the Metaverse may still be the long-term future of mobile internet. Rather than accessing the web through a computer or mobile screen, it could “become a digital layer that can enrich and enhance the surrounding world,” he adds.

Users could one day strap on their helmets to teleport to the Olympics, change their window view to a Caribbean beach, or box with Mike Tyson.

“Non-fungible cryptocurrencies and tokens [NFTs] can be used to purchase and prove ownership of virtual goods. The metaverse will also bring the Internet of Things to life and may even issue its own money,” Tseng said.

The technology still has a long way to go, as AR headsets “require improved computing power, battery life, spotlights” and more to become commercially viable, while the metaverse excludes those without Internet access.

“Its immersive nature could make it even more addictive than 2D mobile apps,” says Tseng.

Not all companies are convinced. Nintendo is avoiding the Metaverse for now, citing a lack of “new surprises and fun”.

However, others are more enthusiastic. The Metaverse is a fully immersive virtual world, in which people can perform many activities they might do in daily life, from socializing, shopping and gaming, to exchanging digital assets, says Richard Shearer , chief executive of artificial intelligence company FinTech Tintra.

“It is not yet a unified, interconnected virtual world like the Internet, but a universe of virtual worlds, each existing in its own silo.”

The big question is how to connect them and enable the exchange of virtual goods and services.

Meta, formerly Facebook, has been busy filing trademarks for activities and services including financial transaction processing services, online social networks and dating, Mr. Shearer said.

“McDonald’s recently filed trademarks for ‘virtual food delivery,’ where meals can be ordered in a virtual world and delivered in real life.”

The metaverse even has its own real estate and last year, Metaverse Group, a subsidiary of Token.com, paid over $2.4 million for virtual land in the fashion district of the metaverse platform. Decentraland.

That was just a fraction of last year’s $501 million in real estate sales across the four major metaverse platforms – The Sandbox, Decentraland, Cryptovoxels and Somnium Space – a sum that is expected to reach $1 billion this year.

In January, a buyer spent $450,000 to be Snoop Dogg’s neighbor in the Snoopverse neighborhood of metaverse platform The Sandbox, says MGIM analyst Jackson Franks.

“An infinite number of platforms within the metaverse can be created and big names in technology such as Meta, Microsoft, Epic Games, Apple and many others are investing billions of dollars to build their own platforms that , they hope, will be the same stature as planet Earth.”

Buying real estate in the metaverse is risky because the market is young and the supply is endless, Franks says.

There is also currency risk as the metaverse is blockchain-based – and we all know how volatile cryptocurrencies can be.

Mr. Franks is suspicious. “While fascinating, I don’t see the metaverse replacing the real world anytime soon. We are constantly looking for new opportunities to add value to our investors, but the metaverse is not one of them,” he says.

Still, the metaverse already has practical real-world uses, says Ben Barringer, global technology research analyst at Quilter Cheviot.

“Semiconductor and graphics card giant Nvidia has built its Omniverse platform for virtual collaboration and real-time simulation, which, to take one example, BMW is using to build a virtual factory to help visualize, test and plan products, reducing costs by up to a third.”

Meta has Horizon Workrooms platforms, which are virtual reality spaces for people to meet and brainstorm ideas, and test products before they are created in the real world.

McDonald’s recently filed trademarks for “virtual food delivery”, where meals can be ordered in a virtual world and delivered in real life

Richard Shearer, Managing Director of Tintra

“It’s the most practical application of the metaverse, and that’s where the real returns will be,” Barringer says.

Skeptics say the Metaverse will only take off when users can ditch those bulky VR headsets.

“No one likes putting things on their face unnecessarily, which is why 3D TV glasses and Google Glass never caught on. The hardware needs to be lightweight and wireless so people can wear it for long long periods of time,” says Barringer.

“Technology may even make facial material unnecessary, but that seems a long way off.”

Instead, investors could focus on hardware, especially companies making the headsets or graphics processing units (GPUs), he says.

“Oculus, owned by Meta, is the leader in headsets, while Nvidia is the leader in GPUs.”

Apple is another company to watch. “It could be the difference between wearable technology taking off or being a big flop.”

Nvidia is attractive as an investment because it already has strong gaming and artificial intelligence businesses.

“If the metaverse becomes a big deal, that’s an added bonus,” Barringer said.

Similarly, American semiconductor company Advanced Micro Devices may one day provide GPUs for the Metaverse, while Adobe’s software will be used for metagraphic design, making Metaverse games more secure.

Look for companies that have a strong investment case, with or without the metaverse, advises Barringer.

Some opportunities may surprise investors, said Mike Rhodes, chief executive of ConsultMyApp.

“Ray-Ban collaborates with Meta to create smart glasses. Imagine if bulky VR headsets could be replaced with, say, contact lenses that you can wear all day.

Any investment is an “informed bet” in a market that doesn’t even have a universally accepted software platform, says Rhodes.

“Investors who focus on companies that generate business through targeted partnerships with smaller, older incarnations of the Metaverse, such as fortnite Where Minecraftperhaps the best placed.

Mr. Zuckerberg’s meta is the obvious game, but Mr. Chebib favors Chinese social media company Tencent.

“It has stronger game expertise as the top game distributor in China.”

Tencent also owns a 40% stake in fortnite creator Epic Games and a 49% stake in Roblox.

“Add Tencent’s cloud infrastructure, AI capability and digital payment service and it seems to have most of the key metaverse ingredients,” Chebib says.

Spend time trying to figure out what’s going on and identify potential opportunities

Tarik Chebib, Chief Revenue Officer at Capital.com

Microsoft could be another metaverse winner, as it owns Minecraftthe most popular video game of all time.

“Microsoft has strengthened its dominant position with the purchase of Call of Duty manufacturer Activision Blizzard for $69 billion,” Chebib adds.

He notes that Samsung is working hard on a 6G network that he hopes will provide the fast speeds the metaverse needs to thrive.

“China’s Huawei is also working on 6G and expects it to hit the market in 2030.”

Metaverse transactions require processing, and the Ethereum cryptocurrency is the currency of choice for the metaverse, providing investors with another way to get started in this virtual world.

These are still early days, so be careful, says Mr. Chebib.

“Spend time trying to understand what’s going on and identify potential opportunities.”

Updated: April 05, 2022, 05:00

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