Mark Zuckerberg announced during Facebook’s annual conference (also called Facebook Connect) about changing the company name from “Facebook” to “Meta”. He emphasized that Facebook isn’t fully justifying what the company is doing right now and where it wants to head in the future. Besides the name change, Zuckerberg also narrated the future of the company in the “Metaverse”. Since then, we can see a lot of debate around metaverse on the internet. So, will metaverse be a key to letting Meta stock go up? Let’s find out with the current information we have on this matter.
Metaverse – Brief Overview
Before we start discussing the impacts of the metaverse and other details, let’s first clear out our viewpoint around metaverse.
Metaverse is like a combination of virtual spaces that you can explore or create with others that are not in the same physical space. So, you will be able to virtually interact with friends or colleagues, play games, hold meetings, do shopping, and perform many other things.
Metaverse is possible by combining aspects of virtual reality, augmented reality, social media, cryptocurrency, and the internet. By using VR/AR headsets, smart glasses, or any other immersive hardware, you will be able to access metaverse. It seems a fancy concept, but metaverse becoming mainstream still requires a couple of years or a decade.
Meta Current Investment on Metaverse
Meta (formerly Facebook) has been investing in virtual reality (VR) and augmented reality (AR) technology for many years, which also includes acquiring companies like Oculus. However, now it has become aggressive around metaverse technology. Just in the year 2021, Meta spending around metaverse research is expected to exceed $10 billion. It also plans to hire around 10,000 new employees in Europe in the next five years to increase its research around metaverse technology. So, Meta is on an aggressive mode to take the lead in metaverse technology.
Other than the fact that metaverse is a game-changing technology, it is also vital for Meta because the company needs something new, innovative, and big to sustain the revenue flow in the future. The company already sees a minor decline in ads revenue. Its 2021 third quarter ads revenue rose to $29.01 billion, which is a little down from analysts’ estimates of $29.57 billion. Meta blames Apple iOS 14 privacy changes as a major factor in the decline. Moreover, Meta is also struggling to attract young adults, as young adults are actively opting for other platforms, such as TikTok.
Metaverse & Meta Stock
Mark Zuckerberg projects metaverse to become a realistic technology in the next 5-10 years period, but many think that it’s at least a decade away. So, whether metaverse will help the Meta stock to go up demands on how quickly the company can release the early version of the metaverse. As per Bank of America research, Meta’s metaverse project can assist greatly in long-term growth and help drive the stock price to 22% upside potential. There are some other factors that can influence Meta stock with metaverse technology. Two of the leading factors in this perspective are listed below:
1. The Race to Metaverse
There is a race going on among tech giants to become the first one to offer metaverse. Other than Meta, the tech giants, like Microsoft, Apple, Google, Sony, Epic Games, and many others are actively spending millions in metaverse technology. Whichever succeeds in offering the first realistic version of metaverse will lead the race. But why is becoming the first one that important?
Tech giants are believing metaverse to be the next “big” thing after smartphones. In fact, many Metaverse investing funds have emerged shortly after Facebook put this concept in the spotlight. The avatar-based gaming apps, such as Fortnite and Roblox, are already successful in grabbing millions of users. The concept of digital avatar is becoming popular, so that’s one indication that how consumers are going to respond when they will get to experience a virtual interactable world. So, whoever manages to lead the race will instantly grab consumers’ attention and investors’ money.
Meta didn’t manage to get involved in the smartphone industry and now it has to follow the privacy changes made by Apple and other platforms. Therefore, it is important for Meta to lead the metaverse race. So, the stock price of Meta can witness a prominent surge if we get to hear any realistic product release by the company.
2. Who Adopts Metaverse First: Businesses or Consumers?
Other than becoming the first one, the next concerning factor is that who is going to adopt metaverse first? Whether it would be businesses or consumers? If you recall, businesses were the first ones to adopt PC compared to consumers. However, the opposite trend was seen with smartphones. If we look at Meta’s Oculus brand, then consumers are dominating in the purchases of VR devices. So, it seems consumers will be the first ones to adopt metaverse, but the opposite can also be true.
On the other hand, Microsoft is focusing on VR and AR from a different angle. Microsoft has focused its strategy around VR and AR to business-related high-value use cases, like construction and engineering. So, if Mark Zuckerberg is right that people want metaverse to meet and interact virtually, then Microsoft seems a potential favorite considering its top-notch product “Teams” and enterprise-centric approach. Microsoft could integrate metaverse into Teams and use the personal profiles and data it possesses already to offer valuable service. If that happens and businesses become the early adopters of the metaverse, then Meta might have to face serious competition.
It is a bit early to guess how the Meta stock will respond to its metaverse project. If the company fails to achieve the targeted goals or someone else, like Apple or Microsoft, manages to offer before it, then we might witness a significant drop in Meta stock price.
However, Meta is doing its best to lead the race. The company is building multiple generations of AR and VR products at the same time, working on a new OS and development model, content studios, digital commerce platform, etc. In a nutshell, we just have to wait and watch how this metaverse battle shapes itself in the coming years, which is also going to reflect who is going to lead the stock market.