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Public Companies Were Buzzing Over This Potential Trillion-Dollar Trend in Q3

By Jon Quast, Jose Najarro, and Sanmeet Deo – Dec 8, 2021 at 7:00AM

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Everybody wants to find a way to profit from the metaverse.

According to NVIDIA, the metaverse "is a shared virtual 3D world, or worlds, that are interactive, immersive, and collaborative." On Oct. 28, Facebook (META 2.20%) changed its name to Meta Platforms, signaling its ambitions to create a platform for the metaverse. And this move from Facebook highlighted the metaverse trend for many investors for the first time. 

In this video clip from Motley Fool Backstage Pass, recorded on Nov. 29, Fool analyst Sanmeet Deo talks with contributors Jon Quast and Jose Najarro about the metaverse and how public companies discussed their metaverse plans at an unprecedented rate in the most recent quarter. Considering many analysts believe it will be worth trillions of dollars, it's easy to understand why the buzz for this secular trend is growing.

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Sanmeet Deo: Speaking of metaverse, I don't know if you guys, one thing I did want to share, which I thought was interesting, there's been a lot of buzz and a lot of talk about the Metaverse but one thing I saw as of recently that was interesting was Metaverse and earnings calls.

Take a look at this: In the third quarter of 2021, "metaverse" was mentioned 449 times earnings call, which is nearly four times that of last quarter. This is sourcing Bloomberg as of Nov. 18, 2021. It's just been that steadily rocketed up this last quarter being mentioned in earnings calls. The buzz is growing, companies are talking about it. It's real.

Jon Quast: It's real and probably also over-hyped in the short term. I think that's where I stand on it right now. It's over-hyped in the short term. It's probably under-hyped in the long term, and we're going to see volatility in between now and then.

Jose Najarro: Yeah. I've got to agree with Jon there on the over-hyped short term. I think it's just going to create a nice amount of volatility. Some of my positions within that market are super exciting right now, and I'm happy to see the prices go up. But at the same time, I'm like they don't deserve this price up right now. I'm expecting that downfall soon enough.

Deo: Yet another article with the metaverse as Tim Sweeney, the CEO of Epic Games, creator of Fortnite, came out and said, "Over the coming decades the metaverse has the potential to become a multi-trillion-dollar part of the world economy so the next two years are going to be critical for all the metaverse aspiring companies like Epic, Roblox, Microsoft, Facebook is race to get to a billion users. Whoever brings on a billion users first would be the presumed leader in setting the standards."

That was an interesting take on the metaverse and the strategy, and like what you said, that there has been a lot of hype, no doubt, then these companies need to definitely prove it out. They need to build these things and, and gather users. But I liked how you frame this and how we can try to figure out who is going to be a winner, who can be a sustainable winner. He laid out what it's going to take. It's almost like a billion users or first one to that has a high chance of success. I thought that was an interesting take.

Najarro: In the perfect gaming world, like all these companies that are talking about metaverse in the perfect gaming world they all unite to create one metaverse that works well with each other. That would probably be the best way. But we know companies, no one is going to go and be like, OK, let's team up, let's unite our platforms together and see how it goes from here.

Quast: I think to Sweeney's point, what he's talking about is there is going to be clear network effects here in the metaverse economy. What I mean by that is it's like why everyone started using Facebook and moved off of Myspace. Because all of your friends were on Facebook and you were sharing things on Facebook and everything else, and if you still were hold out on Myspace or you didn't have an account anywhere, and you were choosing between Myspace and Facebook, which one are you going to choose? You're going to choose the one where all the people that you know are.

There's network effects when it comes to a social network like Facebook. The metaverse is going to be no different when you're going to have many competing options as far as like a second digital world, which one are you going to choose to be on? You're going to be on the one that has the most people that you know on it, so there's clear network effects in this and that's why he puts out a billion as the tipping point. It's an arbitrary number, but at the same time, that is going to be a very clear, if you get to a billion, you are going to be hard to topple at that point.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Jon Quast has no position in any of the stocks mentioned. Jose Najarro owns shares of Meta Platforms, Inc., Microsoft, and Nvidia. Sanmeet Deo owns shares of Roblox Corporation. The Motley Fool owns shares of and recommends Meta Platforms, Inc., Microsoft, Nvidia, and Roblox Corporation. The Motley Fool has a disclosure policy.

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