The metaverse is still an evolving and nebulous technology, and we are probably several years away from seeing it in action. Even so, the basic concept is straightforward: The metaverse will be a virtual world (or a network of virtual worlds) in which people can interact with each other and their environment. And Matterport's (MTTR 0.87%) 3D capture technology could play an important role in constructing those worlds.
In this Backstage Pass clip, recorded on Jan. 11, Motley Fool contributor Jamie Louko shares his thoughts on why Matterport could be a great way to invest in the metaverse, an industry that some analysts peg at over $1 trillion a decade from now.
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Jamie Louko: One thing that I just caught from what you were saying Trevor was the word digital twins, that is basically the rallying cry from Matterport. What they're trying to do is they're trying to bring digital twins to the cloud through 3D imaging technology. Basically, they have hardware and software that allows consumers to take a 3D image of any space they want. I could take a space of this room right here and bring it to the cloud and it would be a digital twin. With this digital twin, I could do anything. If I were a business, I could look at it, to analyze it, to optimize it for whatever I need. If I was Airbnb say or Redfin, which is one of their customers, I could put this on my website and show it off and say, "Hey, you can live in this room." Although it's pretty small, I don't think you want to live here. But you can do virtually anything with this space.
One thing that Matterport thinks that it can use this technology for is to go to the metaverse by allowing individual consumers like you and me to take pictures of the spaces that we like most and bring them to the metaverse with us. Matterport's technology can be used on Androids and iPhones. So, it's pretty easy to bring spaces to the cloud through these digital twins.
This technology has attracted some really big name customers. I said Redfin was a customer, but they also have places like Vacasa and even Chick-fil-A. Chick-fil-A is a Matterport customer, which I thought was very interesting. But they have a massive total addressable market and I don't think that this factors in the metaverse because this was done a few months back with their investor presentation, so I don't even think this accounts for metaverse potential, but don't quote me on that, I can go look back after this.
Why do I like this for metaverse? It can enable a realistic metaverse. I don't think the metaverse is going to be on one platform, I really do think because of the massive opportunity with it, I think there's going to be multiple metaverses where I might have my own personal metaverse, but Trevor might have his, and then we can go to Chick-fil-A's metaverse and get a burger or something like that. I think there will be multiple, and not necessarily just one.
Matterport is an industry leader in this kind of technology. And I think if this does come to fruition, Matterport will be able to use this technology in the creation of the metaverse -- so people and individuals will be able to use this technology to create their own metaverse. As of right now, it hasn't fully grown. Their revenue growth in the most recent quarter was just 10% year over year, which is subpar. But they do have a lot of subscribers -- they have over 439,000. I'll touch on one problem I see with that in just a minute, but their net retention rate is strong, 114%. And over the past trailing 12 months. It's been a little bit higher, it's averaged 122%, which means that existing customers one year ago -- in the third quarter, they were spending 14% more than they did in Q3 2020.
Subscription revenue grew 36%, they make money off of their subscriptions for holding their spaces, these digital twins in the cloud for their customers. They also make money on the hardware, you can buy high definition cameras to take these 3D pictures. But I do have a couple lowlights -- their net loss is absolutely massive. Way, way more than their revenue. Most of their subscribers are really free subscribers. They have a freemium model where if you only want one space, you could have that for free. They only have 54,000 paying subscribers, most of them are free. Whether they can get those free users into paying subscribers, that's one question that I am watching going forward. Then just one thing down here, their non-GAAP net loss is $14 million, but obviously there's a pretty massive disparity between their actual net loss and their non-GAAP net loss. I just thought that was interesting and one reason I don't pay attention to non-GAAP metrics, But that is, aside from that last little comment, that was Matterport. I think it's a really, really interesting play for what I believe the metaverse could become, which is more of a multi-metaverse world.
