When Mark Zuckerberg announced that Facebook's parent company would be changing its name to Meta Platforms, the entire world seemed like it was catching metaverse fever. This multidimensional digital platform that brings people together to work, live, play, and create in a shared virtual world has achieved incredible growth over the last few years, with some saying it will be the biggest investment opportunity of the next 10 to 15 years.
But for all the hype that surrounds the metaverse's seemingly endless potential, there is equal concern that the virtual world will simply fizzle and fade away. Here are the bull and bear arguments for the metaverse and a look at who this speculative investment might be right for.
Image source: Getty Images.
Bull case: Momentum to last
When we heard about the metaverse last fall, it was a whole new thing with so much potential -- except that it wasn't new, and people who had been in the metaverse for years already had already been diligently working to develop that potential.
The metaverse is a vision that's been slowly coming into being for decades. The first proto-metaverse platform, Second Life, opened its virtual doors way back in 2003, offering forms of virtual real estate and an internal economy. To this day, it remains a small but popular platform, with almost 38,000 average daily users and 66 million total registered users as of May 2.
Other gaming platforms like Roblox and Microsoft's Minecraft have pushed the meta-envelope even further. These platforms share the concept of community building with other metaverse projects and provide a metaverse-like platform to gamers as they mature.
Recently, Citigroup released a report estimating that upwards of 5 billion people will participate in the metaverse by 2030, making up an addressable market of between $8 trillion and $13 trillion. Metaverse real estate was up against a big test when Bored Ape Yacht Club (APE +3.65%) debuted its metaverse platform, Otherside, in late April. Although markets everywhere are slumping, land transactions in Otherside have been dramatic, with over $1 billion in sales activity during its first full month of life in May of this year.
The Sandbox (SAND 1.01%) has seen similar surges with each of its land release events, and Decentraland (MANA 1.36%) has been plodding along fairly consistently, with daily organized activities and regular major events for users, since it was first conceived in 2017.
Generation Z, which consists of over 67 million people, is the first age group that will truly occupy the metaverse. They were born into a world where Roblox and Minecraft were normal games where kids could play, make friends, and learn. Their idea of what the internet should be won't die off just because they grow up, nor will businesses stop trying to capitalize upon the worlds these where these audiences can be found.
Image source: Getty Images.
Bear case: Fizzle and fade
The success of the metaverse hinges on the continued growth of users and long-term adoption -- something it's falling short of right now in big ways. Sales volume for virtual land in both Sandbox and Decentraland are at all-time lows, having fallen every month since December 2021. This could be related to general market volatility, but it could also be a sign that the hype surrounding these virtual worlds has popped. Average daily users for both lands fell by nearly 30% last month.
Metaverse investors are largely reliant upon Generation Z to be the primary future users of these virtual worlds, but it's unlikely that one generation will be enough for the metaverse to succeed. What makes companies like TikTok, as well as Instagram and Facebook (both owned by Meta Platforms), so successful is that their programs fundamentally changed how the masses engage, interact, and connect with each other regardless of age or demographic. The metaverse is trying to bridge the gap of age and interest, but the mainstream isn't on board with it.
Several recent surveys indicate the majority of U.S. and U.K. citizens aren't familiar with the metaverse. Among those who did have knowledge of the metaverse, 78% said they felt it was all hype. Another survey found that 38% of Gen Z stated they don't believe that the metaverse will be a part of our daily lives in the future.
It's clear that gamers across all generations are more likely than other cohorts to engage with and use the metaverse. But whether popular users of programs like Roblox and Minecraft will translate over to the cryptocurrency-based metaverse is very much up in the air. For those who aren't familiar with virtual worlds or gaming, the metaverse's complexity makes it feel abstract, unapproachable, and difficult to relate to.
There are also major considerations that haven't been explored surrounding the mental, physical, and environmental impacts of the metaverse. Cryptocurrency and the metaverse require a lot of power, energy, and data to operate even at a relatively small scale. If that need were to grow, there would need to be long-term solutions that would make the metaverse's potential environmental harm obsolete.
The verdict
The metaverse is still very much in the early stages of development, meaning there really is no way to tell if it's here to stay -- at least not yet. For now, it should be considered a speculative investment that may or may not pay off in the long run. More risk-tolerant investors may want to consider investing in metaverse stocks, or possibly even purchase virtual land in the metaverse. If it grows as hoped, the returns could be huge. More risk-averse investors should stay clear of the metaverse for now and put their money into one of the safer real estate investments out there.
