The metaverse will likely be a “next-generation social media, streaming and gaming platform” and will operate initially as an advertising and e-commerce forum, according to a research note by Morgan Stanley published last week.
The “addressable U.S. consumer expenditure to monetize is large … at $8trln,” and the bank sees “~$5 [trillion] of consumer expenditure that could be digitized faster from more immersive experiences.”
Facebook (overweight rated) is the most obvious way to invest in the space, according to the report written by lead equities analyst Brian Nowak, and any success it has in building and monetizing the metaverse is “all upside and would be another layer-cake of multi-year monetization.”
In October, Facebook announced it was changing its corporate name to Meta, signaling its plan to refocus on the metaverse.
Nowak also said he favors the following companies with exposure to the metaverse theme: Roblox (overweight), Alphabet (overweight), Snap (overweight) and Unity Software (equal weight).
Adoption of the metaverse won’t be easy and will take some time, the note cautions, as existing digital media and e-commerce platforms are robust and improving all the time, which means that any metaverse will need to “partner to drive adoption.”
“American daily users already spend the total equivalent of ~11 [billion] days per year consuming digital media,” which are seen as “metaverse hours to capture,” the report says.
The metaverse has the potential to grow digital payments volumes but Morgan Stanley sees the revenue opportunity as smaller and occuring over the longer term, as the “challenge here is that the uncertain long-term regulatory environment around crypto creates more uncertainty about how large this monetization opportunity could be.”
UPDATE (Nov. 22 15:48 a.m.): Adds Facebook name change in the fourth paragraph.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.