Opinion: Investors remain excited about the metaverse

Last month, I met a friend for the first time since Q2 2019, before Covid. We celebrated on the terrace of a London West End restaurant, surrounded by patrons devouring their steaks and fries, before shows began in neighboring theaters. With the arrival of new friends, the overwhelmed waiter quickly prepared a second table to join ours, but he tripped over an uneven tile and spilled wine down my pants.

If it wants to compete with this concrete dose of real-world fun and comedy — the combination of the heat of a reunion and a bath of cold wine, accompanied by a salty laundry bill — the metaverse will have to work very hard to take the plunge. control of the $13 trillion economy that many people predict for him. Current hype about the new market — at least for now — could prove to be a phenomenon associated with the pandemic.

That $13 trillion figure, according to a report published this week by Citi Research, is the higher end of the hypothetical economic range for the broader definition of the metaverse, by the end of this decade. The term is being used with increasing frequency in order to encompass all future routes that can be covered by the internet and by every company, institution and person that engages with it. The manager of a large international investment fund tells me that he loves the idea of ​​the metaverse, but is unable to point to a single stock in his portfolio from a company that operates exclusively in the metaverse.

Still, a number of similar projections have hit fund managers’ desks in the eight months since Facebook fueled the general excitement by declaring its bet on the metaverse — which included even changing its name to Meta. Inevitably, when idea-hungry customers ask them how best to handle it, the instinct of stock traders has been to stretch the package of corporate names associated with the metaverse as far as possible, and with that their reach has become astronomical, almost incomprehensible. . For now, the best bet in terms of investment seems to be companies that work with shovels and pickaxes (i.e., handle digital infrastructure and hardware), and will theoretically build the platform upon which the metaverse’s user base will expand to, who knows, billions of people. The corporate world (especially intensely in Asia) has met these expectations with grandiose strategies for the metaverse that, in most cases, have so far cost close to zero and have not forced companies to make any commitments.

This scope extension was facilitated by the complexity that defining the metaverse involves. When a panel of renowned international experts tried to tackle this challenge at the Global Boardroom, an event hosted by the Financial Times on Tuesday, the participants did an excellent job. But they recognized that the fundamental story – the convergence of physical and digital life – was a mixture between the genuine migration of work and leisure to the digital world (which in part is already under way) and speculative fantasies. We’re talking, remember, about an investment theme that allowed JPMorgan to tell investors in January that “a next-generation financial company could potentially turn to digital clothing as collateral for underwriting mortgages on land and real estate.” virtual”, without the statement seeming a complete absurdity.

The Citi report, in common with other studies that preceded it, describes the metaverse as “a three-dimensional virtual space that is interoperable with the physical world, and represents a step change from current Internet content, which is based on two-dimensional web”. Morgan Stanley, in a February report, expressed a narrower view of a “next-generation social media, streaming, gaming and shopping” platform.

The internet is clearly on its way to a new phase in which much of what we now think of as “online” will be presented in the form of a virtual world. Games, entertainment, and parts of the workplace will be the first to transition, but technology will evolve to appeal to everything else, and ultimately, the risk of staying out of the metaverse will outweigh the risk of joining, for companies.

But there’s a serious timing issue attached to all the hype about a $13 trillion market. The concept of both the metaverse and a distinctive transition to a new phase of the internet may have been around for some time, but the truly explosive speculation on the subject reached its peak at a time when the world felt uniquely receptive to the idea of ​​life. in a virtual world.

Facebook’s October announcement and the events of the months that followed came when much of the world had been forced by the pandemic to replace the norms of the social world and work life with their digital versions. The prospect of finally getting out of this phase seemed, at that moment, to be under serious threat from the omicron variant. Therefore, the moment was especially propitious to plant the idea that this forced transition from the real world to the digital would become a regular cycle and therefore millions or even billions of people could decide, very logically, that the virtual world was the refuge. safer.

That the world will fully emerge from the pandemic is not an inescapable conclusion, but the places that have moved the furthest towards a return to normalcy are a reminder that the real world – with all its splendor and disasters – will always be a fiercely difficult competitor for the world. virtual world.

Translation by Paulo Migliacci