Facebook is now called Meta in order to develop “the next internet”.

Sounds important, so what does this mean for investors? And what are the opportunities in this space?

I ran a Virtual Reality startup for 5 years, and in this article I will share my insider view on whether this is a hype or a real opportunity.

The Metaverse

According to our buddy Zuck, we’ll all be stoked to transition from casually swiping through our newsfeed on our phones like zombies, to a full body immersive social experience inside an ever expanding virtual world, called “the metaverse”.

If you haven’t seen the movie Ready Player One yet, go watch it, 1) because it’s a cool movie, and 2) because it will give you a decent idea of what the metaverse could be like.

The big idea is that we’re reaching the limits of what the current internet can provide us in terms of working together and socializing, and the next “logical” step is a more immersive type of social space.

It’s really like any old MMORPG world, like Second Life, but you’ll just feel more part of that world and can interact with it more naturally.

Immersion

It’s all about “immersion”, and “feeling you’re there”, something a video call just doesn’t really give you.

It’s actually surprisingly easy to trick your brain into believing you’re somewhere else, as I’ve seen from the reactions of the hundreds of people I showed our VR apps to.

But this brings us to one of the many immense hurdles to making this whole immersion thing work: countless peripherals.

You need to be able to look around in this virtual world, so you need a headset of some sort.

To make sounds realistic, you need spatial audio.

To feel things in the metaverse, you need haptic feedback suits.

To freely and naturally walk around (locomotion), you need an omni-directional treadmill.

To input things, you need a mic for voice control, controllers, special gloves, and/or a vision based tracking system.

Oh, and you probably need to dedicate an entire room in your house to set all of this up…

And your wife and kids also want to be in there at the same time being super social with their own crew, so I guess it’s time to upgrade that mortgage.

It’s just not user-friendly (yet), and even Facebook’s fancy Ray Ban smart glasses aren’t going to change this.

Now some people will say that I’m being a bit unfair here, because you’ll also be able to access the metaverse through your phone.

Ok, but that kinda defeats the purpose, right? Where’s the immersion?

Now you’re just playing a fancy video game.

Building the Metaverse

But we’ll brush the above concerns aside and assume some clever engineers will allow us to be plugged directly into the Matrix, hopefully without requiring surgery.

Now who will build this wondrous world of wowdom envisioned by uncle Mark?

Well, he generously invites all of us to work together on this new open world, for no one company can do this on their own he said… We just have to use their API so they will ultimately still control and own everything.

Sneaky gits.

In reality, there is a huge technical problem, in that there are dozens of headsets, running on various operating systems (Android, Windows, Playstation, proprietary etc), all with their own app stores, and so it is extremely hard to develop something that works cross-platform.

I’ve personally built VR apps for years, so I know the struggles developers face, and based on that experience I do not expect this vision of Meta to become a full fledged reality anytime soon.

Metaverse stocks

Now don’t get me wrong, this does not mean there is no opportunity here for investors, because billions upon billions are already being poured into the immersive industry, and this will likely only increase in the coming years.

Like I said, many peripherals need to be developed, but also a ton of software, infrastructure, and tooling, so Meta (FB) isn’t the only game in town.

Since the whole metaverse is a virtual 3D world, a company like Autodesk (ADSK) comes to mind, since they develop professional 3D design software.

But this alternate universe should also support rich, game-like interactions, and Unity (U) is already the game engine of choice for VR and AR developers today.

Rendering realistic worlds requires powerful GPUs, and so Nvidia (NVDA) will probably see some extra orders flow in.

Now if we want to turn our real world into more of a metaverse, we’ll need to cover it with some Augmented Reality sauce, in which case Snap (SNAP) has developed some impressive capabilities.

And speaking about AR, we can't forget that Apple (AAPL) has been working on this for years with over 1000 people, and they seem to finally be getting ready to release some sort of AR headset in 2022.

So should you buy any of these metaverse stocks right now?

It will take a tremendous amount of time, effort, and money for something akin to the metaverse to ever materialize, so there’s no rush to buy right this minute.

Also, there is a more than reasonable chance that the metaverse will enter the history books in the same chapter as “everyone will have a 3D printer at home to print their own groceries and tennis shoes”, while the reality is that 3D printing is still not very plug-and-play, and only a couple of nerds have one (me included).

Closing thoughts

Trends come and go, and while it is possible to make good money riding such a wave, it is in no way required to identify and follow a trend in order to make great returns on the stock market.

Peter Lynch, Warren Buffett and other great investors prefer to invest in “boring” businesses, and have made fortunes investing in candy makers, funeral homes, and waste management companies.

So don’t get caught up in the hype.

Keep looking for companies with strong fundamentals, great growth prospects, and an attractive valuation, and don’t worry if it’s not the hippest thing in town.

Why do you think the metaverse will be huge hit or a huge flop? Let me know in the comments below.

Written by

Nick Kraakman

I'm a value investing expert, serial entrepreneur, and educator. For over 10 years I've been studying the strategies of the world's best investors, and in 2013 I started this website to help other investors consistently grow their wealth. I've already trained 20.000+ people through my best-selling investing course.
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