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The metaverse is the future for consumer businesses

Facebook has announced its ambition to be a metaverse company and this could become the next frontier for successful consumer businesses, while Apple's battle with Epic could shape just how accessible this world is
August 25, 2021
  • Time spent gaming during the year from June 2020 jumped 39 per cent, according to data from Statista
  • Interest and investment in virtual and augmented reality technology have soared this year

Microsoft (US:MSFT) sent its MS-DOS operating system out into the world in 1981 and the World Wide Web was invented by Tim Berners-Lee in 1989. The combination of these two inventions, alongside the huge drop in the cost of computers, contributed to shifting the working world online in the 1990s and led to Mark Zuckerberg digitising people’s social life with the creation of Facebook (US:FB) in 2004. In 2007, Apple (US:APPL) put all of this in our pockets with the invention of the iPhone.

Today, these three companies are among the top six most valuable in the world. Facebook's newest innovation is to evolve the business into a metaverse company. Zuckerberg has since previewed his social reality networking app, Horizon, which showed people’s avatars working and playing together in a simplistic virtual environment. 

Despite appearances, what Zuckerberg is planning is a lot more complex than the initial view of Horizon indicates, as explained in an interview with Casey Newton of news website The Verge. Zuckerberg said he had been inspired by venture capitalist and former Amazon studios strategist Matthew Ball, who has outlined a "persistent” metaverse that “never resets or pauses” and has no cap on the number of users. 

He also wrote that it has to be a functioning economy where creators can build and sell their own products and importantly it must offer “unprecedented interoperability of data assets and content”, similar to the Roblox platform. What this means is that you can transfer digital assets seamlessly across the platform as opposed to the current situation, where Amazon (US:AMZN) and Facebook and Google use similar technologies, but they aren’t designed to transition into one another.

Fortnite already offers an example of this. Initially an open-world first-person shooter, the Epic Games-produced environment is one of the only spaces where gamers are allowed to wear both Marvel and DC characters' outfits, unthinkable in Hollywood properties given Disney's (DIS) iron grip on its Marvel intellectual property. Users across every major gaming platform can also interact, whether on iOS, Android, PlayStation, Nintendo, PC or Xbox – a big step towards the “interoperability” called for by Ball.

Epic is the company currently pushing hardest to make the metaverse a reality. Sweeney created Fortnite as an online shooter game in 2017 but since then it has become more akin to a social space where users can create and share content.

An important aspect of the metaverse is for users to be able to create for themselves and Epic Games allows this through its gaming engine, Unreal, which anyone can license for free. Epic acquired Twinmotion in 2019 and it allows users to design online without needing to know how to code. Throw in cryptocurrencies, which Facebook is already investing in with its Libra coin, and it is possible to visualise a decentralised creator economy in a virtual reality universe.

High-street retail stores have struggled to keep up with consumers' shift online. In the future, the same may be true of companies that are unable to make their products compatible with the metaverse.

Gambling group Entain (ENT) has jumped on board. It just announced the launch of a VR sports bar that will use Facebook-owned Oculus Quest 2 virtual reality headsets. Its chief financial officer Rob Wood said: “[VR] is coming, and it is going to be massive and the whole reason for this £100m investment in innovation is that we have to keep pace with changing technologies and changing consumer trends.”

For investors, they can look to companies such as Entain that are explicitly investing in VR technology or fashion brands such as Farfetch (US:FTCH) and Prada, which have partnered with Snapchat to create an augmented reality tool that allows users to try on clothes in the app. Roundhill Investments has also launched a metaverse ETF that will give investors exposure to hardware companies such as Nvidia (NVDA), game engine designers such as Unity and content hosts including Snapchat.

The catalyst of this metaverse explosion, Epic Games, is currently unlisted. However, its growth clearly requires a lot of capital given its $1bn fundraising in April of this year.

The press release announcing this raising was ambitiously headlined “Announcing a $1 Billion Round to Support Epic’s Long-Term Vision to the Metaverse”. To achieve this ambition it will probably need to IPO at some point but if Tim Sweeney’s dream of a democratised metaverse is to be believed, huge profits could be some time off. But as companies such as Entain, which runs betting chains Ladbrokes and Coral dive into the sector, Epic (valuation as of April: $29bn) and other self-styled idealists better be quick to bring their vision of the metaverse to life and protect this vision of the next stage of the internet.