In its most recent earnings call on July 29, Facebook Inc. (FB, Financial) CEO Mark Zuckerberg said he expects the social media platform to transition to a "metaverse" company. He said the company’s future is in the metaverse, a virtual social environment where people can be present in digital spaces. This is an embodied internet platform allowing people to play games, work and socialize using digital avatars and virtual reality technology. Virtual reality workspaces will be the company's first step into making the metaverse a reality. The company has been using Workrooms (VR workspace) for meetings internally for about six months, and on Aug. 19, Facebook introduced Horizon Workrooms to the public to showcase how it works.
Commenting on the launch of Horizon, Zuckerberg recently posted on his Facebook page:
“We just launched Horizon Workrooms – a new collaboration experience in virtual reality. When you use Workrooms, it feels like you’re really there with people. You’ll notice conversations flow more naturally and you’ll pick up social cues that are missing on video – people turning to listen to each other, hand gestures, and spatial audio to give everyone a sense of place in the room. There’s also a whiteboard for brainstorming together, a screen for people to video conference in, and virtual desktop so you can use your computer in VR for presentations or multitasking. In the future, working together will be one of the main ways people use the metaverse. Horizon Workrooms is one more step towards bringing the metaverse to life.”
Although Facebook has been around for a long time, the company is still growing in double digits, and its big plans for a future dominated by innovative technologies paint a very promising picture for earnings growth.
The metaverse: A fictional term becoming a reality
The concept of the metaverse has been around for a long time used in gaming and sci-fi movies. The word was coined by American novelist Neal Stephenson in his science fiction classic "Snow Crash," which was published in 1992. The tale, where people can travel to 3-D virtual spaces and communicate with one another in real time, is now considered a commercial necessity by tech players. The demand for the metaverse is becoming increasingly apparent because of the pandemic-related shift in work preferences, education and lifestyle, as well as the uncertainty created by political instability and civil unrest. The concept, though, is still in its early stages, and no one knows what the metaverse will look like.
At the launch event of Horizon, Zuckerberg said:
"So I think of The Metaverse as the next generation of the internet. So you can kind of think about it as, instead of being an internet that we look at, right, on our mobile phones or our computer screens, it's an internet that we are a part of, or that we can be inside of."
Although the reality of the fictional world remains unclear, many tech companies and venture capitalists are betting on it. According to Barron’s, venture capitalist Matthew Ball recently helped launch the Roundhill Ball Metaverse ETF (META). The top holdings of this exchange-traded fund include Nvidia Corp. (NVDA, Financial), Tencent Holdings Ltd. (TCEHY, Financial), Roblox Corp. (RBLX, Financial), Microsoft Corp. (MSFT, Financial) and Unity Software Inc. (U, Financial). In January 2020, Matthew Ball wrote an essay describing major characteristics of the metaverse, clarifying that it is not a game, a piece of hardware or an online experience. Although the term is linked with virtual reality, augmented reality and gaming, its architecture is more complicated and vast.
In an interview with The Verge, Zuckerberg highlighted:
“I think a lot of people, when they think about the metaverse, they think about just virtual reality — which I think is going to be an important part of that. And that’s clearly a part that we’re very invested in, because it’s the technology that delivers the clearest form of presence. But the metaverse isn’t just virtual reality. It’s going to be accessible across all of our different computing platforms; VR and AR, but also PC, and also mobile devices, and game consoles. Speaking of which, a lot of people also think about the metaverse as primarily something that’s about gaming. And I think entertainment is clearly going to be a big part of it, but I don’t think that this is just gaming. I think that this is a persistent, synchronous environment where we can be together, which I think is probably going to resemble some kind of a hybrid between the social platforms that we see today, but an environment where you’re embodied in it.”
The metaverse is the next big area of computer platforms and is expected to bring a lot of economic opportunities, and Zuckerberg believes it will allow millions of individuals all over the world to undertake creative work that they enjoy. The key thing to remember is, like the internet, the metaverse will not be owned by a single company or a group of companies. Rather, it will be a collaborative area with various players.
Commenting on the importance of the metaverse, Ball wrote:
“Even if the Metaverse falls short of the fantastical visions captured by science fiction authors, it is likely to produce trillions in value as a new computing platform or content medium. But in its full vision, the Metaverse becomes the gateway to most digital experiences, a key component of all physical ones, and the next great labor platform.”
Horizon Workrooms: Facebook’s first step into the metaverse
Last Thursday, Zuckerberg demonstrated Horizon while wearing a VR headset. Horizon allows users to enter a virtual reality workspace with their own avatars, where users may view their computer screen and keyboard, communicate with coworkers, brainstorm and give presentations. Users can customize the appearance of their avatars and make hand gestures that will be displayed in the virtual room. Individuals can join the Horizon Workrooms app using the Oculus VR headset and the Quest 2. Team members who do not have Oculus equipment can join the conference via a conference call link, which displays them as video call participants rather than an avatar inside the room. Currently, the platform supports up to 16 people in VR and another 34 people via a video call feature.
Commenting on the importance of Horizon Workrooms, Zuckerberg said in an interview:
"There's an important place for offices for people to come together, but I also think that there's an important place for people who may not want to move to an expensive city, may want to stay with their family or where they grew up, but also wanna get access to opportunities that may be historically would have only been in New York or in L.A. or in one of these bigger cities.”
Although the VR workspace is currently in the beta phase, Facebook is continuing to invest in making Horizon a part of virtual office life, providing individuals more work freedom, the ability to live anywhere they want and access to creative spaces.
Facebook’s advantage in the emerging metaverse
The company is expected to shift to making the metaverse vision a reality within the next five years, and gadgets such as headsets and AR glasses would be available for widespread use by the end of the decade. The value of Facebook's metaverse technology will increase as the network's user base grows. Advertising currently dominates Facebook's social networking business model, but the company's transition to a metaverse company opens up the possibility of additional revenue streams.
Commenting on Facebook’s vision for virtual reality, Ball wrote:
“Facebook’s Metaverse advantages are immense. It has more users, daily usage, and user-generated content created each day than any other platform on earth, as well as the second-largest share of digital ad spend, billions in cash, thousands of world-class engineers, and conviction from a founder with majority voting rights. Its Metaverse-oriented assets are also growing rapidly and now include patents for semiconductor and brain-to-machine computing interfaces. At the same time, Facebook has a very troubled track record as a platform for where third-party developers/companies can build sustainable businesses, as a ringleader in a consortium (e.g. Libra), and in managing user data/trust.”
The company seems to be moving in the right direction to secure the long-term sustainability of its earnings.
Takeaway
Despite being in a strong position to be a long-term winner, Facebook is being sued for antitrust violations and continues to confront data security concerns. Furthermore, regulatory pressure is on the horizon, which might force the company and other tech giants to scale back their operations. This is the biggest risk investors need to monitor. Although these short-term challenges might result in increased volatility in the market, Facebook seems well-positioned to deliver handsome returns to long-term investors.
