Things are certainly moving fast for Meta, the parent of Facebook – but not in a good way. It very much looks broken. Behind its mega-stock status and flash offices, Meta faces unprecedented threats from its unravelling business model, crashing advertising revenues, product obsolescence, regulatory threats, and from the unknowns of trying to reinvent itself at the centre of where Zuckerberg sees himself dominating next; the “Metaverse”. Whatever that might turn out to be. 

Zuckerberg has a massive problem. His existing brands Facebook, Instagram and WhatsApp are under the cosh. They are, essentially, advertising companies under competitive and evolutionary threat. They remain dominant brands in social media advertising, but their user bases are not as sticky as once assumed, and they no longer have a monopoly as social media breaks and fragments into multiple players and themes. They are under enormous regulatory and technical threat.

Things started to get bad last year when Apple gave users of its IOS operating system the option to stop trackers – meaning every keystroke on your iPhone is no longer an invitation for resellers to target and sell you cheap tawdry crap you don’t need or particularly want. Google is doing the same with Android. The result is Meta’s advertising income stream is drying up. It’s not going to get better. Advertisers have more exciting places to go.

Imagine a future where kids can attend any school they want as digital avatars – interesting and horrific in terms of real social interaction, not to mention the health consequences of living online.

The reason the name changed from Facebook to Meta was a tacit acknowledgement of the inevitable – Facebook is no longer the new, new, exciting thing. Meta lost 20% of its value on a single day in January when Zuckerberg broke the cardinal rule of tech and told the truth: admitting Facebook has lost ground to newer, more hip, cool rivals like Tik Tok. If you want to know where it’s headed, look up Friends Reunited. Who knew competition and evolution are real? Tech evolves and old firms get eaten up for lunch by new firms… My kids think Facebook is for grandparents and the truth is It is.

As the platforms close tracking windows, Zuck was forced to admit it’s difficult to make money “where less data is available to deliver personal ads”. In a world where it’s being outcompeted, and regulators are establishing the primacy of personal data… Facebook’s model of milking that data looks doomed.

Of course, these are only the visible tips of a much larger iceberg – regulation. Facebook is the mega-villain when it comes to all the ills of the internet social media connected age. When it comes to the evils of fake news, we need a witch to burn, and the unlikable Zuckerberg is just the kind of scapegoat that will burn nicely.

This is why professional politician Nick Clegg, former deputy prime minister and one-time leader of the UK Liberal Party, is going to replace Zuckerberg as the face of Meta. Clegg will “lead our company on all our policy matters,” said Zuck.

That is either another massive sell signal for the beleaguered stock, or it’s a stroke of political genius. Clegg was never a top tier politician. He was the buggins-turn leader of the 3^rd party in a political duopoly. He got famous because David Cameron didn’t win a majority. Suddenly he was catapulted to power in a coalition, bet let himself and his party become the Tories’ stooges to be wiped out at the next election. He was a loser, but a kind, earnest and boring chap who looked like he at least cared. Perhaps that makes him the perfect face to defend the undefendable?

Zuckerberg will find new ways to monetise whatever data Meta can find in its virtual and augmented reality universe – which is not without associated risks to consumers and therefore the company.

Meta’s response to the approaching death of Facebook is to reinvent itself, springing its new concept, the Metaverse, upon us. Zuckerberg has the previous form as something of a congenital acquisitive hoarder of the future – just ask the Winklevoss twins. He clearly wants to own whatever this new “metaverse” is with the intention of monetising it. The question, and future value of Meta, ultimately lies in how well he achieves that.

So, just what is the Metaverse? What kind of opportunity does it represent? Is it, as so many fantabulous things in this wonderful world are, yet another digital solution in search of a problem? Is it hype or a genuine new trend?

The Metaverse concept is not new. It was first described and named by Science Fiction writer Neal Stephenson in the very early days of the internet revolution. Way back in 1992 he presented a vision of human avatars inter-reacting in a 3D digital space. He pretty much nailed it – establishing digital life alongside concepts like “proof of work” leading inevitably to the concept of digital currencies, the genesis of Bitcoin, the Blockchain and even Non-Fungible Tokens.

Today, the Metaverse is being “imagined” as ripe with opportunities; as some kind of Internet version 2.1 – describing how we will all integrate digitally. It will offer a more immersive world of deeper engagement into virtual and augmented reality – once the technology catches up with the promises. “Digital Visionaries” are talking about how natural it will become to do everything from shopping, business and living a social life online in the form of single or multiple digital avatars… It informs the world of “Ready Player One” and raises fears about a “Matrix-like” future.

The thing is – whatever Zuckerberg is telling us – it’s already happening and has been for some time. Meta is not the leader – it's just a follower. The global gaming sector is now infinitely larger than the film industry at over $100 billion per annum. Zuck is trying to paint the Metaverse as a Meta creation where he intends to own as a virtual environment where “you can be present with people in digital spaces”, an “embodied internet”, and how it’s going to “succeed the mobile internet”.

The stock will probably stage a buy-the-dip rally, but like any main-sequence star towards the end of its life, it’s burnt all its hydrogen fuel of imagination, inventiveness and innovation.

It’s an opportunity for him to monetise Facebook’s investment in things like the Oculus VR set and to diversify his earnings from pure (yet risky) advertising to actually selling hard and soft stuff in the Metaverse.

Will he succeed in making Meta the dominant venue in the Metaverse?

Don’t underestimate the potential for monetisation in the Metaverse. Last year 17-year-old artist, Fewocious, sold 600 digital sneakers in NFT format through an online auction for…. $3.08 million. There is now a whole digital fashion universe selling unique NFT apparel gamers can wear online. As yet there isn’t a way of being able to dress across the net (enabling digital avatars to wear the same gear across multiple games and in multiple venues) but I’m assured it’s going to happen. There are now a host of earnest fashion designers exclusively focused on digital fashion.

There clearly are also real and valuable applications for the metaverse in terms of virtual reality business and education. Effectively, education went virtual last year when millions of school kids zoomed an academic year because of COVID. Imagine a future where kids can attend any school they want as digital avatars – interesting and horrific in terms of real social interaction, not to mention the health consequences of living online.

Zuckerberg is a smart fellow who sees potential. He knows Facebook is a risk business – the declining numbers of young people using it isn’t compensated for by the ones using Instagram. The dominant younger generation platform is TikTok, which is now part China Government-owned after it took an ownership stake in Bytedance. As the Facebook brand inevitably fades, its advertising revenues will plummet.

Therefore, he is staking the next stage of his brand’s development on his company’s 3D universe. Zuckerberg will find new ways to monetise whatever data Meta can find in its virtual and augmented reality universe – which is not without associated risks to consumers and therefore the company. And that’s where the jury is out – can he make Meta as much of a monopoly as Facebook once was? If not, and I suspect it’s going to be a very crowded space, then Meta’s future is debatable long-term.

So how does this end for Meta?

What happens next will likely start to happen quickly – fast and broken. Meta is already in trouble for in-house bullying and whistleblowers about its rotten corporate culture. As the stock tumbles and belief wanes, it will suffer key staff defections. The stock price will spike up and down. The firm will miss deliverables, and while trying to fix Facebook, lose focus on Meta. The stock will probably stage a buy-the-dip rally, but like any main-sequence star towards the end of its life, it’s burnt all its hydrogen fuel of imagination, inventiveness and innovation. It won’t go supernova, but as it collapses inwards and atoms fuse into heavier elements, first helium and down the sequence and it will briefly become a red-giant burning brightly in the financial media-sphere for months before it contracts into its white-dwarf long drawn out slow-burnout into nothingness….

Ouch… but not a bad metaphor if I say it myself.

“Over time, I hope that we are seen as a metaverse company and I want to anchor our work and our identity on what we’re building towards,” Zuckerberg told a virtual conference. “We’re now looking at and reporting on our business as two different segments, one for our family of apps, and one for our work on future platforms. And as part of this, it is time for us to adopt a new company brand to encompass everything that we do, to reflect who we are and what we hope to build.”

Following Zuckerberg’s announcement, “metaverse” has become an even bigger buzzword in tech, with plenty of investors now wanting a slice of it. But what exactly is the metaverse? And should you also consider investing in it?

What Is The Metaverse?

The metaverse is far from being a new concept. The term “metaverse” was coined by science fiction author Neal Stephenson in his 1992 novel Snow Crash. Stephenson used the term to mean a computer-generated universe, which is now understood as an immersive virtual world where people come together to play games and socialise but also to work. 

In a founder’s letter, Zuckerberg explained that the metaverse will be defined by “the feeling of presence.”

“In this future, you will be able to teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up,” Zuckerberg said. “This will open up more opportunity no matter where you live. You’ll be able to spend more time on what matters to you, cut down time in traffic, and reduce your carbon footprint.” 

Metaverse users will be able to create avatars that resemble their real-world appearance, with Zuckerberg insisting that avatars will become as common as profile pictures on social media. As technology improves, people will be able to join the metaverse with increasing ease, simultaneously engaging with the physical and virtual in mixed reality. 

Metaverse Use Cases

While the use cases for the metaverse are essentially only limited by human creativity, some ideas make more business sense than others. Here are three common examples: 

Games: Gaming is held in close association with the metaverse and understandably so, with games such as Minecraft and Fortnite, as well as platforms such as Roblox, already offering a taste of the metaverse. However, in the coming years, games are set to become increasingly immersive, increasingly social, and increasingly interactive. 

Travel: There is huge potential for the metaverse to someday allow users to visit tourist destinations in multiplayer mode via telepresence, potentially making world travel more accessible for millions of people. 

Commerce: The metaverse would allow retailers to release products into games alongside their real-world product launches. Vice versa, metaverse users will likely design their own brands and products, which may then come to exist in the real world too. 

Metaverse Industry Outlook

Many believe that companies and investors alike cannot ignore the emerging online marketplace that is the metaverse, arguing that it would be a repeat of companies dismissing the emergence of the World Wide Web. Just like the World Wide Web, which now plays a monumental role in day-to-day life, the metaverse will create new marketplaces that mirror those of the physical world. 

The potential in this space is huge, with platforms such as Roblox already seeing significant success. However, the market is expected to double with ease over the next few years. According to ARK Invest, revenue from virtual worlds will compound 17% annually to $390 billion by 2025. Meanwhile, Bloomberg Intelligence predicts that the market opportunity for the metaverse could reach $800 billion by 2025.

Investing In Companies Engaged In The Metaverse

Investors may look to gain exposure by investing in companies that are actively working on metaverse applications, such as Meta Platforms (Facebook), Microsoft, and Roblox. 

• Meta Platforms: As Zuckerberg has made the world well-aware, Facebook is in full metaverse mode. Prior to their rebranding announcement, in mid-October, Facebook said it planned to hire 10,000 employees in Europe to build the “metaverse”, stating its construction would take place over five years. The company called its work in Europe an “exciting time” for European tech.
• Microsoft:  Microsoft CEO Satya Nadella has spoken about the concept of an “enterprise metaverse” which would enable the company to expand its dominance in the professional software market. 
• Roblox: As a global platform that brings people together through games, Roblox already embraces many metaverse aspects today with its own digital currency and the virtual social experiences that it enables. 

Metaverse ETFs

For investors who are struggling to decide which metaverse stock is best to invest in, an option worth considering is investing in the Round Ball Metaverse ETF (META). Launched in June 2021, META is the first index globally designed to track the metaverse’s performance and has already amassed $176 million in assets. The fund tracks the Ball Metaverse Index and invests in global public companies actively involved in the metaverse. 

The vast majority of META’s holdings are US equities (80%), with the rest spread between Asian countries such as China, Singapore, Japan, Taiwan. The three top holdings are NVIDIA (8.99%), Microsoft (7.26%), and Roblox (6.79%). Since starting out in June, META has risen by almost 3%.  

Summary

While the metaverse is by no means a new concept, Facebook’s recent push will spur further investments into the space. In the coming years, society is almost certain to dive deeper into a digital economy and virtual world, significantly altering life as we currently know it.  

This article does not constitute financial advice. The author and Universal Media Ltd. are not qualified financial advisers. All investments are made at the reader’s own risk.

Finance professionals in the UK and across the globe will have been keeping their eyes on the ongoing developments at Facebook and assessing the business implications emerging from the aftermath of the Cambridge Analytica furore. Earlier this month, Facebook Founder and Chief Mark Zuckerburg appeared before Congress in the US to discuss his company’s activities and the alleged misuse of personal data. It proved a fascinating glimpse into the inner workings of Facebook and shone a light onto how we, as individuals, are ‘willingly’ sharing our data with platforms. The truth of the matter is, not everyone understands the process and benefits such as data sharing can bring - not just to the technology industry, but a variety of sectors and stakeholders from retail to finance, and to both advertisers and consumers.

Despite the guidelines on sharing third party data of thekrogerfeedback for winning $5000 that are already in place, the issue has called into question whether the practice requires further regulation so that lawmakers, industry regulators, advertisers, publishers, financiers, brands and consumers alike are clear on how and when it is acceptable to share personal information.

Facebook is in an unusual position where increased regulation in its platform would likely benefit its business. In fact, it has even welcomed closer regulation on social media, and has offered to develop further thoughts on self-regulation. The social media behemoth has the infrastructure to absorb any impact increased regulation would have on its business, but is this true of its competitors?

Publishers such as Facebook have a choice of how they use their own data, but everyone involved in the industry, including financiers, should be striving for transparency, choice and true customer centricity. Increased regulation is there to protect the consumer in the event of malpractice, bad actors or misuse of personal data. This is a unanimously positive move, and those who put their customers first will continue to survive and thrive.

Our world is becoming more and more data-driven. The opportunities to leverage this data are plenty and benefit all parties, but they need to be done in an ethical, privacy-compliant way that assists the customer rather than exploits them. Greater clarity and regulation that focuses on eliminating the latter - and not inhibiting the former - should be welcomed with open arms by all stakeholders.

Facebook has a wealth of personal data that is volunteered by its members - in effect creating the largest identity graph in the world today. Regulation has to ensure that Facebook - as well as any others in the publisher community - is transparent with how that data is collected and used. To this extent, the impact of regulation should be to create a level playing field and promote the democratisation of data.

The challenge comes when advertisers decide where to spend their budgets. Marketers have more choices than ever and can reach consumers in thousands of places online. The use of third-party data both inside and beyond Facebook’s walls is the means to providing that choice. The alternative is for Facebook to monopolise targeted advertising, which would be bad for the industry as a whole.

If advertisers want to allocate their spend across multiple publishers and platforms, it makes sense to be able to leverage standardised data models and apply them everywhere, rather than building custom models across every touch point. LiveRamp enables this neutrality and agnosticism, and provides a secure and privacy compliant connection to any destination platforms an advertiser wishes to use.

Advertisers’ data is one of their most valuable assets, and they need to be comfortable when sharing it with platforms and publishers like Facebook. More stringent regulations concerning personal data can serve to give advertisers the peace of mind that their data is secure, and allow them to confidently demonstrate its ethical use whenever called upon to do so.

This can only work if data providers source and govern their data in ethical, privacy-compliant ways. The best models and experiences draw from multiple ethical data sources working together, all with the best interests of the customer at heart.

Advertisers need to look out for themselves, their customers and their own data. They should seek to adhere to ethical practices and work only exclusively with experienced and ethical partners.

I believe increased regulation has the potential to benefit not only Facebook but also its competitors. Increased transparency in any industry, be it the financial or tech sector, should make it easier for businesses and consumers to connect and interact, unlocking additional value for both. Regulation, if designed and imposed correctly, can help consumers hold greater control of how their data is used while allowing businesses to use it more responsibly and efficiently.