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Understanding the Economic Potential of the Metaverse and Investing in the Future of the Internet

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By Yonatan Raz-Fridman, CEO, Supersocial, Inc.

The metaverse represents the next evolution of the Internet and promises to unlock trillions in economic value. But what is the metaverse, how big can it be and how do we get there? These are important questions.

What is the Metaverse?

We view the metaverse as the next evolution of the Internet, evolving from 2D webpages and apps to 3D immersive experiences. The shift to the 3D Internet promises to redefine the way that people connect, communicate, play, shop and express themselves.

2D is dead

Source: Supersocial, all rights reserved.

As Matthew Ball wrote in his book “The Metaverse and How it Will Revolutionize Everything,” the metaverse is “a massively scaled and interoperable network of real-time rendered 3D virtual worlds that can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”

We view this definition as the best articulation of the working statement for the future evolution of the metaverse, even if we are still at its early stages. Platforms such as Roblox are similar to a public beta of this vision for the metaverse.

How Big Can the Metaverse Be?

There have been many estimates of the metaverse’s potential economic reach and all of them reflect the scale of the ongoing evolution of digital platforms to 3D. Estimates from Goldman Sachs, Morgan Stanley, Citi and KPMG pen the metaverse’s economy in the range of $8-13 trillion dollars over time.

As NVIDIA CEO Jensen Huang and others have articulated, the metaverse is among a group of emerging technologies and platforms that promise to help drive further penetration of the digital economy as a share of GDP. In 2021, the digital economy was roughly 15% of world GDP, according to the World Economic Forum and IMF estimates. Growth of the metaverse can help drive that 15% higher, possibly to 20-25% over the next decade, helping to create significant economic value.

How Do We Get There?

Patience: it goes without saying that the expansion of the metaverse will take time. Technology platform transitions don’t happen overnight. Cloud computing has been around for a decade or so and still only accounts for roughly 10% of total IT spending.

Investment: the growth of the metaverse will require significant incremental investment in infrastructure and platforms to expand from the roughly 800 million monthly active users of immersive gaming platforms to the trillions of Internet users. Simply put, existing technologies cannot support millions of users simultaneously in a single virtual world and it will require continued technological improvements alongside significant investments to enable this.

Demographics: Gen Z and Gen Alpha represent the 3D native generation, individuals that have grown up on immersive gaming platforms like Roblox and Fortnite. They have adopted these platforms as their main social networks, with their avatars representing digital versions of themselves, their personalities and the causes, interests and even brands they support or that best represent them.

According to Roblox, users on the platform changed their avatars over 600 million times per day in the first nine months of 2023. And 56% of Gen Z users on the platform said that styling their avatar is more important than styling themselves in the physical world.

As Gen Z and Gen Alpha get older, become a larger part of the workforce and have more disposable income, these platforms will only become more mainstream and evolve from gaming and social platforms to core economic engines of commerce, connection, work and more, just as Facebook, Instagram, Snapchat and TikTok have over the years.

Today, we’re already seeing brands including Walmart, e.l.f. Beauty and Universal Music Group partner with companies like Supersocial to reach this audience. We expect brand investment on these platforms to scale in line with these demographic and economic shifts over the next few years.

How to Invest in the Metaverse:

Immersive gaming platforms such as Roblox are at the forefront of the transition of the Internet from 2D to 3D. Roblox has the most daily and monthly active users of these platforms, ahead of Epic’s Fortnite, Microsoft’s Minecraft and others such as Naver’s Zepeto and Meta’s Horizon Worlds.

There are also companies providing core software and hardware for the infrastructure layer, such as Unity Software, NIVIDIA and others. And there are even ETFs tracking the metaverse, such as the Roundhill Ball Metaverse ETF (METV).

Conclusion:

The Internet’s transition from 2D to 3D will continue unabated, even as many seek to claim that the metaverse is dead. The technological, demographic and social tailwinds pushing us in this direction aren’t slowing down.

As we like to say, 2D is dead: welcome to the 3D Internet.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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