A next-generation internet, called the metaverse by some, may well look a lot different in a 3D format. But expect tech giants to battle in a familiar Web 2.0 kind of way.
"We'll see much of the same competition in the metaverse," Haim Israel, Bank of America's global strategist and managing director of research, told Investor's Business Daily. The name of the game: driving internet users to virtual worlds rather than plain old websites.
One big question: How much "interoperability" will there actually be as metaverse stocks vie for eyeballs, clicks or perhaps some other next-generation Wall Street financial metric? To build the metaverse, competitors across hardware, operating systems and applications will have to work collaboratively to create new technical protocols.
In theory, open standards will enable internet users to move from one metaverse platform to another, much like consumers visit websites. But much is unknown about metaverse stocks.
For example, what about virtual avatars that represent humans digitally? Will they go from one metaverse to another? The same applies to digital collectibles or objects, also called non-fungible tokens. And how will cryptocurrencies be utilized?
Metaverse Building Blocks
Most likely, tech giants will battle to attract internet users to their own 3D digital worlds that incorporate virtual reality or augmented reality.
"Different companies and different platforms will offer different services and will try to attract more people to their metaverse. Different platforms will invest more and will attract more services and be more lucrative," Israel said.
"They may align with payment services in e-commerce and so-on," added Israel. "But I do not see anyone or alliances taking the metaverse over. There is a chance for completely new companies to offer completely new services, to deliver new experiences."
The metaverse has quickly emerged as a tech industry buzzword following Facebook's rebranding to Meta Platforms.
Also, Facebook has acquired several small virtual-reality gaming studios over the past two years. But one thing to watch is whether federal regulators allow tech giants to buy large video gaming studios.
Microsoft on Jan. 18 announced an all-cash deal to acquire Activisionfor $69 billion.
In the current internet – Facebook, Apple, Alphabet's Google and others have flourished in so-called "walled gardens." In Apple's case, it's mainly the App Store, which controls mobile apps. For Google and Facebook, it was about being the online fulcrum for consumer daily activities and selling them targeted advertising.
The best metaverse stocks will be most successful in keeping consumers inside their virtual worlds as long as possible, much like social media platforms dominate in daily internet usage today.
The metaverse will still have digital advertising, though other ways to monetize the virtual worlds will emerge, analysts say. Over time, software app developers will focus on virtual worlds with the most digital inhabitants.
Tech Giants: Walled Gardens To Stay?
At Jefferies, analyst Andrew Uerkwitz said in a report to clients that walled gardens are here to stay in the metaverse.
"Walled gardens have proved lucrative for those that have built them, and it appears to be a strategy that will continue to be pursued," he said. "Some will push for openness, others won't."
He added: "A single utopian metaverse is very far way — likely decades."
Some companies in the video game industry, such as Roblox, already offer immersive online gaming experiences. New metaverses are expected to focus on workplace collaboration, e-commerce such as digital fashion, retail, education, real estate and other areas.
"A true 'metaverse' as a three-dimensional embodiment of the internet as is often discussed has too many hurdles to overcome to become real anytime soon," Barclays analyst Kannan Venkateshwar said in his note to clients. "What we are more likely to end up with is an 'Apple-verse' and a 'Google-verse' of experiences spanning real and virtual worlds."
Will Virtual Or Augmented Reality Dominate?
Virtual reality immerses a user in an imagined or replicated world like video games. AR apps overlay digital imagery onto real-world settings.
"Companies like Apple and (Google unit) Niantic are leaning into the AR aspects, while most people are thinking of it more in terms of VR and real-world/AR integrations into VR," Insider Intelligence analyst Yory Wurmser said in an email.
What's clear is that tech giants have the financial resources to develop AR and VR hardware that will enable consumers to access the metaverse. Facebook, Microsoft, Apple, Sony, Google and others are expected to roll out devices.
Facebook's Quest 2 Oculus AR device sells for $300. Microsoft's HoloLens headsets cost about $3,500 each. It has sold around 250,000 units, analysts say. Meanwhile, Apple will likely roll out its own AR/VR device in late 2022 or 2023.
Meanwhile, reports say Google is racing to reignite its AR platform development. Google Glass wearables, introduced in 2013, failed to interest consumers amid privacy and other concerns.
Will Apple Embrace Metaverse Terminology?
Facebook acquired Oculus for $2 billion in 2014. But AR device sales have been slow to take off.
Facebook made a savvy move by renaming itself Meta Platforms, says Gene Munster, managing partner at Loup Capital. Metaverse had been the most popular term among software engineers for a centralized, virtual 3D internet.
"It was an aggressive move by Facebook to claim the marketing high ground around the theme," Munster said in an email. Some analysts have questioned whether Apple will embrace the term metaverse when it rolls out an AR headset.
Munster said Apple might have to live with metaverse as the term for the next-gen, 3D internet.
"(Apple) iGlasses will address the metaverse," he said. "But I suspect Apple will be forced to embrace the language of the metaverse because the cat is out of the bag."
An iVerse Terminology?
Said Wurmser at Insider Intelligence: "Apple could lean into an 'i-verse' terminology, but the idea of the metaverse is that it would be interoperable, so Apple wouldn't have the ability to define the space completely."
Chipmaker Nvidia calls its application development platform the "omniverse." But the term hasn't caught on widely.
In terms of technical standards, one question is whether multiple software operating systems will emerge for the metaverse.
In the smartphone world, two operating systems dominate: Apple's iOS and Google's Android. Among metaverse stocks, new operating systems might come from Facebook, Nvidia or others, analysts say.
Will Multiple Metaverses Emerge?
Bernstein Research analyst Mark Shmulik says tech giants are well-positioned over metaverse startups.
"Major players today have a head start on the metaverse," he said in a report.
Snap is among metaverse stocks.
Tech giants hold "billions of users, strong brand recognition, best-in-class developer teams and massive investments," Shmulik said.
He added: "A single metaverse vs. multiple metaverses makes a big difference, and at this point it's too early to tell how it'll play out."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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