It’s difficult to go almost anywhere nowadays without hearing about the metaverse. Is it investable though and what are the best ways to play it? Amine Bensaid is the Bloomberg Intelligence analyst covering media, video game and metaverse stocks. He joins the ETF Think Tank to offer his answers to those questions.
Identifying who might be best positioned to win in the metaverse depends on your definition of what the metaverse is. If you ask 10 people, you might get 10 different answers. Bensaid defines it as a network of 3D worlds that are connected with a social engagement aspect. He’s in the wait-and-see camp to determine where some of these long-term trends are headed, but he believes that Roblox is probably best-positioned currently.
One thing that concerns Bensaid in the short-term is the lack of content and interconnectedness. Roblox is a little more ahead in this sense because players can take their avatar to bounce in and out of games. If you are playing Fortnite, for example, you cannot take your avatar across games right now. There’s been a lot of development over the past few years, but the technology still just isn’t there yet. If the technology can catch up, there is a significant opportunity. The bullish scenario requires walls to break down.
One thing to watch in the metaverse space is M&A. Bensaid reiterated that the interconnectedness of universes will need to happen, and companies could begin merging in order to aggregate platforms. Just recently, Take Two merged with Zynga and Microsoft bought Activision Blizzard. This could be a first step in that direction to accomplish this. The really bullish scenario isn’t there yet, but names like Microsoft could be better positioned because they are trying to bring others in.
Bensaid is skeptical about how NFTs can fit in the video game world. Just like with avatars, users will want a universe where they can transfer wealth and tokens across platforms. If you have a limited-edition item in one game, you cannot move that across universes. Having a common currency or means of transferring assets is going to be necessary to make NFTs more viable.
Other key takeaways:
- Will the metaverse need to be centralized or decentralized in order to best succeed? Bensaid believes that in order for video games to work, it needs to be decentralized. The multiplayer platform that involves more gamers coming in will work better in a decentralized environment.
- Will the metaverse end up being a real estate play? The area is getting rented out and companies are moving in to advertise. It is possible that we eventually get a REIT focused on metaverse properties.
- Bensaid believes that China is neutral right now in terms of the metaverse. The new law limits how long younger consumers can play, and use has been declining. The Chinese market is not that different from the rest of the world, but adoption and use will be challenges.
- Unity Software could be one of the best pure metaverse plays out there. 70% of top mobile games are made from Unity. 50% of all video games are made from Unity Software. Unity is open source and has a huge library of 3D samples. It encourages new companies to get into development and is a good developer for the metaverse by providing 3D software capabilities.
- Is product, technology or services driving metaverse growth? Near-term, it is a combination of all three. The content is still not comparable to normal video games. It’s still about building up infrastructure. It’ll take 5-10 years for the real development in the metaverse to take place.
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