Here’s Facebook’s $80 Trillion Bet on the Metaverse

Are you optimistic about the future of facebook’s Metaverse?

A few days ago, entrusted by Meta, the parent company of Facebook, the world’s technology Internet giant platform, the well-known international consulting firm Analysis Group (AG) released a white paper on the Metaverse industry.

Here's Facebook's  Trillion Bet on the Metaverse

Image source: Analysis Group

This report estimates the future market development of the Metaverse, and mentions in the report that it is estimated in an optimistic manner that the market size of the Metaverse-related industries in the future will reach:

$80 trillion.

The figure of $80 trillion may not seem to you at first glance, but now the most valuable company in the global market is Apple, with $2.55 trillion.

In other words, the size of his market size is equivalent to:

31 Apple Inc.

Of course, although the numbers are wonderful, the argument of this white paper has a major premise:

In theory, it is hypothesized that any breakthrough technological innovation can serve as a foundational model for Metaverse analysis, especially mobile technology—mobile devices and their associated infrastructure and ecosystems.

This coincides with the point of view of Lao Luo of the Hammer (we talked about it in our previous article: click here to jump)

The reason why the AG team has such an assumption is that:

Offline devices such as mobile phones, computers, and PlayStations are interconnected via the Internet, overcoming geographic constraints and fundamentally changing the way groups connect.The Metaverse concept also has this feature, using existing technologies, such as AR/VR, video conferencing, multiplayer games and digital currency, to “link” the world.

It is not just as simple as linkage, the report pointed out:

The Metaverse will further break down location barriers by enabling a more seamless and immersive experience, as well as creating a sense of off-site coexistence. It will also change many industries.Similar to mobile technology, the expected range of applications in the meta-technology area is far-reaching, including communications, entertainment, education, healthcare, manufacturing, and retail.

Here's Facebook's  Trillion Bet on the Metaverse

Source: Horizon Home, a product of MetaMeta’s home, everything behind Zuckerberg is a Metaverse virtual

Except for data source analysis and estimation model construction, this white paper is mainly divided into three parts:

1. The definition of the Metaverse, the current landing scene;

2. Predict the development of the Metaverse by analyzing the economic impact of the previous generation of mobile communication technologies;

3. Predict the future impact of the Metaverse on GDP through modeling, and point out the opportunities and challenges of the Metaverse economy.

Below, the editorial department will give you some key points to explain the content of the report.

theoretical support

As a revolutionary technology, the Metaverse is not easy to predict its economic impact.

Although quantitative analysis is more difficult, using previous experience of the diffusion and impact of new technologies in the market, as well as economic theories related to these technologies, relevant models can be established for analysis, and then provide valuable insights.

In economics, there are two theories related to new technologies that can be used to make analytical predictions about the Metaverse:

1. The Hype Cycle

2. S-curves (S-curves)

Gartner, a well-known research and consulting company, publishes the “Hype Cycle and Prioritization Matrix” report every year, trying to analyze new technologies according to the prospect of new technologies coming to market. Through years of research, they have compiled and studied the hype cycle curve.

Here's Facebook's  Trillion Bet on the Metaverse

Image source: The Hype Cycle by Gartner

The AG team believes that Metaverse technology also applies to this curve, according to which they analyze:

The Metaverse will be overhyped at first, then the Metaverse will undergo a reverse correction as the over-expected bubble bursts, and sales of related products will rise steadily as manufacturers continue to improve their products and innovate.

However, relying on Gartner’s hype curve alone is not enough.

Because even if we know that new technologies have a hype cycle, it is impossible to define which stage of the hype cycle the specific industry of the Metaverse belongs to at this stage, so it is impossible to conduct a more detailed analysis and prediction of the Metaverse.

So, the S-curve comes in handy.

Here's Facebook's  Trillion Bet on the Metaverse

Image source: Gartner Each “S” represents a new revolutionary technology in the market S-curves (S-curves)

Economist Clayton M. Christensen noted:

“Every new technology tends to follow an S-shaped curve. The development of these technologies begins with a slow initial period (technological innovation and gradual adoption), followed by a period of rapid change, and then as the market evolves Mature and level off. But over time, new technologies tend to start to gradually replace previous ones—for example, smartphones replacing MP3, MP4, etc.”

As Soren Kaplan, CEO of Innovation Consulting, put it:

“The S-curve usually represents the birth of a new market (service, technology, etc.), and the disappearance and death of the previous market”.

Economist Carlota Perez elaborates on each single “S”:

“This is more like a revolution. In a period of economic development, new technologies will act like bulldozers, destroying existing industrial structures, connecting new industrial networks, building new infrastructure, and spreading advanced work and lifestyles.”

For better understanding, the editorial department has translated an S-curve dismantling diagram for you:

Here's Facebook's  Trillion Bet on the Metaverse

Translation: Dabing Editorial Department Photo source: “The Death and Birth of Technological Revolutions.”

Based on the above theories and reports, the editorial department believes that the current position of the third-generation computing platform represented by the Metaverse should be in the financial hype period, and in front of the “technological explosion point”:

Here's Facebook's  Trillion Bet on the Metaverse

Image source: Based on Gartner, produced by this editorial office

Correspondingly, the position of the third-generation computing platform technology represented by the Metaverse in the “hype curve” should be estimated by this editorial department as:

Here's Facebook's  Trillion Bet on the Metaverse

Of course, all of this is only an estimate. For a new technology and industry, the future is very uncertain.

However, all researchers agree that:

The phone is the king who is about to be pushed off the Iron Throne.

And the next-generation computing platform around the Metaverse is a strong contender for the new king.

The AG team that wrote this report thinks so too.

Model building and prediction

The AG analysis team used a model from Waverman, Meschi, and Fuss (2005) and Andrianaivo and Kpodar (2011) to study the relationship between per capita GDP growth and mobile broadband (mobile Internet):

Here's Facebook's  Trillion Bet on the Metaverse

Source: Analysis Group does not need to understand, just know that this model is to study the relationship between new technologies and per capita GDP growth

To avoid the effect of statistical endogeneity, they used the GMM estimator used by Arellano and Bond (1991) and time-specific instrumental variables to estimate the model. (It doesn’t matter if you don’t understand, just read the conclusion below)

Here's Facebook's  Trillion Bet on the Metaverse

(Similarly, don’t read if you don’t understand, don’t embarrass yourself) The OLS linear regression impact factor graph of this study

From the above quantitative analysis, the AG team concluded that:

A 10% increase in mobile technology adoption is associated with a corresponding increase of 0.087 in GDP.

In other words, for every 10% increase in the market penetration of mobile technology, the total revenue of the relevant market increases by 8.7% of total global GDP.

And what about the Metaverse, the next generation of mobile technology?

After further modeling analysis, they concluded:

If the Metaverse begins to be adopted in 2022, the total contribution of the Metaverse to global GDP in 2031 will be at least US$3.01 trillion (the analysis team estimates the value of the US dollar exchange rate in 2015, because the US dollar exchange rate in 2015 is relatively stable and more The deep reasons can write a paper, and the editorial department will not repeat them).

Here's Facebook's  Trillion Bet on the Metaverse

Metaverse’s contribution to GDP in 10 years

Among them, APAC (Asia Pacific) ranks first, and the output value of the core industry in the Metaverse will reach 1.04 trillion US dollars.

In addition, the output value of the Metaverse field for Canada (Canada), Europe (Europe), India (India), LATAM (Latin America), MENAT (Saharan and South Africa), and US (United States) is 0.02 trillion US dollars, 0.44 $0.24 trillion, $0.32 trillion, $0.36 trillion, $0.04 trillion, $0.56 trillion.

Moreover, the article points out that from a long-term perspective, the overall market size of the Metaverse-related industries is conservatively estimated at 3-30 trillion US dollars, while the most optimistic estimates are:

$80 trillion.

Obstacles and case studies

Although the Metaverse has broad development space and prospects, at present, the Metaverse still has three obstacles that cannot be bypassed.

Technical experts Ball, Matthew pointed out in an article published in 2020 that the rapid development of Metaverse technology still needs to achieve three points:

1. Large-scale collaboration will be required, including the integration of existing agreements from different companies and the development of a unified specification for the creation of new agreements.

2. Relevant Metaverse companies are required to create a “tipping point” to continuously attract new users to adopt Metaverse technology.

3. The rapid innovation of technologies such as VR will push the Metaverse technology to a climax when an iPhone similar to Jobs is made.

Obviously, the Meta company that paid AG to do this white paper has a deep understanding of the great prospects and obstacles of the Metaverse.

They made this report, depicting a bright future, to support the story of the current losses in the capital market.

Here's Facebook's  Trillion Bet on the Metaverse

Since Facebook changed its name to Meta and began to fully invest in the Metaverse-related industries, its company’s financial report has been divided into traditional applications and Reality Labs (Metaverse business) two businesses.

Among them, Reality Labs’ revenue reached $695 million in the quarter, an increase of 35% year-on-year.

At the same time, input costs rose by 55%, resulting in a net loss of $2.96 billion.

In this state, Meta’s betting on the Metaverse will only increase, with an average quarterly investment of $2.5 billion, with a minimum of $1.827 billion and a maximum of $3.304 billion.

Here's Facebook's  Trillion Bet on the Metaverse

Image source: X plus

Meta can be said to be All In in the Metaverse gamble:

1. Add a new VR function to the Horizon platform under Meta – Horizon Home (creates a virtual space, do whatever you want in this space);

2. Invest heavily in the development of a new high-end VR headset – Project Cambria (in the product design, you can even make eye contact with friends in a virtual space)

3. Continue to increase the promotion and sales of VR equipment OCULUS QUEST 2.

Here's Facebook's  Trillion Bet on the Metaverse

Source: Meta

OCULUS QUEST 2 has surpassed $1 billion in total sales since its release in 2020. Officials have not announced sales of the device, but multiple third-party sources estimate that shipments of the device range from 5 to 10 million units. s level.

Since OCULUS QUEST 2 is a consumer-grade VR, the main application scenario of consumer-grade VR at this stage is VR games, so we can get a rough glimpse of Meta’s market share in consumer-grade VR through Steam, the world’s largest game distribution platform:


Here's Facebook's  Trillion Bet on the Metaverse

Source: “Steam Hardware & Software Survey: June 2022”

At this stage, it seems that Meta is doing well, but Meta CEO Zuckerberg warned investors in the first quarter earnings call of this year that Meta’s overall profit fell by 10 billion last year due to the layout of the Metaverse. US dollars, and is expected to continue to expand the scale of investment in Reality Labs in the next few years.

In other words, Meta believes that their efforts in the Metaverse are far from enough, and they will invest more resources in this area.

Why is Meta so desperate?

Because at this stage, Meta’s income structure is very thin and its anti-risk level is very low. According to Meta’s financial report, we can find that Meta’s main source of income is only one: Advertising.

This revenue can account for more than 90% of the total revenue.

Such revenue is marginal. Similar to Baidu in China, they are worried about the limited growth of advertising revenue. In the secondary market, they are regarded as:

“There is no future company.”

In order to break the game, Baidu chose All in AI.

And Meta, chose All in Metaverse.

It’s hard to say for sure if Meta will be successful.

However, make such a huge gamble in a trillion-level market.

Whether it is successful or not, it is still admirable.


《The Metaverse: What It Is, Where to Find it, and Who Will Build It 》, Ball, MatthewThe

《Potential Global Economic Impact of the Metaverse》, Lau Christensen&Alex Robinson

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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