In the current digital world, how will the Metaverse be realized?
As Facebook changed its name to Meta, investors are growing more curious about what the future of Metaverse will look like.
Morgan Stanley believes that although Metaverse may take several years to create and evolve, it is still most likely to become the next generation of social media, streaming and gaming platforms. Similar to these platforms, Metaverse is likely to become an advertising and e-commerce platform for offline products initially.
However, with the existing digital media and e-commerce platforms being robust and improving all the time, coupled with a variety of uncertain factors, the market will not easily adapt to Metaverse in the short term.
Total Available Market (TAM) is as high as $8.3 trillion
In the digital world, users’ time is very precious.
Morgan Stanley's analysis found that daily active users in the United States spend around 6 to 39 days on social media, streaming media and gaming platforms each year.
Daily active users spend a total of 11 billion days in digital media each year, this is the target time that Metaverse wants to seize. If the calculation is based on monthly active users, Metaverse will need to capture a longer period of time.
As a comparison, Morgan Stanley also counted the time spent by Americans in other areas. Statistics found that Americans spend 14 billion days watching cable TV every year while spending 35 billion days sleeping.
Morgan Stanley stated that it often adopts the framework of "participation + innovation = monetization" when analyzing consumer-based platforms, and Metaverse also applies this framework.
Current leading social media platforms monetize user time at a price of $0.04-0.13 per hour, so when combined with innovation and spending, consumer time will have significant value.
This also means that the Total Available Market (TAM) in the United States is as high as 8.3 trillion US dollars, covering real estate, core retail, automobiles, games and other fields. Out of this TAM, $5.1 trillion comes from immersive experiences. Immersive experience has a more direct connection with business and transactions and can be profitable at a higher level.
At the same time, Morgan Stanley saw the connection between immersive experiences and the opportunities to unlock the Metaverse, including in the fields of clothing, cosmetics, games, video streaming, automobiles, real estate and home design, music and education.
It is worth mentioning that the $8.3 trillion does not include new potential consumer spending items, such as non-fungible tokens (NFT), digital collectibles, or new creative subscriptions.
The bank expects that digital collectables and NFTs will grow with the development of the next generation of Metaverse. However, it will take a longer period of time before virtual products can replace physical entities on a large scale (ie, digital jewellery, digital sports cars, or digital appliances completely replace physical entities).
In addition, in order to monetize TAM, Morgan Stanley believes that any Metaverse project must build a transaction, commission system or highly targeted advertising product, and establish a delivery mechanism for physical products on the backend.
What will be the future of digital payment?
Morgan Stanley believes that as online shopping increases, Metaverse may also increase the number of digital payments. But in the long run, the result is still uncertain.
If consumers continue to use traditional currencies in general, then Metaverse windows (such as Facebook and Roblox) may compete with existing payment platforms. However, given that the existing payment network has a relatively good consumer experience, they may also need to seek cooperation.
In other words, for cryptocurrency to develop from the Metaverse, it may be necessary to use Facebook's Novi or Diem crypto wallet service.
In addition, the regulatory environment has brought more uncertainty to this monetization opportunity.
Key barriers to adopt Metaverse1. The current digital media is prevalent
In Morgan Stanley's view, the current digital media and e-commerce products are still prevalent and improving all the time which might cause the market resistance to adopt Metaverse soon or easily. Therefore, Metaverse's hardware and technical products must be better than the existing ones.
The agency believes that it is very important for Metaverse to be "10 times better than the second-best product." But so far, many products (5G, cloud games, e-commerce, etc.) have not yet reached this high threshold.
Therefore, any Metaverse may need to cooperate to promote market adoption or develop new "killer products" to promote the general interest.
2. Privacy, human nature and regulatory issues become hidden dangers
It is worth noting that the frequent use of social media by consumers has once again demonstrated the usefulness of social media, but Morgan Stanley admits that it is not sure whether consumers will choose to share more detailed digital information in the next 10 years. This is possible, but it must have some positive effects, and it must be sufficient to offset its negative effects.
In terms of security, although Facebook and YouTube have made significant progress in cleaning up their platforms, the former has spent more than 13 billion U.S. dollars on cleaning up platforms since 2016, but there are still security risks. Both have been criticized for leaking user information and child safety vulnerabilities issues.
In addition, it is not yet certain whether the relevant regulatory environment will be more stringent or will be relaxed in the next 10 years.
Can Facebook's B2B Metaverse succeed?
On October 28, Zuckerberg officially announced that Facebook was renamed Meta, opening a new era in its Metaverse. In Zuckerberg's goal, Metaverse will "reach 1 billion people and hundreds of billions of dollars in digital commerce."
Morgan Stanley is hesitant about whether Facebook's Metaverse will succeed in B2B; as current digital B2B, communications, and production tools will continue to improve.
On the one hand, as Meta faces a large number of data privacy leak scandals and uses algorithms to amplify harmful content, which makes users increasingly alienated, consumers and businesses may not be willing to trust Facebook completely. Aside, Facebook is currently a social-networking platform and lacks a professional background in corporate tools.
In this context, are we still far from a safer Metaverse?