Metaverse ETF: invest in the Internet killer

One of many October's highlights is Facebook's rebranding to Meta, not the social media company but the company behind it, a change to reflect its push into a nascent and intriguing industry, the Metaverse. CEO Mark Zuckerberg announced it during Connect 2021, Facebook's 8th annual developer conference for all things virtual reality.

In this article, we will tell you more about the Metaverse, its applications, its main players and how you can become an early investor.

What is the Metaverse?

The Metaverse is a term used to describe a virtual space within digital spaces such as online games, social media, and virtual reality. It is a combination of the prefix "meta", meaning beyond, and stem "universe". It was first mentioned by Neal Stephenson in his 1992 "Snow Crash", a novel about a hacker and mafia pizza delivery man by day, VR superhero by night, who lives in an online universe called The Metaverse.

The Metaverse is where people can hang out with friends, work, visit places, buy goods and services, and attend events among other things. Many believe it will one day change the internet as we know it. Facebook CEO well described it as an embodied Internet we’re inside of, rather than just looking at.

The rise of Metaverse

The idea of creating an alternative, digital universe isn’t new. It has always existed in games and on websites. But the digital world fuelled by gaming and NFTs in midst of a global pandemic has boosted the digital goods economy and platforms that offer augmented and virtual reality. Unsurprisingly, companies took notice and are now working relentlessly to expand the Metaverse from the basic state it's in today.

Use cases for Metaverse

The use cases for Metaverse are limitless and go as far as human creativity but some ideas have more business sense than others, including:

• Games: Games like Fortnite and Minecraft, and platforms like Roblox and Unity have already given us a taste of Metaverse, but they’ll be increasingly adapted to sense-of-place, more social, more interactive, and crafted by an exponential rise in creators.
• Commerce: NFTs and digital products can be a prime example. But shoe companies for example can release products in the real world, and then they’ll throw these into a game, and the inverse would be rue in the future. There will be users designing their own brands in these game worlds, and then they’ll be made in reality.
• Real Estate: Through VR technology, people can pre-screen the properties they are interested in visiting, do virtual walkthroughs, and examine the augmented information about a property.
• Traveling: The Metaverse may someday allow people to visit touristic sites in multi-player mode with friends via telepresence.
• Engineering and Creative design: NVIDIA’s Omniverse is an example where engineers, architects, and designers can collaborate and work together to design space in full digital immersion.
• Fitness: VR headsets has brought fitness into the world of the metaverse by making it more interactive and more social
• Education: Education through virtual tools can be made more fun and interactive and improve student engagement

The layers of Metaverse

According to Entrepreneur John Radoff, there are 7 layers in the metaverse that constitute the value-chain.

Source: John Radoff, Market Map of the Metaverse

1. Experience are games, social experience, concerts, and other things that we engage with.
2. Discovery is when users recognize that such an experience exists.
3. The Creator Economy is everything that helps creators make and monetize things for the metaverse: design tools, animation systems, graphics tools, monetization technologies, etc.
4. Spatial Computing revolves around software that brings objects into 3D, computing into objects in the world, and allowing us to interact with them. It includes 3D engines, gesture recognition, spatial mapping, and AI to support it.
5. Decentralization is everything that is moving more of the ecosystem to a permissionless, distributed and more democratized structure. (e.g., blockchain)
6. Human Interface refers to the hardware that helps us access the Metaverse such as mobile devices, VR headsets and advanced devices like haptics and smart glasses.
7. Infrastructure includes semiconductors, cloud computing, cybersecurity, telecommunications networks and material science that make it possible to build the 7 layers.

Learn more about the Metaverse Value-Chain.

Metaverse Industry outlook

These 7 layers and the companies that will be involved in building them show that the virtual world is set to be a bigbusiness. From video games to virtual and augmented reality (AR/VR), ARK Invest estimates that revenue from virtual worlds will compound 17% annually from roughly $180 billion today to $390 billion by 2025. Bloomberg Intelligence on the other hand, expects the market opportunity for the Metaverse to reach $800 billion by 2024.

Investing in companies engaged in Metaverse

The race in the Metaverse space is heating up with more than 100 start-ups and publicly listed companies involved in the infinite applications of this nascent industry.

Source: John Radoff - Market Map of the Metaverse

Investors can gain exposure through investing in companies actively working on Metaverse applications. Here are a few examples, in no particular order:

• Meta Platforms (Formerly Facebook, FB): With their recent Meta rebranding and their ongoing VR/AR activities through their Facebook Reality Labs, Facebook is in full metaverse mode. "Today, we're seen as a social media company. But in our DNA, we're a company that builds technology to connect people, and the metaverse is the next frontier, just like social networking was when we got started," CEO Mark Zuckerberg said during the annual Facebook Connect event.
  Prior to the event, the company announced in a mid-October recruitment drive its plans of hiring up to 10,000 people in Europe to build the “Metaverse”. Facebook said it would take place over five years and described the European push as “an exciting time” for Europe’s tech industry, saying it boasts “a large consumer market, first-class universities and, crucially, top-quality talent.”
• Microsoft (MSFT):  Microsoft is planning to embed Metaverse for professional use. The company's CEO Satya Nadella talked about the concept of an "enterprise Metaverse", which will integrate the Internet of Things, digital twins, and mixed reality to help Microsoft grow its professional software market dominance.
• Unity Software Inc. (U): Unity is one of the world's leading game engines, helping artists and developers in the gaming world render 3D worlds in real-time. With their expertise, they are well equipped to help businesses build their Metaverse applications.
• Roblox Corp. (RBLX): Roblox is an online platform that allows users to program games and play games created by other users. RBXL has many Metaverse aspects today, with their own digital currency and the virtual social experience they provide.
• Amazon.com (AMZN): Amazon will likely look to maintain its e-commerce dominance by establishing some form of virtual "Amazon mall" in the Metaverse where shoppers interact with and buy products. The company has been developing a new VR shopping experience since 2018.
• Nvidia (NVDA): The Metaverse requires an immense digital infrastructure and computing power and Nvidia will play a critical role. Nvidia produces the graphics and video processing chips used in high-end computing servers, supercomputers, and artificial intelligence, and VR applications. CEO Jensen Huang said last year "The Metaverse is coming". The company has already launched its own Omniverse digital platform for virtual collaboration and simulation.

Investing in the full Metaverse package with Metaverse ETFs

Assessing what would be the best Metaverse stock to invest in is tricky in a young industry, especially with too many players involved already in infinite applications. One way to get the full package is through the first to market Metaverse ETF, the Roundhill Ball Metaverse ETF or METV.

METV was launched on June 30th, 2021 and has amassed $176 million in assets. The fund tracks the Ball Metaverse Index and invests in global public companies that are actively involved in the Metaverse, including companies developing the infrastructure, providing gaming engines and revolutionizing digital commerce, content and social experience.

In terms of geographic exposure, around 80% of METV's 41 holdings are U.S Equities, while the rest are distributed between China (6%), Singapore (4%), Taiwan (4%), Japan (3%) and others (2%). The top 5 holdings are NVIDIA (8.99%), Microsoft (7.26%), Roblox Corp. (6.79%), Facebook (6.07%) and Unity Software (5.0%). The fund trades on the New York Stock Exchange and charges 0.75% in annual fees. Since inception, METV has risen by 2.8%.

METV recently found a new competitor in Fount Metaverse ETF (MVTR), provided by Fount Investment company.

MTVR will invest in companies that develop, manufacture, distribute, or sell products related to metaverse technology. Its top holdings include Apple Inc. (11.55%), Meta Platforms Inc (5.88%), Alphabet Inc. (5.07%), Oriental Land Co. Ltd. (2.54%) and Sea Ltd. (2.5%). Since inception on October 28th,2021 the fund's assets grew to $4.35 million. It currently trades on the NYSE Arca and charges an annual fee of 0.7%.

Founded in 2015, Fount is the leading Robo-Advisor (RA) FinTech company in Korea that specializes in the use of AI to expand the asset management industry.

Conclusion

Despite the complexity and the massive efforts required to create a fully functional Metaverse, Facebook's push will spur further investments into the space. In the future, physical human interaction will be threatened as we dive deeper into the digital economy and the virtual world. And whether it will bring value to us or not, only time will tell.

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