In late October, Meta Platforms (NASDAQ:FB) stock shook up the internet with the next breakthrough in technology, the metaverse.
The social media giant aims to make the metaverse a critical component of its future direction. The critics panned CEO Mark Zuckerberg’s decision to reinvent itself at a time when it’s reeling from a PR predicament. However, if you stick around with FB stock for the long haul, you’ll reap the rewards of the enterprise’s need of the hour.
The metaverse concept was relatively unknown to most people before Facebook’s foray into the sector. You probably would’ve known about the concept from the 2018 sci-fi/adventure flick Ready Player One. However, Meta Platform’s investment in the sphere isn’t just a flash in the pan, as Zuckerberg sees it as the “successor to the mobile internet.”
If the metaverse is what Zuckerberg has pictured it to be, it has all the makings of having a cataclysmic impact on the world. Moreover, the social media sector is maturing fast, and growth rates are expected to drop significantly in the coming years. Hence, the move into the metaverse is likely to pay many dividends in the future.
Why the Metaverse Now?
The market hasn’t taken too keenly to Meta Platform’s strategic pivot. The renaming of its brand comes when it’s facing a reputational crisis. Researches have panned its impact on teens’ mental health and its use in spreading fake news. However, the metaverse announcement is more about driving future growth.
There were years where Facebook used to post double-digit revenue growth numbers, comfortably above the 40% mark. However, we have seen a significant slowdown from those levels in its most recent quarters. Additionally, that trend is likely to continue for the foreseeable future.
On top of that, it is driving most of its growth from countries where the average revenue per user (ARPU) is considerably low. Growth from markets where its ARPU is in the higher end has slowed down over the past few years. Hence, Facebook cannot make much from the regions where online advertising rates are remarkably low.
Enter the Metaverse
The metaverse idea involves the creation of a more immersive internet that effectively makes use of technologies such as VR and AR to engage in the virtual world. Zuckerberg aims to integrate the virtual world with our physical existence seamlessly.
It’s clear that Meta Platforms is going all-in on the metaverse opportunity and has stressed its importance to its future. It may have spent more than $60 billion from 2014 to 2023 breathing life into its plans. This includes the $2 billion spent on acquiring VR headset specialist Oculus and more than $50 billion on organic and inorganic investments.
Facebook plans to make its headsets affordable and focus on generating revenues from advertising and commerce within the metaverse. It currently generates next to nothing in revenues at this point. Moreover, its “other revenue” segment contributed just 2.3% to its revenues from the first to the third quarter this year. Meta Platform’s Realty Labs segment, which includes its VR and AR businesses, will launch in the fourth quarter. The segment is expected to lose roughly $10 billion every year as we advance.
Final Word on FB Stock
Meta Platforms will invest truckloads of cash in tapping into the metaverse opportunity. However, it’s unclear how it will play out at this time.
Nevertheless, its CEO is a visionary and has revolutionized the tech industry in the past couple of decades. He has a track record of executing his plans effectively.
However, investors aren’t likely to see a return on these investments for the next few years, so you need to be patient with FB stock.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
