Do you or someone you know play Roblox or Fortnite? If so, you're already a part of the burgeoning metaverse, a virtual space that blends the physical and digital worlds.
Metaverse combines "meta," meaning transcendent or beyond, and "verse" from “universe.” Author Neal Stephenson coined the term in his 1992 science fiction novel, "Snow Crash." Stephenson's characters are avatars—virtual representations of themselves that transcend reality.
Many of us use avatars to play games, attend virtual concerts and communicate with others. In the future, Roblox, Fortnite and other gateways to the metaverse will support core elements of our lives: education, work, finances, social life, virtual travel, shopping and entertainment.
The Metaverse as an Emerging Investment Theme
Though the metaverse is early in its growth trajectory, many investors believe it could be the next big investment theme. Scott Nover of business news site Quartz describes it as "an immersive next-generation version of the internet, likely rendered by virtual or augmented reality technology."1
Several companies have already seized on the metaverse and seek to shape it. After changing its name to Meta Platforms to demonstrate its focus on the theme, Facebook is a high-profile example. Another is Nvidia, whose Omniverse offers a 3D simulation and a design platform that allows collaboration in a shared virtual world. Lesser-known entrants include companies like Unity Software, which offers tools that enable users to design the real-time, 3-D environments essential to the metaverse.
Roblox Has an Early Foothold
Even though Facebook (Meta Platforms) is a more prominent company, we think Roblox has staked out a unique position in the metaverse. Since opening its doors in 2004, it has developed innovative digital infrastructure that could make it a pure-play company on the metaverse investment theme. The firm went public in early 2021 with a remarkable $38 billion market cap.
Roblox is one of the world's most frequented virtual ecosystems. It connects the physical and digital worlds with experiences, environments and assets that enable people to interact, participate in enjoyable challenges and create personal virtual worlds.
The company has experienced rapid account growth during the last five years, as shown in Figure 1. More recently, activity on the platform spiked when the pandemic's social-distancing restrictions limited the in-person interactions young people could have with their friends and classmates. So far, adoption has proven sticky, with users remaining engaged after opening accounts.