Bottom-up look at metaverse landscape
This analysis is by Bloomberg Intelligence Senior Analyst Mandeep Singh. It appeared first on the Bloomberg Terminal.
Metaverse expanding ecosystem to spark growth outside hardware
Though metaverse-related hardware spending may keep rapidly increasing, we believe integrating 3D immersive effects in uses beyond gaming into entertainment and e-commerce will be essential for mainstream adoption. The use of tokens and nonfungible tokens (NFTs) could help unlock new business models. Meta’s additional capital spending of $10 billion every year to build the data-center infrastructure for its metaverse is likely to support leading GPU makers, including Nvidia. Unity and Matterport, along with other design-software makers like Adobe and Autodesk, are exposed to demand for 3D software used to build the metaverse.
Metaverse sales could gain 72% a year as tokens outpace VR/AR
Metaverse’s revenue will come mostly from VR/AR, specialized servers for data centers and 3D design software over the next two years, while we calculate token-based transactions driven by NFTs and blockchain-based currencies can boost the market to about $140 billion by 2025. We see 3D virtual spaces used for shopping, events, social media, video conferencing and other consumer apps.
VR form factor for 3D experiences
Revenue from the sale of virtual reality and augmented reality (VR/AR) devices will probably be the highest portion of the metaverse market initially, before an installed base of at least 15-20 million engaged users allows companies to drive monetization through transactions and ads. Though Roblox has built its metaverse offering on iOS and Android ecosystems, we expect maturity of VR/AR technologies would help spark more immersive 3D experiences. The VR/AR hardware market is worth about $4.5 billion, with Meta’s Oculus as the category leader, and could expand at a compound annual rate over 50% to reach $26 billion by 2025, based on IDC data.
Token-based transactions may grow 60% every year
We expect metaverse offerings to expand beyond gaming into 3D virtual spaces for shopping, concerts and sporting events. The monetization will likely be driven by token-based transactions, with ads a much smaller portion at first. Token-based revenue is about $7 billion, fueled mainly by gaming companies like Roblox and Epic Games, and could grow by more than 60% every year through 2025, based on our calculations, spurred by integration with cryptocurrency and digital wallets.
Social media monetization remains about 2-4x more than all other forms of media in the U.S., which implies any loss of engagement to gaming or metaverse offerings will be a much bigger headache for social media companies in the near-to-medium term.
 Demand for high performance, AI workloads
Demand for artificial intelligence (AI) workloads is expected to get a boost from companies launching metaverse offerings. We expect most cloud infrastructure players will debut high-performance computing (HPC) offerings for running 3D virtual spaces, which could make HPC among the fastest-growing segments of the metaverse market, expected to expand at annual rate of over 200%, based on our work. Though metaverse infrastructure as a service, about a $1 billion segment, will probably be offered by most hyperscale cloud providers, we expect there will be more companies offering multicloud support.
Design-software demand to remain
Design-software makers may be among the major beneficiaries of tech companies across domains, including social media and marketplaces investing in 3D virtual worlds, where people can interact with other people’s avatars and transact with digital assets. The metaverse design software segment could also expand by about 40-45% a year, driven by license and subscription sales for software companies such as Unity, Matterport, Autodesk, Adobe and Procore.
