Facebook CEO and pantomime villain Mark Zuckerberg announced that his company would be rebranding as Meta.
It was a huge statement about the direction of the metaverse, which many began to declare would include everything from socializing to transacting, entertainment to entertainment.
And as I wrote about last week, it’s a bet that has turned sour for the billionaire.
But are we seeing the same pattern across the market? Is interest in the metaverse dwindling?
The first port of call I went to was Google, where Search Analytics painted a picture of a huge spike in interest for the term “metaverse” after Zuck left last October. Not long after, a steady decline.
A harmful chart, no doubt. But how much of this can be attributed to the concept of the metaverse, and how much is a result of the widespread macro-bear environment?
It’s hard to say, but there’s no doubt that a lot of the Metaverse projects were grossly exaggerated. It is possible to believe in the metaverse, yet simultaneously hold the opinion that too many tokens in the space are either overvalued, offer minimal utility, or both.
One thing I still don’t understand is why there are so many investors willing to put cash into anything even remotely related to the metaverse, even if the investment is one thing to gain market share in the eventual metaverse. Be a verifiable plan, whatever it may look like.
Sure, this blindness has fallen off a cliff now that the market is so brutal, but a lot of these companies still have huge valuations even after their declines of more than 80%.
DOT COM BUBBLE –
We must not forget that the Internet has changed the world immeasurably, exceeding the expectations of even the biggest bulls. And yet, think about how many companies went when the dot com bubble burst.
A poignant reference is Priceline.com. You might not recognize that name today, but it was once one of the biggest internet companies around. Its thesis was compelling: out of half a million unsold plane tickets every day, customers could use the train to enter the price they would be willing to pay.
In this way, airlines removed their excess inventory, customers picked up cheaper seats and the market was balanced. It kind of makes sense, doesn’t it? And all the while, the train was cutting every transaction.
a reasonably sensible business plan; a gap in the market; And something that would make people at parties respond with “ooh, that’s so clever.”
It was launched in 1998, and within seven months it had sold 100,000 tickets. Only 13 months after launch, it went public for $16 per share. It rose to $88 on the first day and closed at $69. There were plans to expand even further – why couldn’t the system work equally well in areas like hotel rooms, train tickets, even mortgages?
Its close of $69 after its IPO day gave Train a valuation of about $10 billion. It was the most valuable company in the short history of the Internet.
And then it fell 94%.
Of course this story is not unique. The Nasdaq dropped more than a third of its value just a month after it peaked in April 2000.
What does the dot com bubble have to do with the Metaverse?
Which brings me to my point. You can trust the Internet without having to believe all the companies that were claiming to be “Internet companies”. With the concept of profit unheard in the days of the dot com, these companies were notoriously loss-making. For example, Train lost $142.5 million in its first few quarters.
And yet, the Internet clearly changed the world.
There are many Pricelines out there today. Perhaps the “benefits” of the dot com era are the “usefulness” of the Metaverse era. Before investing in any of these tokens, ask yourself what exactly do they do? Do they have a clear roadmap towards leveraging the metaverse to create some tangible value? Most importantly, is there any utility here?
Those seem like basic questions. And it’s that sort of thing. They’re really basic – but so many coins can’t answer them. Let us not forget how easy it is to create a cryptocurrency; A simple copy and paste technically gets you one. Pair this with the fact that there was a lot of cash coming into the space – both from investors and through VCs – and it’s no surprise that so many tokens have completely collapsed.
For every Amazon, there are ten Pricelines.
And the second thing that needs to be mentioned here, there is (obviously) no guarantee that the metaverse will be remotely as influential to society as the internet was. Even after hitting every single conceivable target of the internet, there’s still a lot of train running out there. Imagine how many would be if the internet flopped?
Just because you believe in the Metaverse, don’t blindly write anything called “The Metaverse” in it.
For the foreseeable future, of course, every single crypto – metaverse or other – will continue to follow the stock market, such is the macro environment right now. So even those that offer utility, and may otherwise be well placed to excel, will not yield returns for investors as long as the broader market continues to lag.
But even if the market recovers, Metaverse tokens will still have to prove that they actually achieve something – which many cannot. As always, in investing, it is therefore important to do due diligence on the coin in question, block out the noise, and ask yourself the basic questions as discussed above.
Don’t let the metaverse seduce you with the sweet nods whispered in your ear. A utopian dream won’t pay the bills at the end of the day, and we have the dot com bubble as proof of that.