The “metaverse” has captured the imagination of technology investors, but what is it, and what does it signal for the next era of computing? In the latest episode of Exchanges at Goldman Sachs, Goldman Sachs Research's Eric Sheridan examines how the blending of elements of the physical and digital worlds via virtual reality, augmented reality, gaming and immersive online communities is contributing to the rise of a more decentralized Web 3.0.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This exchange is Goldman Sachs and I now see anything in your strategy to combat research. Today, be talking about the matter, verse. What exactly is it and the hype or the next big thing, to help some light on the top I'm joined by my colleague Eric Sheridan, who covers the? U S, internet sector proponents, acts, be searched. Eric welcome the programme thanks to which we have made great yeah. You recently published research outlining your view that were entering into the future of when three point, all of which one and that is getting a lot of attention is the better verse start by explaining first about what is the matter. so the matter first broadly, is the concept that we're gonna take what our physical world experiences and broadly moved them into elements of mixed reality.
Reality and eventually augmented reality, the idea that you will have it period, such around the inner creator, can unities that are very immersive, some of which We have to consumer headsets somewhat, you might experience through the camera on your phone, but they basically are taking. What we know of now is digital experiences, predominantly your mobile smartphone or your desktop computer and Britain into a more immersive layer than they are today so everywhere. Arguing on whether three point always you describe it, how did we Yet here, how has the internet evolve through its various stages? What we ve talked about it said there's been two phases of the internet. today web one Dato, which was the concept of desktop computer and desktop computing on a global scale, became much more ubiquitous. The rise of the web browser. It was the introduction of battle
Advertising and e commerce check out. There was broad consumer adoption of the desk top web. Then we moved the web to with the adoption and the invention of the smartphone, obviously apple with the Iphone led, the broader consumer adoption of that as a category. What we saw was the operating system layer apple, I was an android rises scripture models. The rise of the scale platform form begin. If social network streaming media, but it was all primarily rooted round. The rise of mobile computing three out of which we believe will be next now that rain more of the later in Asia. The later stages of web to now will be element of more decentralize web they'll be less centralized fires that will act as either Walled gardens or gatekeepers for how you consume content, how you interact with creators- and you might have more control over your identity, there could be a dish.
A rise in privacy, there could be more local Experience is part and parcel of that is the idea that you could have augmented reality and this concept, based on your first question, up the met, a verse where we will interact anymore virtual world with each other, with less of the tenants tat we ve seen in web to data so. Where are we in that evolution towards web two point zero per day? We want I'll call investment cycle and encourage row Allison. You talked about height, verses reality, there's a lot of news coverage of this concept right now, so there's a lot of press coverage. There's a lot of investments being made in consumer hardware in content in play. it or ecosystems, even down to infrastructure, to enable bandwidth for these types of experiences to be about the consumer and the enterprise side. So I think or add two points at this moment in time. There's a lot of attention.
Should on it and there's a lot of investments being made if we think about what over the long run. We always phrase that is the next three to ten years. They'll be experiences that will make the consumer hardware cheaper, consumer option, will go higher, he'll, be cases that will make this an interesting technology needs to be adopted and then you'll see elements of revenue monitors, asian and scale in the platforms over the long term, so what's happening you're catalyst for all the attention that the metaphor is getting right. Now your what has potato this interest. Why now question and is really to aspects of it in the gaming you there was, the public listing RO blocks and there's been these experiences that have grown up among gamers in games Minecraft craft roadblocks and fortnight.
You go into these games, you have rather immersive experiences. You use virtual currency, you buy virtual goods, you interact with people as a character in all different parts of the world in this sort of virtual world, so the concept or the building blocks were laid out of the gaming industry and then recently faced rename themselves as better platform, they change the name of the company to I If I to the investment community and to the broader internationally, that the focus of the company over the next ten years is going to be to build this concept of the matter and build the bomb, the asset they are quite a number of years ago, which was archeologists, which was a virtual reality. Company, citing those catalysts, as went from twenty twenty two. Twenty twenty one have brought this concept to bear. One of the points to make on this. That's interesting is game. As an end user experience accelerated as a result of the pandemic and a father
for two and a half year old, was played wage of any video games over the last eighteen months, as just been elements of work from home, stay at home and school from home, and what you ve, seen as a rapid adoption of gaming experiences as a form of media consumption by a wide array of people. So I did all of those themes have brought this to bear in the last couple of months seem talked about it evolution potential evolution of the members ahead. How big is the potential opportunity how you quantify that think about the size yeah Headlight numbered assurance, throw out, as we think this could be as much as an eight trillion dollar opportunity revenue of democratization side. How do we think about that? We look at it digital economy today, which is broadly Euro, roughly back twenty twenty five percent of the global action,
to me this various elements of all my travel that are sixty percent penetrated and then there's elements that are signalled that it better traded of the global economy for online or soft light experiences. We see the digital economy continuing to grow, and on top of that, we see a virtual economy that can grow with and alongside this digital economy, and that's how we come up with a number for various outcomes of anywhere from two trillion to twelve trillion dollars with HIV. In the mid point of potential outcomes, democratization from this thematic element of the evolution of the internet. So are basic, in this investment Jesus, you said: how is the peace an investment that were observing affecting the role of private capital and formation in this space nursery The two really interesting data points. You know when they change the name of the company from Facebook to matter Facebook disclosed Twenty twenty one day
we're going to lose about ten billion dollars in the company itself in investments in what they call the men averse to envision of theirs. Pole virtual reality lapse. That's just one company making these investments towards the future. Alongside of that in twenty twenty one you saw in excess of ten billion dollars of private capital raised across various sectors such as gaming online. games, augmented reality and virtual world Experience has shown that the type of scope of investment receive right. Now we could see a multi year cycle, which is what we ve talked about and the result of that could be anywhere from a hundred and thirty two billion of investment. To one point: three times even the best man again against that idea that there could be an output of this around eighty million or more, and we think about the application. the best were already seeing evidence of the members and video games. As you mentioned, I also have an eleven years.
Who has the oculist. You know stuck to his face a lot of the time and these devices are blurring the lines between virtual and physical events. Maybe talk about how its playing out. gaming industry. More specifically you ve, seen examples where companies like fortnight roadblocks minecraft within Microsoft. These are all barriers platforms that have hosted sporting events, cancer music, festivals, luxury fashion, shows, you know, I'm not load to admit that my family, I sat down and watched a concert inside fortnight together as a family. That is something That is a different experience that we all had three four or five years ago. I think what you're going to see over time is the potential for do about beyond just gaming and for more it, just come into these types of experiences and expand the potential footprint beyond game
A lot of these developments do some very futuristic. I guess a few years ago we could never have to see the sitting around in watching a concert together, but you know how far we along in this developmental phase- and is it really too early to assess the winners and losers here it's a little early to determine winners and losers because we are in the beginning of a cycle, but I can we're. Looking for r l, and job. What are some of the air market? Second move into these type experiences. We talked about music, there could be retail, there could be education there, Reforms of advertising? Should you think about some of the parts of the global economy and then the digital economy within that economy. That can be disrupted or shift even from a did, environment into virtual environment. Those are all examples of end markets that we could see shift with dollars over the net
three to ten years and will be watching not just see what that means in terms of winners and losers. In the long run, I can generally when you talk to technology leaders about this transition. This concept of being decentralized is poor, so sexual They should allowed some elements of very large companies to grow up in web to data when there's some of the largest companies in the public markets. Today, decentralization stays is its core there is. debate bait out there in the technology industry of whether they'll be large scale winners in a way three that'll work they'll be a greater proliferation of smaller winners. They take advantage of different niches. I think that remains an open ended debate about it do to monitor how that develops in the years ahead, but it also seems in order to create a true virtual world. Other attack and social media companies will have to open up their platforms. How likely that happen? You're integrate question
You will likely see what happened with web window going to web too, that there were companies that were scale players that work operating at scale, taking advantage of the desktop computing cycle, and some companies pivoted quite successfully intermodal computing some. fell by the wayside and others popped up that were not there before apple, for instance, which is a company. I cover my coverage, but it's an example that I can give you a company that was a smaller place. in a desktop computer world, but obviously become a massive player in a mobile computed world. Google was a cop but he the bridge the gap between both of those worlds, desktop search, went into bauble, search an android. So I think we're gonna have to watch how some of the companies that are considered. Leaders today continue to adopt and invest into
technologies or whether they succeed execute and as we draw up a little bit earlier in the conversation I'll? Send you there's a couple unlock steps here we have to watch to see who gets it right now who gets it wrong? There's the consumer! hardware peace, there's the content, peace, there's cornering with creators to want a partner for distribution with platforms as they grow and scale. Those will all be really interesting elements to watch for how different companies react and execute against those opportunities and challenges in the years ahead and matter seems to be so uncharted in so many ways that are so when will regulate and be necessary in the space, and how do you think future regulatory action more impact when three point our investments, you're a woman to point to the goods really interesting Topic is obviously a lot more regulatory scrutiny of the internet today than there was five or ten years ago we ve talked about how that's an output of the scale of the companies that
just today and how mission critical they become too. The economy on a global scale show this me is already there from day one and if you think about what we talked about it, LEO. The transition of web one doubt owed to battle. There was now a regulatory scrutiny of companies at that point, so already were going through computing cycle transition where regulators or on the look out for is a comedy gaining too much power. come to get into which information. So, therefore, that could have implications for who scales and in what manner they build scale as we move into web three that out they'll be number one and obviously more consumers and regulatory entities or to today than they were ten years ago. The elements of content privacy and deputy. So there is a really interesting demon. You could see elements of this matter, verse or element of the broader way, read out o being built the concept that regulators are struggling to regulated web two Dato as aid.
Starting point in WEBS three data. Only at you the space for most of your career, how would you characterize the development of wealth we point out within the evolution of computing, more broadly, while First Avenue doing it for so long because it's always interesting, I never lacked for things to read or learn or try to continue to educate mice about, and this is yet another topic over the last couple of decades, where I'm trying to think about how technology is going to shift how it's gonna have a real impact on consumers and enterprises going forward. I think the way I think about it is We have a lot of computing power more than we never had an there's an element for connection both in enterprise application. That social applications and there's an element want to consume content and have shared experiences, so really does feel like if the execution, can be done about the hardware side in the content scientists we talked about. This could open alone
economic opportunities in the next five to ten years, we ve talked about some examples like concerts, but this even broader examples round education and travel and allocate open up opportunities where some folks might not be able to have the money experience, something in person or experience, even digitally prefer less dollars. They could experience it virtually all in an augmented reality world, and that tends to be an economic expansion That's what I'm the most focused on the most excited about. Well, act, I'll, look for went to the time when our avatars can have a conversation about. The changes made so much for joining us and sharing all these inside for this? Thank you so much Is this episode of exchanges of Goldman Sachs things for listening, and if you enjoyed this, the show we hope is an apple, podcast and illegal waiting and comment. This podcast is acquitted on Friday January. Seventh, twenty twenty two
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Transcript generated on 2022-01-11.