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Why I’m buying Facebook shares now

Male and Female Architects Wearing Augmented Reality Headsets Work with 3D City Model. High Tech Office Professional People Use Virtual Reality Modeling Software Application.
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Following the news that Facebook would rename itself Meta (NASDAQ: FB) and rebrand as a metaverse company, the Internet has been awash with commentary on the metaverse, who will create it, and at what cost. As a founder-led company with a gigantic budget, wide-reaching social networks, and a bold vision, I think that Meta (née Facebook) will be a major player and its share will benefit.

R&D potential 

The recent announcement by Meta that its priority is to deliver the next generation a radically enhanced mode of communication will inevitably involve huge investment: an expected $10 billion in 2021 alone. But I’m welcoming this move, and buying shares in the company.

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While I’m seeing Meta as a long-term play, since it will take years for the company to realise its metaverse vision fully, some of its R&D investments are already bearing fruit. Take, for example, the exciting development of ReSkin and DIGIT (with Carnegie Mellon University), which could allow for “embodied” virtual experiences.

Meta also plans to open physical stores to introduce users to products from its Reality Labs division, which could include Oculus headsets, Ray-Ban Stories voice-activated sunglasses, and, eventually, augmented reality headsets. While there is a certain irony to this move into brick-and-mortar shops, it will likely increase Meta’s revenue streams and suggests the company’s desire to bring users along with it.

Network effects

Beyond spending on innovation, I think Meta has another big advantage: the networks that make up its existing ecosystem. According to Metcalfe’s Law, the value of a network is proportional to the square of the number of nodes in that network. Meta has a massive user base (around 3.6 billion), and should be able to exploit this early advantage as it builds a new model for connectivity.

Crucially, CEO Mark Zuckerberg has stressed the importance of interoperability, which might, for example, mean allowing users in the metaverse to own and exchange NFTs from other platforms. As far as I can see, the main risk is that Meta ends up prioritising corporate exclusivity over interoperability and thus loses potential users to less hierarchical alternatives.

Centralisation

While Microsoft, NVIDIA, Epic Games, and others are all investing heavily in software and hardware that could supercharge the metaverse — and it will be exciting to watch their plans unfold — Meta will also have to compete with decentralised networks. Decentraland is perhaps the best known, and “legacy” institutions are already making use of this platform, such as Sotheby’s with its NFT auctions.

But the fact that Meta is founder-led means that it may be able to act faster and more decisively when building a digital universe. In decentralised metaverses, individual users have their own educational and social goals, whereas Meta can devise a strategic plan for the communal culture of its metaverse, and Meta’s ESG concerns are already evident from recent partnerships with the Digital Wellness Lab, Colorintech, and various other groups focused on well-being and inclusion.

Winner takes all?

As Meta has stressed, the metaverse will not be a single product but numerous connected ones, many of which are likely to be developed by other companies across the hardware, software, telecommunications, and gaming sectors. I’m therefore consciously viewing this investment as just a piece of a puzzle and am aware that patience will be key. With that said, the fact that Meta has committed vast sums to the project and the perceptible confidence behind its recent announcement suggests to me that Facebook’s transformation is not in name only.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Natasha Bailey owns shares in Meta. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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