Opinion: Horizon Worlds Metaverse Won't Likely Overtake the Cash Cow That Facebook Presently Has With Its Social Network

Mark Hake

Facebook, now known as Meta Platforms (FB) just opened up its Horizon Worlds metaverse platform to the adult world in the U.S. and Canada.

Zuckerberg believes this is the future of social interaction in the metaverse. However, investors in FB stock won’t react too kindly to this version of the company’s future. As I pointed out in my recent article on Facebook’s recent quarterly results, its bread and butter is its digital advertising.

As there is no digital advertising in the Horizon Worlds metaverse, it is not likely that Facebook, as a company, will make too much money on this venture. At least right not now.

What’s Going on With Horizon Worlds?

So does Facebook really expect advertisers to follow adults into Horizon Worlds who supposedly will move their social interactions into a non-reality-based platform like Horizon Worlds?

No, they don’t. That is why they put a sign saying Horizon is open to “everyone 18+” in the US and Canada. Up is down here. Facebook knows full well that younger people will want to be on Horizon Worlds, especially if the company limits it to “everyone 18+.”

Facebook has a diverse audience including adults and young people. The audience for Horizon Worlds — a pseudo world of games, including laser-tag, flying over cities (“Wand and Broom”), and riverboat traveling — will likely include many young people as well. I expect that Facebook counts on young adults posing as 18+ to join Horizon in droves. After all, that is who they need to reach with advertising in this world.

But that brings up the nasty subject of how Zuckerberg expects to monetize this metaverse. The truth is that it is not likely to start out with digital ads. But in the end, he will have to eventually insert them in the Horizon Worlds metaverse, especially if its Facebook platform starts to show lower ad revenue.

FB Stock Is All About Ad Revenue

Facebook is losing some control over its sources of ad revenue. Most people use their phones to get into the app. Last quarter Apple (AAPL) started allowing people to opt-out of app tracking on their phones, hurting Facebook’s ability to have advertisers reach them.

As a result, Meta Platforms now wants to control its followers’ eyeballs. By allowing them in the metaverse called Horizon Worlds, digital ads could be inserted into the virtual reality world.

For example, there could be signs, billboards, TV ads, pop-ups, and all kinds of other ways in this world to reach these eyeballs. In a way, it could be like the digital billboard ads that were populated throughout the futuristic city in the 1982 movie Blade Runner with Harrison Ford.

What to Do With FB Stock

The truth is that Facebook is a cash cow with its existing digital ad platform. That is not going to go away anytime soon, as I discussed in my last article.

As a result, now is a great time to buy FB stock, as it is still well below its peak of $384 earlier this year. Moreover, as I pointed out in my last article, most analysts have much higher target prices for FB stock.

My own estimate is that the stock is worth at least $515 per share, as I explained in my last article. That assumes that Facebook will keep relying on its cash cow digital ads on its existing social network platform, Horizon Worlds or not.

Also, don't forget to fully "Follow" me and make sure to download the Newsbreak app to become a Registered Follower. This way you can also see all my articles in the past. Click on the Follow link underneath my profile name.

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This is not financial advice and you should not rely on my analysis to buy or sell any stock, security, or crypto, as I am not undertaking to induce you to buy or sell securities.

I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.

This represents my analysis of Meta Platforms (Facebook) and it is not meant to provide you with specific advice in your own situation. I do not own any position in any of these companies right now, but I may buy it in the near future. Your own situation could be different and this is not a recommendation to purchase the stock.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ
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