Rec Room and Roblox Valuations Highlight the Appeal of the Metaverse

In March, two big names in virtual spaces drew attention for significant valuations. Rec Room, the social VR platform, raised US$100 million, which resulted in a US$1.25 billion valuation. Revenue grew at more than 500% in 2020, paired with 1 million monthly active users and 15 million lifetime users. VR is 25% of Rec Room’s user base. Roblox made similar news, after going public with a direct listing and a valuation over US$40 billion. While VR is not the primary portfolio element for Roblox, the platform’s flexibility in content means that there are a few VR-enabled titles as part of the ecosystem. The company claims more than 18 million “worlds” and experiences and 33 million daily users, with nearly US$2 billion spent on the platform’s virtual currency.

These two announcements join an increasingly active market in virtual spaces, sometimes called metaverses—virtualized spaces to facilitate social engagement, collaboration, and content creation and consumption. Facebook is working on its social VR platform Horizon, along with the rest of the company’s Reality Labs ventures. Microsoft previewed Mesh, a look into the workplace of the future leveraging real, holographic (mixed reality), and virtual for office tasks and work collaboration. Horizon and Mesh will join a growing list of immersive collaboration offerings and companies, like Spatial, The Wild, and MeetinVR. Location-based experiences are also likely to see strong growth in 2021 and 2022, partially thanks to a post-pandemic rush but also due to increasing interest and maturity in high-end virtual experiences. Sandbox VR, emerging from bankruptcy, is opening a Las Vegas location with plans for 15 total locations by the end of 2021.  

While it’s easy to home in on the consumer side of things with Rec Room and Roblox, realistically it is only half the story. As evidenced by the amount of activity in the space, virtual spaces are here to stay, serving many different purposes. While there will be specialization—Roblox is not likely to be a dominant enterprise collaboration platform in the future—the impact of virtual spaces will be felt broadly. Although, theoretically, there is no reason it could not be—Roblox is merely a content creation platform, so the type of content isn’t necessarily of import.

Immersive devices are being leveraged significantly in areas like remote assistance, training, and collaboration already; virtual spaces are a piece of this today, and will become a more significant component going forward. Rather than siloed applications or use cases—such as launching a specific remote assistance application—a user can enter the virtual workplace and accomplish a variety of tasks there. The idea of a “remote” expert fades away because the definition of remote changes. This cohesiveness is critical to not only presenting a useful and efficient space for workers, but also enables greater breadth and depth of applicability. The premise holds true for more enterprise-targeted platforms as well.

There’s even potential for integration of blockchain-based technology for products and virtual goods. With the discussion around NFTs increasing significantly, it’s easy to see a place for NFTs as a supplement to a virtual space platform, ensuring security and uniqueness of product. When more and more of a workflow is virtualized, the value of a traceable, proof-based system becomes invaluable. For the consumer side, NFTs can slot into the virtual goods market very cleanly, and have already begun doing so. Whether NFTs become commonplace is yet to be seen (there are some fundamental concerns around longevity and economic/ecologic impact for them), the idea of uniquely identifiable content isn’t going anywhere.  

The idea of a metaverse is a forward-looking idea, but the groundwork is in place today, as is some early adoption and usage of smaller-scale use cases. It can be viewed similarly to the AR Cloud—a persistent digital twin copy of the real world—both in terms of challenge and opportunity.

Seamless user experience is paramount. This manifests in a few ways, but primarily in supporting all necessary content types and devices. A virtual space must be equal to or better than the real-world alternative use case or environment, otherwise value is diminished and interest will wane. Supporting both immersive devices as well as traditional smartphones/tablets/computers keeps the addressable market large and maintains connection between different users and user types. This holds true in both consumer and enterprise applications, although enterprise will always present more stringent content challenges, while consumer will ultimately offer more content, and overall platform, choice.

Look for tech giants to push this idea more in the coming year; Facebook is ahead of others on the social side, while Microsoft is heading strong into the workforce side. Competitors will launch their own platforms, either through in-house development or acquisition into the space—a mix of both is most likely.

For businesses, virtual spaces present an opportunity to become a next generation of the workplace, while also expanding on high-return use cases seen today. The AR and VR markets have consistently been moving more horizontal—fewer siloed, narrow focus applications and platforms in favor of more universal and/or flexible approaches—which reflects this value and the need to keep user experience streamlined.

ABI Research recently completed a webinar on collaboration and the future of work, which expanded on some of these topics and analyzed market impacts and likely timings for the space. Another report on immersive collaboration is coming soon, in the form of a competitive assessment on the major immersive collaboration companies today.