The metaverse and Web3 are coming. Like it or not, they are coming. How fast they are going to arrive is another issue entirely. This has huge implications for the likes of cryptocurrency, non-fungible tokens, and the companies such as Roblox Corporation (NYSE: RBLX), the Facebook people who changed their name and face to become Meta Platforms, Inc. (NASDAQ: FB) and the future of many collectibles.

While everyone is being told that the metaverse, or metaverses, and Web3 are coming. People have been spending real world cash (and crypto) to buy up digital real estate. The reality is that this grand transition will simply take longer than the instant gratification of now or even next week. Mark Zuckerberg of Facebook (they really want to be known as Meta Platforms but aren’t there yet) and now Roblox are showing that technological change and disruption cannot always move as fast as the creators and developers may want. It’s also not just a chip and supply chain issue.

Wednesday was a bloodbath for Roblox after its shares fell 26.5% to $53.87. Roblox’s stock was already down over 25% year-to-date ahead of the report, and that is down over 60% from last year’s high. Wall Street analysts are having to dial down some of their expectations for just how fast a videogame player focused on the metaverse will be able to deliver. And for Facebook, or Meta Platforms, its stock is down about 45% from last year’s high.

There are many problems in the world of technology that are playing a role. A chip shortage and supply chain issues are not helping, but the reality is that a whole new generation of gadgets have to work their way into society for the metaverse to perform the way it is intended. This takes years, and it requires more than just the teenagers and kids of today to grow into adults with jobs that allow them to buy their own things.

As for Roblox, its daily active users rose 33% from a year ago to a new high. Its loss of $143 million is signaling that the company is still willing to spend whatever it can to foster all that growth. That loss was basically double what analysts were expecting and that has brought on a slew of price target cuts.

The Roblox platform mainly targets kids and teenagers (for now) and allows them to effectively make their own games. It also allows them to create their own online experiences, which is effectively its push for the metaverse and a virtual interaction with others. The virtual world is losing some ground now that the great reopening is happening even where certain leaders would prefer to keep people locked in their homes. Two stats from the Roblox earnings report point this out:

• hours engaged fell 4% sequentially in the fourth quarter of 2021
• average bookings per daily active user (the revenue Roblox gets per user) fell year over year in January by about 22%

As far as what this means for the metaverse and collectibles, there is an entire generation that is getting used to being online in virtual worlds like Roblox — and Minecraft from Microsoft Corporation (NASDAQ: MSFT). This will undoubtedly send more and more tasks and items into the metaverse. And let’s not forget about the HoloLens product Microsoft has, and Facebook’s purchase of Oculus (or is it Project Cambria now?). This digitization is just going to take longer than some of the 2021 predictions may have seemed.

Even in January, Goldman Sachs was forecasting that the digital economy’s share of total GDP will keep rising. The firm laid out the bearish and bullish cases and the timing:

In the most bearish case with ~15% of the digital economy shifting towards the virtual world and ~2.5% market expansion from current estimated levels, we arrive at a ~$2.6 trillion total market opportunity and in the most bullish scenario of ~33% of the digital economy shifting to the Metaverse and ~25% market expansion, we arrive at a ~$12.5 trillion opportunity. While the range is quite broad, we acknowledge that we are still 20 years into web 2.0 and expect the timing of web 3.0 will be similar, if not longer.

Several analysts have slashed expectations on Roblox after its disappointing earnings report despite maintaining buy and outperform ratings:

• Target cut to $90 from $110 at Stifel (Buy)
• Target cut to $108 from $124 at Goldman Sachs (Buy)
• Target cut to $99 from $133 at BTIG (Buy)
• Target cut to $83 from $136 at Needham (Buy)

Morgan Stanley, which had already lowered its target on Roblox to $115 from $150 back in mid-January, has now downgraded the stock’s formal rating to Equal Weight from Overweight. The new target after this fresh post-earnings downgrade is down to $65 for Roblox shares. Morgan Stanley’s Brian Nowak summed up his downgrade despite being more optimistic long-term:

Our prior view assumed Roblox would continue to grow users and bookings at outsized rates through reopening. We were wrong. We now assume 8%/11% lower ‘22/’23 bookings, and lower our EBITDA by 17%/22%.

The firm Jefferies has gone as far to point out that kids and teens no longer forced to be inside due to the pandemic and are actually now spending more time in the real world again rather than just on their devices at home. The firm now has only a Hold rating and the report said:

Like many content platforms, Roblox is seeing difficult compares and the impact of reopening… The big picture monetization metrics were disappointing. The question: is monetization a canary or is engagement a sign of transitory issues.

The future of the metaverse and Web3 will arrive. There are going to be more uses for crypto and blockchain, more uses for NFTs, and the continued digitization of things like sports cards, live events, trying on clothes, masking and so on will all still arrive. It’s just not going to all be here in 2022.