Everyone these days is talking about the metaverse, and the world’s biggest brands aren’t about to miss out. Companies from fashion brands to tech companies to the F&B industry are all rolling out their plans to plant their flags in the ecosystem’s virtual soil.
For example, Gucci recently purchased digital real estate in The Sandbox to create an interactive fashion experience. Adidas is also setting up in The Sandbox by partnering with NFT collection Bored Ape Yacht Club to create digital clothes for users to wear inside the virtual platform. Meanwhile, fast food giant McDonalds announced that it is registering its McDonald’s and McCafe trademarks in the metaverse and plans to launch a virtual restaurant integrated with home delivery.
The tech industry is getting in on the game as well, with NVIDIA launching its virtual work experience “NVIDIA Omniverse”, which will integrate Open-source 3D animation tool Blender along with Adobe.
Most companies’ strategy centers on inserting its real-life products or brand experience into the metaverse ecosystem, such as setting up virtual storefronts or issuing NFTs. And these initiatives are certainly garnering no shortage of media attention. The real question is: how can these brands successfully integrate themselves into the ecosystem while competing with web3-native companies and facing consumers with shorter attention spans?
With these brands moving into the metaverse, I can’t help but be reminded of the Second Life phenomenon and the huge business opportunities it created in the early aughts. According to developer Linden Lab’s estimate, about $60 million US dollars worth of “products” were traded on the interactive gaming platform in 2006 alone. Major brands such as Adidas, Reebok, and Toyota all threw their hats in the ring. However, their virtual storefronts ended up getting very little digital foot traffic.
So what went wrong? In my view, it was mainly a marketing problem. According to statistics, nearly a third of players at the time were unaware that these online stores even existed in the game. Additionally, most of the virtual products offered were more or less the same as the real-life products, and players would quickly exit the store after purchasing. This gave brands little opportunity to build a connection to users. Add on the fact that the products bought by players served no clear practical or even gaming function, which meant even less incentive to buy.
The above factors all contributed to a business failure and even left many fans feeling acrimonious about real life brands invading the virtual worlds they had created. However, I think the failure to monetize Second Life is a great use case for the brands now entering the metaverse.
The metaverse presents brands with a totally new marketing battlefield that will not only test their creativity but also their ability to successfully combine hardware, software, and IT talent. These companies will have to work out how to integrate AR/VR, gaming equipment, and blockchain technology into marketing activities to create a fully immersive experience. A smooth payment experience supporting a wide range of cross-device payment options such as credit cards and virtual currency exchange will also be a key factor in brands’ ability to monetize virtual assets. Additionally, we have to consider how quickly consumers become familiar with these emerging technologies.
The investment of big brands in the metaverse goes beyond attracting a younger and broader consumer group and flipping their brand image. It is about speeding up the development of a future virtual economy. As more brands jump into the metaverse, the concept will gain wider acceptance and lead us towards a world where the virtual and the physical exist side by side.