The metaverse, NFTs, Web 3: the sprawling virtual world is all the rage. With the market opportunity estimated at over $1 trillion, the metaverse will likely touch every sector in some way in the coming years.
But how can brands explore this new digital frontier and navigate its hype versus its reality? A new paper from Onyx—the blockchain platform JP Morgan Chase (JPM) launched in 2020—explains everything a marketer needs to know about the metaverse, the ownership economy, what areas still require development and the factors to consider when devising your brand’s metaverse strategy.
First, it’s interesting to note Onyx’s approach to the metaverse since JPM recently became the first bank in the US to enter the space with a virtual lounge in Decentraland. Inside the Onyx lounge, users can buy virtual plots of land in the form of NFTs, enabling JPM to operate as a bank in the virtual world just like it does in the real world.
As the paper notes:
“The success of building and scaling in the metaverse is dependent on having a robust and flexible financial ecosystem that will allow users to seamlessly connect between the physical and virtual worlds. Our approach to payments and financial infrastructure will allow that interoperability to grow.”
Currently, Onyx is building and scaling technologies to modernize financial infrastructure, including tokenization and digital identity while streamlining the way content creators commercialize their creations. It says it’s also creating custom solutions with assets like embedded and interoperable stored value virtual wallets, flexible single-pay or multiple-pay options, fast and secure checkout, and the ability to support more than 120 currencies.
In addition to providing a handy chart outlining the differences between features of today’s metaverse—Web 2—and the emerging Web 3, Onyx shared these quick facts about the opportunities in the metaverse:
- Every year, $54 billion is spent on virtual goods, almost double the amount spent buying music.
- About 60 billion messages are sent daily on Roblox.
- GDP for Second Life was about $650 million in 2021 with nearly $80 million US paid to creators.
- NFTs currently have a market cap of $41 billion.
- The Sandbox boasts 200 partnerships to date including Warner Music Group’s announcement of a music-themed virtual world.
The question on businesses’ minds is: Why invest in the metaverse now, if at all? For one, augmented reality (AR) and virtual reality (VR) headsets have become cheaper and more powerful, thereby improving the user experience. Blockchain has paved the way for digital currencies and NFTs. Token-holders can monetize and participate in the metaverse’s governance. All of this activity has created a democratic ownership economy that could open a world of new economic opportunities as well as communities based on shared values.
Another thing to keep in mind is the metaverse is evolving from two decades of gaming. Among the key events that shaped its formation include Second Life’s release in 2003, Microsoft’s acquisition of Minecraft and Amazon’s purchase of Twitch in 2014, Decentraland’s launch in 2020 and most recently, a visual plot of land adjacent to Snoop Dogg’s Sandbox estate selling for $450,000 in ETH.
Speaking of virtual real estate, that market is growing quickly. The average price of a parcel of land doubled in a six-month window in 2021—from $6,000 to $12,000 by December—across four main Web 3.0 metaverses, notes Onyx. Brands gobbling up land for the purpose of creating virtual stores and other experiences is one reason for the market’s growth. As the paper notes, in June 2021 developer Everyrealm purchased one land package in Decentraland for $913,000 to turn it into an entire shopping district called Metajuku.
The virtual real estate market could start seeing services already offered in the physical world, like credit, mortgages and rental agreements. The way Onyx sees it is:
“With the emergence of decentralized finance (DeFi), collateralized lending primitives and the composability of blockchain token-based digital assets, a next-generation financing company could potentially leverage digital clothing as collateral to underwrite virtual land and property mortgages. In fact, the financing company may not be a company at all, but instead, a self-organizing, mission-based community of people (who may not have met at all in person), also known as a decentralized autonomous organization (DAO). The DAO may have seeded its original balance sheet into a multi-signature wallet to create the mortgages.”
Advertisers have a lot to gain from the meta-economy by way of branding and immersive ad experiences. In-game advertising is set to reach $18.41 billion by 2027 as in-game activations are on the rise. Remember Travis Scott’s concert in Fortnite? It was seen by 45 million people. Similar activations will eventually become more common as people who otherwise wouldn’t have access to such experiences, either due to location or cost, can now participate.
As the metaverse beckons greater interest and investment, people will need to develop and build the products that are consumed in the virtual world, which will spur opportunities for the creator economy. A pair of sneakers, for example, recently sold for $10,000 in an auction. The seller? Virtual shoe designer RTFKT, which Nike recently acquired.
More virtual events and experiences also mean a need for gig workers in the metaverse. If a brand is looking to host a party and wants musical entertainment, it could hire a singer or DJ to perform.
Before the metaverse can reach its full potential, key areas including technology, privacy and regulation must be developed. The following are just a few imperatives for growth, according to Onyx:
- Development of interoperability or cross-virtual world interactions, and ways to manage engagement and digital assets across these platforms (Onyx says to think of it like being able to seamlessly change channels on the television)
- Expanded data analytics and reporting for virtual spaces. These will be specifically designated for commercial and marketing usage and will track business key performance indicators (this already exists in some worlds, such as Cryptovoxels)
- Reduction of environment ‘sharding’ so all participants can interact with each other live in the same location
Privacy and Identity
- Verifiable credentials that can be easily structured to enable easier identification of fellow community/team members, or to enable configurable access to varying virtual world locations and experiences
- Expansion of NFT token-gated spaces to include the creation of private interactions, discussion and messaging
- Prevention against cyberbullying or online harassment/assault across virtual worlds
- Web 3.0 virtual world integrations with legacy traditional finance payment rails (e.g., credit cards, pay by bank, debit, automated clearing house/wires)
- Creation of cross-border and cross-metaverse foreign exchange and liquidity solutions
- Evolution of virtual/cryptocurrencies and digital asset backed financing and mortgages through using lending models, or leveraging decentralized finance (e.g., NFT-collateral backed virtual world mortgages)
Regulation, Tax Accounting And Social Infrastructure
- Evolution of community governance (e.g., Who sets rules in the virtual worlds? Who governs?)
- Paved paths on regulatory, tax and accounting treatment of Web 3.0 digital real estate/property, and virtual world commercial transactions
- Solutions and services to support virtual worlds that are globally accessible, but may be required to adhere to local jurisdictional requirements and rules in commerce and payments
The metaverse opens a completely new realm of ways to engage consumers, but not everything in it will be relevant for every marketer. Here are some key questions Onyx suggests brands consider before jumping on the trend:
- How would your business model and/or overall organization be impacted if there was more time spent interacting, transacting and socializing in virtual worlds? Would there be any impact at all?
- Is there an opportunity to create new marketing channels through experiences, digital goods, sponsorships and a branded real estate presence?
- If you want to have a presence or create an experience in the metaverse, do you have the in-house skillsets to do it yourself?
- How important is it to your business to target a younger generation audience and tech-forward sub-communities?