Conquering the metaverse: 3 ways that businesses can find real customers in virtual worlds
Last week, Nike announced that it would create a new virtual world, Nikeland, on the metaverse platform Roblox. Modeled after its real-life headquarters, Nikeland will consist of stadiums, fields, and arenas, where players can compete in dozens of virtual games such as tag and dodgeball. They will even be able to dress their avatars in the latest Nike sneakers and apparel, which they will buy at a virtual shop nested in the platform.
There’s a reason the Collins Dictionary declared “NFT” the 2021 word of the year, and why “metaverse” made its annual short list. Like Nike, several companies—from luxury players such as Balenciaga, Gucci, and Sotheby’s to mass-market ones such as Coke, Chipotle, and Wendy’s—are rushing to create, or use, the metaverse. That term encompasses the idea of persistent, immersive, and shared virtual 3D spaces that people can explore with a sense of their own presence. NFTs are deeply connected with the metaverse, and business has also invested in NFTs, with Christie’s recently auctioning a digital artwork by Beeple for $69 million, while a plot of digital land in Decentraland sold last week for $2.43 million worth of the platform’s cryptocurrency (618,000 MANA)—higher than the price of the average “real-world” Manhattan apartment.
The concept of the metaverse is no longer under the radar, but grasping its concrete implications may not come naturally to many companies. While digital-first brands can apply their existing skill sets to the metaverse, using their digital personas and content to connect with consumers, other companies will have to learn quickly if they are to stay abreast of rivals. Our recent analyses and experience threw up two guardrails that will help companies think through their metaverse strategies.
The metaverse—and its underlying platforms—need brands more than brands realize. Building new worlds, even virtual ones, is costly and time-consuming; Meta (formerly Facebook), for instance, will invest $10 billion in metaverse construction in 2021, more in future years, and expects to lose money on it for the foreseeable future. Like other multisided markets, metaverse platforms (or m-platforms) rely on network effects, and brands help trigger them so they can grow.
None of the current major m-platforms—such as Animal Crossing, Decentraland, Discord, Fortnite, Roblox, or Topia—will be able to survive for very long without real-world brands helping them generate revenues. Many, like Roblox, offer free-to-play games, with in-game purchases being the backbone of their business model. Over 150 million people play on Roblox every month, and they generated $920 million of revenues in 2020, but the m-platform still reported a loss of $253 million last year.
If the m-platforms are to make money, they will need to ensure that the volume, and size, of in-game transactions rises, including by attracting many more people to their virtual worlds. However, if m-platforms become interlinked and interoperable, as many people anticipate, consumers’ avatars would be able to buy skins, accessories, and houses on one m-platform and use them in another (yes, you could wear your favorite Roblox virtual jacket in Fortnite). Players will start shopping for the cheapest products across platforms, which could trigger price wars and shrink revenues. Even so, brands will be central to commanding premiums in the metaverse.
M-platforms will also have to grow advertising revenues, even though many metizens aren’t exactly fond of advertising. Many m-platforms are sensitive about offending users and disrupting their business models. However, they’re learning to work with companies to create products, events, and worlds that contribute to the metaverse experience in a native way. In fact, Roblox describes its partnerships as shared experiences, rather than as ads, underlining the fact that the environment’s interactivity turns the brand-consumer relationship into a two-way street.
That provides the perfect segue to our second guardrail: Focusing only on advertising in the metaverse may not maximize results for most companies. The metaverse may appear to be virgin territory, with untapped shares of mind and low customer acquisition costs, but this should not last long, and it won’t be easy to make inroads. To succeed, companies will need to embrace the metaverse as an opportunity to expand what their brands do.
The interactions in a metaverse usually involve the integration of physical and virtual spaces. For example, Coke recently auctioned a Friendship Box in Decentraland containing three NFTs: a custom Coca-Cola bubble jacket; a sound visualizer featuring audio clips as you sipped or poured virtual Coke; and a Friendship Card, with revamped artwork from the 1940s. And the auction winner received a real cooler filled with cans of Coke.
In an increasingly digital world where the lines between the real and the virtual are blurred, brands have to craft interactions that engage consumers at a personalized, deeper level and offer value in a noninvasive way—exactly the type of experiences that the metaverse can make happen. And conveniently, m-platforms will leverage those experiences to remain fresh and interesting.
Companies are therefore likely to win if they can develop metaverse-appropriate strategies, which should be three-pronged:
Capture more emotion-related data in real time
Powered by a more potent generation of microchips, VR headsets enable companies to collect a variety of novel data—how people’s legs, hands, and bodies move, when the pupils of their eyes contract and expand, how their minds react—from users that visit metaverses. A 2018 Stanford Virtual Human Interaction Lab paper estimated that 20 minutes in a VR simulation allows almost 2 million body language recordings. The first companies to collect and analyze data when people’s avatars use their virtual products or interact with employees’ avatars in their virtual stores will enjoy an edge. They will have more data than later entrants, be able to refine data-driven insights over time, and be able to negotiate from a position of strength with companies that need to access their data.
Cocreate and test products virtually
Companies can use the metaverse to share ideas and advanced concepts with potential users; codesign virtual prototypes; and get feedback from a variety of consumers. Doing so could accelerate product development cycles, and help predict whether innovations will succeed—or fail. In addition to familiarizing young people with their products, business could plant the seeds of long-lasting relationships.
In October, for example, Hyundai Motor launched Hyundai Mobility Adventure, a shared virtual space on Roblox in which avatars can experience Hyundai’s offerings and communicate with each other. They can test-drive Hyundai’s new vehicles and transportation solutions; operate robotic vehicles and urban air-mobility devices; and participate in several social activities and experiences.
Test the metaverse market
There’s no doubt that the metaverse economy is going to grow—and become big. With global metaverse revenue forecasted to reach $400 billion by 2025 and driven by millions of visitors, brands that focus on them, particularly premium ones, will be able to foster a sense of community as well as inculcate brand loyalty among younger customers before they can buy the real thing! For high-end brands, selling NFTs of their products in the metaverse could become revenue streams in their own right. It isn’t an exaggeration; several luxury brands such as Balenciaga, D&G, and Rebecca Minkoff are showing the way. They have launched digital products that can be bought in-game; launched limited-edition NFT collections; and created branded worlds.
To be sure, metaverses are far from an enduring reality (sic!), but when they become part of our daily lives, not every company will be able to find the room to grow in those competitive markets. Like the human beings who control them, avatars will have limited time, opportunities, and energy to engage with brands. Companies that hope to prosper in the metaverse tomorrow should explore its frontiers today, and plant their stakes before there are no virtual worlds left to conquer.
François Candelon is a managing director and senior partner at BCG and global director of the BCG Henderson Institute. Karen Lellouche Tordjman is a managing director and partner at BCG, and fellow at the BCG Henderson Institute. Ariane Lafolie is a consultant at BCG and ambassador at the BCG Henderson Institute.
Fortune’s upcoming Brainstorm Design conference is going to dive into how businesses are building experiences in the metaverse. Apply to attend the event on May 23-24 in New York.