Until late 2020, the most Mike Winkleman – the digital artist known as Beeple – had ever sold a print for was $100. Last year, he sold a non-fungible token, or “NFT,” piece of work for $69 million at Christie’s.
Consumer brands are also entering the world of NFTs and the digital, virtual realm in which NFTs are so important, the metaverse. While atmospheric economic gains such as Beeple’s may not be the expectation, brands are positioning themselves to capitalize on what may prove to be a paradigm shift. Last week, companies as divergent as Proctor & Gamble and the UK’s Selfridges launched programs geared for the metaverse. They have joined the likes of Nike, Adidas, Gucci, Louis Vuitton, Burberry, Forever 21, Coca-Cola, McDonald’s and NASCAR. Perhaps most notably, Facebook has changed its name to Meta.
Sounding otherworldly, the metaverse (or at least the idea of it) has been around for years. In the 1992 science fiction novel Snow Crash, author Neal Stephenson imagined a virtual world called Metaverse: an internet-connected, immersive world that served as an alternate shared reality for its users. As the internet grew, the metaverse reference in that novel became the definitional word of a large-scale continual virtual environment in the online space.
The video gaming world is largely credited for being the first metaverse platform. However, these games to date are considered primeval because they are limited in scope and self-contained. The metaverse of the future is much more ambitious.
Technologies associated with the metaverse include virtual reality (characterized by ongoing virtual worlds even when one is not engaged) and augmented reality (characterized by combining aspects of the physical and the virtual world). This virtual world can simply be accessed through computers, game consoles and smart phones.
Further, the ambition of the metaverse is to provide a greater overlap of the physical and digital worlds, including entertainment, socialization and shopping. Consequently, it can serve as a digital economy, where users can create, buy and sell goods.
Critically, the metaverse of the future will be “inter-operable”, meaning it will allow one to take virtual items like clothes or cars from one platform to another. For instance, a consumer in the real world can buy a shirt at the mall and then wear it to a restaurant that evening. However, virtual platforms today do not interact. Thus, a user may be able to create an identity (or an avatar) on one virtual platform (and use or purchase items offered therein), but they cannot take that persona nor possessions to another platform.
The promise of the metaverse is to allow interchange among virtual platforms, which holds high appeal to brands because of the potential for greater exposure. This is coupled with the ability to transfer digital ownership of a branded good through the use of an NFT. NFTs are exchangeable and each one has its own unique identity so it can’t be claimed by more than one owner (thanks to another modern concept, blockchain).
A virtual product may be a representation of a real product (acting as a digital twin), or it may be a product that only exists in the virtual realm (such as Beeple’s artwork). While these products may not be “real” in a physical way, they are digitally real enough for real people to spend real money on them.
Understatedly, the demand for NFTs has grown exponentially. The total market volume of sold/traded NFTs in 2020 was $100 million. Last year, it grew to $23 billion. Some forecasters expect the metaverse market size to reach $800 billion in 2024.
Seemingly, luxury brands are well suited for the metaverse due to their touted provenance and perceived permanence. In other words, their values are expected to hold. Gucci recently sold digital handbags at prices far exceeding their physical bags. Dolce & Gabbana sold a 9 piece NFT collection featuring gems that “can’t be found on earth” for nearly $6 million. At the other end of the spectrum, Gap will launch an NFT collection later this month offering digital assets across four price points (“common”, “rare”, “epic” and “one-of-a-kind”) ranging from $8 to $415.
Beyond selling digital goods, there is the opportunity to massively increase brand exposure and brand equity in the metaverse. Just considering video games, this market itself is larger than the sports and film industries combined when considered at the global level (this may be hard for Americans to believe).
However, naysayers exist. Is paying hundreds or thousands of dollars for a digital file today’s version of Tulip Mania? As Rod Sterling famously intoned on the Twilight Zone, we are about to enter another dimension. How real will it prove to be?
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