Brands need to think twice before entering ‘the metaverse’. Rob Foster, senior consultant at The Observatory International, explains why strategy should be more important than fear of missing out.
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The Emperor of Marketing, as we know, likes shiny new clothes. Right now, there’s nothing shinier than the metaverse. But should marketers really be plunging head-first into this world, or more correctly these worlds, at such pace?
According to McKinsey “the metaverse is too big for companies to ignore”. It highlights that company investment of more than $120 billion in the first half of 2022 alone and claims that the metaverse “may have… a $144 billion to $206 billion impact on the advertising market” by 2030.
Such predictions explain why a UK survey of marketers found that 55% have already set budget aside for metaverse activity, budgets that are being diverted away from other, often proven channels. There is a worrying volume of client requests to ‘do something in the metaverse’.
While there are some great examples of good strategic use of metaverse platforms, I think marketers should take a deep breath before they invest for four reasons.
As of April 2022, two of the metaverse’s biggest platforms, The Sandbox and Decentraland, have just 1,180 and fewer than 1,000 daily active users respectively. It is hard to imagine a video platform with only 1,000 active users or a magazine with a circulation of 1,000 attracting so much interest. These are not exactly encouraging numbers or signs that would typically coerce brands to invest.
Secondly, market transparency
Even in the most prominent area of the metaverse, NFTs – the digital assets/virtual products that many brands are looking to promote – ownership is highly concentrated. According to the Financial Times, of the 360,000 NFT owners, 9% of them control 80% of the total value. Such levels of concentration are in stark contrast to the promises made by Web3 technologies – which includes NFTs and the metaverse – to create an equitable ecosystem where value is created and distributed more evenly.
Thirdly, financial safety
Cryptocurrencies, the digital or virtual currencies that underpin transactions on the blockchain, come with plenty of risk management concerns for companies. Bitcoin, the most popular cryptocurrency, has seen its valuation drop repeatedly, in May Terra's 'stablecoin' cryptocurrency collapsed, wiping out $40 billion of value, and the International Monetary Fund has issued its own warnings. In short, a lack of consistent, established cryptocurrency regulation means that scams and fraud are rife in the metaverse.
Fourthly, intellectual rights
NFTs come with complications and problems as the concept of digital ownership also floats on murky waters in virtual worlds. The actor Seth Green recently paid almost $300k in ransom for the return of a Bored Ape NFT, for example, while Lavinia Osborne, Founder of Women in Blockchain Talks and creator of the Crypto Kweens NFT Marketplace, had two digital artwork NFTs stolen from her crypto wallet. It required a ruling from the UK’s High Court to get the NFTs recognised as Osborne’s property.
But there are also two marketing reasons that should make brands approach the metaverse with care; namely is this a good use of my, increasingly limited, budget and is it strategically right for my brand.
Most industry presentations, articles and talks that promote the metaverse and NFTs to marketers consistently make two points:
- That brands should be dipping their toes in the water and experimenting in these areas; and
- That they should not expect any financial return for these experiments.
With a predicted global recession, rising energy prices and soaring inflation, marketing budgets are already under scrutiny as we start the budgeting process for 2023. Few brands can afford to invest in speculative projects that are guaranteed to deliver no financial return.
There have certainly been some excellent brand involvements and activations – everything from the fun (Lil Nas X concert in Roblox) to the business–problem solving (H&M virtual showroom) to driving purposeful change (Hellman’s food waste) – but brands that rush in risk producing turkeys.
I don’t dislike NFTs or the virtual worlds that are forging the path for what the metaverse could become but fundamentally, marketers need to overcome their FOMO and remain focused on achieving business objectives via a strategically led marketing vision.
If the right solution happens to involve making an NFT of an ape wearing your brand or consuming your product, then so be it. If it’s not, then stay clear.