The Sandbox, Decentraland, Axie Infinity, Roblox… these companies look like coming out of nowhere for whom are not familiar with gaming industry. However, in the past two years, they are showing up in news headlines frequently associated with “metaverse” and well-known brand names, including but not limited to, Gucci, Nike, Adidas, and JPMorgan. However, what are businesses doing in the metaverse? How are they making money there?
It’s an old idea
The idea of metaverse was introduced in a science-fiction novel, Snow Crush, in 1992. It presented the idea of using digital avatars to explore the online world. Second Life gave it a try in 2003, the same idea is followed in today’s metaverse. Furthermore, a metaverse economy is built thanks to the non-fungible token (NFT) which can turn digital content into digital assets. And why is everyone talking about it? The big players started to make noise, Meta with its rebranding, Microsoft acquisition of activation blizzard and Accenture snatched up 60’000 VR sets recently.
Go Into Metaverse
Businesses are showing their presence in the metaverse to capture a slice of immersive business opportunity. The global Metaverse revenue opportunity could approach $800 billion in 2024, according to Bloomberg. Cathie Wood, Ark Invest’s Chief Executive Officer and Chief Investment Officer sees the opportunity in the multi trillion-dollar range.
Certain industries can easily merge in the metaverse thanks to their business nature, for example, gaming, fashion, and entertainment industries.
1. Virtual Apparel
Multiple luxury brands are partnering with metaverse providers to develop their virtual apparel for avatar’s. Gucci’s bag sold in Roblox recorded $4,115 which is more expensive than in real world. It proves the potential in developing virtual apparel business. At the end of March 2022, Decentraland is holding the first Metaverse Fashion Show with dozens of global brands. The success stories for fashion brands in metaverse have attracted different industries into metaverse.
2. Showroom or land
JPMorgan has set up a lounge in Decentraland, which is used to show the bank’s history, but it does not yet come with metaverse banking services. Although not all businesses are able to replicate its business model in metaverse, they are still keen to buy land in the metaverse. If you want to become the neighbour of Snoop Dog, 500k USD is the price tag currently. The average price of The Sandbox in secondary market surged from 0.5ETH to 4ETH during the last quarter in 2021. A showroom or a plot of land can turn out as a good investment, not only towards consumer satisfaction and branding.
3. NFT Gaming
Metaverse providers like The Sandbox, Decentraland, Somnium Space and Roblox incorporate game making feature to users. Combing gamification with NFT, a play-to-earn model, which allows players earn in-game assets in NFT format while playing game, has developed. Different celebrities and businesses are also building games in their lands to attract users. Nike has built Nikeland in Roblox that allows users to build and play games.
Back To Real World
Yet, developing business in metaverse is not a one-way ticket. The business model, ranging from marketing, product offerings and even corporate governance in real world has changed.
1. NFT Burning
The value of NFT is controversial, people spend millions to buy one NFT which underlying item is a jpeg image. Yet, companies are giving physical items to NFT owners through the NFT burning mechanism and it may redefine the value of NFT. Adidas minted a collection of NFT’s , “Into the Metaverse”, which offers owners special physical clothes. After redemption of physical item, the status of the NFT will change and there are total 4 status. Exchanging NFT for physical goods does not limit to fashion industry, it suggests how business can link their real world business with metaverse.
Another indispensable part of enjoying the immersive metaverse experience is hardware support, including network and wearables such as VR/ AR glasses. There is intense competition in VR/AR wearables. Headsets allow users to enjoy immersive experience in a relatively lower cost. However, it is observed that companies are moving into mixed reality. Microsoft and Nitanic create a proof-of-concept version of Pokémon Go, demonstrating how to mixed reality will reshape the metaverse.
As mentioned, the governing structure of company may also change. DAO is what users will be looking for. It stands for decentralized autonomous organization. Instead of having a hierarchical management structure, decisions are made by a collective of members owns the organization. Tokens and smart contracts are the backbone of the DAO. The concept is arising in view of increasing customers’ awareness on their own rights. Who would not love to break some organization hierarchies and boundaries, let the consumer who own the organization make the decisions.
As we are entering into the metaverse era, new business models will emerge and disrupt the way we will consume the metaverse, or how it will consume us. There are opportunities for businesses to go into the virtual world, including minting NFT and marketing in the metaverse. Nevertheless, to maximize the value of the metaverse, they need the link from the metaverse to the real world to succeed. McDonalds will allow you to order a burger in the metaverse, and gets it delivered to your address of choice. The question remains’, do you really want that burger?
Thanks Tsui, Cathy for co-author