The shift from Web2 to Web3 is one of the most significant developments on the technological horizon – many marketers however, are stuck scratching their heads at the terminology alone. The metaverse, an immersive virtual world powered by Blockchain technology, is set to be the next big frontier for brands to build engaged communities while capitalising on a burgeoning multi-billion dollar opportunity.
Experiences on the internet are set to become immensely more three-dimensional, with Meta’s announcement of a virtual metaverse sending shockwaves around the world late last year. Several brands have successfully marked their territory in the metaverse, leveraging token economics and audience engagement to foster a deeper sense of brand connection.
Jordan Fogarty is the founder and CEO of Perth-based Be Media by Animoca Brands, an agency that helps businesses strategically take advantage of emerging Web 3.0 technologies by providing a framework for go-to-market strategies, community building and token economics. The agency was acquired by Hong Kong-based gaming company Animoca Brands in April 2022 – a tech unicorn that was delisted from the ASX two years ago before going on to receive a $5 billion market valuation.
Right now, marketers may be eluded by the tactile value of curating a metaverse strategy, but Fogarty believes there is no better time to capitalise on this rapidly-growing collection of communities. Fogarty emphasised several core elements as key to the development of a successful brand presence in Web3: community, patience, psychographics, and a utilitarian approach to creating brand NFTs.
What exactly is the metaverse?
To put it simply – Fogarty deems the metaverse to be “a more robust way to run the world in the future.”
The metaverse is a cyberspace powered by Blockchain technology. Pragmatically speaking, it’s an immersive social platform that leverages VR and AR to engage users in a deeper way, enabling them to customise avatars, buy property in metaverse ‘worlds’, and partake in economic activity through NFTs (non-fungible tokens).
“In lay terms, the metaverse is the next era of the internet. It’s a space where you can, through augmented reality and VR (virtual reality) experience digital worlds in a much more amazing, rich way. Simple as that,” said Fogarty.
“Let’s differentiate Web3 from Web2, which was social media and mobile, as well as product centric marketing. Web2 was putting your product in the middle and doing all these campaigns. It’s very product centric. I would view Web3 as very community-centric. I mean, you probably already spend 6, 7, 8, 10 hours a day online, easily. So do I, but what if that starts to become a little bit more of an engaging and immersive experience?”
While marketers may scoff at the ambitious nature of the metaverse, the numbers tell a different story. Customers spend billions a year on their digital avatars alone, and the size of the NFT wearables market is growing – in Decentraland alone, wearable sales volume totalled $750,000 in the first half of 2021, up from $267,000 in the same period last year, according to NonFungible.com, a website which tracks the NFT market. Digital and graphic designers are netting thousands in profit a week simply by making and selling virtual garments for gamers on the metaverse.
Wearables can be bought and sold on the blockchain in the form of NFTs, which would be the main source of profit for brands in Web3.
Fogarty’s core emphasis is for marketers to focus on building an authentic sense of community, like they would in any other realm, or platform.
“Start small. It’s not for revenues initially. It’s to build a community. Long term, you’d be looking at building something actually valuable and interesting.”
An example of the crossover between virtual engagement and revenue can be found in fast food outlets featured in metaverse worlds – “You can be playing a game in the metaverse environment, walk into a Subway or McDonald’s, order within the game and have the order sent your house in the real world,” Fogarty said.
What brands need to know about entering the metaverse
Several brands – primarily global luxury brands like Gucci, Dolce & Gabbana and Balenciaga – have all made a successful foray into the metaverse, profiting handsomely from the sales of NFTs made within virtual metaverse events like catwalks, courtyards and fashion shows.
Fogarty was emphatic that metaverse success isn’t limited to designer brands or household-name multinationals. When asked how marketers or brands could foster community organically, Fogarty said “In the longer term, if you can build a really strong thriving community, you are going to have above average returns compared to your competitors.”
“Marketers are used to just doing campaign based activation; same old, right? The risk for the Australian market, for any market anywhere, is to get stuck in watching Google campaigns, looking at analytics, looking at user experience on the website, doing an out of home campaign… marketers are used to just splitting their budget that way.”
There are demarcations between the brands that succeed in the metaverse and the ones that don’t; Fogarty noted that the brands who succeed are “going in in a playful way to build a community, to connect, develop experiences that are a bit different and creative with their audience and customers rather than purely for return on investment initially.”
“A really good example is Gucci – they’ve just nailed it. First of all, they went into this space saying ‘we’re just gonna test and play.’ So they built this thing called Gucci Gardens, which was essentially a play space where they initially did some ceramic NFTs that were also items you could buy. They actually sold for over 3000 euros each – just these cool little activation NFTs. These NFT activations are parallel to what a campaign would be in Web2, or in physical reality.”
Certain brands however, may feel like the cyberspace nature of the metaverse doesn’t necessarily align with their historic brand positioning. It’s more difficult to image a brand like Burberry, which started out creating trench coats for soldiers in WWII, emerging energetically in the metaverse – the associations just don’t always align.
“Think of it this way – they still have customers, audiences. They’re still trying to build communities on social media and other areas. They can apply that same thinking here and just keep it connected to their brand values. I don’t think they can staunchly stay in the past and ignore where the world’s moving. I think it’s a poor decision to ignore it.”
The key to measuring ROI? Having patience and playing the long game
Given that the essence and the value of the metaverse is still murky to many marketers, it’s understandable a discernable, clear understanding of an ROI timeline is desired before plunging into the Web3 world. However, it’s crucial brands exercise patience and seek out a more intangible form of value in lieu of ROI – community.
A shift away from a campaign-centric, product-centric approach is critical for building long-term success in the metaverse, Fogarty urged.
“A lot of marketers are used to the ROI, the first thing they ask is ‘what’s the return on investment? What’s the bottom line?’”
“Whether it’s out of home, TV, digital, PR, they’re always monitored and measured for the immediate returns. The metaverse in this Web3 era is still early days. And the brands we are seeing have the most success are not going in with the expectation of an immediate three month return on investment.”
Fogarty warned if brands “go in at chasing return on investment in the first three months, they’re probably going to do a product centric style campaign,” which “is just not going to be right” for the Web3 landscape.
“It won’t be community building. It’s going to be obvious that they’re just there for money,” he said.
“Let’s say a brand’s in fast moving consumer goods or hospitality; whatever industry you might be in, I would recommend knowing what Web3 communities your audience is currently hanging out in. What are they currently buying? What discord groups are they in? In Web3, what are they following? What are they buying in this metaverse environment? I would start by joining those communities and actually asking, ‘what could be a valuable way we could join in here?’
It’s a bit like when social media first started. You didn’t jump on social media straight away and start treating it like you would a radio campaign. Right?”
Heralding the return of psychographics
In a data-fuelled marketing landscape, Fogarty dares to urge marketers to go back in time and draw from the essence of psychographics and personas.
Utilising personas is ideal for a metaverse entry strategy – it enables brands to find the existing communities in Web3 their target market is engaging with, and to identify what they’re spending money on in the metaverse.
“Look at your typical customer profile for the AFL. He’s 28 years old, his name’s Mickey, loves the football, loves NRL, loves craft beer. So imagine if a craft beer company came in and said, if you own an AFL NFT – you can get one free craft beer at a pub nearby before you go to the game. Or if you want to fly from Melbourne to Sydney – Virgin’s a big sponsor of the AFL – you will get a discount on your flights if you’re flying to a game. So a lot of it involves connecting like-minded communities together,” Fogarty said.
Evidently, it appears brands will have to talk together to make their Web3 strategy work – and Fogarty affirms this.
“Brands will have to do a lot more collaborations, which you’re already seeing in a lot of spaces. This way, each brand can bring their two communities, connect together and do something big.
“I think if I was a brand right now, I’d be thinking ‘who’s a brand that has the same audience? A complementary audience?
“Brands should really start at psychographics/personas: They should start thinking, ‘who are our personas that make up our community?’, and then – ‘how do we collaborate and do partnerships?’ They could start to think down the track about capitalizing and profiting.”
“Right now, you can’t own your favorite mark of the year – you can’t actually own that content and intellectual property. You can go watch an actual football game, but you can’t become an active participant in the AFL economy. Now though, the AFL is selling that IP as an NFT. It can appreciate in value.”
Fogarty encourages brands to embed ‘utility’ into their NFTs, a concept that will allow customers to “go and get huge amount of usage out of the NFT that they’ve bought, sort of like a coupon.”
NFTs are generally associated with exorbitant costs and seen as pricey investments – but Fogarty noted engaging in the metaverse won’t be prohibitive for any consumers, regardless of income bracket.
“You can still engage and be involved in the metaverse for no cost. Some NFTs are $1, some are a $100 million. There’s no barriers for people getting involved.”
The ESG question
Much ire has been raised about the environmental sustainability of the blockchains that power the metaverse.
“There’s a common misconception that Web3, or blockchain uses a huge amount of energy. Now, mining cryptocurrency uses a hell of a lot of energy. We choose to work on blockchains. For example, Flow is the type of blockchain where, to mint an NFT actually uses less energy than putting up one Instagram poster – and that was verified in a global study done by Deloitte. I still think overall Web3 does have some way to go, but these more sustainable blockchains are using less energy than Instagram or Facebook posts.”
When asked if these blockchains, like Flow, are these the ones that are being used in most prolifically or more sustainable blockchains, Fogarty noted the uptake is still in a growth stage.
“They’re definitely growing in popularity. People are conscious and wanting to make environmentally friendly choices.”