5 minute read
The metaverse: A new dimension for commerce
The signs are everywhere: the metaverse is going mainstream. For a while, experiments with this new technology were limited to gamers and tech-forward early adopters. But now that brands like Adidas, Nike, Coca Cola, Microsoft and the newly named Meta from Facebook have entered in, everyone is paying attention.
The metaverse is hard to define because it's still being developed. The basic concept often involves a few key characteristics—including the blending of digital and physical realities to create a unique, shared experience where you can engage with other users. While it's not a requirement, these digital spaces are often accomplished through AR and VR technologies. The immersive and “real-life feel" of the experiences they generate are highly characteristic of what the metaverse has to offer.
“The metaverse is emerging at a time when a more decentralized internet is also under construction, commonly referred to as Web3. The two are related, but whether the success of one will depend on the success of the other is a topic of debate," says Frank Young, chief strategy officer at Global Payments.
Centralized and decentralized metaverses
Metaverses fall into one of two categories: centralized and decentralized Centralized metaverses are built, governed and monetized by a single institution. Decentralized metaverses offer an open-sourced platform that's controlled by users, which creates a community of power.
In a centralized metaverse, one entity governs and controls the experience—often an institution or company that people know and trust. Individual users will interact in a space overseen by leadership teams and monetized according to the governing entity's strategic vision. Massive multiplayer games like Roblox and Fortnite are great examples—the entities that run them build the user experience and develop community rules.
In a decentralized universe, it's much earlier in development and implementation. They empower users to build and enhance the immersive experiences they want through Web3 and blockchain technology. Decentraland and The Sandbox are great examples—they represent communities of users that build, iterate and manage without a single brand running the platform.
Some experts believe that centralized models will eventually fade away to their decentralized counterparts completely. As the metaverse continues to emerge, it's important to understand the way it's unfolding and how it will impact customer payments demand.
Where people go, businesses follow
Hopes for the metaverse are astronomically high. Current projections for the metaverse represent an $8-13 trillion market by 2030 with as many as 5 billion users. It's no surprise that major brands are jumping in as fast as they can.
- Nike's “Nikeland" experience in Roblox offers participants promotions and visual showrooms, and opportunities for gamification. With a click of a button, participants can “jump in" and play new online games and style avatars with Nike branding.
- Hyundai's “Mobility Adventure," is an immersive experience that combines a sense of fun with product marketing and education. The company refers to it as a “collectively shared virtual space" with blocky avatars showing off Hyundai vehicle technology. It's a prime example of savvy marketing tactics merging with native platform integrations to create a cohesive experience for the user.
- JPMorgan Chase & Co is the first major bank to enter the metaverse. Their Onyx Lounge in Decentraland allows for the exchange of data and digital assets. The cafe's winding staircase and roaming digital tiger illustrate how companies can own bespoke virtual spaces that give audiences compelling brand interactions.
- Accenture has also used the metaverse for training and conferences. “If that's where the people will be, that's where [brands] want to be," says Michael Abbott of Accenture. Sometimes, people stop into Accenture's VR experience just to say “hi." While Abbott mentions banks, retailers and media companies as early brand adopters, the interest goes far beyond those categories. His view is consistent with the adage that marketers spend money where people spend time.
The metaverse gives businesses the flexibility to experiment with new ways of connecting with audiences. By inventing and evolving their own virtual worlds, businesses have an opportunity to have more meaningful touchpoints with customers.
Consumer adoption is slow but steady
Currently, gamers and NFT traders are most likely to enter the metaverse. But as more brands follow suit, the net is growing wider with more and more business and consumer categories exploring how they can tap into the space. A study by Insider Intelligence on attitudes toward the metaverse found that 57% of respondents felt strongly or very strongly that the metaverse will soon be as popular as social media is now. 47% said they could see themselves using the metaverse.
While adoption is moving forward, a host of obstacles are currently in the way of the metaverse going mainstream.
- Operability across metaverse communities—which means making digital assets accessible in different digital ecosystems. This is a hefty roadblock for digital economies to scale large enough to facilitate mass commerce.
- Device technologythrough which users experience the metaverse needs significant improvement. Current devices are physically heavy, which interfere greatly with the overall experience and chance that a user will want to come back and try again.
- Privacy concernsaround digital identity, social conventions, etiquette norms and laws governing metaverse experiences. They also raise a host of both practical and ethical questions that often have gray answers.
“What are the rules of the road?" Abbott asks. “And who's going to set them?" Still, he and other advocates remain optimistic.As consumer adoption increases, businesses need to have a plan in place that helps them stay ahead. Knowing that popularity will only increase, the time is now to start thinking about how your business could translate to a new environment.
The metaverse and commerce today
Since we know that commerce in a centralized metaverse is confined to the platform itself, it makes the utility of tokens limited. Possibly the most famous example of a centralized metaverse purchase is someone who bought a digital version of a Gucci bag for 350,000 Robux, roughly $4,115 USD. The owner of the digital Gucci bag can't sell or trade it outside of Roblox—making it only available for use inside its native centralized metaverse. If you're thinking, “what's the point?" you're not alone. But in the era of the metaverse, the meaning of physical objects versus digital objects becomes an existential question that we can't quite answer yet, similar to someone questioning the value of Facetime on the iPhone before 2010.
Unlike its centralized counterpart, currency exchange in a decentralized metaverse can happen inside and outside of the metaverse. Tokens like cryptocurrency and stablecoins will fuel commerce in a decentralized metaverse. Users can also buy and trade non-fungible tokens or NFTs, unique tokens representing digital assets like art.
The hope for the future is that sophisticated, multicurrency digital wallets will be able to hold fiat money, cryptocurrencies, non-fungible tokens (NFTs), property—and even more. The metaverse will open a world of possibilities for businesses and for commerce, that unites the virtual and physical worlds.
There's ample business opportunity
“It may be more useful, and certainly more exciting, to think of the metaverse not as virtual reality but as a new reality itself," said Jim Kennedy, senior vice president for strategy at The Associated Press.
Businesses can leverage this emerging opportunity to build relationships with new customers and strengthen existing ones. Better understanding what customers want in the metaverse can unlock new opportunities to engage with them like never before. Learning buying behaviors and preferences in the metaverse can help you create a strategy that puts customers at the center—and is catered to what they need in today's increasingly digital landscape.
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