Marketing in the metaverse: time to explore, experiment and learn
As the metaverse expands its reach, IMD’s Howard H. Yu examines how CMOs should position themselves to make the most of related business opportunities
When, in late 2021, Facebook announced that it was going Meta, it shifted talk of the emerging metaverse from the fringes to the mainstream business conversation. CMOs asked which strategic approach they should take in these emerging online worlds. How should they think about the metaverse in relation to their digital presence on today’s established platforms? And how could they seize the opportunities that the metaverse offers and create new ones, without exposing themselves to undue risk?
For some sectors, the metaverse remains a long-term prospect; for others, it is very much current. What is certain is that no CMO can ignore the scale of the metaverse opportunity. Crypto investment firm Grayscale estimates that bringing the Metaverse to life could be worth more than $1 trillion in annual revenue from sources including advertising, social commerce, digital events, hardware, platform development and in-world content creation. According to Gartner, its emergence “fundamentally changes how individuals and organisations interact with each other and the world.”
Yet, the metaverse is very much in its infancy and CMOs should bear this in mind when developing their approaches, allowing space for experimentation, exploration and discovery.
The shape of things to come
The first questions CMOs should ask are: what is the metaverse and what does it mean in business terms?
Broadly, the metaverse is an evolving configuration of virtual worlds that allows people and businesses to connect in real-time, forming a new economy that spans the digital and physical. Rather than simply accessing it via laptop screens, it is easy to imagine that, soon, we will be strapping on virtual-reality headsets to engage with this new environment.
Within these loose parameters, however, people are building very different visions of the metaverse future. Today’s disparate platforms – such as Roblox, Decentraland, or The Sandbox, to name just three – may remain discrete within the metaverse or, equally, they could soon converge into one inter-operable open world. Technologies that can transition between these worlds are already emerging, such as non-fungible tokens (NFTs), which allow users to transfer digital clothing or other purchases from one digital realm to another.
However, although such a range of possible futures lends itself to a non-committal, exploratory approach, value for some could lie in the potential benefits of a more active strategy.
Taking an active approach
For CMOs taking a more active strategy, there are three key opportunities.
First is the opportunity to experiment with purpose. In this way, organisations can quickly build knowledge of what works and what doesn’t and focus capabilities on the former. Those may be built in-house, or by partnering with – or acquiring – digital natives and startups. The German sportswear giant Adidas announced its entry into the metaverse by partnering with NFT leaders such as Gmoney and Bored Ape Yacht Club, while Nike acquired digital startup RTFKT, a digital sneaker collectibles site, in December 2021, bolstering its NFT presence.
Second is the impact on brand. The emergent metaverse culture prizes the role of creators, such as artists and designers. For highly innovative brands, an early association with the free-flowing creativity of the metaverse could have long-term value. This is the driver of the fashion sector’s early move into the metaverse, creating NFT-based digital versions of their clothes. March 2022 saw the first ever Metaverse Fashion Week, offering NFT versions of designer wear – and for those nostalgic for more traditional garments, a “physical twin” that can be worn in the real world.
Third, there are opportunities to realise value now, seizing first-mover advantage, which could include elevating the brand or snapping up virtual real estate before the metaverse market booms (one virtual plot in Decentraland sold for the equivalent of $2.4m in late 2021). Likewise, there are commercial opportunities already available: in late 2021, Dolce & Gabbana sold a collection of nine NFTs for $5.7m, while a digital-only Gucci bag sold for over $4,000.
But are these eye-catching examples of NFT sales scalable or one-offs? And are such hefty price tags for digital goods real evidence of a sustainable shift in business models? When it comes to the digital future, companies should not try to run before they can walk.
Many companies are likely to benefit most from approaching the metaverse not solely as a showcase for extravagantly priced limited-edition items, but as one strand of a coherent brand strategy that can deliver a holistic experience across online and offline spaces.
Consider Nike’s approach. It has already built a significant presence in the metaverse: Nikeland, its site in the gaming-oriented Roblox world, offers a changing menu of free games and the chance for users to equip their avatars with Nike apparel. Since it launched in November 2021, it has welcomed more than seven million visitors.
These activities are best seen in the context of Nike’s market-leading omnichannel and e-commerce capability and its world-class digital supply chain: it ranks number two for fashion brands in the Future Readiness Indicator rankings developed by the IMD Centre for Future Readiness.
Building metaverse muscle
With a mindset of experimentation and exploration, CMOs can begin to build the capabilities needed to seize the metaverse opportunity. Here are four priorities for CMOs who are serious about engaging with the metaverse.
1. Understand the technology and the ecosystem. Focus on developing a first-hand understanding of the opportunities in the metaverse, and identify the ecosystem partners that could offer the greatest benefit. The growth of the metaverse may be flavour of the month but it should be treated as a long-term opportunity that will reward forward-thinking investment.
2. Forge connections with product teams. If organisations approach the metaverse as just another marketing channel, they will fail to grasp its true significance, which lies in reshaping how your customers experience your brand, online and offline. This means that marketing and product teams need to consider the full spectrum of opportunities and forge links accordingly. Where could you position NFTs in your product range? Do they relate to physical goods? If so, how? For many businesses, online opportunities will remain complementary to the core physical product. Consider The LEGO Group, which has expanded into blockbuster movies and games, but retains its core business of buildable molded bricks. Similarly, for fashion brands, the physical goods business remains core, so how can the relationship between online and physical worlds evolve?
3. Learn how to manage uncertainty and mitigate risks. In an emergent world such as the metaverse, uncertainty comes with the territory. Experimenting on a small scale limits exposure, but there is danger in being too limited. Minting NFTs may have a near-zero marginal cost and consequently seem a smart proposition for the CFO to sign off on. However, too many small-scale activities could distract from the big-ticket projects that carry more risk but also, potentially, more reward. The emerging technologies of the metaverse will bring their own specific problems: how can brands guard against counterfeit NFT goods or IP theft, for instance? Brands also need to consider the risks of creating spaces within the metaverse; amid growing concerns about predatory or abusive behaviour, what is their approach to safeguarding young users?
4. Determine measures of success. For CMOs to justify investing in the metaverse, evidence of impact will be needed. Some businesses will make money in the short term by selling NFTs but, for many others, a narrow focus on sales revenue is unwise. The impact of metaverse activity on brand reputation and sentiment is a much more accurate measure of the potential value of engagement, especially by triangulating across other social media platforms to see how your activity is shaping the conversation.
Behind all the hyperbole and excitement, some marketers might see the metaverse as a fad, a bubble that is bound to burst, sooner or later. That would be a mistake: it may take time to gain definition, but it is shaping up to be the next stage in the internet’s commercial evolution. For the CMOs who are sure of themselves and the direction their businesses want to take, a more defined, proactive strategy could work best. For others, there is still time to play in the shallows of the metaverse before immersing themselves in its many opportunities.
Howard H Yu is the LEGO Chair Professor of Management and Innovation at IMD and the Director of IMD’s Center for Future Readiness. He is the author of the award-winning book LEAP: How to Thrive in a World Where Everything Can Be Copied.