Are you hyped by the buzz around Metaverse or are you a little sceptical? Digital expert Stefan Wenzel has a clear view on why we should neither bury our head in the sand nor fly too close to the sun in this third version of the web.
(This article was first published here in German)
Are virtual goods a market? The answer is simple: This year, around 130 billion US$ will be spent on subscriptions, services, and virtual products. That’s roughly the size of the entire German e-commerce market. The market for in-app purchases is bigger than the global music and film industries combined.
Virtual ownership is an essential feature of the third evolutionary stage of the web. While parts of our industry are still struggling with digital basics from the first and second stages of the web (Web1 = read, Web2 = read and write), Web3 has arrived (Web3 = read, write and own). And it comes with topics like the Metaverse, the next big application platform after desktop and mobile, and NFTs attached.
This new sphere is complex, many new and unfamiliar topics intertwine, and new nomenclatures confuse. For example, anyone who wants to sell unique virtual items does so by the means of NFTs (non-fungible tokens = unique digital assets), ownership is documented via blockchains (decentralised digital regulatory) and payments are made with cryptocurrency (= virtual currencies). Got it?
Gaming is the driving force behind many of these developments and is already the most popular form of entertainment with more than three billion users worldwide across all age groups. Ahead of streaming and TV. Some fashion brands have embraced this trend early on. Balenciaga, for example, sells virtual fashion for avatars in the online game Fortnite and links digital twins to physical products. Moschino sells virtual fashion in the game Sims, Canada Goose in Taobao Life and Louis Vuitton in League Of Legends.
But matters are expanding beyond the gaming space. Nike opened its own theme park, Nikeland, in the Metaverse game Roblox. Adidas went one step further and bought virtual property in the Metaverse Sandbox. Virtual stores, virtual community events, and virtual fashion shows are created in these virtual worlds. Brands sell virtual products via NFTs as part of physical launches or as a stand-alone, and use NFTs for membership in exclusive communities or event tickets. And completely new brands and companies that strike a chord with the Zeitgeist emerge, such as the Parisian start-up RTFKT (pronounced artefact, recently acquired by Nike).
Does anybody want to spend hours in virtual realities? Just ask the teenagers around you. And the introduction of the iPhone in 2007 demonstrated just to what extent new devices can accelerate the use of technologies. It’s easy to imagine how augmented reality (AR) alone could be leapfrogged into the mainstream with Apple’s upcoming, everyday AR optical glasses.
Scepticism towards novelty is in our nature. No surprise then, that like at the beginning of the first two stages of the web’s evolution, the third is being shrugged off by many established players. And yes, whenever new technologies enable new application types, speculative, unsustainable bubbles also tend to emerge. The appropriate response is neither uncritical euphoria nor default aversion. Instead, it is a matter of identifying the structural changes behind the hype, and evaluating their relevance for our own context against the backdrop of our own capabilities.
This is a difficult balancing act for brands and retailers, as the spectrum in the industry ranges from Covid-induced digital late bloomers with a store-fetish to fully digital performance engines. But technologies are only ever a means to an end. And the end is to trigger dopamine in customers. Meaning and a sense of reward following a memorable experience or excellent service are proven dopamine triggers. Don’t try to be fashionable in your business strategy. On the contrary, creating meaningful and rewarding difference is crucial to counter the unfortunately so widespread POS and platform uniformity. So, without genuine answers to the very core questions “Why exactly do I exist? What do I do differently, and above all, what do I do better?”, the problem isn’t technology but the lack of a proposition.
Whether and to what extent Web3 offers opportunities in creating your meaningful and rewarding proposition is something every business needs to assess individually. But given that the highest costs are usually opportunity costs, the chronological order remains: understand, evaluate, prioritise. The good news is that all this is still in its infancy. For the vast majority, the learning curve is just beginning to kick in. So, it’s a good time to get to grips with it!
About the Author:
With more than 20 years in Digital Commerce for leading players, Stefan Wenzel is a recognized figure and a distinguished mind in the industry. Stefan has held positions as managing director for companies such as Ebay, brand4friends, Otto and Tom Tailor Digital, led digital transformation & acceleration across various business models and growth states, including nine years of work and life abroad.