The metaverse is here. In fact, it has been for quite some time. While most of us may have just learned of the term “metaverse,” those born in 1997 and after (Gen Z and Alpha) have grown up with it. For them, the idea of interacting, learning, conversing and even buying in a virtual universe isn’t new. It’s how they’ve learned to communicate (just ask your child about the latest skin release or virtual concert).
Perhaps already the biggest buzzword of 2022, “metaverse” might be the latest clickbait, but the futurist concept of a virtual reality (VR) alternative to the real world isn’t futurist at all. It’s already here and is at the precipice for rapid acceleration. We’ve reached a convergence point with consumer intrigue, technology at-the-ready (artificial intelligence (AI), internet of things (IoT), blockchain), increased network connectivity via 5G and cloud computing, and the democratization of e-commerce — a development accelerated by the pandemic that has driven the adoption of digital — to create the perfect storm for the metaverse to take flight. If the last two years have changed our thinking around how digital fits into our lives, the next five may completely upend everything we’ve been expecting from the digital revolution.
The Future is Indeed Virtual — Yet Still a Bit Murky
From a brand perspective, entering the metaverse is still a bit like the Wild West. Much like the prospectors of 1849 set off for California in search of gold without a clear picture of the journey ahead, brands and other entities entering the metaverse are still largely ill-equipped for future challenges. This is because the future vision of what the metaverse will become remains largely undefined. We don’t yet know who or what will control it in the long term, whether several virtual worlds will coexist and be interoperable, or which experience standard (such as augmented reality (AR)-enabled or VR-facilitated) will become dominant.
Interesting use cases continue to enter the metaverse discussion seemingly every day. DTA — direct-to-avatar — product releases are gaining momentum as several luxury and mainstream brands promote their contactless cyber fashion offerings. Last year unveiled virtual cars, zero-space museums, around-the-globe travel tours and a virtual real-estate surge, with the world’s first virtual home sale going for $500,000. Meanwhile, the island nation of Barbados is preparing to legally declare digital real estate as sovereign land, becoming the first country to open an embassy in the metaverse.
Cryptocurrency and virtual art, collectively known as non-fungible tokens (NFTs), are already receiving incredible valuations in the metaverse, with almost half a trillion dollars through the sale and purchase of NFTs to date. While digital art has been the primary NFT revenue source so far, the use cases continue to evolve and have blossomed into digital twins of physical products, memorabilia, exclusive NFT fashion collections, and more. The implications for retail are immense and provocative.
The metaverse is limitless — there are no constraints to virtual experiences, variety of worlds or number of users — and persistent. It’s a virtual space that’s always on. This lends itself to some very real implications to explore. As brands and companies begin to purchase virtual real estate, design and sell digital products, and build communities in the metaverse, what are the tax and legal implications of a virtual world? Legal-entity structures, trademarks, flash-title transfers — these are all areas that currently have no precedence in the virtual world. For example, if you take a picture of a luxury bag and place it on your avatar in the metaverse, are you infringing on copyright?
Uncertainty and the Risk-Reward Quotient
There are fears, of course. How will an evolving meta-society handle the straddling of physical and virtual realities simultaneously? Do ethical codes extend to the metaverse? Would a decentralized Web 3.0 make the metaverse a homogeneous society, “blocking” all people, ideas and ideologies that differ from one’s own? Do ethical codes extend with us to the metaverse?
The metaverse will extend physical realities into a virtual realm beyond what we can currently envisage. Companies, brands and ecosystem participants have carte blanche to shape the future metaverse landscape. The challenge is determining when the reward of jumping in will outbalance the current risks and unknowns.
How Today’s Companies Can Keep Their Eyes on the Ball
While we don’t have answers to every operational question yet, we do know that a new digital realm is coming, and it’s transforming the value of companies, products and assets. Web 3.0 will leverage industry ontology to transform experiences, reshape e-commerce and accelerate innovation. AI and machine learning will deliver curated and hyperpersonalized interactions and leverage data to enable insights-driven decision making, while also monitoring cybersecurity and enhancing overall risk management. Finally, crypto and blockchain offer a decentralized payment solution, which enables accurate logistics and secure revenue record-keeping that’s theoretically unhackable and immutable.
The adoption of these mega tech trends will reshape how companies create a tight entanglement with the consumer. Determining the precise adoption point, however, is difficult if not impossible. While some naysayers cast metaverse as the next dot-com bubble waiting to burst, there’s legitimate concern that companies not investing in this innovation risk falling behind sooner than anticipated, similar to brands and retailers that lacked a robust digital presence in the early months of the pandemic-driven lockdowns.
Companies entering the metaverse will need to understand their financial business case and level of investment before dipping their toes in the virtual marketplace, and then balance that against the cost of waiting.
Metaverse brands will have to determine whether they’re there to create a true digital twin of physical operations in a virtual world or explore new ways to reach consumers relative to the physical world. A brand’s forte in the metaverse might take the form of a shoppable virtual store in a virtual mall, or it may materialize through an avatar space suit that transports users to a branded meetup lounge on the moon.
Opportunities to personalize “omniverse” experiences in the metaverse based on a unified view of the customer in alignment with what they do in other, more traditional channels (e.g., search, web, email, SMS and physical store) are vast. Brands that can tap into the sentient possibilities of virtual exploration can create real and lasting brand loyalty with consumers, redefining the end-to-end customer journey and the entire ideology of experience. This is one of the areas where companies must consider the extent to which they want to drive innovation with virtual customer experiences vs. waiting to conform to any established experience precedents.
In the Wild, Wild West, Who Won?
- Success came to those who provided tools and infrastructure (think jeans, picks and shovels, and roads). How should a company think about becoming essential in the metaverse? Consider a digital transformation and the ways in which it can open new channels for growth by experimenting with new ideas and delivering innovative and new levels of consumer experiences.
- Moving West was a scary proposition — they took one step at a time on the trail. Step into the metaverse and learn — experiment, fail fast, look to measure engagement with your brands and offerings. But don’t get caught standing still.
- Water was essential for life. In the metaverse, a brand’s “water” is its purpose — how will others in the metaverse receive and partake in your purpose? Think about developing a purpose-led strategy for long-term value that involves attracting and retaining employees, meeting the demands of consumers, and maintaining an authentic, purpose-driven brand.
As the metaverse continues to take shape, brands considering voyaging the unmarked trail must do so with intention and strategic vision. While your departure date might still be unknown, the time to begin the conversation is now.
The views expressed by the authors are not necessarily those of Ernst & Young LLP or other members of the global EY organization.
Alison Medina is consumer and generational strategist, Ernst & Young LLP. Mehrdad Moghaddam is senior director, corporate and growth strategy, Ernst & Young LLP. Marcie Merriman is the Americas cultural insights and customer strategy leader, Ernst & Young LLP.