The metaverse is breaking loose – here’s what it means for advertisers

Open Mic

This promoted content is produced by a publishing partner of Open Mic.

Open Mic is a paid-for membership product for partners of The Drum to self-publish their news, opinions and insights on thedrum.com. Find out more on the Open Mic homepage.

As part of The Drum’s Metaverse Deep Dive, Anzu’s Itamar Benedy (co-founder and chief executive) and Dow Jones Live’s Elena Corchero (director of emerging technology) look at the evolution of the metaverse, its future and what it means for modern advertising.

The metaverse – a digital space where people gather to play, hang out, create, learn, spend, consume media and interact with brands – is fast approaching. At its core are connected experiences, linked together via one giant virtual environment, which will create a new and exciting playground for advertisers.

Although it seems like the word is suddenly everywhere, the idea of the metaverse is not new and has been imagined in books and films including Snow Crash and Ready Player One for decades. However, we’re now starting to see the beginnings of it in today’s most popular gaming platforms such as Fortnite and Roblox, which are hosting virtual concerts, film screenings and even memorials.

On the other side of the coin, we are seeing the metaverse emerge in the visions of some of the world’s biggest tech companies, such as Microsoft and Meta, which see it as a way for people to connect and work together. As the metaverse draws ever closer, it will be imperative for advertisers to understand where they fit in and how to navigate these immersive, digitally-connected spaces.

Why now?

People have understood the need for and benefits of a virtual space for a long time. Back in 2003, Second Life – an online multimedia platform that allowed people to create avatars of themselves and live a second life in an online virtual world – became hugely popular, even if the craze did soon die out, partly down to the lack of technology available at the time. Many tech companies, including Microsoft and Google, have also tried to build hardware and software to facilitate a shift to a more virtual world. Still, there were not enough reasons for us to exist in it, nor was it accessible enough to the average consumer. Covid-19 changed that.

Before the pandemic, meeting someone virtually, rather than seeing them in real life, was meaningless if they lived nearby. However, with prolonged lockdown periods and restrictions on travel, these attitudes shifted and virtual meetings became commonplace. Sports games, festivals, live gigs and trips to the theater and the cinema were also not possible. As live entertainment closed down, people began to head in their millions to virtual worlds via their mobiles, PCs and consoles.

This led to companies that were bullish about working toward the metaverse getting more resources to build it out and grow. As of November 2021, after substantial growth and several acquisitions, one of these companies, Roblox, announced its daily active users had reached 49.4 million – up 35% from the previous year. Hours engaged were 3.6bn, up 32% from the previous year. Revenue was estimated to be between $184m and $187m, up 84%-87% year-on-year. It now has more resources to fulfill its vision, with lots more capital to invest in its technology and acquire companies to help it get there, as well as making it easier to persuade people to stay.

The new attention economy

The attention economy linked to advertising started with Google and Facebook creating ecosystems of services around studying human behavior to add value to advertisers. The difference is that previously adding value to advertisers wasted users’ most valuable resource: their time. However, advertisers have realized that their interventions must be relevant, timely and contextualized, adding value to all parties involved. This is especially true for gaming as players are often fully engaged in the experience, meaning if a brand wants to reach them, they need to become part of the environment and the experience, rather than disrupting it with an interstitial ad.

Ad experiences in the metaverse will need to be more immersive, interactive and user-defined. Ads will need to feel natural and fit into the same experience as the consumer, rather than disrupting it. We see the first iteration of this within in-game advertising, where ads are placed within the gaming environment, perfectly positioned to complement the gameplay.

Within the metaverse, people will head to different experiences for different reasons. For example, if they want to hang out with friends, they may head to a virtual cafe or space to catch up and chat, whereas someone wishing to escape and seeking an adventure may head for an action experience. The ads shown within these spaces will need to fit not only the environment, but the mood and reasons why people are there. This will take contextual advertising to the next level.

It’s hard to imagine one centralized platform coming out on top that users will head to and then choose which experience they want to access. Instead, an easy way to imagine it is to think of the web browser. Just like you use Chrome or Safari to access websites, it’s inevitable that something similar will arrive to help link up people and allow them to access these potentially interconnected immersive worlds.

The evolution of in-game currency

Another important aspect of the metaverse will be purchases and their payments. People won’t only spend time in the metaverse, but also money, investing in their avatar’s appearance and virtual space to show off their ranking and status. Many believe the metaverse will work on blockchain technology, with its own cryptocurrency allowing people all over the world to transact easily via a virtual marketplace. Previously you would spend money within a game for additional content and then go to a website to buy clothing. In the future, you will be able to earn money and carry out most transactions in the metaverse, so it makes sense for brands to be there to advertise, build a community and sell their products within the same space.

We’re already beginning to see this happen within Fortnite and Roblox, where millions are being spent on kitting out characters with outfits and in-game items to stand out among their friends and other players. The NFT craze also signals a move toward people seeing the value in owning and trading virtual items. Once this is brought to the metaverse, it will become just as normal to spend $50 on a pair of virtual trainers as it would a real pair. Platforms such as the Sandbox and Axie Infinity have already begun experimenting with combining the NFT marketplace and gaming. Expect to hear much more on this topic as games studios continue to discover the value of having players not only purchase but invest and earn through their experiences.

Blurring the lines between on- and offline

The metaverse will extend into the real world, and as this happens we will no longer use terms like on- and offline, as everything will become connected. Augmented reality (AR) and virtual reality (VR), accompanied by new devices like virtual headsets and VR glasses that better connect us, will allow for exciting experiences that will mix the virtual with the real world, opening up new and endless possibilities for advertisers that will no longer be constrained by the barriers that are present in many of today’s marketing channels.

We’ve already seen early signs of this in games from Niantic such as Pokémon GO and Pikmin Bloom and Nintendo’s new theme park, which mixes rides and attractions with virtual experiences that you access via your mobile as you navigate the park. Last year’s Electric Daisy Carnival (EDC) also happened in the real world and on Roblox, where users could navigate a virtual version of the festival and experience live acts in tandem with those attending the festival for real.

Where do we go from here?

Next-level contextual advertising, mixed reality, friction-free transactions and in-game NFTs – these are just a few areas that are going to skyrocket thanks to the metaverse. Advertisers that want to stay relevant in this new world will have to keep their ears to the ground and ensure they have the right people in place, and understand as a company where and how they fit into this channel.

A good head start would be to look into the platforms that are championing this kind of connectivity and begin to understand how to reach their users, as these platforms are essentially the start of something that’s going to quickly evolve into a place where the majority of us will spend our time.

Co-authored by Itamar Benedy, co-founder and chief executive officer of Anzu, and Elena Corchero, director of emerging technology at Dow Jones Live.