Earlier this year, we announced our new collaboration with the University of Nottingham’s Data-Driven Discovery Initiative (3DI). The first article from our collaboration focuses on the collision between marketing and the metaverse; written by Dr Benjamin Lucas, MD at 3DI, Martin Wetzels, Professor of Marketing, EDHEC Business School, France and our CEO, Julio Taylor, it unites the academic sphere with real-world experience.
In recent years, blockchain technology has emerged as the backbone of decentralised finance (DeFi) via cryptocurrency and triggered a shift in the future of the contract.
Most recently, interest has begun to boom in another blockchain-based technology: the non-fungible token, or NFT. Simultaneously, the emergence of a proposed virtual universe – the metaverse – points towards the advertising, selling and service provision of the future. But how will NFTs and the metaverse impact the marketing world, if at all?
What is an NFT?
In very simple terms, NFTs are digital contractual deeds and certificates of ownership. When an NFT, commonly (but not necessarily) a digital asset, is exchanged, the transaction and transfer of ownership is cryptographically recorded, and thus made verifiable, via a blockchain record. This allows unique assets to be acquired and traded by unique owners.
The attention and interest boom surrounding NFTs has arguably been driven in particular by reports of often massive prices and earnings achievable by digital art and content creators who mint and sell (often via cryptocurrency) one-off pieces, which are subsequently auctioned or sold, purchased, held and traded much like a physical art asset via marketplaces such as Open Sea. Another factor driving this interest, however, is the potential of further convergence of NFT with the metaverse.
What is the metaverse?
The metaverse concept has emerged in its current definition as a future, immersive online world – or rather, universe – where real human beings and collective entities can carry out virtual lives. Technologies including social media, ubiquitous remote communication, gaming, virtual world gaming, esports and MMO games, virtual reality, augmented reality and even online shopping have all helped to lay the foundation of what this parallel digital future might look like, but also offer clues as to which constituent technologies might form part of the metaverse in the future.Facebook’s recent rebranding as “Meta” also clearly signals the tech giant’s intentions to actively develop and operate within this reimagined web, representing a substantial step for the concept in becoming mainstream reality.
The metaverse concept is also occasionally described as overlapping with the emergent Web 3.0 paradigm: an internet reimagined around decentralisation. This overlap is most apparent in the integration of NFT assets into virtual worlds, where everything from digital fashion to digital real estate is possible.
What do NFTs and the metaverse mean for marketing?
Brands have begun to employ NFTs in a variety of ways. Coca-Cola has engaged in charitable auctions of NFT collectables, the NBA and WNBA offers a futuristic version of trading cards and Nike has acquired RTFKT to sell digital shoes (Ad Age offers a “continually updated list” of NFT applications in marketing). How exactly the prevalence of NFTs grows – especially when considering the form the NFT and metaverse marketing sphere will ultimately take remains to be seen – but a few sensible predictions and the noting of foreseeable opportunities is possible.
NFTs as a basis for selling digital goods inside the metaverse(s) will likely continue to grow in the future, especially as the ultimate form of the metaverse becomes clear, and if some group of consumers become – and remain – interested in managing sophisticated digital avatars of themselves.
Somewhat back in the ‘realverse’ though, NFTs may find applications in advanced loyalty and membership programmes and CRM.
For example, NFT-based customer gift and voucher promotions are an intriguing possibility, especially against a backdrop of advancements in marketing automation – especially precision personalisation.
NFTs could also serve as a basis for repeat monetisation of digital content (including promotional content) and merchandise, as well as a basis for exclusive product launch access tokens and tickets. Collectively, this points to potentially exciting and compelling disruption to advertising in coming years.
Brands will also likely benefit from collaboration with content creators. But it should be noted that the democratisation of content creation and mass-distribution – which began in the social media sphere – may also play out in the “creator-centric” world of NFT production.
In terms of creating and launching new services, precursors to future metaverse service provision are already emerging, such as in entertainment, as fascinatingly illustrated by Ariana Grande’s concerts inside the Fortnite video game. The retailing of virtual goods also raises interesting questions about tangibility: what a service is and what service design and omnichannel delivery might look like in the future.
An important and interesting consideration for marketers using NFTs is around the value of participation in a resell market for their NFTs and how to make pricing or starting bid price decisions. For example, the more NFT marketplaces can incorporate a resell or gains quota for the original creator no matter how many times an asset is sold, the more NFT creation becomes a potential revenue stream for existing brands.
Irrespective, in some situations, an after market for NFTs may be extremely valuable to certain brands in terms of its potential positive effect on brand reputation and brand equity, by creating exclusive asset classes for exclusive customer segments, comparable with what has been achieved via the emergence of the resell market for high-end physical sneakers (which has, in turn, lead to opportunities for producers to develop and command higher prices for exclusive highly-collectable products).
In other cases, the potential volatility in terms of demand fluctuations, market longevity, growth and price stability in a certain NFT aftermarket – or even the risk of alienating certain customer segments – may present a significant downside risk.
In a nutshell, the potential for NFTs to define the marketing strategy toolkit of the future will be the combination and recombination of existing marketing tactics; for example, consider NFTs as combined advertising + reward schemes + tickets + collectables. Here, the current selling model of blending a physical and digital presence could work, such as where NFTs include ownership of an ancillary physical asset or participation in ancillary events or services.
Important and interesting considerations for marketers looking to invest in the metaverse as part of marketing strategy include the need to realise that the technology currently exists as a nascent family of technologies, but has the potential to turn into a major reimagining of what the internet can facilitate. The timeline for constituent technologies is – and will remain – difficult to predict, as will the coalescing of these technologies (and others not yet emerged) into the fulfilment of the true metaverse.
Marketers should also actively participate in shaping this future through a prosocial marketing lens. If the depth and volume of a consumer’s time spent online does continue to increase exponentially via new forms of immersive interaction with the world around them (and the world ‘not around’ them!), crucial considerations for policy makers, lawmakers and commercial entities – both platform owners and platform participants – will exist in areas such as digital ethics, digital privacy and user protection online.
Scientific research has begun to explore topics such as the NFT market and NFT security, but there is a vast opportunity for research to understand NFT-based and metaverse-based marketing as these technologies grow (building on existing research on the marketing applications of blockchain in general).
Specifically, academic research will facilitate the building of understanding and best-practice in deploying and fine-tuning new marketing techniques enabled by these technologies via existing knowledge and research frameworks within consumer psychology and behavioural science. This will likely start with understanding dynamic user segments and motivations and behaviours in far greater detail.
In the meantime, marketers should remain curious and vigilant in keeping track of new developments in these spheres, as they are moving quickly and may give rise to substantial first-mover advantage opportunities.
This should include keeping track of advancements in constituent (and potential) metaverse technologies and developments in other blockchain based technologies such as the Basic Attention Token which offer clues to future directions in consumer preferences, demands, and empowerment and new market structures.