Source: “The Metaverse and How We’ll Build It Together” – Meta
Is the metaverse a bubble waiting to pop?
Bernard Arnault, CEO of LVMH, said the French luxury group is willing to wait to embrace the metaverse and remains wary of potentially speculative bubbles.
“This is a virtual world. And right now, we are very much in a down-to-earth world,” Mr. Arnault said last week on LVMH’s fourth-quarter analyst call. “We want real product, selling for real.”
Mr. Arnault conceded that it’s “rather thought provoking” to see non-fungible tokens (NFTs) generating profits.
For now, however, he added, “We are not interested in selling virtual sneakers for 10 euros. We’re not into that. There may be more relevant applications, but we have to see what these applications might be.”
Mr. Arnault further added that LVMH is “wary of bubbles” that have happened in past digital phases. He elaborated, “At the beginning of the internet in the 2000s, there were all sorts of things cropping up — left, right and center. And that was a bubble that burst.”
Many firms, he added, likewise later tried to create social platforms similar to Facebook but “only one pulled through and the others failed. So we have to sound the note of caution.”
Gucci, Prada, Balenciaga and other luxury players have been experimenting with branded in-game characters and NFTs across a range of virtual platforms.
A recent Morgan Stanley study estimated the metaverse could represent a revenue opportunity of $56 billion for luxury, or 10 percent of the marketplace by 2030, with early adopters benefiting. The report stated, “NFTs and social gaming present two near-term opportunities for luxury brands, allowing them to monetize their vast IP (intellectual property) built over decades.”
Hype around the metaverse as the next internet revolution has shot up since Facebook’s name change to Meta, but the underlying technology is seen by even metaverse proponents to be in the early stages. Turbulence is expected as platforms are developed.
Cathy Hackl, chief metaverse officer at the Futures Intelligence Group, told Vogue Business, “We’ve seen hype cycles in the tech industry before that have led to bubbles. We will possibly see area specific bubbles and market corrections [in the metaverse].”
- New records for LVMH in 2021 – LVMH
- LVMH Moët Hennessy – Louis Vuitton, Société Européenne’s (LVMHF) CEO Bernard Arnault on Q4 2021 Results – Earnings Call Transcript – Seeking Alpha
- LVMH CEO Bernard Arnault says ‘we have to be wary of bubbles’ with the metaverse – CNBC
- Bernard Arnault in Wait-and-See Mode on Metaverse – WWD
- Metaverse Gaming, NFTs Could Account for 10% of Luxury Market by 2030: Morgan Stanley – CoinDesk
- Luxury NFTs Could Become a $56 Billion Market by 2030 – Business Insider
- Metaverse: Opportunities for Investors Today – Morgan Stanley
- LVMH’s Arnault is wary of the metaverse “bubble”. Should luxury be? – Vogue Business
- In the metaverse, brands’ FOMO is competing with consumers’ burnout – Digiday
- What the metaverse means for retail today, and what’s in store for tomorrow – eMarketer
Discussion Questions
DISCUSSION QUESTIONS: What signs would indicate whether parts or all of the metaverse is a bubble? Is a first-mover advantage worth much now, and how can retailers and brands protect themselves from potential fallouts?
Poll
Loading …BrainTrust
Nicola Kinsella
SVP Global Marketing, Fluent Commerce
Ryan Mathews
Founder, CEO, Black Monk Consulting
If prices continue to grow for virtual products, that will define the bubble. When current consumers/players grow a little older, and the next generation of gamers doesn’t see the fun in it, that’s when the bubble will burst.
P. T. Barnum famously said “There’s a sucker born every minute.”
I have to go with Mr. Arnaut’s line of thought. “We want real product, selling for real.” The metaverse is going to be very real and it will be an absolute blast in many ways. But – when I shop online, it’s research. When I shop in-store, it’s discovery. When I shop online, I have curiosity. When I shop in-store, I have intent. When I shop online, I have questions. When I shop in-store I have answers and confirmation.
All new tech goes through a bubble phase, before the dominant players emerge.
First mover advantages are probably more at the platform level rather than the individual brand level. But if innovation is a core part of your brand, then you need to dabble in the space early. Especially if you want to attract Gen Z. Brand impressions in the formative years count.
That said, finding the right balance between dabbling and learning lessons early versus waiting for a platform winner to emerge, along with tools to accelerate rollout of metaverse experiences, will be key to success.
The metaverse is the collective, persistent, parallel reality created by the stitching of all virtual worlds to form a universe that we can seamlessly traverse. This sounds far too futuristic and advanced to start formulating monetizing the metaverse.
However there are plans already in motion, especially as Amazon’s Livestream gaming platform Twitch boasts more than 140 million unique monthly users who, as a group, watched almost 2.2 billion hours of livestreamed content in April of this year alone. Nike is one of the companies to watch in 2022 in and around the metaverse. The company continues to deliver and innovate products that connect with local consumers by promoting a healthy lifestyle and other important societal themes.
Nike has also teamed up with Roblox to establish a virtual world called Nikeland. Companies see entering the metaverse as a way to potentially reach younger consumers and hopefully translate those engagements in a virtual setting into actual sales in the real world.
This is a serious topic and brands need to think seriously about how they will be portrayed in the metaverse, what they want to stand for, and how much control they want to have over their image in a virtual world. I agree it is early stages and a lot of the infrastructure still needs to be built, but most people would be surprised by how much content already exists in augmented and virtual reality domains. Who knows if Gucci can sell virtual handbags for $10 or $100, but figuring out whether and how a brand wants to be visible in the future depends on how they tinker with the technology over the coming years. I don´t believe customers will flock to virtual stores that look like existing physical stores, but shopping for and influencing real-world purchases will absolutely exist. We may not know for years whether this will be big or huge, but brands that put their customers first will want to experiment with how they can engage with those customers where those customers will spend an increasing amount of their time.
Is the metaverse going to play a bigger role in the future? Most certainly. Will it be the predominant way of shopping and buying? Most certainly not! We are physical beings living in a physical world, that is a fundamental truth that influences how we shop, consume and live.
Virtual worlds are the evolution of the internet, and they are the foundation of the metaverse. With 2.5 billion people globally using VR daily and 43 million active users on Roblox daily, it is important for brands and businesses to take the metaverse seriously. Marketing in the metaverse can take many forms and first mover advantage is important, as long as it is managed in a controlled way, to avoid fallouts which are inevitable. This is a very exciting time as we transition into Web 3.0.
I definitely believe that this too will follow a hype cycle. However when retailers and brands realize that they can effectively become software companies, “shipping” bits and not shipping atoms of products that are generated by AI for a specific buyer’s interest and likes — this trillion-dollar opportunity will be hard to ignore. But we have a way to go.
More and more consumers are skeptical of the “filtered” life. (Just search Instagram for a catfish filter.) So while there may be some initial excitement from first-movers, I think consumers will be more curious in the metaverse than have a sustained, vested interest initially.
I don’t think whether the metaverse is a bubble or not is the right question. What circumstances led up to the belief in its possibility? Why would one of the largest and most influential tech companies stick their neck out about it? I think Nicola is spot on. Dip your toes in, take some calculated risks, don’t overdo it.
Virtual worlds are here to stay. What we are talking about here is brand impression, brand vision and creative marketing. Early entrants like Nike leading the charge via their partnership with Roblox is a big splash. A brand won’t be “behind” if they don’t jump in with a big statement like that. But completely staying on the sideline too long could create risk long term. The virtual purchases will establish brand loyalty and turn into actual purchases- that’s what Nike is betting on. This has to be part of brand vision. This is not a place to be a laggard.
Good insight and I agree with your view, Megan.
In its latest incarnation the “metaverse” is, as the British might say, “A not so clever ploy by Mark Zuckerberg to distract from the negative press Facebook is receiving. End of.” The truth is, it isn’t even a particularly new idea, or a new word for that matter.
For those unfamiliar with science fiction, apparently the breeding ground of most new marketing theories, the word metaverse gained reasonable popularity after appearing in Neal Stephenson’s “Snow Crash” – a 1992 novel set in a dystopian 21st Century Los Angeles where people, including the book’s main character, Hiro Protagonist, a hacker who delivers pizzas for the Mafia, escape the drudgery of their lives in an enhanced 3-D virtual reality space experienced through avatars. If you want an earlier references look up Vernor Vinge’s “True Names” (1981) or Plato’s “Allegory of the Cave” (~514-520 BCE). For the more commercially minded do the words “Second Life” (2003) ring a bell?
Anyway, you get the idea. There may be something new under the digital sun, but it sure ain’t the idea of a metaverse, So — what’s real here? Some of us have argued for decades that retailers needed to start viewing tools like Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR and various other names) as serious tools. We have also argued that companies need to study the commercial potential and application of gamification. The technology has been steadily evolving since 1968 when Ivan Sutherland and Bob Sproull created the first VR/AR head mounted display (HMD) which they named the Sword of Damocles. So “metaverse” is really a 54-year-old idea with a 39-year-old name that is apparently the “Next Big Thing.” What Zuckerberg has done is rebrand what is more commonly known as Web3 with the frighteningly predictable effect of sending all those “cutting edge” thinkers out there in CPG/Retailland off chasing their tails. Web3 isn’t a bubble, it’s a totally predictable evolution, but that’s not to say that a bubble won’t form around it. As to first-mover advantage, where were these guys almost 60 years ago when this all was really new?
As much as I personally am not rushing to get involved in the metaverse, professionally, I have to say it feels like an inevitability for retail. There will be a lot of regulatory complexities retailers will have to take into account, but there’s also a ton of opportunity here – especially from a data perspective. More integrated digital can mean more security and better understanding of the customer. It will really be up to retailers to navigate this landscape and figure out how to be successful here.
Of course it is. And then it will rebuild. We know the innovation adoption cycle and are close to the peak of heightened expectation right before the trough of disillusionment. But out of the bubble are real use cases where NFTs become digital deeds to loyalty rewards, physical products, real world experiences. Just look at the retail NFT tracker of retail launches for 2022 and we are only one month in!
The Meta may or may not be the next big thing, but the point is few if any retailers is in a position to know. And while they could miss out on being the next Amazon, it’s more likely they’d end up the next failed.com … best to stick to what you do best.
The metaverse is still meta-confusing to me. It starts with these intangibles — just like advertising. What is really being sold? From my first guess, it’s branding, PR, and general marketing. Something companies like Facebook have been exceptional at for years. Bubble — not exactly; variation of marketing — probably. Does a first mover advantage really matter? Only if there is mass support that can’t be easily replicated and gained and for now, dipping your toes in is better than committing your annual marketing spend.
Rather than calling it a bubble, I consider metaverse as a typical example of Gartner’s hype cycle right now. Since retailers, tech companies, all are exploring their avenues in the metaverse, the concept is therefore at a peak of inflated expectations. However, metaverse will gradually get concentrated, and only true players who are eager to innovate will remain. And it won’t be long before metaverse becomes mainstream.
Metaverse is more of a tech concept, and retailers will need time to delve deeper and leverage it accurately. This makes me unsure if there will be much of a first-mover advantage for retailers. Only forward-thinking brands who are open to adopting new technology, innovating, and experimenting will gain a competitive edge and reap long-term benefits. These brands would have to get to know their customers and make sure that their metaverse experiences are relevant.