Will advertising exist in the Metaverse?

Defining the Metaverse is thorny. This is true at least in part because the companies most invested in it are incentivized to preserve the soft, spongy epistemological force field that surrounds the concept. As a nebulous idea, it can credibly be lauded as the next human-machine compute platform; with a sharper focus, and especially when presented as a specific product implementation, perhaps it seems less grandiose. This assessment isn’t meant to be cynical or pejorative. The Metaverse as an idea is exciting, and many exceptionally smart people are attempting to construct it. Conceptually, the Metaverse is reasonably crisp, but if someone were to tell me, “in 10 years’ time, everyone will engage with the Metaverse,” I’d have a hard time imagining what that looks like.

So while the “What” substance of the Metaverse is unclear, the “Why” has sharpened dramatically over the past year as some of the world’s largest companies wrapped various initiatives in that narrative in earnest. Mark Zuckerberg articulates the potential power and value of the Metaverse, as well as his company, Meta’s, motivations in building it, very coherently in an interview with Ben Thompson of Stratechery:

So, a couple of thoughts. One is that I think that the phrase “the real world” is interesting. I think that there’s a physical world and there’s a digital world, and increasingly those are sort of being overlaid and coming together, but I would argue that increasingly the real world is the combination of the digital world and the physical world and that the real world is not just the physical world. That, I think, is an interesting kind of frame to think about this stuff going forward.

For what it’s worth, I conceptualize the Metaverse as: a collective, persistent pool of content, accessible through a multitude of hardware form factors, that is designed to accommodate numerous use cases and contexts.

Unpacking this characterization by parts:

  • Collective, persistent pool of content. The content is accessible by some group of users and exists, evolves, and is enlarged constantly, and globally to all users, through every interaction that it facilitates. The state of content is consistent for all users, regardless of whether they are interacting with it or not;
  • Accessible through a multitude of hardware form factors. The content isn’t exclusive to any single piece of hardware and may be adapted for consumption across a range of devices. One way I conceptualize this: a group of employees is meeting for a whiteboard session. Some portion of the group uses VR devices and perceives, spatially, everyone else in the virtual room; some other portion of the group is using tablets and can only interact with the whiteboard. Despite the fact that the users are interacting with the whiteboard through different types of devices, the whiteboard is synchronized for all participants;
  • Designed to accommodate numerous use cases and contexts. An instance of a Metaverse is all-encompassing across a user’s life and might be interacted with at any point in their day, for any purpose. The Metaverse isn’t strictly social (gaming) or related to work (the whiteboard example from above); it is built to augment any of the settings that a person might encounter in a convergence of their physical and digital worlds.

A hurdle that I believe analysts, commentators, and technologists alike fail to clear is conceptualizing the Metaverse as a wholly new framework for human interaction as opposed to a specific form of technology. This is why the Metaverse is often conflated with VR, or the very specific (and dystopian) implementations depicted in Snowcrash and Ready Player One. To my mind, in success, the Metaverse represents a new way of organizing human behavior. One wouldn’t describe Democracy or Religion through the various technologies used in engaging with it; the same should be true of the Metaverse.

Which raises an interesting question: how will the Metaverse be commercialized and monetized? And what role does advertising play in that? Digital advertising is the economic engine of the internet, but as I discuss in a recent post about growth models for web3 gaming (and discussions between web3 and the Metaverse tend to overlap), there is a tendency with new technologies and forms of human-machine compute interfaces, but especially with web3, to assume that a technological innovation necessitates an economic revolution. This mentality presumes that the business models of old get thrown out as humanity inches toward a techno-utopia in which the vulgar pursuit of making money has become anachronistic.

And, generally speaking, no approach to making money is seen as more vulgar by technologists than advertising. As I write in The metaverse isn’t here yet. Until it is, digital advertising finances the internet:

Manifest destiny was a 19th-century political slogan that motivated the annexation of Western territories and was facilitated by the construction of the US intercontinental rail network, principally financed by the US government. If the digital equivalent of manifest destiny is to shift engagement into a metaverse, then that migration will be financed by the digital advertising businesses of the companies constructing the virtual railroads that will deliver this new medium. The ambition of building a new nexus of consumer engagement, unconstrained by the limitations and broken incentives of the ad-funded internet, is soaring and noble. But the pursuit of that ideal will be financed by digital advertising.

But is the advertising business model discarded entirely as the Metaverse takes shape? Almost certainly not. Advertising is a fantastically high-margin business, and if anything, the opportunities to deploy it expand meaningfully in a Metaverse. But beyond the economic opportunity, advertising also provides content creators with a critical means of driving discovery of, and engagement with, their work. That need will never dissipate — and in the Metaverse, isn’t everyone a creator?

Nike and Adidas have both recently made inroads into Web3 via acquisitions (Nike acquired RTFKT, a virtual shoe company that mints NFTs) and partnerships (Adidas teamed up with the Bored Ape Yacht Club and released its own NFT collection, Into the Metaverse), following in the footsteps of other luxury brands such as Balenciaga and various LVMH labels like Louis Vuitton. And Gucci recently released a collection of 851 virtual bags into the digital world of Roblox, with one of them selling for more than its real-world equivalent. Brand collaborations already exist in the Metaverse in a form of advertising that leverages brand resonance and prestige to make money from virtual goods.

But these types of branding exercises are hard to scale and are really expressions of real-world value. What infrastructure supports a Metaverse-native brand advertising to an audience within the Metaverse? How do Metaverse-exclusive products achieve initial traction? And in what ways can a native implementation of advertising in the Metaverse actually improve upon that business model? These are more fundamental questions.

Photo by Joshua Earle on Unsplash