The commercial reality of the metaverse

The commercial reality of the metaverse

While most sectors will eventually find themselves in the metaverse, early activities have centred around brands collaborating with games. These collaborations give players a means to express themselves or engage with their favourite content. In return, brands receive exposure, bigger audiences and opportunities to tap into new revenue streams. Music, TV and film, fashion, sports, art, automotive and others are already testing the metaverse waters, and medicine, defence, cities and transportation are en route.

Why the metaverse matters for gaming

Simply put, the metaverse is creating – and will continue to create – new forms of engagement, not only with gamers but also with non-gamers too. To that end, the next big shift in gaming is from games as a service, or GasS to games as a platform (GaaP), and it's already happening:

  • Gaming has evolved over the last decade to become an experience, including playing but also viewing and social engagement. The latter has also led to non-gaming events within games.
  • The metaverse is the next logical stage of non-game integrations, driven by a combination of technology and the evolving ways consumers interact with games.
  • This evolution allows games to become platforms in which multiple stakeholders can create and capture value beyond the core game or product.
  • Publishers are driving new experiences through these non-gaming experiences, such as virtual concerts and fashion shows, intellectual property (IP) activations, and media and product partnerships. The broad appeal of non-gaming experiences is powerful; virtual concerts can and do attract non-gamers.
  • Meanwhile, players are driving metaverse-like experiences by using games GaaP to express their identities, host social events and even create their own games and game modes.

The metaverse will redefine some gaming concepts

Game design

Beyond standard single/multiplayer modes, metaverse games will have creative, social and in-game event modes designed for people to create shared experiences beyond the core game.

Content

The community will have a much larger role in game development, powered by artificial intelligence and other non-coding tools that simplify creation aspects (we are already seeing this in Roblox, Dreams and Minecraft – among others).

Business model

The metaverse will open up economic possibilities, both inside games and out. Below are just some of the new possibilities the metaverse unlocks:

  • Consumers paying to attend digital concerts, talks or other non-game events.
  • Opportunities to sell and trade non-fungible tokens (NFTs) or persistent digital items outside of the game.
  • Powered by the blockchain, players can earn game rewards for contributions to the game ecosystem, which they can exchange outside the game markets for real money (via secondary markets).
  • Exemplified by NBA Top Shot and CryptoKitties, collecting NFT items is a new way for players to engage with game IP and might even attract those who don’t play the game.
  • Monetisation mechanics designed to encourage in-game social activities.

Marketing

Interruptive advertising may be harder to translate to immersive worlds, leading to growth of native ads. Native brand integrations/activations, influencers (both real and virtual), and IP will be fixtures of metaverse marketing tools. Limited-edition NFT releases can help generate a buzz as well.

The ever-expanding gaming ecosystem represents the perfect mix of elements for brand and entertainment collaborations. Games offer the perfect means to reach highly engaged consumers via:

  • Live-service features: During the last decade, post-launch support for games has become a popular business model. With consistent updates, gameplay balancing, and an evolving game world, games are already built to nurture audiences receptive to experimentation and new content.
  • Mainstream penetration among a deeply engaged and hard-to-reach audience: Games have grown to become a bigger business than other entertainment sectors. Especially with younger audiences, games have become completely mainstream. At the same time, young people are notoriously hard to reach through other traditional advertising methods or linear entertainment.
  • New game-native brand integration with authenticity: It has historically been challenging to include brands in games in an authentic and non-intrusive way. With platform games, the players are there for the shared experience – of which the collaborations have become a part.

Zooming in on key metaverse themes (and their commercial realities)

GaaP

  • An increasing amount of non-game social activities is happening in games, not only community events like weddings, graduations and birthday parties but also official brand-driven events like virtual concerts, activations and fashion shows.
  • Games are replacing social media for casual connection, enabled by the enrichment of in-game social engagement features.

User-generated content (UGC)

  • The metaverse requires community-sourced creation to scale effectively. Game platforms such as Roblox, Crayta, and Core lead the trend of user-created experiences, games, mods, and worlds.
  • There has been a growth of in-game creator tools and no-code development to simplify the creation process.
  • There has also been growth in AI-assisted UGC.

Merging of virtual and physical worlds

  • Real places, cities and objects that are mapped digitally 1:1 (for example, NVIDIA Omniverse and Digital Twins).
  • Virtual fashion that can be "tried on" using augmented reality (AR).
  • Improving AR lenses/glasses.

Cloud and scalability

  • Large-scale persistent simulations.
  • Increasing mass concurrency from 100 users per shard/instance to 10,000+.
  • Expanding accessibility and entry into the metaverse through instant-join experiences that don’t require download or installation.
  • Games designed without processing power limits in mind.

AI and procedurally generated content

  • Rich and dynamic AI avatars/NPCs (non-player characters), enabling interactivity and influencing behaviour via community input (for example, Rival Peak).
  • Rapid auto-generation of maps, worlds, and other elements, especially in open worlds.
  • Real-time creation and simulation/visualisation.
  • Hyperrealistic digital humans adapting to real-time situations and able to read emotional states.

Persistent avatar and identity

  • Concept of a persistent digital identity that accumulates unique digital assets (fashion, land, art) that can be used or interacted with in various games/metaverse gateways.
  • Increasing importance and complexity of digital avatars as representation in virtual worlds, with associated digital assets to match, such as pets, land or vehicles.

Digital identities go far beyond character customisation

Gamers already greatly value their in-game representations, as demonstrated by the universal popularity of in-game cosmetics. But, beyond the expansion of customisation options and the blurring of virtual and real selves, the identity trend is also about a growing interest in the idea of a persistent interoperable and decentralised digital identity, often referred to as self-sovereign identity (SSI).

One identity, multiple avatars

The SSI movement aims to protect user privacy through decentralised identifiers (DIDs), which can be thought of as digital passports.

DIDs can verify identity and ownership between two parties without needing to reveal detailed personal information or having that information stored (and therefore accessible) on a centralised server.

Ready Player Me, for example, has an avatar system that can be integrated with virtual worlds and game engines. Users can create one or multiple 3D avatars to be used across games as they travel through the metaverse.

Self-expression amplified

Metaverse citizens will be interested in more than just their avatar. Games following the metaverse trend are expected to let players own and customise assets as well, such as pets, vehicles, houses or real estate.

Aside from avatar-based assets, several companies are pursuing virtual clothing for users’ real-life selves, which they can "try on" using AR or simply collected and viewed gallery-style. Influencers can also use avatars to interact with fans. For example, Genies has partnered with many artists who use avatars for promotional activities or fan interactions.

A commercial reality?

The commercial reality of the metaverse is already beginning to materialise. While the metaverse can feel like an impossibly "far away" concept in the eyes of many already living among protometaverses, and the future will be here before we’re truly ready for it, companies and sectors that move early will be better positioned to reap the commercial benefits of our imminent metaverse future.

Author

Peter Warman Co-Founder and CEO, Newzoo peter@newzoo.com +31 20 66 35 816