Exploring the Metaverse: Beyond the NFT Hype
04 May 2022
Louis Chan, Simeon Woo
With the Covid-19 pandemic hastening the digital transformation of the economy, service providers are rushing to roll out relevant technology solutions that deliver new customer experiences and open up innovative online sales and marketing channels. Many companies have already entered the virtual world of the metaverse and carried out marketing in this new ecosystem in which they can interact with customers and create new experiences and business opportunities.
At a webinar entitled “Exploring the Metaverse: Beyond the NFT Hype”, organised recently by HKTDC Research, industry experts discussed how the advent of the metaverse would help traditional supply chains overcome the limitations of the real world, and how SMEs can carry out marketing and promotion in the metaverse. The webinar was moderated by Simeon Woo, Economist (Global Research), HKTDC Research.
Louis Chan, Principal Economist (Global Research) at HKTDC Research, kicked off the discussion by introducing the metaverse concept and the associated business opportunities. Describing the metaverse as a new ecosystem that brings new experiences (notably immersive 3D internet experiences) to users and creators, Chan went on to list the five essential components of the metaverse.
The first is content. Because the metaverse is a decentralised ecosystem, much of its new content is created by users. The second is hardware and devices such as VR (virtual reality) and AR (augmented reality) glasses, all of which require the support of a robust semiconductor industry. The third is infrastructure, including the internet, servers, cloud-based systems and 5G and 6G wireless networks, which all help towards enhancing the internet experience and the ecosystem development of the metaverse. The fourth is community - the virtual collaboration across platforms, networks and apps that can generate new communities and new exchange methods. The fifth is currency or settlement. New currency systems including those of virtual or encrypted currencies such as Bitcoin can bring new ecosystems and environments to the metaverse.
Non-fungible tokens (NFTs) are a tool to access the metaverse. They give new value to products such as classic films, classic comics, works of art, digital products, and so on. The development of the metaverse therefore also involves new marketplaces. An example cited by Chan was that of an NFT avatar (head shot) worth several million dollars which would no longer be sold via online shopping platforms or at ordinary trading venues. Instead, it would be sold on one of the NFT marketplaces, the largest of which is OpenSea.
In the metaverse, avatars can be created to use in product photos or the production of online films. These avatars are not limited to being used in gaming. They can also be used in other sectors such as entertainment, sports, online shopping, fashion and social media; or serve as brand endorsers and key opinion leaders (KOLs). In social media, avatars can also have followers. Some consumers also like to have their own avatar when shopping online so as to create new shopping experiences.
Chan warned the audience, however, that participation in the metaverse carries with it definite risks. According to data from the Hong Kong Computer Emergency Response Team Co-ordination Centre (HKCERT), when someone is immersed in the virtual world, they are likely to encounter an increasing number of cyberattack threats, including phishing, zombie viruses and junk software. Because of this, businesses entering the metaverse should consider buying virtual insurance to increase their protection.
From Picture to NFT
Roy Kwok, co-founder and Business Director of Vplus Studio Corporation Limited (Vplus), explained the relationship between the metaverse and NFTs. He described the metaverse as a second space outside real space. When people put on VR/AR glasses, they enter another world in which they can interact and share with the community inside and even do some shopping. The metaverse offers different environments and settings such as gaming scenes, animal spaces, and so on.
An NFT is the simplest medium through which the general public can access the metaverse. It can start with a single picture such as a ballgame club logo, a clubhouse membership card or an artist’s painting. The transaction of an NFT picture must be carried out using blockchain because the technology can provide verifiable proof of ownership of the NFT. In fact, a picture is but a method of presentation, whereas an NFT represents the value of the picture. Currently, Solana and Ethereum are the two most popular blockchain platforms. An NFT picture also confers on the buyer a symbol of a community group that possesses different authorisations and rights. Thus, the picture is more than just an avatar and a symbol of the buyer’s attachment to the community. As a member of the community, the buyer can enjoy all the existing and future privileges offered by the community. The buyer can also interact with other members of the community and even participate in decision making.
Kwok explained that NFTs are things which present the real world in a different way. For example, the membership card of various clubhouses can be traded in the blockchain world without any paperwork because there are smart contracts tied to various rules and regulations. Because NFTs are also a superb promotion channel, artists can promote their works creatively through NFTs. Take, for example, the MERGE by Pak collection. The size of the sphere in this artwork varies according to the amount of public participation and enthusiasm of the related auctions. As a result, each piece of the collection is unique.
Combining Virtual and Real
Tony Lau, co-founder and Executive Director of Vplus, explained how companies can carry out marketing and promotion using the metaverse and NFTs. He said that NFTs are one of the components of the metaverse. Through blockchain technology, the ownership of an NFT can be defined and trading can be carried out. The widespread use of internet-of-things (IoT) and 6G has spurred the creation of perfect pictures in the metaverse, allowing players from all over the world to enter the same space to interact with each other, take up challenges or exchange props, information and images. Promotion in the metaverse also requires the support of AI technology to, for example, interact with the public through machine learning and audience targeting.
Lau pointed out that the exchange technology involved in the metaverse can help increase public participation and enhance virtual experiences. A case in point is the virtual sports shoes recently created by a sports brand. Customers who have bought the virtual shoes can determine what type of sports shoes would be a perfect fit based on their walking speed. Moreover, customers accumulate virtual coins based on their walking speed, which can not only be used in the virtual world but are also convertible into cash on transaction platforms. Brands and their customers can generate income through movement, or they can earn income through participation in games or business activities. This type of model gives rise to all-new marketplaces.
As the metaverse expands, some brands are starting to stage new-style metaverse promotion activities. For example, early this year, the mobile giant Samsung bought a plot of land in the metaverse world and asked a game designer to create a virtual flagship store there in the image of one of its physical flagship stores in the US. It then held a virtual conference in which new products were launched and reporters, fans and game players around the world were invited to participate in real-time. After the product launch conference, the participants performed virtual tasks while getting virtual garments and helmets which can be sold in second-hand markets.
Some brands have hosted virtual activities, transferring the participants to an internet interface to browse their official websites. These participants were then invited to buy NFTs and participate in physical activities in the future. In this way, they have built virtual communities which can then be targeted for further marketing and promotion.
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