Metaverse advertising: rationale, options, metrics, AI

“Many brands are barely thinking about advertising in gaming, let alone the metaverse, so preparing for this next-gen brand experience will require a considerable shift in strategy.” Ben Plomion, CMO at Dibbs [1]

The Metaverse, utilising VR, AR, MR, and AI, heralds an immersive, user-centric revolution in advertising.

Why it matters

The Metaverse reshapes advertising, making users central to brand experiences. Brands must navigate this unregulated space, balancing innovative opportunities and real challenges to stay relevant and competitive.

Overview

From this article, you will learn:

1. What advertising opportunities the Metaverse offers.
2. The rationale behind and benefits of Metaverse advertising.
3. Comprehensive overview of advertising options in the Metaverse.
4. Measuring performance and return on investment of Metaverse advertising.
5. Challenges and corresponding solutions to get Metaverse advertising right.
6. AI and the future of Metaverse advertising.

Introduction

Metaverse advertising opportunities

As the world transitions from digital to Metaverse advertising, a promising new marketing era unfolds. This shift mirrors the previous one from traditional media like TV and radio to social media. The Metaverse, a shared, persistent, and open 3D world, allows marketers to immerse their brands within user experiences, thus making each user the protagonist of their own story. This could mean users try on a clothing brand’s latest looks virtually in real-time, providing a more engaging, less intrusive advertising experience [2].

As video content on platforms such as Facebook, YouTube, Instagram, and TikTok becomes commonplace, brands must seek innovative ways to distinguish themselves. The Metaverse offers precisely this, blending physical and digital realities to create a ‘phygital’ solution. It aims to redefine how we interact with the world, making it a desirable platform for advertising. Its potential lies in its constant availability, real-time functionality, fostering of a self-directed creator economy, and above all, a user-centric environment [2].

The Covid-19 pandemic has catalysed a digital shift in consumer behaviour, with increased online work, learning, play, and shopping. This digital dependency has paved the way for Metaverse advertising, as it exploits the blurred line between physical and virtual reality to create immersive experiences. The Metaverse is not merely a 3D version of the internet. Instead, it’s a revolution in how people experience their second life in augmented, mixed, and entirely virtual realities [3].

Metaverse advertising, though nascent, has caught the attention of global brands looking to capitalise on its significant potential. The Metaverse promises advertisers exclusive access to premium customers, primarily interested in novelty, utilising technologies such as Virtual Reality (VR), Augmented Reality (AR), Mixed Reality (MR), and artificial intelligence (AI) in digital marketing strategies. Therefore, advertisers worldwide must adapt to these new virtual realms of creative possibilities.

Additionally, the Metaverse is gaining recognition as an affordable and potentially rewarding platform for advertising, with predictions indicating it could become a multi-trillion-dollar industry [4]. Moreover, its relatively low costs for campaign launches and billboard rentals allow brands to reach new audiences.

Further, the Metaverse’s advertising potential is unique, boasting a wider reach than traditional marketing strategies. This is especially relevant for brands targeting millennials and Gen Z audiences, largely familiar with digital experiences, particularly gaming. The global gaming population is substantial, with roughly three million active gamers worldwide and a high percentage of American adults and children among these [5].

Another significant aspect of the Metaverse’s appeal to advertisers lies in the rise of cryptocurrency and non-fungible tokens (NFTs). With these digital assets becoming mainstream, the Metaverse is poised for adoption and growth. Indeed, it has become a favoured destination for NFTs, as illustrated by auction house Sotheby’s establishment of a virtual gallery in Decentraland [6].

Moreover, the Metaverse allows for advertising innovations unbound by real-world limitations. A prime example is Gucci’s successful Gucci Garden campaign in Roblox, which allowed users to explore a virtual environment while viewing the brand’s digital fashion collection. This resulted in the remarkable achievement of selling a virtual bag for more than its real-life counterpart [7].

So these possibilities raise the question – why should brands advertise in the Metaverse?

The rationale for and benefits of Metaverse advertising

The Metaverse presents a unique opportunity for brands to revolutionise their advertising strategies across three key aspects [5].

• It offers a first-mover advantage for early adopters, allowing them to experiment with smaller, engaging advertisements, such as in-game banners or AR experiences [5].
• The Metaverse is also evolving into an integral part of the cross-channel mix, mirroring the growth trajectory of platforms like Facebook and Instagram. Hence, brands must understand this shift and adapt their strategies accordingly, maintaining a presence even if initially minimal. This can help capture long-term audience attention and establish brand relevance over time.

“Because it’s another channel, it can be treated the same way as other digital channels. For example, we could use advertising in the metaverse to either build brand awareness or even drive conversions.” Janek Gonzalez, Head of Growth at Clearcode [8]

• Perhaps the most enticing aspect of advertising in the Metaverse is its endless creative possibilities. Unlike traditional advertising mediums, the Metaverse is a blank canvas, free from physical limitations. This allows brands to devise innovative campaigns and engage consumers in ways not currently possible. The introduction of haptic technology, for example, can create multi-sensory simulations, making the user experience immersive and interactive and potentially mitigating the trend towards ad avoidance.

Brands that understand these motivations can benefit across four main categories: unlimited turnout, boundless infrastructure possibilities, high-volume monetisation, and personalisation [5].

1. The Metaverse’s infinite capacity allows for a potentially unlimited audience, a feat not yet achievable through existing technology. This offers the capability to simultaneously gather and target millions of people, a revolutionary and advantageous prospect for brands seeking mass reach.
2. Furthermore, the Metaverse’s boundless infrastructure possibilities break the constraints of the physical world, such as gravity, space, and budget, offering a limitless scope for creativity. Here, brands can conceive and construct anything they dream of, providing an unprecedented platform for innovative advertising strategies.
3. Regarding monetisation, the Metaverse is unlocking opportunities through blockchain and smart contracts. Artists, influencers, and content creators can create and sell unique digital assets like NFTs. This enables them to monetise their work and foster deeper connections with their followers by offering exclusive content.
4. Lastly, the Metaverse empowers personalisation, a critical trend in modern marketing. Through VR, AR, AI, brands can design tailored experiences, fostering deeper relationships. This is particularly salient for engaging younger generations who seek personalised interaction rather than being treated as a faceless part of the crowd.

“It also means building the communities for the next generations, like Gen Z, Alpha — the ones who are actually using those kinds of platforms and understand the essence of digitalization, globalization, and digital identity.” Ksenia Stark — co-founder and COO at MD X [8]

In conclusion, the Metaverse is an exciting frontier for advertising, offering unprecedented opportunities for reach, creativity, monetisation, and personalisation. Therefore, brands must consider strategies to tap into this new digital marketing era.

We learned why advertising in the Metaverse is advisable for brands. We can now focus on how it can be done.

Advertising options in the Metaverse

Overview

The Metaverse presents an unexplored yet potent platform for advertising that necessitates a creative, user-centric approach. Traditional advertising strategies are insufficient in this dynamic, multi-dimensional environment, calling for methods that resonate with the context and the immersive gaming experiences the users interact with [9]. For instance, in the Air Jordan partnership with Fortnite, players competed in tournaments to win the XI Cool Gray Sneakers, watched branded videos, and visited the Air Jordon Museum, demonstrating the potential of immersive advertising in gaming [10].

Brands should recognise the Metaverse as more than a digital platform. It is a social sphere where consumers interact [9]. The Metaverse offers brands more freedom to reach their audience and presents a novel avenue for innovative marketing strategies. Critically, it also necessitates greater creativity, with brands required to consider immersive, engaging formats in their communication. The shift to a Metaverse-based society challenges traditional advertising norms, where interruption has been the modus operandi. However, as companies like Coca-Cola, Samsung, and Volkswagen exemplify, a successful integration strategy involves in-game advertising, enhancing user engagement without disrupting gameplay [3]. Thus, advertising should aim to enhance social interactions rather than disrupt them.

Intelligent strategies are required, especially considering that many Metaverse spaces are decentralised and already have a user payment model. Rather than relying on standard billboards and banners, brands could focus on structuring and designing virtual communities where consumers want to spend time. This could potentially enhance brand value and adapt to the shifting consumer behaviours and purchase decisions, which view brands in the Metaverse as highly innovative [9].

According to a survey by Obsess in 2022, a significant percentage of consumers have purchased in a virtual store or through a video game. In particular, Gen Z consumers comprise approximately 60% of Metaverse users and have shown a propensity for digital commerce within the space. They are more likely to spend time in the virtual world, participate in various Metaverse activities, and engage in digital realities [11]. Therefore, brands should aim to connect with the shifting behaviours of consumers, especially Gen Z, and determine the balance between native advertising and in-game experiences .

Altogether, brands venturing into the Metaverse should clearly define their purpose, understand their target audience and the value they can add, and consider potential collaborations with already established platforms. Ethical considerations are also paramount due to the unregulated nature of the Metaverse. The key is to view the Metaverse not just as a space to sell products or services but as a platform to create a community and enhance the overall consumer experience [9] .

Ultimately, the expectation is for a societal shift towards digital immersion in the coming decade, with devices such as glasses potentially replacing smartphones. This urges forward-thinking brands to adapt and participate in constructing this new reality, thereby unlocking unprecedented marketing potential [3].

With this understanding, we can now explore options for Metaverse advertising.

Metaverse advertising formats and options

This digitally conceived world offers vast opportunities, including new unique advert formats with integrated tracking for intelligent investments, live shopping, virtual stores, product launches, content production, live events, and the integration of NFTs [3]. Despite being nascent, trends indicate that established real-world advertising strategies also have potential in the Metaverse [5].

Firstly, in-Metaverse advertising takes a cue from in-game advertising, with virtual billboards commonplace on platforms such as Roblox, Fortnite, and Decentraland. Though seemingly rudimentary, these billboards represent a relatively unexplored channel, with brands like Coca-Cola, Samsung, Balenciaga, and Adidas already present [5].

For example, Gucci launched a themed world in Roblox [12], a prominent video game platform. Players can engage with this world by purchasing in-game content with real money, including digitally represented avatars [13]. These avatars serve not just as users’ virtual identities but crucially as potential advertising tools for brands to assert their presence in the Metaverse. Gucci, a pioneering brand in this realm, has introduced a digital collection of its signature clothing on Roblox. This move reveals an emergent strategy among brands to replicate and sell their real-world products in the virtual sphere, thereby capitalising on the marketing possibilities of the Metaverse. It further underscores the importance of selecting the right gaming platform to achieve optimal visibility and reach.

The second trend is the burgeoning potential of virtual influencers for marketing. Brands are pivoting towards these virtual personas, which, being more manageable and cost-efficient, can offer advantages over their human counterparts. For example, high-profile campaigns with virtual influencers like Lil Miquela, Shudu, and Imma demonstrate this shift [4]. Still, human influencers are predicted to retain relevance in the Metaverse [14].

Virtual influencer Lil Miquela, created by Los Angeles start-up Brud, symbolises the impact of virtual reality in today’s world. Debuting in 2016, Miquela has amassed a three million-strong Instagram following, working with high-profile brands like Prada and Calvin Klein, and being recognised by TIME Magazine as a key internet influencer. Brud’s Chief Content Officer, Nicole de Ayora, attributes Miquela’s success to her transformative, ever-evolving story, resonating with audiences, especially Gen Z, for its candid exploration of life, love, fame, and self-discovery. Miquela is notably vocal about significant issues, including LGBTQiA+ rights and Black Lives Matter, reflecting the contemporary social media audience’s craving for authenticity and social consciousness. Brud further enhances Miquela’s relatability by drawing on its team members’ diverse industry experiences and perspectives [15]. This makes virtual influencers such as Lil Miquela the perfect vehicle for Metaverse advertising.

Thirdly, Metaverse events offer significant advertising potential, with millions of users being drawn to virtual concerts and events on platforms like Fortnite and Roblox. These events present opportunities for overt advertising and subtle product placements [5].

A notable example is Fortnite’s collaboration with Nike to promote its ‘Jordan sneakers [10] to the Gen Z audience and teaming up with renowned rapper Travis Scott for a virtual concert, reaching over 12 million individuals simultaneously [16]. The latter proved to be an especially effective and relevant example of entertaining advertising that kept users interested and engaged millions across the five performances spread over two days [17]. The early adoption of the Metaverse trend by video game companies such as Epic Games and Roblox indicates its potential. Specifically, Nike’s creation of ‘Nike land’ in partnership with Roblox underlines a growing trend of companies seeking involvement in the Metaverse, transforming the advertising landscape [3].

Next, the rise of the direct-to-avatar (D2A) economy reflects the growth of Metaverse commerce. Brands sell digital goods, often NFTs, to enhance users’ avatars, tapping into a market projected to surpass $74.4 billion in 2025 [18]. In addition, brands like Nike, Coca-Cola, Gucci, Tommy Hilfiger, Samsung, Wendy’s, and McDonald’s have already established a presence in this space [5].

Nike’s success with its Roblox-based virtual store, Nikeland, offers insights into effective D2A advertising. Launched with the help of Nike’s acquired Metaverse partner, RTKFT, Nikeland saw 7 million visitors in its first two months and 21 million to date. This venture now contributes 26% of Nike’s total brand revenue [19]. However, with the Metaverse’s rapidly evolving nature and user base, sustainable growth depends on continuously introducing new products. Furthermore, Metaverse experiences help brands build affinity with Generation Z, potentially influencing their real-world purchasing decisions. This fusion of gaming and retail principles is shaping the future of e-commerce, but brands must commit to long-term investment in Metaverse advertising for lasting success.?

“Evergreen experiences on Roblox – such as Gucci Town, Vans World and Nikeland – keep players coming back because they have created engaging social spaces with ongoing content updates where fans can discover new products in authentic and interactive ways.” Winnie Burke, Head of Fashion and Beauty Partnerships at Roblox [19]

Advergames are an innovative advertising method involving custom-designed games to promote products or services. They are gaining prominence amongst brands. Examples include Tourism New Zealand’s 3D adventure game, PLAY NZ, developed by TBWA\Sydney, allowing players to virtually explore New Zealand’s renowned attractions, and Balenciaga’s “Afterworld: The Age of Tomorrow”, which presents its fall collection in a virtual store [3]. These advergames indicate brands’ increasing embrace of immersive, interactive advertising.

Louis Vuitton, meanwhile, launched “Louis the Game”, which merges heritage, innovation, and NFT art. The game involves a global adventure to collect candles, each revealing intriguing stories about Louis Vuitton and his Maison [20]. It achieved over two million downloads since its August 2021 launch, marking the brand’s 200th anniversary. Players guide a virtual avatar, Vivienne, to find a sixteen-page manuscript and 200 candles symbolising the brand’s age. The game features raffles and exclusive NFT postcards that players can collect. The latest update introduced two additional locations and challenges and ten new NFTs designed in collaboration with renowned NFT artists Wenew Labs, Beeple, and Mike Winkelmann [21]. Louis Vuitton’s successful incorporation of NFTs into a gamified experience seeks to attract a younger, tech-savvy audience to its high fashion offerings and demonstrates innovation in engaging Metaverse advertising.

Furthermore, billboard advertising in the Metaverse offers an innovative approach for businesses to reach their potential customers. In addition, billboards within these digital environments present a unique opportunity for interactive and immersive advertising. A vital part of success is the strategic placement of billboards and continuous ad updating in response to evolving trends within these digital spaces. The Metaverse is not static. Therefore, billboard advertising must be dynamic and interactive to achieve effectiveness. Furthermore, Metaverse billboards offer benefits such as targeting specific demographics, creating interactive ads, and tracking engagement affordably [22].

There are several successful examples of Metaverse billboard campaigns. Notable among these are the campaigns for the Oculus Rift head-mounted display and the promotion of the film “Ready Player One”. These instances underline the effectiveness of Metaverse billboards in marketing products and boosting brand awareness in three-dimensional, computer-generated environments [22]. Therefore, businesses are tapping into this advertising avenue due to its immersive engagement and broad reach.

However, it is important to critically consider the limited and unique accessibility of the Metaverse, which might restrict the reach of the advertisements to a specific tech-savvy audience. Plus, the novelty of this platform could also mean a lack of established best practices, thereby increasing the risks involved in Metaverse advertising. Despite these potential challenges, billboard advertising in the Metaverse can be a powerful tool for businesses with the right strategy.

The Metaverse also introduces a new frontier for product advertising, though this concept is still in its infancy and faces many challenges. Despite similarities with advertising in video games, Metaverse advertising requires consumers to see the Metaverse as a distinct entity. While current forms of Metaverse advertising are not revolutionary yet, they include product placements, in-game ads, and curated events and experiences. However, constraints exist due to the lack of third-party platforms that support product feed integration into the Metaverse [23].

However, the UK start-up KadVR is addressing this gap, allowing brands to reach Metaverse audiences through video ads, considered more immersive. KadVR also offers unique metrics like impressions, content viewed, duration, and viewing intensity. Notably, this technology opens revenue streams for institutions such as museums by facilitating limited-run exhibitions virtually, funded by Metaverse product advertising [23].

“Eventually, the plan will be to work with product data feeds and product feed management software to offer products directly to users. They will be able to engage with products they see and purchase them without leaving their game or app. It will be a seamless process.” Sean Tracey, Co-Founder and CTO, KadVR [23]

Like social commerce in apps like Instagram and Pinterest, the ultimate goal is direct purchasing within the Metaverse, overcoming payment obstacles. This could be feasible within a few years, transforming multi-vendor e-commerce in the Metaverse. Yet, 3D scanning, essential for virtual product interaction, remains a hurdle due to its high costs. While Snapchat’s augmented reality filters provide a solution for brands, more advanced 3D scanning will elevate the Metaverse shopping experience [23].

Brands not directly selling products can still leverage Metaverse marketing. McDonald’s, for instance, envisions a virtual restaurant where friends can interact while ordering food to their homes [24]. Hence, the Metaverse, seen as the next big marketing and customer experience platform, can potentially revolutionise e-commerce, eliminating traditional barriers, enhancing sustainability and transforming product advertising.

The Metaverse can also transform traditional ambient advertising into a more immersive and interactive medium. As the next frontier for advertisers aiming to build a stronger connection with their audience, it promises new opportunities for scientists and practitioners to understand consumer behaviour better and optimise their offerings.

For instance, a pedestrian crossing utilised as a McDonald’s advertisement could be transformed into an interactive experience with music and movement, possibly leading to a virtual McDonald’s restaurant. This can turn mundane city elements into engaging, immersive virtual advertisements. Underground spaces, often overlooked in real-world advertising, also have potential as advertising platforms in the Metaverse, providing even more opportunities for consumer engagement [25].

Moving further on the complexity ladder, the ‘owned Metaverse’ concept provides a radical shift in advertising strategy, moving away from traditional approaches towards immersive, interactive digital experiences. This novel approach leverages the rising popularity and engagement with platforms like TikTok, Fortnite and Roblox. It employs new technologies like AI and AR to target a broad spectrum of consumers [3].

Numerous applications of this ‘owned Metaverse’ strategy are emerging. Brands, for instance, could establish their Metaverses, inviting consumers to virtually try on new clothing collections, offering a more engaging experience than conventional online ads. This trend also extends to using ‘digital humans’ – 3D AI-powered humanoid bots – as influencers, which could revolutionise how adverts are launched. Furthermore, brands could weave full-scale stories around their products, allowing users to interact and purchase within VR [3]. Besides being an excellent advertising channel, such owned Metaverses could be the ideal ‘home’ for virtual influencers. However, despite its potential, the ‘owned Metaverse’ strategy still has to prove itself in practice, and it will be interesting to see how this transformative concept evolves in the coming years.

Finally, VR, AR, MR and Extended Reality (XR) applications can facilitate immersive Metaverse advertising in various industries. For example, Thomas Cook, an established travel company, leveraged immersive VR in a campaign titled “Try Before You Fly”. This allowed customers to explore potential holiday destinations using the Samsung Gear VR virtually. The successful impact of this approach was evidenced by a significant 190% uplift in bookings for New York excursions after customers experienced the 5-minute virtual version of the holiday [3].

AR, which overlays digital information onto physical surroundings, presents an innovative method for interactive advertising. The emerging concept of a ‘real-world Metaverse’ incorporates AR into everyday life rather than creating a completely disconnected digital reality. Despite the hype around the Metaverse concept, the actual adoption appears to be less about total escapism and more about enhancing real-world experiences. This new reality presents marketers with an opportunity to engage consumers in a novel and more immersive way, as demonstrated by the successful campaign for Bon Viv’s Spiked Seltzer. The campaign combined traditional advertising methods with AR, creating a seamless and interactive consumer journey. Investing in AR now, rather than treating it as an experiment, could provide immediate ROI and prepare consumers for the real-world Metaverse experience they are increasingly expecting [26].

“Our devices – phones today, but headsets tomorrow – are going to have the contextual understanding of the world that you’re evolving in and can start bringing you information, new types of content, getting you out of your phone, and really into the world in a whole new context.” Kjell Bronder, Senior Director of Product Management, Augmented Reality & Geodata Platform at Niantic ?[26]

MR and XR represent advancements on AR. MR facilitates interaction between real and virtual components in a single environment. At the same time, XR merges physical and virtual worlds to exploit the full capabilities of 5G technology for immersive on-the-go experiences [3].

Incorporating MR into marketing strategies brings the potential for driving immersive and holistic brand advertising. Leveraging them for Metaverse advertising can facilitate interaction with those not physically present and boost trade in all contexts. Crucial to this endeavour, however, is balancing creativity with a strong strategy and sustained investment that can yield significant returns [27].

Critical appraisal of these trends indicates great potential but also implies a need for cautious evaluation. The Metaverse is relatively uncharted territory, and the success of these strategies is contingent on how the space evolves. Brands must be mindful of their audience’s changing preferences and behaviours in this new environment and adjust their strategy accordingly. This highlights the need to measure performance, tailor execution and demonstrate results.

Performance and return on investment (ROI) measurement

Metaverse marketing ROI controversies

The value of Metaverse marketing is a debated topic. On the one extreme, some argue that despite the hype around Metaverse marketing, its real-world ROI appears underwhelming at best. Although, prominent brands like McDonald’s and Gucci have promoted their participation in blockchain-based Metaverses, such as Decentraland and The Sandbox, despite seemingly modest user engagement. For example, as of March 2022, Decentraland and The Sandbox reported just 978 and 1,180 active daily users, respectively. While ambitious estimates suggest the Metaverse market could be worth trillions by 2030, it’s noteworthy that this speculation hinges on the Metaverse replacing the internet within a decade, a proposition that merits scepticism. Thus, while the Metaverse has low entry barriers and offers novel marketing opportunities, some question its effectiveness and future potential [28]. Indeed, this unproven ROI is what half of senior marketers cite as the biggest obstacle to jumping into the Metaverse [29].

“In terms of adding AdTech into the Metaverse, it’s a technical issue. It is not standardized yet and needs to be figured out. I would assume that it will happen soon due to the popularity of the metaverse. Also, as long as we will have access to the outside world, i.e. communicating with the AdTech platforms via API, that shouldn’t be a problem.” Grzegorz ?ukaszewicz, Head of Engineering at Clearcode [8]

Conversely, others believe the exact opposite. Some analysts even believe that it “might be the biggest ROI opportunity for marketers” [30]. Although still in its nascent stages, it is swiftly gaining traction, with brands utilising it for increased sales, engagement, and awareness. This digital realm hosts many virtual experiences and assets, evolving from the digital transformation spurred by the pandemic. NASCAR, for instance, has offered an interactive experience on Roblox, inserting a digital car in the game and selling apparel for player customisation [31]. Additionally, Hyundai launched its Metaverse space to showcase its future mobility lifestyles, providing a sneak peek at forthcoming innovations [32]. Hence, the Metaverse allows brands to personalise experiences, connect with audiences, and foster brand presence in the digital era. All of these hold the potential to generate positive ROI on Metaverse advertising. But how can brands actually measure it?

How to measure Metaverse advertising performance

As a starting point, it is helpful to identify key performance indicators (KPIs) to track. These can encompass sales figures, conversion rates, lead generation, click-through rates (CTR), and customer satisfaction [22]. Sales and conversion rates reveal the effectiveness of Metaverse brand ambassadors, while lead generation provides an insight into their reach. In addition, CTRs denote the ability to incite action in potential customers. Lastly, tracking customer satisfaction gauges overall customer approval, measured via surveys or reviews. Finally, the importance of data analytics in assessing the performance and effectiveness of Metaverse marketing strategies must be an important consideration from the start. However, even more importantly, brands must consider whether they can reach their target audience through a VR platform.

“Brands need to begin by understanding their target audience. Understanding whether their target audience includes early adopters of Metaverse platforms is key to understanding whether the brands should be investing in marketing on those channels.” Conrad Tallariti, regional vice president of sales at DoubleVerify [33]

Although these generic marketing metrics may be helpful, it can also be argued that the Metaverse requires a new set of measurements. Platforms with more experience in the field introduce new technologies to enhance businesses’ abilities to prove their Metaverse marketing ROI. Recognising the importance of data-driven insights in this space, advanced analytics and measurement tools allow users to track campaign performance, identify optimisation areas, and make informed decisions that drive growth [34].

An adequate measurement and analytics module would allow users to access detailed metrics about their Metaverse experiences. These can include information on user engagement, performance metrics, and usage statistics. Additional unique insights on visitor numbers, sessions, dwell time, visitor traffic by hour, and user sign-up types can also help enhance and optimise virtual advertising campaigns. Additionally, offering a granular view of user movement within the environment and showing the most visited areas of an experience map are also valuable additions [34].

“Brands that figure out how they can creatively play in the Metaverse will build strong muscle memory in their marketers. The next time a new experiential layer opens up, whether I fly people to Mars on a spaceship or we create a virtual environment inside a spaceship, it does not matter because you will learn that no matter what we do, these are the ways to connect back to ROI and work with creative technologies to bring across the experience quite well.” Stan Lim, chief creative officer of Singapore Creative Group at Dentsu International [33]

Such functionality would represent a substantial leap in analytics capabilities, addressing the pressing need for quantifiable ROI in Metaverse marketing and advertising. By enabling businesses to optimise their Metaverse experiences based on real-time data and intuitive visualisation, brands can create more engaging, satisfying, and profitable virtual experiences.

But despite such advancements, challenges remain, which we will discuss in the next section.?

Metaverse advertising challenges

“I think that there are two main challenges that we need to be aware of. One would be mental, the second one would be technical. There is a level of skepticism for brands to participate in creating this new channel and this is something that we need to overcome. We need to somehow build the audiences, make people keen to join and to participate in those environments. The second challenge will be rather technical: how can we connect the existing part of the programmatic ecosystem into this virtual world?” Piotr Banaszczyk, CEO at Clearcode [8]

Advertising within the Metaverse presents complex challenges, with critical issues revolving around data privacy, regulatory concerns, adoption rates, and difficulties in measuring performance [5]:

• Ensuring user data privacy is crucial. Amid rising concerns about data security, it is incumbent upon brands to ensure their digital footprints in the Metaverse remain secure and trustworthy. Technology giants face increased scrutiny over their moderating and regulatory practices, so the Metaverse’s inherently decentralised nature poses further complexities.
• Although self-regulation is crucial, potential issues might persist, warranting novel approaches such as smart contracts to moderate inappropriate content or misinformation.
• The adoption rates of interfaces such as VR headsets and VR technology remain low on the consumer front, hindered by issues like subpar user experience and sluggish reception of virtual reality content. Presently, enthusiasm for the Metaverse and the associated intense gaming and social media activities necessary for early adoption remain lukewarm at best.

“Advertising in the Metaverse is a new environment but there’s not a lot of audiences. We need to build communities.” Alexander Aleksashev-Arno, co-founder and CEO of MD X [8]

• Furthermore, the Metaverse introduces new challenges in evaluating advertising effectiveness. Despite what we discussed in the previous section, current metrics fail to provide a comprehensive overview of advertising returns, making it difficult for brands to justify their expenditure. As marketing metrics evolve, brands may grapple with defining and assessing their objectives and key results.

However, beyond these more obvious challenges, there are additional critical considerations for Metaverse advertising, which include:

• Audience understanding: The Metaverse represents a new form of media with unique user behaviour and consumption patterns. Brands can find it difficult to understand their audience within this realm fully. Therefore, research and data gathering is crucial. Brands should work with Metaverse platforms to access relevant user data, behaviour patterns, and preferences. Surveys and interactive experiences could be used to understand users further.
• Content creation: The Metaverse requires different formats - VR, AR, 3D, and other immersive content. Many brands lack experience and capability in these areas. Hence, they should either upskill their existing teams or collaborate with agencies and freelancers specialized in these formats. Over time, they can also develop in-house capabilities.
• Brand integrity: The open and unregulated nature of the Metaverse could present brand safety issues. Ads might appear in undesirable environments or contexts. Thus, brands should work closely with platforms to establish clear policies and controls over ad placements, ensuring they align with the brand’s image and values.
• Platform fragmentation: There may be multiple Metaverse platforms, each with its own rules, user demographics, and content types, making it challenging for brands to maintain consistency. Therefore, brands should create a flexible strategy to adapt to different platforms while maintaining core brand messaging and identity. They should also carefully choose platforms that align with their target demographic.
• High entry costs: Creating immersive experiences and advertising in the Metaverse can be costly, especially for smaller brands. So, companies can start by learning and testing on a smaller scale before fully investing. They could also collaborate with other brands or sponsor deals to share costs.
• Tech compatibility: Ensuring that advertising content is accessible to all users, regardless of their tech devices or internet capabilities, could be challenging. Hence, marketers should design their content to be as universally accessible as possible, potentially offering lower-tech versions of experiences for users with less advanced hardware.
• Keeping up with evolution: The Metaverse is a rapidly evolving environment with new features, technologies, and trends emerging regularly. Thus, brands should remain agile and open to change, constantly learning and adapting their strategies. Staying up-to-date with industry trends and being willing to experiment with new approaches will be crucial to success.

In conclusion, the Metaverse offers a promising yet challenging frontier for marketing and advertising, demanding innovative solutions to address these critical issues.

Now that we understand the potential, options, and challenges of Metaverse advertising, we can formulate some recommendations.

Best practices and recommendations for Metaverse advertising

The Metaverse, valued at an estimated $1.5 trillion by 2029, up from $47 billion in 2020 [35], offers a significant advertising opportunity for businesses looking to connect with audiences in novel ways. According to a McKinsey & Company report, 59% of consumers are enthusiastic about transitioning daily activities to the Metaverse, while 57% of Metaverse-aware firms have already incorporated the concept, signalling substantial investment growth and confidence in the Metaverse’s potential [36].

However, as the Metaverse evolves, advertisers must approach it responsibly and inclusively. Three key areas of focus include accessibility, user experience, and privacy [37]:

• Learning from previous digital advertising platforms, the Metaverse should foster inclusivity and accessibility for all users. There is concern that without harmonious integration, the Metaverse could end up as a series of isolated mini-VR-worlds, each with its own advertising restrictions, creating an experience reminiscent of the walled gardens of earlier social media platforms.
• The user experience in the Metaverse will also play a pivotal role. Advertising should be immersive and complementary to the user experience, avoiding disruptive practices. The advent of the Metaverse is expected to mirror the shift from traditional to digital advertising, requiring a departure from existing 2D advertising methods. Cross-platform, cross-fandom and cross-entertainment campaigns within the Metaverse could offer innovative ways for brands to engage with audiences, presenting unique opportunities for advertising strategies.
• However, the Metaverse also presents challenges in data privacy regulation. Given the vast amount of user data available, it’s imperative to create transparent, user-first models for data collection that are ethical and legal. The recent issues surrounding internet privacy suggest caution. Data availability does not equate to an ethical imperative to collect it. Establishing standardised tracking that respects personal privacy and avoids creating walled gardens will be crucial, particularly concerning young people’s data.

In summary, successfully implementing advertising within the Metaverse will depend on balancing accessibility, user experience, and privacy regulation.

“We are facing an incredibly exciting yet daunting future, and we should all feel a collective sense of responsibility to ensure that what we are creating is a future that we not only want to be a part of, but that benefits and lays the groundwork for future generations to come.” Itamar Benedy, Founder and Chief Executive Officer, Anzu [37]

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AI and the future of Metaverse advertising

Artificial Intelligence (AI), a domain of intensive global research, has made significant strides in various fields, including marketing and advertising. AI, comprising complex software and hardware systems, replicates human behaviour in logical reasoning, movement, speech, and perception tasks. This allows machines to mimic human cognition, paving the way for profound transformations in marketing-related fields [38].

AI has also enhanced customer experiences in the realm of marketing. Using consumer data, AI assists in forecasting customer behaviour, bridging the gap between data science and practical execution. This involves handling and analysing colossal data quantities, a task hitherto impractical [39]. The Metaverse will increase the volume and possibly the quality of available user data. Coupled with the responsible use of AI, this can help marketers achieve unprecedented advertising customisation and precise targeting.

Presently, AI’s ubiquity necessitates a clear definition. Intelligence is perceived as the ability to respond aptly and predictably to one’s environment, and AI equips machines with this capacity. Consequently, AI has been, is, and will continue to be integral to various industries. Specifically, marketers leveraging AI-enabled software for Metaverse advertising can optimise operations, reduce costs, accelerate delivery times, and boost creativity. Moreover, rapid technological advancement is likely to support the continued prosperity of organisations embracing AI solutions for Metaverse advertising [40].

Practical applications of AI span speech, text, image recognition, and decision-making. Speech recognition software like Siri can function as a virtual assistant. Facial recognition aids in securing financial transactions. Educational tools like IBM Elements assist students and teachers. In addition, industrial automation, such as Amazon’s Kiva system, demonstrates the prowess of robotics [41]. Consequently, Metaverse marketing can exploit AI subdomains for enhanced decision-making, robotics, and recognition technologies to dynamically integrate native Metaverse advertising that enhances rather than disrupts virtual experiences.

Notably, technology giants like Amazon, Google, Apple, and Microsoft are harnessing AI’s power across various use cases. Integrating AI technologies, including AR, VR, automatic content generation, and speech recognition, will revolutionise digital and virtual marketing platforms. These advancements would automate tasks, enrich user experiences, and amplify customer satisfaction, potentially enhancing Metaverse advertising effectiveness [38].

AI’s profound potential to revolutionise Metaverse advertising underpins its critical importance. Its ability to enhance productivity, creativity and customer experience, coupled with its transformative potential, signifies its indispensability in the future landscape of virtual advertising.

Conclusion

Enabled by the blend of physical and digital realities, the Metaverse offers an exciting frontier for marketers, especially after a digital shift catalysed by the global Covid-19 pandemic. This uncharted domain, enriched by VR, AR, MR, and AI technologies, along with trends in cryptocurrency and NFTs, allows for immersive and personalised campaigns. It also calls for a shift away from interruptive advertising, urging brands to create strategies that engage users and respect the social and decentralised nature of the platform.

Navigating this terrain requires brands to understand their purpose and audience, explore collaborations, and acknowledge ethical considerations. While the Metaverse can constrain a brand’s reach to a more technologically adept demographic, it provides a range of advertising formats, including virtual billboards, digital product representations, and virtual influencers.

Incorporating AdTech into the Metaverse is an ongoing challenge, highlighting the importance of developing reliable measurement methods and embracing data-driven insights. Moreover, marketers must tackle various issues, such as data security and content accessibility, to remain relevant in this evolving landscape.

While the Metaverse presents many challenges, it provides fertile ground for innovation, heralding a shift towards immersive, user-centric experiences. Brands must approach this potential responsibly, prioritising accessibility, user experience, and privacy. In addition, the capacity of AI to analyse vast consumer data offers an opportunity to enhance customer experiences and refine advertising targeting, thus contributing to less disruptive Metaverse advertising experiences.

In conclusion, the shift to Metaverse advertising necessitates reimagining traditional marketing paradigms. Filled with potential yet fraught with challenges, the Metaverse calls for innovative, immersive, and responsible marketing practices. Brands must respect the unique dynamics of this space while seeking to maximise its remarkable potential.

Summary

• The transition from digital to Metaverse advertising introduces a new era of marketing, turning each user into the protagonist of their own brand experience.
• The Metaverse, blending physical and digital realities, is becoming an appealing platform due to its constant availability, real-time functionality, and user-centric environment.
• The Covid-19 pandemic has catalysed a digital shift in consumer behaviour, making immersive Metaverse advertising increasingly relevant.
• Advertisers use VR, AR, MR, and AI technologies to create unique campaigns targeting a digital-native audience, while the rise of cryptocurrency and NFTs further bolsters the Metaverse’s appeal.
• The Metaverse represents a significant opportunity for advertising that calls for creative, immersive strategies that engage users, rather than interrupt their experience.
• Brands must respect the Metaverse’s social and decentralised nature, creating virtual communities that consumers choose to engage with.
• Gen Z, comprising about 60% of Metaverse users, are particularly engaged with digital commerce.
• Advertising formats in the Metaverse include virtual billboards, digital product representations, and virtual influencers, while events also provide significant advertising potential.
• To succeed, brands must understand their purpose and target audience, explore collaborations, and consider ethical issues due to the Metaverse’s unregulated nature.
• With the projected societal shift towards digital immersion, brands have an opportunity to construct this new reality and unlock unprecedented marketing potential.
• Advergames and Metaverse billboards exemplify innovative advertising strategies, with successful examples such as Louis Vuitton’s “Louis the Game”. Yet, their unique Metaverse platform may limit reach to a tech-savvy audience.
• Metaverse product advertising, facilitated by start-ups like KadVR, aims for direct purchasing, signalling a potential e-commerce revolution, although challenges, like high 3D scanning costs, remain.
• The ‘owned Metaverse’ concept enables brands to create immersive, interactive narratives but requires validation.
• VR, AR, MR and XR applications present opportunities for immersive advertising, but these trends call for measured execution, aligning with audience preferences and proving results.
• The effectiveness and return on investment (ROI) of Metaverse marketing remain debated. While sceptics cite lacklustre user engagement and the nascent state of the field, supporters highlight its potential for brand interaction and awareness.
• Incorporating AdTech into the Metaverse is a technical issue to be solved. Yet, developing measurement methods is critical, potentially including key performance indicators like sales figures, conversion rates, and customer satisfaction.
• A move towards data-driven insights via advanced analytics tools could greatly enhance Metaverse marketing strategies, allowing campaign optimisation and more informed decision-making. Despite these possibilities, several challenges persist in this evolving marketing landscape.
• Brands must ensure data security, employ smart contracts for self-regulation, increase adoption rates for VR technology, and develop more comprehensive advertising metrics.
• Marketers must conduct extensive research to understand user behaviour, develop skills for creating immersive content, maintain brand safety, adapt to different platforms, manage high costs, ensure content accessibility, and stay updated with the evolving Metaverse.
• Metaverse advertising offers considerable potential, but this must be approached responsibly and inclusively. Accessibility, user experience, and privacy are key focus areas.
• AI’s ability to analyse vast quantities of consumer data can enhance customer experience and aid precise targeting in advertising.
• Brands can leverage current applications of AI, such as speech and image recognition, and decision-making for more integrated and less disruptive advertising experiences within the Metaverse.?

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