Unlocking the potential of the Metaverse for branding
Martin Petkov
Writing & Marketing @ Cyfrin: World-class web3 education, tools, and security audits | "Metaverse AI" trilogy author
“The days of marching in line with brands’ manicured ideals and influence are on their way out. The future of branding in the Metaverse is about getting to know your audience on a psychological level, meeting them where they are at, and inviting them to build community together - using brands as a conduit.” [1]
Branding in the Metaverse presents opportunities and challenges for consumer engagement that can revolutionise digital marketing.
Why it matters
The Metaverse represents a paradigm shift in digital marketing, providing brands with unprecedented opportunities to engage and connect with consumers in a new virtual reality. Navigating the Metaverse’s complex landscape of decentralisation, NFTs, and tokenisation will be essential for brands to unlock its full potential and maintain relevance.
Overview
From this article, you will learn:
Introduction
The Metaverse presents brands with unprecedented opportunities and challenges in marketing, consumer engagement, and technological innovation. This article will explore branding in the Metaverse, focusing on the driving forces behind successful brand engagement. We will also address the role of decentralisation, the significance of non-fungible tokens (NFTs) and tokenisation, and the importance of storytelling and experimentation.
To provide a comprehensive understanding of branding strategies, we will delve into the motivations and perceptions of brands entering the Metaverse. We will aim to identify the most crucial factors influencing long-term brand success by examining case studies showcasing successful brand endeavours in this space.
Furthermore, we will assess the challenges and opportunities of decentralisation, both for traditional and Web3-native brands, along with the implications of city branding in the Metaverse. The article will also address consumer familiarity and interest levels in this new digital realm, highlighting the need for effective communication and education strategies to bridge the knowledge gap.
Throughout the article, we will raise vital questions that brands must ask and answer to navigate the complexities of the Metaverse successfully and, ultimately, make a meaningful impact on their target audience.
Overview of the Metaverse’s implications on branding
This section offers a high-level view of the Metaverse’s implications for branding.
Environmental attributes of the Metaverse
The key attributes of the Metaverse relevant to our discussion are novelty, interactivity, vividness, and gamification marketing activities [2]. Augmented reality (AR) can provide users with fresh and unique experiences. Interactivity and vividness shape user perceptions and engagement. The importance of gamification in marketing activities relates to the rapid digitalisation of businesses and the focus on younger demographics.
To sum up, attributes such as novelty, interactivity, vividness, and gamification of marketing activities can help create unique and engaging experiences that support branding efforts in the Metaverse. By understanding and leveraging these attributes, brands can create immersive, personalised, and interactive experiences that cater to users’ preferences and interests, ultimately enhancing customer engagement and decision-making processes.
Implications for branding
The Metaverse is poised to play a crucial role in the loyalty and support stage of the buyer journey, with AR/VR technologies facilitating enhanced connections with customers post-purchase [14]. This engagement can bolster brand loyalty through emotional attachment, narrative transport, and social interaction [15].
However, the implications of using VR in the consumption experience of luxury brands are more nuanced. On the one hand, VR is seen as a democratising force, making even the most exclusive consumption experiences more accessible. Furthermore, it provides an enjoyable escape from daily routines, offering embodied recreation. On the other hand, some consumers associate VR experiences with anxiety, loneliness, and fear, which may dampen their effectiveness as a brand advocacy tool [16]. Therefore, brands must carefully consider these factors when designing their Metaverse strategies to maximise the benefits and mitigate potential drawbacks.
Additionally, engaging customers early in the purchasing process can result in downstream benefits, such as increased purchase and recommendation behaviours [17]. In the Metaverse, the virtual interaction between consumers and brands influences consumer preferences. Further, gamification of marketing activities in the Metaverse can make such engagement more enjoyable. As a result, satisfied and engaged customers would be more likely to develop brand advocacy habits in the Metaverse [2].
How brands see the Metaverse
Leading brand marketers tend to view the Metaverse as the next phase in the evolution of virtual connections and socialisation, where the digital realm gains equal or greater value than the physical world. Moreover, emerging technologies and platforms aim to provide diverse user experiences, making the Metaverse an enticing prospect for brands [18].
Researchers have identified three key ideas emerging from our current understanding of the Metaverse. These are the increasing importance of digital value, virtual worlds, VR, and AR in enhancing user experiences and the potential for a decentralised metaverse [18]. So, next, we will explore these dimensions further to gain a deeper understanding of the implications of the Metaverse for brands and consumers.
Digital value creation
The Metaverse has evolved to encompass digital identities, interactions, and assets with equal or greater value than their physical counterparts. Notably, the COVID-19 pandemic has affected this shift, accelerating the adoption of digital platforms and experiences. This further demonstrated the feasibility of the Metaverse and unveiled commercial opportunities centred on individuals’ digital selves [18].
“Everything goes digital. Your friends, your job, your identity. And now, with crypto, your assets are online too. Bored Apes are the new Rolex. Fortnite skins are the new skinny jeans. [...] our attention has been sucked from physical to digital.” Shaan Puri, Entrepreneur [19]
Enforced isolation contributed to the migration of time spent in physical environments to digital spaces, as evidenced by the exponential growth in virtual platform users during this period. Secondary data further substantiated this growth. For instance, non-fungible token (NFT) expenditure increased by 21,000% between 2020 and 2021 [20]. Similarly, blockchain-related technologies experienced a surge in growth during the same time [21].
Concurrently, the first Web3-native brands, initially branded as NFT collections, emerged and gained mainstream traction. Notable examples include The Bored Ape Yacht Club, which capitalised on the increasing positive perception of digital value. Additionally, Gucci released its first NFT during this period through a special auction hosted by Christie’s. The proceeds were donated to UNICEF USA in support of COVAX, an initiative to ensure global equitable access to COVID-19 vaccines [22].
In summary, the pandemic played a crucial role in redefining the Metaverse as a space where digital experiences hold significant value, driving increased adoption of digital platforms and presenting new commercial opportunities centred on the digital self.
Better experiences?
It is true that the Metaverse encompasses various digital platforms, including social media and immersive technologies such as virtual worlds, virtual reality (VR), and augmented reality (AR). However, as advanced and immersive technologies become increasingly vital to enhancing user experience, the Metaverse depends heavily on further developing and democratising such hardware [18].
“Once there are more hardware options that are different than what we’re dealing with now [...] I think that’s going to change quite a lot how we are actually going to do marketing because it will no longer be attached to flat screens. So we’ll just start thinking in a more spatial way, I think that we’re going to start using those different virtual worlds also kind of in a different way to promote brands.” Timmy Ghiurau, innovation and metaverse leader at Volvo [18]
Current limitations in accessibility and affordability restrict the widespread adoption of immersive technologies, presenting both challenges and opportunities for brands. To optimise consumer experiences, brands must identify their position within the Metaverse’s various layers and leverage existing technologies effectively. Additionally, researchers observed that some brands invest in virtual spaces without fully grasping the potential impact on consumers, leaving unutilised potential on currently available technologies [18].
Let us not forget that user experience is paramount in the Metaverse. Specifically, a report from the World Economic Forum emphasised that Metaverse platforms should concentrate on enhancing user experiences and reducing entry barriers to boost adoption rates [23]. Similarly, democratising immersive technologies can unlock new levels of digital experiences for Metaverse users [24].
Further, examining the Bored Ape Yacht Club (BAYC) case study demonstrates the importance of understanding and traversing the Metaverse’s layers of experience. Initially an NFT collection that engaged its community mainly through Twitter and Discord, BAYC has evolved to develop its own immersive platform, Otherside, to offer a more immersive user experience [25].
However, research reveals that a lack of comprehension of the metaverse user experience and its layers can harm brands. A good example is JP Morgan’s activation in Decentraland (Fig. 1), which many considered questionable and misaligned with the overarching brand image. This underscores the need for brands to critically assess their strategies, aligning them with current and emerging technologies to deliver an optimised experience within the evolving metaverse landscape [18].
The decentralisation spectrum
Overall there is a perception that the Metaverse is almost synonymous with or depends on blockchain technologies. This leads to the sometimes erroneous assumption that it should be decentralised by default. Although the term is used for both centralised and decentralised versions, the lingering view is that we can only realise the full potential of Metaverse through decentralisation [18].
“What’s really important is noticing the differences between centralised and decentralised metaverses. So when you look at what Meta, Roblox or Fortnite are building or have built, that’s obviously a centralised platform where you don’t have blockchain being the enabler, you don’t have [...] gated ownership of assets, or you don’t have like power to create and sell within that marketplace in an open manner.” Chris Cook, VP Brand Partnerships at Fancurve [18]
In a more nuanced world, we can have decentralisation on various levels for businesses and brands within the Metaverse, ranging from finance to governance. A case study on Bored Ape Yacht Club (BAYC), a pioneer in granting full intellectual property rights to NFT owners, reveals its shift towards advanced levels of decentralisation. BAYC’s token, ApeCoin, powers a decentralised autonomous organisation (DAO) that allows participants to use the currency without centralised intermediaries and participate in ApeCoin DAO [27].
Interoperability, allowing users to maintain the same assets and identity across diverse digital contexts, is another promising decentralisation aspect. However, this concept is not a common theme in the current state of the Metaverse. For instance, Gucci and Nike have not explicitly addressed their stance on interoperability, whereas BAYC is actively working towards it [28].
In terms of community expectations, members of the RTFKT/Nike community show high hopes for interoperability despite the lack of clarity from established brands [18]. Simultaneously, we must highlight the risks brands face in offering decentralised ownership, such as losing control over digital assets that are shared across different platforms through interoperability [29].
While more established brands may embrace the decentralised Metaverse, they currently engage in lower decentralisation levels than Web3-native brands. The full potential of the Metaverse can be unlocked through decentralisation, with interoperability being a significant aspect of achieving this potential. However, we are yet to see how established brands will balance the benefits of decentralisation and the risks associated with losing control over their digital assets and brand identity.
Evidently, the Metaverse has been recognised as an increasingly significant space for digital experiences, driven by the pandemic and the subsequent rise in digital platforms. Despite advancements in immersive technologies, limitations in accessibility and affordability hinder widespread adoption. Moreover, decentralisation, critical to unlocking the Metaverse’s full potential, remains an area of debate, especially when considering the trade-offs for established brands. With this context, we can discuss the motivations for brands to approach the Metaverse.
Why brands enter the Metaverse
In this section, we will explore the reasons driving brands into the Metaverse.
Gaming
The increasing attraction towards the Metaverse causes a significant shift in gaming and gamification, transforming the marketing and branding landscape. The gaming industry is already larger than movies and continually evolves as brands recognise its potential for engaging with their target audience. Furthermore, the stereotype of gaming as a nerdy pastime is being shattered as more people recognise the benefits of gaming and the rise of eSports [18].
“It [the Metaverse] will become a place where the idea of gaming will change. Because we are used to thinking about gaming as a hobby. But gaming in the Metaverse is something different. Gaming in the Metaverse is marketing.[...] They are using a gamification approach. Meaning I do something I want a reward, and that’s why again, we are also witnessing the shift towards a play-to-earn model. You are witnessing a complete disruption of marketing, branding, and I would also say production.” Amalia Martino, Marketing and Branding advisor for Web3-focused projects [18]
As a result, brands need to adapt their engagement strategies by incorporating interactivity and gamification elements, such as badges, NFTs, or exclusive art, to encourage community interaction and foster loyalty. Simply having a Discord server is no longer sufficient. Even traditional brands like Gucci are now exploring innovative ways to engage with their community, such as through gaming collaborations and Metaverse strategies [18].
Cultural shifts
We must also acknowledge the role of cultural evolution in driving brands towards the Metaverse, a phenomenon accelerated by global pandemics that have increased the influence of digital culture on people’s behaviour. As the first digital-native generation comes of age and new generations emerge, the Metaverse could become their natural habitat. This shift has led to brands engaging with the Metaverse to maintain relevance within this new culture?[18].
A key factor for brands to succeed in the Metaverse is understanding the underlying culture rather than simply imposing their presence on it. NFT activations are an excellent way to achieve this. Prominent figures highlight the need for brands to acknowledge and adapt to the creativity and talent nurtured in the gaming sphere for the past two decades [30].
“That generation is there waiting to kill us all, in a good way. Kill us with creativity [...] I think a lot of people in fashion always disregarded gaming for a very long time [...]. They all wake up, and then there’s been 20 years of gaming [...] where you have all the talent and creativity, and that’s the thing. Suddenly they start to open their eyes, but things are gonna be very hard to be successful because you can’t learn stuff you (don’t) love.” Benoit Pagotto, co-founder of RTFKT and Senior Director for Brand and Partnerships at Nike [30]
For example, Gucci, a century-old brand, has recognised the importance of cultural integration by hiring a young team to develop its gaming strategy and oversee its metaverse endeavours [31]. This showcases the significance of incorporating individuals who are part of the changing culture to ensure successful adaptation.
Further illustrating the Metaverse’s role in cultural revolutions, users of GTA V’s virtual world have used in-game clothing options to dress their avatars as Hong Kong protesters. This was a prime example of effectively blending virtual and real-world issues [32]. Moreover, the increasing adoption of NFTs by celebrities and artists highlights the growing relevance of the Metaverse in pop culture [33].
Seemingly, there is a connection between pop culture, entertainment, and the Metaverse, showcasing both Web3-native and traditional brands as key players in the evolving cultural landscape. So brands must consider the influence of major cultural forces, such as Disney, who are already investing in Metaverse and AR technology [18]. Therefore, understanding and embracing the cultural shifts brought about by the Metaverse is crucial for brands to remain relevant and successful in this rapidly changing digital landscape.
Fear of missing out (FOMO)
Brands are increasingly adopting Web3-focused strategies to avoid repeating past mistakes, such as missing out on the early opportunities of the Internet and e-commerce. However, solely approaching the Metaverse with the fear of losing business opportunities is not a proper strategic move for brands. Unfortunately, short-term financial goals, influenced by the hype surrounding the Metaverse, can lead to scepticism towards a brand and question whether its intentions are genuine [18].
“It will be amazing to see if they (brands) can collaborate much more effectively, [...] to take full advantage of the space and create something ethically successful also have an impact on the consumer, rather than just playing [...] because it’s trending.” Brenda McCulley, Venture Design Lead at SPACE10 [18]
Successful brand engagement in the Metaverse should involve collaboration and an ethical approach, focusing on the long-term impact on consumers rather than just following trends. Nike and Gucci, for example, approach the Metaverse effectively by demonstrating a long-term commitment. Nike’s acquisition of the Web3-native brand RTFKT is one example of this. Similarly, Gucci’s business area focused on the Metaverse illustrates its dedication to long-term growth in the space [18].
Statements from their respective CEOs further exemplify the long-term approach of these brands. Nike’s President and CEO, John Donahoe, emphasises the company’s intention to invest in the RTFKT brand and extend Nike’s digital footprint [34]. Gucci Vault’s website highlights its commitment to evolving within the Metaverse through community collaboration and Web3-based initiatives [35].
Additionally, companies should evaluate whether the Metaverse aligns with their long-term goals and purpose and whether it can support sustainability efforts [36]. Brands should also participate in the exploration and potential long-term adoption of metaverse strategies to nurture community creation [37].
“See whether the Metaverse gives you opportunities as a company to not only try new things, but also to accelerate your purpose or long-term goals like sustainability, which is well suited to many applications of the Metaverse. Almost every CMO already has made, or will soon make, a public commitment to sustainability-related ESGs, and they will soon be measurable.” Janet Balis, Ernst & Young consulting professional [36]
In conclusion, while the fear of missing out on opportunities in the Metaverse is a driving force for many brands, it is essential to approach this emerging space with a long-term, ethical, and collaborative strategy. Therefore, companies should focus on the long-term impact on consumers and explore opportunities aligning with their goals and purpose.
With an understanding of how brands see the Metaverse and why they want to enter it, we can explore key branding drivers in this space.
What drives branding in the Metaverse
Brands usually start with traditional marketing concepts when exploring the Metaverse. However, to go beyond these established approaches, the focus shifts to decentralised networks and Web3 concepts [18].
“If you want to strengthen your brand equity, you have to act consistently with your brand essence. So I would ask myself [...] what is the affinity territory between the Web3 and my brand? [...] The second challenge is facing a new kind of community there [...], so you will have to deploy an additional branding strategy for people that are already, let’s say, Web3-native.” Amalia Martino, Marketing and Branding advisor for Web3-focused projects [18]
Supporting this idea, a McKinsey & Company podcast featuring Metaverse consultant Cathy Hackl raises questions about whether brands should replicate physical goods in the Metaverse or launch new Web3-based, co-created brands. Either way, the important thing is to take action, move into this space, and be willing to learn through trial and error.
“If you wait a year and a half or two years to do something, to have a clear strategy, and to start testing these assumptions, it might be a little bit too late.” Cathy Hackl, a Web3 and metaverse strategist, tech futurist, speaker and author [38]
Further, decentralisation emerges as a crucial concern for traditional brands entering the Metaverse, presenting challenges regarding control and ownership. However, it is already a core component of Web3-native brands. Their users appreciate different aspects of decentralisation and different types of brands embracing it for a vibrant and inclusive community [18].
We can explore the various levels of decentralisation through case studies. For example, Gucci invests in its community and collaborates with Web3-native and more decentralised brands [39]. On the other hand, Nike ?Finally, BAYC, a Web3-native brand, moves towards greater decentralisation through its DAO and other initiatives [27]. Yet, despite differences, all three have enjoyed substantial success in the Metaverse, further confirming the value of variety in decentralisation.
With this context in mind, let us now explore six categories of drivers propelling branding practices in the Metaverse [18].
1. Community
The importance of community in the context of Web3 and the Metaverse and its impact on branding is a fundamental theme. In Web3, communities have a different role, becoming central to a brand’s token, NFT and overall equity. The value of a product in Web3 also depends on the community supporting it, offering a unique opportunity for brands to be built from scratch through the active participation and fractionalised ownership of community members. Therefore, brands must foster community growth, focusing not only on product sales but also on nurturing the community and its values.
“The value of your brand in the future is not going to be made by your market cap, but by your community market cap [...] and how they can create value for you [...] Community gives money, and it gets value from you, and then the value they provide back in. Either by supporting, or creating their own business, they will connect your ecosystem.” Benoit Pagotto, co-founder of RTFKT and Senior Director for Brand and Partnerships at Nike [30]
However, this approach has potential drawbacks, as mishandling a community can negatively impact a brand. Therefore, careful management and authentic engagement are essential to prevent backlash or damage to a brand’s reputation.
“If you do it wrong, it can be pretty bad for your brand as well. Because you know, they will not care, you can’t throw them (community) out. If others complain and you delete things, they’ll hate you. So you need to be careful, as you need to be in real life.” Jürgen Alker, Head of NFTs at Highsnobiety [18]
2. Ownership
Web3 has also brought a shift in ownership and intellectual property (IP) within the online ecosystem, with brands viewing consumers as co-owners rather than merely a source of income. BAYC exemplifies this change, granting NFT owners commercial usage rights to build upon their products, as seen with Jenkins the Valet [40]. Similarly, Nike and RTFKT provide comparable IP rights to their holders, allowing them to profit from their NFTs.
Additionally, although co-creation and user-generated content have existed for a long time, Web3 could potentially turbocharge this approach. This mindset shift demands brands focus on nurturing communities rather than exploiting customers [30]. Additionally, trust and positive associations with well-established brands like Nike and Gucci also foster loyalty in the community. Moreover, BAYC’s success in providing ownership and freedom to its users underlines the importance of this aspect for brand growth [41].
“The expectations of your audience are gonna change because they want to add value to you, and they also want to get value from you, not only from the product side.” Benoit Pagotto, co-founder of RTFKT and Senior Director for Brand and Partnerships at Nike [30]
However, giving ownership can also pose challenges for brands, as relinquishing control could lead to negative associations or potentially damage reputation. For example, Gucci’s collaboration with BAYC further complicates the ownership and IP situation, as Gucci maintains control over its IP, in contrast to BAYC’s full ownership model [42].
In summary, web3 is transforming the concept of ownership and IP, encouraging brands to embrace community-building, co-creation, and co-ownership. While this approach can yield benefits, it also poses risks, requiring careful navigation by companies as they adapt to this new digital landscape.
3. Empowerment
The rise of Web3 has brought about a significant shift in people’s attitudes towards prominent brands and market players. Individuals are no longer passive receivers of information but demand entertainment and value in exchange for their data. Therefore, Web3 is characterised by decentralised governance, leading to a preference for platforms such as Telegram, Twitter, Discord, and YouTube among users rather than the more traditional and centralised Facebook [18].
Web3 also drives a pushback against centralised internet experiences and exploitation of personal data, with users increasingly disliking brands imposing aggressive or manipulative sales tactics. Moreover, brands must be mindful that they are entering users’ spaces and adapt their strategies accordingly.
“Individuals are not just passive receivers of a message [...] People need to be entertained. [...] You cannot have my data or something from me if you don’t give me something back. [...] Web3 people are very different from the web2 people. [...] We are talking about a decentralised model where the governance is in the hands of users.” Amalia Martino, Marketing and Branding advisor for Web3-focused projects [18]
Chris Dixon, general partner and crypto arm leader at Andreessen Horowitz, emphasises the importance of emerging Web3 companies, such as Yuga Labs, as a counterweight to major corporations like Meta. This prevents a dystopian future where a single dominant company controls all digital experiences and reaps the economic benefits [43]. In this new landscape, power shifts towards the consumers, promoting a more equitable distribution of benefits and control.
Altogether, Web3 fosters a decentralised environment where individuals are more critical of brands and expect greater value in return for their data. Brands must recognise this change in attitudes and adjust their strategies accordingly.
4. Tokenisation and NFTs
Connecting the physical and digital worlds through tokenisation delivers new value to users. Web3 is the future, set to disrupt digital-virtual dynamics. The importance of tokenisation is exemplified in the context of luxury brands and NFTs, with a Gucci bag symbolising a physical token of belonging to a particular philosophy [18].
NFTs offer utility beyond simply owning a 2D image in a crypto wallet. NFT membership is a win-win situation where users can enjoy benefits, such as restaurant discounts, before transferring or selling the NFT for profit. However, the potential of NFTs is yet to be fully realised as their value in virtual products is still emerging. Still, while the Metaverse is still in development, NFTs are already present, leading the way and providing benefits [18].
“So I experienced it. I ate, I learned something from it. And I also transferred my membership. And I made a profit out of my experience. So what has happened? This is a win-win situation, right?” Reva Ananda, Founder of BravaNFT and CMO at Decentology [18]
Furthermore, NFTs can contribute to a brand’s image, creating a positive perception in people’s minds. For example, brands can build affinity by appearing progressive, technology-savvy, and digitally focused, thus appealing to their target audience. This offers a valuable targeting opportunity for brands to enhance their image and forge stronger connections with their communities.
In summary, tokenisation connects the physical and digital worlds, with NFTs offering utility beyond mere digital ownership. They provide various benefits and facilitate brand affinity while also holding the potential to lead towards the development of the Metaverse.
5. Storytelling
Storytelling is a crucial driver for brand practices in the Metaverse, as it helps attract and maintain community engagement around a brand. Its importance is exemplified in the success of BAYC due to its effective use of intellectual property, partnerships, and merging different community lores to create enticing stories. Case studies further support storytelling’s influence in branding within the Metaverse, such as Gucci’s collaboration with Web3-native brand 10TKF. Creative Director Alessandro Michele crafts a narrative of a journey through a parallel universe, highlighting the brand’s evolution beyond time and space [18].
“Within this metaverse metropolis, he crosses paths with the famed digital artisan Wagmi-san, legendary for crafting coveted items in his 10KTF Shop. As it happens when creativity encounters curiosity, something unimaginable becomes a reality. In this particular case, a magic globe encapsulates the imagination of Alessandro Michele and Wagmi-san, and those who come into possession of it usher in a new form of self-expression across dimensions.” [44]
Such narratives effectively sustain Metaverse endeavours among communities, as evident in Gucci’s Discord server, where users are excited about the brand’s Metaverse roadmap. Moreover, storytelling is a primary link between a brand and its audience, reinforcing its significance for brand practices in the Metaverse.
“Whether you are communicating with customers, partners, or your industry at large, storytelling is the primary link between a brand and its audience. [...] here is another rubric to help brands understand Web3 and create an informed position to develop and deliver tangible ideas with high impact.” Cathy Hackl, a Web3 and metaverse strategist, tech futurist, speaker and author [45]
Altogether, storytelling is an essential driver for brands in the Metaverse, as it engages communities and establishes a connection between brands and their audience.
6. Experiment and learn
Experimentation and learning is another key driver for brands exploring and adopting the Metaverse. It stresses the importance of gaining hands-on experience for professionals to understand emerging technologies’ potential and limitations. Testing strategies in a controlled manner is a recommended practice for large corporations, as it allows them to learn from the outcomes before committing to more extensive, decentralised campaigns. Conversely, a poorly aligned branding strategy can harm a brand’s image [18].
Being open to feedback from younger generations is crucial, as the Metaverse challenges traditional marketing conventions. Senior professionals should adopt a more open-minded approach, embracing the insights provided by those more familiar with new technologies. Gucci, for example, emphasises the importance of testing and learning as a key practice in their Metaverse strategies [46].
Additionally, many brands are exploring the Metaverse without a clear long-term strategy, which supports the notion that experimentation is a driving factor in the industry. However, adopting a test-and-learn mindset must be combined with remaining faithful to a brand’s core identity, regardless of the platform [47].
“Be prepared to open your mind. Be a bit more philosophical, don’t be so closed. Don’t always think you know, the answers [...] the other really bad thing for older people, established people in marketing, is that they have to listen to younger people.” Chris Cook, VP Brand Partnerships at Fancurve [18]
In conclusion, as brands venture into the Metaverse, they need to adopt a proactive and open-minded approach, focusing on testing and learning from various strategies. This iterative process allows them to understand the intricacies of the Metaverse better, develop more effective campaigns, and remain consistent with their brand identities.
Now we understand what drives branding in the Metaverse. With this background knowledge, we can now investigate how to perform branding in the Metaverse.?
How to do branding in the Metaverse
This section will explore possible Metaverse branding approaches based on popular theoretical frameworks where there is one primary focal point [18].
Consumer
Interactivity is a fundamental aspect of marketing within the Metaverse. It enables users to “experience” a brand, thereby enhancing brand awareness and image [48], [49]. This notion aligns with the consumer-based approach to branding, where brand knowledge and associations are intrinsically linked to consumers’ perceptions when engaging with marketing [50].
Gaming, although not a new concept in marketing, plays a central role in the consumer-based approach and has been studied extensively in the context of virtual worlds such as SecondLife [51]. Researchers have recognised the benefits and opportunities such alternative worlds provide to reach diverse audiences.
Crucially, the Metaverse has expanded these opportunities beyond gaming, encompassing entertainment and culture. As gaming is considered the foundation of the Metaverse, gamification incentivises consumers to return to a brand and seek value, fostering brand loyalty. Therefore, brands are increasingly venturing into gaming as it constitutes the base for the Metaverse and appeals to a younger demographic [18].
This trend corresponds with the consumer-based approach to brand equity, where consumers drive value rather than the company itself [49]. The Metaverse environment facilitates a novel context for experiencing and customising products according to users’ preferences, as opposed to traditional exposure through billboards or advertisements. Furthermore, it has the potential to make users feel understood and valued by the brand, differentiating the brand and altering its perception in consumers’ minds.
Personality
The personality approach to branding focuses on the significance of self-expression in shaping consumer attitudes [49], positioning brands as emotional drivers for individuals. The Metaverse, with its unique characteristics and opportunities, provides an ideal context for this approach, as it enables consumers to express their digital selves, sometimes more significantly than their physical selves, thanks to avatars. This is closely linked to the notion that consumers purchase brands for self-expression [52]. Examples in the Metaverse include acquiring virtual clothing for avatars and NFTs that resonate with a buyer’s personality.
Storytelling is a crucial tool within the personality approach, influencing brand perception in the Metaverse. This powerful narrative device helps shape a brand’s personality ?[53] and can be further leveraged in the Metaverse by allowing consumers to act as brand storytellers. However, this presents new challenges for brands, as increased decentralisation could lead to a loss of control over the brand personality. This highlights the importance of careful risk-benefit assessment and finding the right balance.
Relational
Much like the personality approach, the relational approach to branding can be effectively integrated into Metaverse brand practices. Historically, this approach paved the way for customer-influenced brand meanings [49], a feature that aligns with the Metaverse’s potential for customer brand control. The customer’s inner world remains relevant in the Web3 context, with brands like BAYC demonstrating potent community meanings and fostering enduring relationships. This enduring relationship is symbolised in the Metaverse by possessing brand-related tokens, such as NFTs, which are held as long as the brand remains a viable relational partner [54].
Additionally, brands with established loyal communities in the Metaverse can potentially recover from missteps through testing and learning, leveraging the power of customer forgiveness [55]. Essentially, the emotional connection between brands and their communities, evidenced in sentiments of brand love [56], can be observed among both Web3-native and pre-Web3 brands who apply authenticity to their Metaverse experiences. Specifically, in the Metaverse, high brand trust and a strong brand image drive customers to feel brand love [57]. Confirming this view, Gucci’s success in creating a strong sense of community and engagement has created strong affinity and brand love putting it among the two most loved brands by Gen Z [58]. Crucially, we must underscore the critical importance of maintaining authenticity in these interactions.
Community
The community has a pivotal role in brand success within the emerging Web3 and Metaverse landscape. Communities are no longer seen as mere enthusiasts of a brand but as integral parts of it, actively involved in value creation and enhancing brand equity [49]. This shift in perspective has led to innovative methods of managing brands as organisations have started to realise the potential of engaging their communities more actively. Beyond making a brand more distinct, community involvement can also usher in novel business models [59]. We are witnessing an evolving interaction between brands and their communities, with members of organisations like head moderators, creators and even co-founders becoming more directly involved [18].
The recommended engagement strategy with these communities is through testing and learning, reinforcing theories that brand communities can improve decision-making by understanding and meeting their needs [59]. This appears to mark a shift towards a more interactive model of brand management, with consumers anticipating more personalised interactions. In essence, brands must embrace a community-centric approach, utilising the power of two-way communication for community growth and value creation in the Web3 and the Metaverse [60].
Cultural
The cultural approach to branding is integral to understanding the relationship between culture and brands in the Metaverse [49]. The rise of digital-native generations has triggered a cultural shift that has accelerated the impact of digital culture on society, influencing the creation and perception of brands within the Metaverse [18]. Brands that have achieved iconic status, such as Bored Ape Yacht Club (BAYC), a Web3-native brand, illustrate the power of this cultural approach. BAYC has significantly contributed to mainstreaming the Metaverse and NFTs, influencing various industries, including entertainment, legal, and sports, and generating its own cultural artefacts [61].
Additionally, pre-Web3 brands like Gucci and Nike have become iconic brands within this digital realm by maintaining authenticity. However, there is a pitfall in leveraging the prevalent FOMO to maintain brand relevance. Instead of capitalising on this fear, the cultural approach advises a deeper understanding of digital culture to guide brand strategies within the Metaverse. Therefore, the cultural approach remains a salient perspective in brand management within the Metaverse, where brands exist as cultural artefacts that evolve and influence society [62]. Rather than adopting impromptu tactics, this approach encourages brands to appreciate and engage with the intrinsic forces of digital culture.
Decentralised Branding
Decentralised branding, an emerging concept in brand management theory, represents a departure from traditional approaches. It is characterised by community-driven push, collective and consumer ownership, and the absence of a singular centralised entity owning the brand [63]. Brands like Bitcoin, BAYC, and RTFKT exemplify this decentralised branding model, especially in the Metaverse. This approach combines branding strategies that leverage the power of communities, ownership, tokenisation, storytelling, and iterative learning to build brand value in a decentralised and digital-first context [18].
Applying blockchain technologies such as NFTs and DAOs further emphasises the movement towards decentralised branding [64]. Despite initial beliefs that blockchain and decentralisation would render traditional branding practices obsolete [63], traditional branding approaches can still be beneficial when incorporated with decentralised strategies. This challenges previous presumptions and highlights how traditional practices can evolve and be relevant in a decentralised context ?[65].
Additionally, there is a pressing need for pre-Web3 brands to engage more actively in the decentralised Metaverse to remain relevant and competitive [18]. While there is a risk involved for traditional brands owned by central corporations [66], adopting decentralised branding strategies, such as collaborations, creations, or acquisitions of Web3-native brands, can potentially mitigate them. Even so, prominent brands like Gucci and Nike, exploring this space, have not fully embraced decentralisation. This highlights that relinquishing control is a long process, and brands can be successful even when not fully dedicated to Web3 ideologies.
Implications
We explored the potential opportunities and risks associated with hype-driven Metaverse marketing and branding approaches. Instead, brands must exercise critical thinking when venturing into the Metaverse, ensuring they fully comprehend the main characteristics and technologies that underpin it (e.g., communities, tokenisation, storytelling, and testing and learning capabilities). Additionally, balancing between decentralisation and immersive experiences within the Metaverse is vital.
Interestingly, there is a stark difference between Web3-native brands (those born within the context of a decentralised web) and pre-Web3 brands (those established before the advent of the decentralised web). While both types can adopt traditional and decentralised branding strategies, the implications of advanced decentralisation vary. For example, Web3-native brands perceive decentralisation as an integral part of their strategy, whereas pre-Web3 brands face higher risks with this approach.
Hence, pre-Web3 brands can mitigate these risks through collaborations, creation, or acquisition of Web3-native brands. This tactic could enable them to navigate more efficiently within a decentralised Metaverse, reducing their exposure to risk whilst capitalising on the opportunities.
With this understanding, we can focus exclusively on use cases and examples.?
Use cases and examples
Context
The Metaverse opens up extensive possibilities for a range of sectors. For instance, higher education, medical, military and other industries could utilise its framework for immersive learning experiences [67]. Retail could benefit from an extended reach to a more immersive shopping experience, while enterprises could improve engagement and collaboration through virtually augmented workspaces. With the rise of video, live broadcasts, augmented reality (AR), and virtual reality (VR) in marketing, consumers are increasingly seeking more engaging interactions with brands [68].
The Metaverse, however, is not without risks. Its immersive consumer experience is new and uncharted territory, demanding a shift in how brands interact with customers. Thus, brands must be prepared to balance these risks against the high rewards. By setting clear targets, monitoring competition, exploring applications and opportunities, planning their entrance, and preparing for risks and rewards, brands can begin to navigate the Metaverse [36].???
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Therefore, brand marketers must think creatively about how their brand can exist and interact within this new dimension. The Metaverse allows for innovative brand experiences at every stage of the customer journey, from acquisition and engagement to transaction and customer support. This enhanced customer journey can be used to the brand’s advantage, irrespective of their specific business goals, and it has the potential to be both spectacular and more enduring than traditional methods [36].
Real-world applications
The Metaverse has opened up innovative avenues to launch creative content and communication strategies, with many big brands already executing Metaverse strategies [69].
By becoming part of the Metaverse, brands aim to attract younger audiences (millennials and Gen Z) who comprise a large portion of the Metaverse users, as seen with Roblox’s 42.1 million daily active users, two-thirds of whom are Gen Z [68].
Furthermore, brands have leveraged the Metaverse to provide unique experiences during global events like the Covid-19 pandemic [69].
Furthermore, brands across industries are implementing augmented reality technology for virtual try-on. Nike visualises all available sizes in its collections, Gucci allows app users to try on make-up, hats, glasses, and sneakers, and Prada displays a virtual collection of bags through a Snapchat filter [69].
Analysing brand use cases in the Metaverse reveals an intricate relationship between augmented reality (AR) technologies, brand engagement, and consumer attitudes. A key example is Snapchat’s AR-based platform, used by cosmetic brands such as Nyx, who combined AR with immersive pop-up event simulations to present their new collection [69]. Such innovative uses of technology underscore the importance of the Metaverse as a space for brand advertising and experiences, a notion supported by surveys. 15% of UK and 22% of US internet users believe brands should advertise in the Metaverse, while 13% and 19% respectively, suggest brands should build more experiences within it [79].
However, consumer knowledge and interest in the Metaverse remain inconsistent. A study showed that only 36.8% of respondents had heard of the Metaverse, and only 23% were familiar with the supporting technologies. When Facebook rebranded as Meta and shifted focus to the Metaverse, a US survey found 68% of respondents were not interested in the new venture, with most interested respondents belonging to the Millennial and Gen Z demographics [69].
Business investment in the Metaverse also varies across sectors. A 2022 Statista survey of companies in selected countries found the computer and IT sector most likely to have already invested, with 10% of Marketing & Advertising companies also investing [80]. This suggests a growing recognition of the Metaverse as a business opportunity.
Delivering meaningful, authentic experiences to users is critical to success in the Metaverse. Brands that consistently achieve this can foster fruitful, enduring relationships. In an increasingly crowded media landscape, the Metaverse offers a unique opportunity for differentiation. Brands can leverage the endless possibilities to create original narratives, virtual worlds, and characters or bring their already recognisable assets to life in new ways [69].
Despite the potential of the Metaverse, its nascent status means brands must navigate consumer unfamiliarity and disinterest. Effective education and communication about the Metaverse and its possibilities could be vital to bridging this gap. Further, brands must carefully consider which demographic groups are most engaged with the Metaverse, as the interest and knowledge levels vary significantly across different demographics [69].
Ultimately, the Metaverse presents a promising but complex landscape for brands. Success requires both creativity and a deep understanding of the specific characteristics of this new medium, as well as careful consideration of consumer attitudes and technological literacy.
However, beyond these, the Metaverse, combined with blockchain, presents more unique brand use cases.
Branded non-fungible tokens (BNFTs)
Therefore we must be mindful of the potential of BNFTs as an innovative form of brand visual communication, providing valuable insights for brands venturing into the Metaverse. So let us explore the practical implications of these insights [81].
Therefore, brands can use various strategies to maximise the appeal and value of BNFTs. Ideally, developing a tailored approach that combines these most sensibly according to the brand’s needs would maximise the probability of success.
Furthermore, the Metaverse can also satisfy the branding needs of cities.
City branding
The Metaverse offers various cases of virtual native cities and their applications in urban development, commerce, culture, and communication [89]. The emergence of cities like Aetheria in Decentraland [90] and Mega-City in The Sandbox [91] reveals the evolving concept of urban spaces. Aetheria, for example, offers a cyberpunk aesthetic and incentivises online commerce through renting land and virtual infrastructure. Mega-City represents Hong Kong’s future vision, showcasing a diverse and vibrant culture with technology at its core.
While these cities are not as well-known or widespread as their real-life counterparts, they offer unique experiences and opportunities for social interaction and commerce. For example, virtual spaces like Aetheria, with its own website, and Sentosa Island in Animal Crossing New Horizons [92] are trying to reach new audiences and generate interest in their virtual spaces.
Another example is digital twins, which are virtual replicas of real cities. These have their own approach to promoting tourism and targeting gamer communities, as seen in “Benidorm Land” on the STEAM platform [93]. The Santa Monica district in Los Angeles incorporates augmented reality through the FlickPlay app, offering a gamified experience that encourages users to explore their city and collect digital assets [94].
On the other hand, Tokyo is working on its cultural metaverse project, “MetaTokyo” [94], where experiences like pop-up museums and fashion events in Decentraland promote contemporary Japanese culture. Dubai, however, focuses on the transaction of digital assets in its Metaverse, with the aesthetics and topology of the city’s prestigious areas serving as a backdrop [95].
All these examples demonstrate disruptive immersive experiences in these virtual cities. However, dissemination strategies are still scarce, which affects the mainstream interest and demand for such initiatives. Additionally, communities are formed and maintained through social platforms like Discord, allowing cities to reach new segments of the public. Ultimately, socialising and participating in collective experiences are pivotal in these virtual spaces for the Metaverse to prove a valuable platform for city branding.
In summary, virtual native cities represent a new frontier in urban development, commerce, and culture. With unique aesthetics and experiences, these cities are carving out their niches in the digital landscape. As these cities evolve and gain prominence, they may soon redefine the relationship between urban environments and their citizens.
Now that we have covered various aspects and examples of branding extensively in the Metaverse, it is time to connect the insights into a coherent and executable strategy.
Strategic brand transformation using the Metaverse
To sum up the preceding discussion, three broad pillars will be transformed by the Metaverse: consumer experience, resource allocation, and data strategy. Within these pillars, eight strategic elements are changing: messaging strategy, consumer engagement, consumer journey, communication guidelines, metaverse impact measurement, technology/hardware skills, people strategy, and consumer data management [96]:
“The Metaverse is a ‘full-funnel play’ of the consumer journey through discovery, trial, reconsideration and adoption.” [96]
“The Metaverse data is a huge treasure that will need sophisticated analytical tools to mine, powerful servers to store them and newer computer languages to process them.” [96]
“A long-term investment in the rightly specialised people is arguably the most important decision that Business leaders will make in their Metaverse journey.” [96]
In conclusion, the Metaverse presents an exciting opportunity for businesses to transform their marketing and brand-building efforts. Still, it also requires significant strategic planning and investment in technology, skills, and consumer data management. The eight outlined strategic elements can serve as a roadmap for organisations to become ‘metaverse ready’. By understanding and addressing these elements, business leaders can harness the full potential of the Metaverse and shape the future of marketing and brand experiences.
Conclusion
In conclusion, this comprehensive exploration of branding in the Metaverse highlights the significance of understanding and traversing its various layers of experience. As the Metaverse continues to gain mainstream attention, brands must critically assess their strategies, aligning them with current and emerging technologies to deliver an optimised experience within this rapidly evolving landscape.
The decentralisation spectrum is a crucial consideration for brands, with the misconception that the Metaverse is synonymous with or depends on blockchain technologies. While decentralisation has merits, brands must appreciate the differences between centralised and decentralised metaverses.
Additionally, NFTs and tokenisation have emerged as prominent drivers for brand practices in the Metaverse. They offer utility beyond mere digital ownership, providing various benefits and facilitating brand affinity. Furthermore, the potential of NFTs in virtual products is still emerging, with use cases like Bored Ape Yacht Club (BAYC) showcasing the power of granting full intellectual property rights to NFT owners.
Storytelling is another key driver for brand practices in the Metaverse, helping to attract and maintain community engagement around a brand. Successful case studies, such as Gucci’s collaboration with Web3-native brand 10TKF, illustrate the importance of crafting compelling narratives that resonate with target audiences.
However, brands must be cautious not to merely capitalise on the fear of missing out (FOMO) to maintain relevance in the Metaverse. Instead, a cultural approach advises a deeper understanding of digital culture to guide brand strategies within this digital realm.
Further, decentralised branding, a burgeoning concept in brand management theory, underscores the significance of community-driven push, collective and consumer ownership, and the absence of a singular centralised entity owning the brand.
The diverse levels of decentralisation revealed through case studies demonstrate the importance of personalisation, originality, novelty, and consistent visual assets in fostering brand commitment, active engagement, and BNFT purchase intention. By implementing a tailored approach that combines these key drivers, brands can maximise the appeal and value of their Metaverse experiences.
City branding is another emerging application of branding in the Metaverse, offering unique opportunities for urban development, commerce, culture, and communication. The rise of virtual native cities like Aetheria and Mega-City signifies the evolving concept of urban spaces and the potential for promoting tourism and attracting gamer communities.
In essence, while the fear of missing out on opportunities in the Metaverse is a driving force for many brands, a long-term, ethical, and collaborative strategy is paramount. Companies should focus on the long-term impact on consumers and explore opportunities aligning with their goals and purpose.
Ultimately, brands must remain agile and adaptable as the Metaverse continues to develop and expand. They should embrace the inevitable challenges, take action, and be prepared to learn through trial and error. By doing so, brands can optimise their presence in the Metaverse and foster meaningful connections with their communities while also being attuned to this new frontier’s evolving cultural, technological, and social dynamics.
Summary
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