The Metaverse And Web3 Creating Value In The Future Digital Economy
In the early days of the internet, there was a shared understanding that this new technology would be transformational. It would change the way we communicate, work and even play. This utopian view of the internet has essentially come to fruition. But as we’ve become increasingly reliant on the web, we’ve also seen its darker side. From data breaches to election interference, it’s clear that the internet is not the safe haven we once thought it was.
But what if there was a way to build a new internet? One that was secure, decentralized, and had the power to transform how we interact with the digital world. This is the promise of Web3.
But what if there was a way to build a new internet? One that was secure, decentralized, democratized and had the power to transform the way we interact with each other in the digital world. This is the promise of Web3, sometimes known as the Metaverse, a term coined from the famous science–fiction novel Snow Crash, written by Neal Stephenson, which predicted virtual reality worlds as an evolution of the internet.
Web3 is the third generation of the internet, and it’s built on the philosophy that the internet should be a decentralized network of computers rather than a centralized one. This means that there is no single point of failure and no central authority controlling the flow of information.
The Metaverse is not to be confused with Web3, which is the third stage of development of the World Wide Web. The Metaverse refers to a virtual reality-based parallel internet world where users can interact with each other and digital objects in a 3D space. It’s an extension of the internet into a three-dimensional virtual world. It is an immersive, interactive, and social platform where people can create avatars to represent themselves, buy and sell virtual property, and interact with other users in real-time. Web3 is more about blockchain technology and concepts, including digital identity, smart contracts, and decentralized applications (dApps). According to Statista, the global Metaverse market is worth $47.48B in 2022 and is set to soar to $678.7 billion by 2030.
According to Richard Entrup, Advisor to Mayfield Fund, Investor, and Global Technology Leader For Fortune 100 companies, “It’s amazing to me that brands are creating metaverses that would bind us to the constraints and constructs of the meatspace (physical world), using walls, ceilings, walking/running, etc.. they need to let us color outside the lines and experience a new reality, not limited by old physical constructs of IRL.”
Indeed, the Metaverse is not limited by the physical world, but it’s also not limited by time or space. It’s an entirely virtual world where anything is possible.
Many believe the Metaverse is a speculative scheme of the future, but it’s about connecting the digital world with the physical world. It brings people together in a shared, virtual space to interact and create.
Entrup continues, “Having personally witnessed the transition from a no Internet world to a globally connected Internet world, I find it funny to hear the same negative comments being made about the metaverse. I recently gave a talk on the subject. Many older IT executives expressed concern that our children are already on social media and gaming too much and that the metaverse will only exacerbate this issue. I’m not interested in exploring why it won’t work or why we shouldn’t do it. Web3 is a boat I don’t want to miss and one I believe large companies shouldn’t miss either. I believe we can achieve revenue growth, competitive advantage, and improved customer experience through the adoption of the metaverse.”
Web3 is highly distinct from Web 2.0. Whereas Web 2.0 is centralized and non-interoperable, Web3 is decentralized and interoperable. In Web3, the Metaverse’s primary goal is to generate experiences and establish a new system of ownership and financial system. This is achieved via NFTs (non-fungible tokens) that can serve as products or services and can be bought and sold with cryptocurrency via the blockchain – Web3’s infrastructure.
Web3 is still in its early stages regarding adoption by the general public. According to a joint BCG and Potloc Survey of 2500 participants across Europe and the USA, 61% of respondents stated that they are familiar with one (or more) of the following concepts: Web 3, Metaverse, and NFTs. On the other hand, 16% of respondents stated that they had never heard of these three concepts. However, as the use cases for Web3 continue to grow, awareness will likely increase, especially amongst enterprises seeking to capitalize on the benefits of this new technology. “According to a recent BCG survey, 65% of individuals who have already purchased an NFT prefer to be gifted a bluechip NFT rather than a luxury item (luxury bag, luxury watch). Web3 brands are the new luxury brands,” mentioned Joel Hazan, Managing Director & Partner at The Boston Consulting Group (BCG) and Global Leader Pricing.
Example use cases include reach and community engagement, and loyalty. According to a BCG analysis, macro use cases within the domain of “reach” (or top-of-the-funnel) include leveraging the Metaverse for immersive brand awareness and virtual showrooms. Companies such as Ferrari, Nike, and Red Bull have already advertised themselves in virtual worlds to generate awareness and excitement for their products.
Within the domain of “community engagement and loyalty” (or middle-of-the-funnel), macro use cases include developing virtual customer service channels, offering digital product experiences, and creating personalized avatars for customers. For example, Dolce & Gabbana has created an NFT collection that gives customers access to unique online/in-real-life experiences and products similar to a membership program.
In addition to engagement and loyalty, Web3 can also be used to unlock new sources of revenue and business models. Decentraland, for example, is a virtual world powered by the Ethereum blockchain. Users can buy, sell, or rent parcels of land that they can use to build whatever they want. These virtual experiences can range from simple games to educational content and social experiences. According to public offering reports, BCG analysis, and Coinmarketcap analyses, Decentraland’s Opensea land GMV (or Google Metaverse Liquidity) sits at $816M, with a Token Market Capitalization of $2.3B, and has raised $50M from classic VCs. Moreover, The Sandbox, another popular Web3-based virtual world, has a GMV (or Google Metaverse Liquidity)of $612M, with a Token Market Capitalization of $3.8B, and has raised $93M from classic VCs.
Games such as Decentraland and The Sandbox have highlighted new revenue streams generated from Web3 experiences. Namely, these models include virtual real-estate (whereby users can buy, sell, or rent virtual land), infinite commissioning for creators (whereby creators are incentivized to continue developing content as they earn a percentage of the revenue generated from their creations), and play-to-earn (whereby users can earn rewards by playing games).
But gaming is not the only industry that stands to benefit from the adoption of Web3. As the technology matures, many other industries will likely begin to explore and implement Web3 use cases to create new value for their businesses. These include art, social media, entertainment, healthcare, fashion and luxury, and the public sector. In this section, we will deep dive into each of these industries to explore how they can benefit from Web3.
Art: The art industry is already experimenting with Web3 technology to create new experiences for artists and buyers alike. For example, NFTify is a platform that allows artists to mint their artwork as NFTs (non-fungible tokens). These NFTs can then be bought, sold, or traded on the open market. In addition to NFTs, Web3 can also be used to create virtual art galleries. These galleries can be used to showcase an artist’s work and provide a space for buyers to view and purchase artwork. On NFTs, Entrup states, “We need more “NFTs for Good” stories to help raise awareness for worthy causes, and not just shelling out cartoon PFPs for quick cash.”
Social Media: Social media is another industry that can benefit from the adoption of Web3. Twitter, for example, allows users to showcase their NFTs and NFT Profile Pictures to Twitter Blue members on iOS. The implications of this are two-fold. First, artists can use Twitter to showcase and sell their artwork. Second, buyers can use Twitter to find and purchase art. Social Media is also central to community building. “ Web3 brands have a community and not clients; when you look at RTFKT in 6 months, they generated over $1.5bn in gross merchandise value but decided they would keep only $300M for themselves and gave back millions to their community,” says Joel Hazan, Managing Director & Partner at The Boston Consulting Group (BCG) and Global Leader Pricing.
Entertainment: The entertainment industry is also beginning to explore the use of Web3 technology. Numerous events by big-name celebrities, such as Justin Bieber and Grimes, have been held in virtual worlds powered by Web3. For example, on November 19th, Justin Bieber performed a 30-minute meta-universe concert on the virtual music platform Wave. This allows a new level of engagement with fans and the ability to sell tickets, merchandise, and other items related to the concert.
Healthcare: Healthcare is another industry that can benefit from the adoption of Web3. The use of Web3 can help to create a more secure, efficient, and immersive healthcare experience. For example, physiotherapy will utilize computer vision, such as cameras, to measure the range of motion in injured joints and the patients’ recovery progress.
Fashion and Luxury: The fashion and luxury industry is also beginning to explore the use of Web3. For example, Hugo Boss released a TikTok challenge in which participants could win NFTs, and five distinct Boss x Russell Athletic NFT jacks with a physical duplicate might be obtained. The campaign generated 3.1M #Bossmoves videos and over 7.5B views. Estee Lauder’s “Clinique” collection hosted a contest for customers who were members of its loyalty program, with the opportunity to win free items for ten years and one of three versions of NFT art if they shared “stories of optimism” on social media. According to Sarah Willersdorf, Partner and Managing Director, Boston Consulting Group (BCG) and Global Head of Luxury, “In Luxury 3.0, the brands that will win tomorrow are those that invite their audiences in to contribute and play active roles within their community. Online communities are not just adjacent to the luxury experience: they are powerful multipliers.”
Public sector: The public sector is also beginning to explore the use of Web3. Web3 can make public sector processes exponentially more efficient and widen access to government services to those who need them. For example, governments can use Web3 to create digital identities for citizens. These digital identities can be used to access various government services, such as healthcare, education, and social security. In addition, Web3 can also be used to create digital voting systems that run on the blockchain. This would allow for a more secure and transparent voting process.
The Way Forward
“The bottom line is that we are moving towards a more immersive web 3.0 (even if we can only speculate what that will be like), and every beauty brand will need to have a virtual strategy. My message for brands who want to know what to do is to DO SOMETHING. Have a go at something that gets you into this world. I also advise companies to have someone whose job it is ( or part of the job ) to know and care about this,” said Sarah Willersdorf, Partner and Managing Director, Boston Consulting Group (BCG) and Global Head of Luxury. Web3 has very significant potential implications across a broad range of industries. To stay ahead of the curve, enterprises need to begin experimenting with and implementing Web3 technologies. By doing so, they will be able to create new experiences for their customers and increase efficiency and transparency. Lastly, as we approach this new digital economy, enterprises need to consider how they can use Web3 to create a competitive advantage.