If you participate in online gaming, either on a game console, mobile device or PC, it’s very likely you’ve already invested in the virtual economy.
The virtual economy is an emergent economy that exists in a digital virtual world, where virtual goods are bought, sold and exchanged using virtual currency, typically in the context of an online game or social platform.
This article will look at the ways brands are investing in the virtual economy.
Online Gaming Just Got Real
A 2021 report by Statista revealed that by the end of 2025, the market value of in-game purchases is projected to surpass $74.4 billion.
In-game purchases are nothing new. You’ve likely seen them mentioned when adding apps or games to an Amazon Firestick, smartphone or web browser. The fact that in-game purchases equate to charges on a credit card invoice has been the consternation of many a parent for years now.
The difference is that now, you or your children may be purchasing the online equivalent — or virtual twin — of the products and services of real-life brands. This broad definition may include the purchase of a package of “hints,” “diamonds,” “weapons,” “clothing,” “land,” “experience points” or any of the infinite items available within the virtual world of games.
Virtual worlds are still considered to be a part of the gaming industry, but they are now moving into territory that’s far beyond Pokemon Go or even Roblox (which is also a metaverse with its own virtual currency, called Robux). Complete virtual worlds that are not limited to the laws of physics, and may represent real locations on the earth, are already in use.
Noble Drakoln, co-founder of Bandroyalty, a music NFT project, and founder of WarePlay Games Inc., a play-to-earn NFT gaming company, spoke with CMSWire about the intersection between In Real Life (IRL) and virtual worlds.
Drakoln said the virtual economy is not a new concept and that corporations have been figuring out ways to monetize cyberspace since as far back as when the movie “Tron” was released.
“Our entire world has been centered around the careful curation of our digital identities,” he said. “In fact, you would have to say our digital lives are more robust than our physical lives. People have more adventures, via video games, more friends on social media and know the intricacies of people’s lives they have never met by watching shows on YouTube.”
As people’s digital identities become more important and real to them, brands are finding ways to monetize the digital worlds they inhabit. Drakoln added, “So the logical extension is that now companies are combining this robust digital identity with income streams via GameFi or play-to-earn and digital real estate. They have to keep pace with people becoming aware of their digital strength and the expression of them attempting to find a synergy between ‘IRL’ and digital personas, who are oftentimes more real than the actual person.”
Related Article: How Retail Businesses Should Prepare for the Metaverse
Virtual Malls, Buildings, Trees, Clothes and More
The virtual economy includes the buying and selling of virtual real estate in metaverse worlds, and that virtual property may become the home of malls, shopping centers, nightclubs, apartments, homes, movie theaters, arenas — the virtual sky is the limit.
What’s more, the owner of such virtual land may be able to sell or rent part of the virtual properties they own to others. Additionally, many brands are now buying virtual real estate in various metaverse worlds to create destinations that are attractive to their target market.
Corey Walters, founder and CEO of Here, a vacation rentals investment marketplace, spoke with CMSWire about how brands are using virtual worlds. “Buying and developing digital land helps companies connect with their target market in a futuristic setting,” said Walters. “What’s great about this virtual world is that real-life people can explore a digital reality that takes them to museums, art installations and experiences they may not have access to in the physical space.”
Walters is excited to see brands embrace the idea of virtual spaces and believes they will enable customers to experience brands from a unique perspective. “In doing so, brands are eliminating the FOMO experience many users feel in real life and instead, invite everyone to the party.“ These branded virtual spaces enable customers to interact with their products and brick-and-mortar storefronts without leaving the comfort of their homes.
Other brands are investing in digital-only assets that are to be used exclusively by digital avatars. Direct-to-Avatar (D2A) is an emerging business model in which products are “sold” directly to avatars (D2A) or digital identities in virtual worlds.
Some merchants, such as The Fabricant, sell digital-only fashion as NFTs that can be designed, traded and worn by avatars in the metaverse. The Fabricant is said to be “the digital fashion house leading the fashion industry towards a future of digital-only clothing, which operates at the intersection of fashion, gaming and blockchain.”
Virtual Real Estate Is Already Big Business
The Sandbox Game is a user-generated blockchain-based game in which users can buy land (via the OpenSea NFT marketplace) and then monetize that land by renting, selling or populating it with storefronts, apartments, etc.
Sandbox LAND on OpenSea ranges in price from 1.7 ETH ($5,011) to 17,000 ETH ($51,013,608). In the Sandbox, a LAND “parcel” is around 300 square feet in the virtual world.
Pretty much everything seen in The Sandbox is available for purchase as NFTs using Sand coins, the platform’s own virtual money, which users can acquire with normal currency. NFTs available for purchase in The Sandbox include virtual real estate, signage, artwork, avatars, animals, plants and practically anything else:
The Sandbox is just one metaverse in the omniverse. Many others exist, such as Viveverse, which is a metaverse created by the manufacturers of the Vive VR headset. Similar to The Sandbox, players in the Viveverse are able to purchase assets as NFTs:
Others, such as the Tilia.Earth metaverse, allow users to purchase virtual properties as NFTs, which are digital representations of actual locations on earth.
Tilia.Earth is billed as “both a virtual property exchange platform and a social experience. We are creating a business community of people all around the globe.”
Another metaverse, Decentraland, has been around since 2020 and is made up of 90,000 parcels. Land can be bought and sold as 50-square-foot land parcels using its own digital currency, called Mana tokens, which can be bought, sold and traded on most cryptocurrency exchanges. Users that own enough plots of land can combine them to create a single “estate.”
The Metaverse Group, a leading virtual real estate company, bought an estate in Decentraland in 2021 for approximately $3.2 million in Mana tokens. The Metaverse Group’s publicly traded company, Tokens, invests in Web3 assets linked to the metaverse, DeFi, NFTs and gaming.
Other groups, such as IQ Protocol, enable individuals, game developers and brands to rent properties (both NFTs and Fungible Tokens) to others, as well as rent tokens that allow users to subscribe to software, media, entertainment and other services.
In March of 2022, to promote its 2023 Integra, Acura launched Acura of Decentraland, which it described as “the first-ever virtual auto showroom in the metaverse.” Decentraland users are able to investigate the car’s new features, see the latest Integra wearables, play the Acura racing game and experience other immersive rooms.
Acura isn’t the first to create a virtual brand space in Decentraland. In 2021, Sotheby’s created its own virtual auction house in Decentraland as the primary portal for its NFT sales. In June 2021, metaverse investment firm Republic Realm spent $913,000 on 259 parcels in Decentraland.
Michael Gaizutiz, founder and CXO of RNO1, a branding and digital design agency, spoke with CMSWire about how brands are able to determine which metaverse is best to invest in — a daunting task, as there are hundreds of options.
“For brands, investing in the metaverse is an opportunity to reach a bigger audience, expand their digital footprint and possibly a new profitable revenue stream,” Gaizutiz said. “When a brand considers each platform, they must strategically pinpoint which virtual world best aligns with their design, users and ultimately the overall experience the platform embodies and offers.
“If you’re new to the metaverse, it’s important to do your diligence and log into the platforms you’re considering investing in and explore how that platform works.”
Related Article: Current and Future Uses of Digital Twins Across Industries
Redeeming NFTs for Physical Items or Access to Events
Brands can connect NFTs that represent digital goods with physical goods or services or even access to events like concerts, conventions, lectures, conferences and more.
Specialized protocols such as the Boson Protocol can resolve the challenge of digital-to-physical redemption “by representing physical items as NFTs which can be redeemed in the real world without the need for intermediaries.” The Boson Protocol is for creators, communities and brands and allows people to “trade physical products for on-chain value by tokenizing a commitment to exchange as an NFT decentralizing specific functions of ecommerce platforms through smart contracts.”
What does that mean, exactly? Brands that offer digital assets for purchase in virtual worlds can enable those assets to represent entry to conferences, access to special areas of websites, downloads, software or services, providing real-world value.
The Challenges of Virtual Goods
Matthew Lobel, founder of PLAYN, a play-to-earn blockchain gaming provider, spoke with CMSWire about what he sees as the main challenge that brands face when it comes to investing in the virtual economy. With very few exceptions, virtual goods purchased by customers cannot be used anywhere except for the metaverse or virtual game in which they were purchased.
Lobel described the problem using an analogy of a virtual car: “Somebody sells you a beautiful virtual collectible car and they tell you ‘It’s $1,000, but it’s got to stay in your garage.’ Technically, they’re pointing to an address on the blockchain, saying now you own that address on the blockchain and it connects with this piece of art. You now have a beautiful spot on the blockchain that you’ve paid $1,000 for, but you can’t take it out of your garage, because it does not work on anybody else’s roads or in this case metaverses.”
It’s a valid point — even virtual goods sold as NFTs, which may be transferred to other blockchain networks, can thus far only be used within the metaverse or virtual game in which they were purchased.
Roblox is unique in that items purchased in the Roblox Avatar Shop can be used in any of the thousands of games that exist in the Roblox metaverse — but they cannot be used in The Sandbox, Decentraland or any other non-Roblox metaverses.
The challenge, which is something many metaverse developers have discussed, including the Open Metaverse Interoperability Group and Outlier Ventures, is to create a set of standards for creating metaverses or virtual worlds, avatars, land, etc. (such as Disney Pixar’s open source Universal Scene Description (USD) file format, which is used in NVIDIA’s Omniverse).
Once that’s been established and incorporated into all metaverses, those who buy NFT items can use them in any standardized metaverse, rather than just the one where they purchased the NFT.
Conceptually, that’s how it’s supposed to work. In reality, however, one can’t purchase a piece of NFT artwork on OpenSea and then put it on the wall of their virtual house on Decentraland.
Many brands have already invested in virtual land, created digital twins for use in various metaverses and offered NFTs that can be bought, sold and traded by users.
While the dust is still settling and industry standards for the metaverse are still being worked out, now is the time for brands to begin considering how they wish to invest in the virtual economy.