Understanding the next era of advertising

In the next ten years, the metaverse is expected to sign on a billion users and eventually earn over $1 trillion in revenues.

This presents a massive opportunity for brands, marketers, and advertisers. Investment fund and crypto company, Grayscale, notes that the metaverse will enable new revenue streams via advertising, digital events, e-commerce, and hardware – and we believe that advertising probably has the least barriers to entry.

It is easy to envision and adapt digital advertising technology as it exists today for a VR world. The same programmatic principles can be applied, metaverse real estate could be treated as digital ad spots, and consumer data-based targeting mechanisms are already in place.

However, the dynamics of user engagement and spatial arrangement inside VR are completely different. When the metaverse does come to pass, it will be a jungle out there – here’s why.

Defining the Metaverse for Marketers

In the context of advertising and marketing, the metaverse can be defined as a persistent, 3D, and virtual space where users can spend their time and may be targeted with brand-related content and sales enablement tactics.

The closest analogy today would be social media, where users log in, engage with their friends, family, and peer network – and in the course of these interactions, they encounter brands, advertising, sponsored content, and calls to conversion.

Over time, social media has evolved to feature direct-to-customer stores where you can pay for products online and get them shipped to your address.

Similarly, the metaverse could have 3D “stores” where you not only view ads but can also trial products and make purchase decisions.

How Will Advertising in the Metaverse Work?

There are two ways to look at the metaverse opportunity in advertising. First, it is an additional channel in your marketing mix, just like you have a branded mobile app, banner ads on Google, an analytics-enabled website, and social media presence (both organic and sponsored).

The metaverse, too, will have its own unique ad formats that come with full marketing attribution so advertisers can track traffic and invest intelligently.

Second, the metaverse can be viewed as a new medium for storytelling. Apart from traditional ads like the ones that pop up on Google, Facebook, LinkedIn, etc., you can have immersive ad experiences that tell the brand story.

Interestingly, this isn’t a new concept. Ever since the rise and gradual mass adoption of VR headsets, brands have invested in sophisticated 360-degree videos for specific ad campaigns.

Gucci’s pre-fall 2017 campaign, for example, invited the audience to participate in a soul scene dance choreography from the 60s.

These are the two primary ways in which advertising would work in the metaverse – but they aren’t without their own challenges.

Key Challenges and Concerns: It’s a Jungle Out There

While companies have experimented with VR advertising before, the metaverse is a whole new ball game as it were. It aims for interoperability at an unprecedented scale and has the potential to engage users for prolonged periods of time.

Also, its decentralized architecture, new mechanisms of interfacing, and crypto-based economy present further challenges.

At least in the early years of the metaverse, advertisers could struggle with the following:

• Blurred branding boundaries – Since the metaverse is decentralized, companies may not be able to exert control over ad spots. You may find an influencer sporting items from two competing companies simultaneously.
• Replicating products in the real world – Prospective customers can engage in hyper-customization in VR. But when brands fail to deliver a similar experience in the real world, product engagement could actually fall.
• Content overwhelm – Constant video pop-ups, indistinguishable sponsored content, and repetitive ads are all too common in the digital world. Inside the metaverse, they take on an even more intrusive dimension and could cause sensory overload.
• Data privacy and ethical issues – In the metaverse, brands can see a version of your identity in the form of a 3D avatar. But does the avatar denote explicit consent? Can advertisers, therefore, target ads based on someone’s appearance in VR? These issues are yet to be ironed out.

5 Opportunities for Advertisers

That said, the industry is mostly bullish about advertising opportunities in VR due to the promising possibilities that it enables. Brands will be able to gain from:

Virtual reality billboards

Early advertising in the metaverse will mostly comprise virtual reality billboards. They are easy to design and insert into existing app experiences.

For example, when you are in a Horizon Workrooms-like VR workspace, you might be able to loom outside the window and see a billboard depicting your favorite snack brand.

Sponsored content in social spaces

The next to transition will be sponsored content. Our social media feed comprises a mix of organic and sponsored content, and this can be replicated in VR spaces meant for multi-party interactions. Instead of consuming content alone, you can share ad experiences with your peer network.

Product placement in VR games

As more and more VR games are built for the metaverse, product placement is inevitable. This strategy was already used to great effect in Pokémon Go, where sponsored locations popped up to invite footfall, using the game’s AR creatures as a lure.

Branded elements could act as a subtle but noticeable overlay on top of game surroundings.

A new generation of influencers

The metaverse could feature an interesting new technology called digital humans, who are essentially AI-powered humanoid bots in 3D. In the future, brands could design their very own influencers from scratch and transform how ads are pushed via influencer marketing.

Immersive native ad experiences

Finally, native VR advertising holds the most promise for marketers in the metaverse. Brands can create full-scale experiences that weave a story, allow users to interact with their product, and eventually make a purchase – also online, without leaving the metaverse.

A good example is Nikeland on Roblox, a VR gaming platform and metaverse company. Nikeland allows you to engage in gameplay and organically explore the company’s range of shoes, apparel, and accessories in VR.