There is a well-known saying when buying property that the three most important things to consider are “location, location, location”. metaverse
This mantra now appears to apply in the so-called metaverse, a virtual universe that some are hailing as the future of the internet.
This is an immersive, online space where cartoon-like 3D representations of ourselves, known as avatars, can walk around, talk, and interact with others.
It is typically accessed by wearing a pair of virtual reality (VR) goggles that are linked to your computer.
The company formerly known as Facebook is so convinced that the metaverse is the internet’s future that it changed its name to Meta last year. Meta and its CEO, Mark Zuckerberg, believe that many of us will eventually work, play, and shop in the metaverse. Or, at the very least, our avatars will.
While this may sound fantastical to some, an increasing number of businesses are purchasing space in the metaverse in order to set up shop there. Adidas, Burberry, Gucci, Tommy Hilfiger, Nike, Samsung, Louis Vuitton, and even banks HSBC and JP Morgan are among these companies.
The question for such businesses, however, is where they will locate. The metaverse now has around 50 different world providers, with the most popular ones including The Sandbox, Decentraland, Voxels, and Somnium Space, as well as Meta’s own Horizon Worlds.
Retailers and other investors must wager on which of these will emerge as the dominant force in the metaverse, attracting the most visits from our avatars. And which other worlds will vanish into obscurity?
Andrew Kiguel, a Canadian entrepreneur, is betting on Decentraland. Last year, he spent $2.4 million (£2 million) in cryptocurrency (you must use cryptocurrency to make a purchase in the metaverse) to secure a portion of space in Decentraland’s dedicated fashion retail area.
Mr. Kiguel, the founder of cryptocurrency investment website Tokens.com, claims to have already held a fashion show and intends to rent out his space to fashion companies.
The idea behind such retailers is that your avatar can visit a metaverse clothing store and purchase items that will be delivered to you in the real world. Alternatively, you could buy a new piece of computerized clothing for your avatar.
While Mr. Kiguel supports Decentraland, he warns that not all metaverse worlds will be successful. “It takes me back to the early days of social media. Like social media, the metaverse space will have some big winners as well as many niche metaverses that succeed “he claims
Adrian Cheng, a Hong Kong businessman, has decided to invest in The Sandbox. He is the CEO of the property and retail group K11, and he recently paid an undisclosed sum for an area in that metaverse world.
“We’ve invested heavily in start-ups and would like to build a pavilion where entrepreneurs can showcase their real-life success stories,” he says.
Yat Sui is a co-founder of Animoca Brands, which owns The Sandbox. He claims that “the network effect is what makes a [metaverse world] location powerful.”
This refers to how busy it is now and how busy it can become. “The more people who use something, the more valuable it becomes,” Mr Sui says.
But how much does it cost to buy a plot of land in the metaverse, and what do you get in exchange?
Each plot, known as a “land,” at The Sandbox is 96m x 96m long and wide, with a height of 128m. You can buy just one or a group of them to form a “real estate.”
Prices vary greatly depending on whether or not the property is in a popular area. The current average price for a Sandbox lot is around $2,300, but someone was reported to have paid $450,000 for an estate next to rap star Snoop Dogg’s Sandbox mansion late last year. While the plot’s size was not disclosed, the price of each land was said to be significantly inflated.
Meanwhile, according to one report published earlier this year, total retail sales in the metaverse will exceed $500 million by 2021.
According to Scott Galloway, a marketing professor at New York University’s Leonard N Stern School of Business, the metaverse is already a gold rush, and there may be financial casualties.
“What we are currently witnessing is a speculative bubble around virtual real estate and other metaverse assets,” he says. “When speculative economics emerges in a space, they tend to dominate and drive valuation and interest until the bubble bursts.”
Prof Robert Stone, chair of interactive multimedia systems at the University of Birmingham in the United Kingdom, agrees.
“Firms can really only be confident about the location of their purchase – and that location’s future value to the activities they intend to pursue, and the clients they intend to attract – if they first conduct adequate research,” he says.
“Purchasing virtual real estate ‘on spec’ or solely based on the over-hyped marketing ploys of online vendors is a sure-fire way to disappointment and wasted funds. Con artists exist, and because the market is largely unregulated, mistakes can be costly.”
Prof Stone also wonders how long most people will be willing to wear VR goggles. “How long will VR tech wearers be able to stay in the metaverse at one time?” he wonders. “Will the health and safety issues associated with VR wearables, which are unlikely to be resolved for a long time, actually harm the reputation of the metaverse?”
Katie Witkin, director of marketing at Everyrealm, a metaverse investment firm, is unsurprisingly far more optimistic. “The metaverse is a space where [retailers] can create experiences, build, and be creative without being constrained by physics,” she explains.
Prof Galloway goes on to say that the winning metaverses will be jam-packed with everything that businesses have to offer in the real world. “They will create entertaining experiences, outrage and division, and useful tools – the same things capitalists create in every marketplace.”