A letter from our founder and CEO, David Jones
January 14, 2022
THE METAVERSE IS A GIANT OVERHYPED NOTHING BURGER WITH NO FUTURE
…is a view held by many people. And the cynics are divided into two camps. On the one hand the technophobes who can’t get their heads around virtual worlds, virtual products and why anyone would want to live in the metaverse, and, on the other hand, the technologically savvy who think it’s being massively overhyped and won’t actually become a thing of any real scale. And, it’s fair to say that when it comes to hype curves, it’s broken all records.
It’s also led to a flurry of companies turning their brand or product into an NFT and putting it on a marketplace like OpenSea for no other reason than it’s possible. But a bad idea doesn’t become a good idea just because it uses the latest technology!
Beyond the hype, I personally believe the metaverse is going to be the biggest and most exciting thing I’ve seen in my career to date. In many respects, it reminds me of the late nineties and the ‘arrival’ of the internet. In 1998, we launched Australia’s first digital agency. We had no idea how important the internet would go on to become. And even those of us who were believers were of the view that it was unlikely we’d ever watch videos on our computers as the technology was just too slow and would never allow it. (This was Web1 and it was all about portals and websites with hundreds and hundreds of pages).
The reaction from many people then was that it was hype and that “their business would never be on the internet.” This was all compounded by the dot-com boom, which created huge valuations for many companies that just weren’t worth them. And people mistakenly confused the overhyped valuations of dot-com boom companies – which had no future – with the audience growth and usage of the internet – which had an enormous future.
You can see this same pattern playing out here. As a recent report1 on the metaverse said, “If 2022 is 1999, crypto is Pets.com and the metaverse is the internet.”
So, as we head into the new metaverse world, how is it all going to play out and what is going to happen?
1) Anyone who tells you they know how it’s going to play out is lying
Firstly, the one thing I think we can be certain of is that no one knows how it’s going to play out. We’re at the Palm Pilot or Apple Newton phase – we all owned Newtons and Palm Pilots but in reality, they were pretty crap. A few years later someone came along with the iPhone and it changed the world. The same thing is going to happen again here. What we are seeing is the early promise and lots of excitement but until ‘the iPhone’ is invented, the full potential won’t be realized.
But even that isn’t going to be enough.
2) It’s the ecosystem that grows around the metaverse that will dictate how much it will change the world
In speeches, I sometimes cruelly show a video of the then Microsoft CEO, Steve Ballmer, being interviewed the day after Steve Jobs had unveiled the iPhone at Macworld. Ballmer is instantly dismissive of “the most expensive phone in history” – “$500 without a plan” – and the fact that it doesn’t have a keyboard means it’s “no good for business users” and “not a very good email machine.”
The three points I make when I share this clip are: firstly, everything is now recorded and will live forever so when someone shows you something and asks your view, be a little less categoric and dismissive. Secondly, while he looks stupid now, the majority of people at the time thought Ballmer was right. When Apple unveiled the iPhone in January 2007, its market cap was $72BN (a far cry from today’s $3 trillion) and on the back of flops such as the Newton, it was far from obvious that they would succeed.
But thirdly, and the critical point, is that the reason the iPhone changed the world was the ecosystem that grew around it. The iPhone itself was just a phone with a camera and an iPod built in. Useful but not game changing. What made it so incredible was the ecosystem that grew around it from Google Maps to Uber to Airbnb to YouTube, Facebook and Instagram, to the ability to do pretty much whatever you wanted from booking flights, rooms, restaurants to buying anything you wanted. All in your pocket, at any time, wherever you were.
And it will be the same again with the metaverse. The ecosystem that grows around it will dictate whether it’s just a few hundred million gamers sitting at home wearing VR headsets or the most important technological revolution of the 21st century.
As we come to the end of the Web2 revolution that Apple enabled, there are key lessons and key differences we will see between Web2 and Web3.
3) Web3 will be “We the People”
In Web2 the brilliant new products and services and the excitement of the mobile revolution meant that for a long time, people were distracted from what was really going on. In Web2 it wasn’t all free after all, duh!!!! – the big platforms became incredibly valuable and made a huge amount of money from the data and creativity of the people using them. You were the product!
Yes, of course ‘you the people’ could post and share your content and create and connect, but hey, ‘we the platform’, we’ll keep all the money. And we’re seeing today the backlash against that. The missteps of the big platforms in Web2 should be and in my opinion will be, a lesson for Web3. But wait! I hear you say, wasn’t that the exact promise of Web2 as well? Don’t I remember ‘You’ being the Person of the Year on the front cover of Time Magazine in 2006 because “You control the Information Age”? That’s 100% true, but back then we were a little naïve. The big difference today, as we’re seeing from the huge backlash, is the enormous suspicion people have of the big players.
That’s not to say that in the decentralized world of Web3 there aren’t going to be very big, very valuable, very dominant platforms – there will be. But the ones that become the biggest and the most valuable will, in my view, be the ones that let people make money out of their creativity, their content, their products, and their data. Web2’s platforms became very valuable by keeping all the money for themselves. Web3’s platforms will become very valuable by making a lot of money for the people on the platform. It is from here that we are likely to see the next generation of trillion dollar companies emerge.
4) What’s the hardware of the metaverse? The death of the mobile phone and the arrival of glasses
Our first metaverse investment (although it wasn’t called that then) was in Niantic, the creators of Pokémon GO and more recently the Lightship platform, who are one of the world’s leading metaverse companies today.
I met John Hanke, the Niantic founder, in the summer of 2015 as he was spinning the company out of Google and I was immediately blown away by his brilliance and vision. A few weeks later we became one of Niantic’s very earliest external investors, a decision that will make me happy for the rest of my career. Back then, Pokémon GO was still a year away and everyone, absolutely everyone, was convinced that VR was going to be the next big thing. John said something that, at the time, struck me as very true and has so far held true, he said that he believed AR would get more traction than VR because everyone already had the device and didn’t need to buy a new one. Twelve months later, 1 billion people had played Pokémon GO and John’s hypothesis had the data that proved he was right.
Clearly, the VR headset experience is getting better and better. And some of the world’s biggest companies are investing billions in trying to make those experiences exceptional. But above and beyond the quality and technology challenges, they still face the human one – that they cut people off from the real world (although at least that means you can’t see yourself and how ridiculous you look when you’re wearing the headset!).
I think instead of it being VR headsets that are the hardware of the metaverse, it will be glasses. Glasses that will allow you to do AR, VR or just plain reality. It’s going to take a while for these to be fully functional, but if and when they are, it’s likely that we’ll see the death of the mobile phone. And also likely that we’ll look back and think it odd we had to totally monopolize the use of one of our hands for our phones, in much the same way as it now seems odd there was only one phone in a house that was attached to the wall by a wire and that everyone in the house used the same phone and had the same number.
Will it be glasses or will it be contact lenses? At CES this year there were a number of contact lens products unveiled. My personal view is that glasses will still win out both in terms of the speed to market for the technology (the single biggest issue facing the iPhone is still battery life and it’s hard to see where the battery goes on contact lenses) and also in terms of ease of changing people’s behavior. Almost everyone has worn a pair of glasses or sunglasses at some stage, most people haven’t worn contacts and some are a little grossed out by the idea. But the one thing about technology is that it is hard to predict exactly what will happen – or as Bran Ferren, the former head of R&D at Walt Disney Imagineering once said: “You can predict technology but you can’t predict human behavior.”
5) Owning virtual products isn’t dumb – it’s the future (and present)
How quickly will we see these glasses take over the world? Who knows. Five to ten years is my guess. But the thing we will see arriving like a freight train, and already are, is the rise and rise of virtual products. Adroit Market Research predicts that the virtual goods market will be worth $189BN by 2025. I think it could be a lot more than that.
Nike’s acquisition of RTFKT at the end of last year reminded me very much of Facebook’s acquisition of Instagram. I remember Mark Zuckerberg coming to a Facebook Client Council meeting in 2012 and explaining why they spent $1BN on a start-up (Instagram) that had no revenue. Most people thought it was the most overpriced deal in history back then. Today, most people think it was the biggest bargain ever in tech. It’s not impossible that RTFKT will one day go on to be worth more than Nike. Or at the very least, play the critical role that Instagram has played for Meta.
So why am I so convinced that virtual products will be huge?
For those of you who don’t agree or don’t see it yet… most of you think Instagram or TikTok are completely normal parts of everyday behavior. Imagine trying to explain to your grandparents that in the future people would take photos of their lunch, post them to social media and their friends would comment and like. It would have seemed as ridiculous as virtual products seem to some people today.
Back to why I think virtual products will be huge.
Firstly, the world is increasingly living online. There are now 4.55 billion people on social platforms2 and 2.96 billion people worldwide gaming3. This means a dramatically larger number of people see you online and in digital and virtual worlds than in the “real” world. The new red shirt you bought might be seen in real life by the five people you’re having dinner with on a Friday night, but it will be seen by hundreds or thousands or, depending on who you are, millions of people online. People are increasingly seeking a rare and unique way to represent themselves in future metaverses. Personal identity is increasingly digital.
Secondly, it’s generational. Your definition of what’s real world and what’s not depends very much on how you live your life. What’s interesting is those under 18 who are spending the most time in digital worlds don’t actually call it the metaverse – it’s just how they live their lives and it’s their world. A quarter of 12-15-year-olds have daily interactions with people they only know through their online games4. In a world like this, owning digital and virtual products makes a lot of sense.
Thirdly, Second Life, which – let’s face it – was terrible, said in 2013 that over the previous 10 years $3.2BN in transactions for virtual goods had been exchanged between its users5, so if something that bad could do that well just imagine how big it’s going to be when the metaverse experience is brilliant. Or another example, Fortnite is probably one of the world’s largest clothing brands given the billions of dollars of virtual “clothes” it sells every year.
Finally, as the threat and impact of climate change become bigger and bigger every year, the carbon footprint of the products we buy and own will be under greater and greater scrutiny. The carbon footprint of the Gucci handbag you bought in Roblox is much much smaller than that of the one you are carrying in the real world.
Luxury brands are badge brands. Status symbols. Scarcity and rarity are what create their value. FOMO is their currency. But as the planet is increasingly impacted by climate change and the wealth of the 1% grows and grows, further dividing the world, and we fail to deliver on the UN Global Goals – there’s a generation for whom the badge they want to wear is not one of shameless conspicuous consumption but one of doing good and trying to make a difference.
Now don’t get me wrong, this doesn’t mean they won’t want the latest cool, hard-to-get product drop. They will. But the exclusivity can come from how much good a product does. And products will be judged on the positive impact they have on the world in the future vs the negative impact their production had on the world in the past.
6) The metaverse will turbocharge purpose
This leads to my next point. The metaverse will turbocharge the movement from profit to purpose. I wrote my book Who Cares Wins: why good business is better business on the subject of purpose more than a decade ago, before it became so fashionable.
Going back to the generational point, there’s an entire generation who are now adults, and who are wired differently. My day job is in technology but my night job is as the co-founder of One Young World, the world’s largest charity for young leaders. Kate Robertson and I created it back in 2009 to empower brilliant young leaders to drive change in a world where our senior leaders were (and still are) failing us. We’ve given One Young World equity in the company to help further its work. Through One Young World we’ve had a ringside seat into the last two generations of young people and they think differently than previous generations.
They increasingly won’t buy your products if you don’t have a purpose beyond profit and they won’t work for you either!
It is this same generation who are the ones living more and more in digital and virtual worlds.
So, if you put those things together, it isn’t a very big leap to imagine that the brands they will want to own as their ‘badges’ will exist virtually, but will do real good in the real world.
And because the cost of creating these virtual products is so much lower than that of real world products, that saving means that the amount of money available to do good in the world is so much greater. That $10,000 virtual handbag can put 100 girls into school in a poor community in the world. And with that, the status of owning these brands can and will be so much higher.
Virtual Goods Matrix (Low is Good)
I predict that one of the world’s biggest luxury brands 10 years from now will only exist virtually. And will be obsessively focused on doing good in the world.
I also predict that we are likely to see brand TV campaigns being replaced by virtual purpose-driven products where, instead of the campaign being an expensive TV commercial driving the image of the brand, the new version will be brands selling virtual products in the metaverse that do good in the real world. In doing so, tangible actions will be what change the image and reputation of the brand, not some TV commercial overclaims.
There’s another benefit of the metaverse vs the real world. It has the potential to be much more inclusive. The real world is judgmental and not inclusive. The social media world is even more judgmental. The metaverse has the potential to allow everyone to be who they are or who they want to be. It has the potential to have no discrimination on the basis of color of skin or gender or sexual orientation or gender identity. It’s also just as easy for a disabled person to navigate, which is something that can’t be said about the real world. But going back to the point I made earlier about our naïve optimism around Web2, I don’t want to fall into the same trap here. There are bound to be issues and unintended consequences. But the start point is one where we have the potential to create a world that is much more fair and much more inclusive for all.
So, what could undermine this brave new metaverse? Climate. It’s been a huge area of focus for us at One Young World since we launched and since back in 2008 when we met our Founding Counselor, Kofi Annan, and led his TckTckTck Climate Justice campaign.
One thing that gives the metaverse and virtual products so much potential is NFTs.
And NFTs rely on the blockchain. And the blockchain relies on mining. And the climate impact of all the mining is potentially extremely negative. I don’t think we fully understand yet just how negative or how big that impact currently is or how negative it could be if the metaverse explodes. I’m struggling to get the actual data beyond soundbites, so if you have it, please share. We’re also unable at the moment to do the equations that say, for example, if in the future 25% of the world’s luxury products are not real but virtual, what is the carbon equation when you subtract the negative impact of the mining (to create the virtual products) from the positive impact of the savings from not producing actual products? We don’t know yet and it’s very early days.
We also don’t know yet the extent to which advances in technology will solve these issues.
But what we do know is it’s a very real threat to the metaverse and its future. If the metaverse stands for toxic impact on the planet in the way that the Web2 platforms have stood for toxic impact on people, it is unlikely to succeed and to go on to change the world.
So in summing up, what is the future of all of this when it comes to the world and the world of marketing?
Is it a dystopian Ready Player One future where we are living on our sofas with a VR headset permanently attached to our heads, cut off from the outside world, and we don’t go out anymore or have any real-world human contact, and where our lives are controlled by a giant super-platform that makes today’s platforms look like charitable organizations?
7) The future, and the future of marketing, lie at the intersection of the real world, the social world and the virtual world
I think the future doesn’t actually lie in any one world. But at the intersection of the real world, the social media world and the virtual world.
It’s all about mixing real-world and virtual and social experiences. In much the same way everyone today seamlessly blends their real world and social media worlds. In the metaverse, which some people call the multiverse for this exact reason, we will seamlessly switch between the three.
Now depending on your generation or your behavioral habits, this might seem either totally obvious to you or a ridiculous existentialist leap – more than 50% of people under 18 in North America are on Roblox and 63% of 12 to 17-year-olds use TikTok weekly6 – so this is already the world they are inhabiting, most brands just haven’t joined them there yet.
The brands, businesses, platforms and people that succeed in the future will, in my opinion, be the ones who are neither all-in utopian idealists preaching a metaverse-only vision of the future, nor Luddite naysayers who think it will never be a thing and that the idea of buying virtual products or having virtual friends is ridiculous. It will be the ones who are excited about and embrace this new world and realize that its power – and with that the future of the world and the future of marketing – lies at the intersection of the real world, the social world and the virtual world.
And I’ll leave you where I started. No one knows exactly how it’s all going to play out. But one thing is for certain – it’s going to be an incredible time to be in the marketing business and more importantly the world. And I couldn’t be more excited about the future.
David Jones is the founder and CEO of You & Mr Jones, founded in 2015, which on January 12, 2022, changed its name to The Brandtech Group.
- 1 Clocktower Group, All Along the Clocktower, January 2022
- 2 Datareportal, Digital 2021 October Global Statshot Report, 21 October 2021
- 3 eMarketer, Digital Gamers Worldwide, 2015-2024, 19 October 2021
- 4 Ofcom, Children and parents: media use and attitudes report 2020/21, 28 April 2021
- 5 Linden Lab, Ten Years of Second Life, 20 June 2013
- 6 Forrester, Weekly Usage of TikTok Surpasses Instagram Among US Gen Z Youth, 18 November 2021