What marketers need to know

Recently, a student of mine at the University of Oregon introduced me to a digital clothing app that allows users to house a “digital closet.” Curious about the value it provides, I downloaded the app and started experimenting. At first glance, it looked like a Snapchat lens, where you can overlay virtual clothes, jewelry, hats and other fashion accessories over your photo via your phone’s camera.

The app charged a fee for users to upload a photo of themselves which would then be altered to include the digital fashion element so they could post it on social media. This is worthless to me – as I can easily change a picture of myself or take a picture through an AR lens. Most social apps these days offer similar features.

However, after more exploration, this digital closet app sold the idea of ​​being able to wear these digital fashions on virtual dates and in virtual meetings. In my view, that’s how I envision a truly digital wardrobe—one that you can wear virtually, wherever you are. To get this option, you had to buy an NFT.

Excited by the idea of ​​using a digital pink feather boa during my next online course, I eagerly attempted to purchase a cool NFT. After an investment of several hours and dollars, I am still unable to use my digital fashion in a Zoom meeting. This possibility does not even exist. So, what gives?

NFTs just aren’t there yet

Let this story be a cautionary tale. Without the right strategy, you will annoy your audience and may never win them back. There have been many headlines announcing the failure of NFT slips, Porsche being one of the latest victims. (Yes, Porsche!) This is just the start of the NFT problems.

A recent court decision has suggested that NFTs are securities and must be treated as such, with oversight by the SEC. The same court ruling now holds the brand liable for infringement as a result of their efforts to reduce the friction of purchasing NFTs and provide a better user experience.

While NFTs can be risky for marketers, the metaverse can still offer brands opportunities to engage audiences, share digital goods, and build community. And if there’s only one thing I want you to take away from this article, it’s NFTs, the Metaverse, and Web 3.0 is not it the same.

Dig Deeper: What is the Metaverse and How Can We Get There?

If they are not the same, how are they related? Why do the media, agencies and industry experts keep lumping them together?

These terms are often confused due to a lack of historical perspective and the belief that all ownership of digital goods begins and ends with an NFT. This is not the case. You can own a digital object, digitally land in the metaverse and not come close to an NFT or the blockchain. Let me try to provide simple definitions of these terms through a marketing lens.

If you’re old like me, you remember the promise of Web 2.0 and the excitement of turning passive Internet users into active creators. Tools like WordPress, YouTube Studio and others allowed everyone to create web content. Social platforms allowed communities to come together like never before and offered a framework for those communities to share product reviews and recommendations.

Smart marketers were not only excited about these innovative technologies, but they were also quick to adopt them themselves and start exploring their new capabilities. I see Web 3.0 the same way.

The promise of Web 3.0

The common definition of Web 3.0 (or Web3) often includes technologies such as blockchain and cryptocurrency. However, I choose to define Web 3.0 more broadly. The future of the internet is spatial and I see Web 3.0 as referring to this new 3D version of the internet.

Immersive spaces do not rely on the blockchain or cryptocurrency, and it is misleading to suggest otherwise. I also feel that part of Web 3.0 is moving users from creating 2D elements like images and videos to creating 3D content.

Whether this 3D content lives on a decentralized network is yet to be determined. To summarize, Web 3.0 is a broad term that refers to the future of the web as spatial, which may include new technologies such as NFTs, blockchains, and cryptocurrencies.

The metaverse usually refers to virtual spaces where users will spend time. Here, the promise of Web 3.0 will come to life and provide the infrastructure and framework to support these interoperable and immersive spaces. I think the metaverse exists, but it’s an ambitious vision of what we can achieve in the future. We all have a role to play in shaping it. You can read my take on how we get there in my Manifesto for the Creators of the Metaverse.

Today we have a network of private clubs or walled gardens (I would call “virtual worlds”). They have different languages, rules and currencies, making it difficult to navigate from one community to another.

This also challenges brands that want to build a community in one of these immersive areas. Just as you carefully choose where to place your media spend to reach your target audience (ie CIO.com, Wall Street Journal, CNN, USA Today, etc.), you must hunt for your audience across these virtual worlds.

You can identify the right platform with the help of this report, which shows the size, demographics and technology behind all the major virtual worlds, including Roblox, Second Life, Decentraland, The Sandbox and hundreds of others.

Digital ownership is not new

So now that we have a working definition of Web 3.0 and the Metaverse, how do NFTs fit into this mix of emerging technologies?

A non-fungible token (or NFT) is defined by Merriam-Webster as “a unique digital identifier that cannot be copied, replaced, or subdivided, that is recorded on a blockchain and that is used to certify authenticity and ownership.” If we remove the blockchain part, then the virtual world of Second Life has been offering NFTs for over a decade.

Second Life was forced to address the issue of digital ownership back in 2006 when content creators on that platform sold their virtual goods. Initially, the Second Life platform did not have a framework to prevent users from copying virtual objects such as clothes, skins, furniture and buildings. The creators of this content could not “own” their creations. The developers quickly created a system of permissions that allowed a content creator to specify whether the item could be copied or transferred to another user.

If the creator wanted to make a one-of-a-kind thing, they could. But it was more common to sell multiple versions of the item that were not transferable, more like buying an off-the-rack item of clothing. I could only use that item if I bought it from the creator. This system allowed many Second Life designers to earn significant dollars in real life, with the virtual world’s first millionaire, Anshe Chung, being announced during that time.

Does it solve a real problem?

One of my biggest problems with NFTs is that I don’t see the problem they solve. You can create digital ownership without NFTs. Their value is positioned as allowing true ownership of a digital good through a decentralized platform rather than relying on infrastructure provided by a large technology company. And this may be true, but right now that benefit is exactly what makes them risky and difficult for consumers to engage with.

I’ve had a digital closet in Second Life since 2006, and I still “own” every item in that closet. I can even use them on the platform today. This is an amazing statement, given the changing landscape of the metaverse and immersive worlds over the past 20 years. I predict that NFTs as we know them today will disappear and this technology will transform into something truly valuable – but not for years to come.

The promise of the metaverse, Web 3.0 and NFTs is a world where I can wear every item in my digital closet anywhere. The promise includes immersive spaces for work, for play and even for navigating around the real world using AR glasses – and a persistent and interoperable digital layer that interacts with real and virtual worlds. This vision will become a reality. We’re just not quite there yet.