Virtual Beers and Digital Orgasms_ Welcome to the Age of Metaverse Commerce

Virtual Beers and Digital Orgasms_ Welcome to the Age of Metaverse Commerce

Executives from Adidas, Budweiser, Clinique, NARS Cosmetics and other major consumer brands explain why the metaverse is "seismic" for their companies.

Guess what holiday falls on July 31? That would be National Orgasm Day. That was the occasion for French cosmetics brand NARS to unveil NFTs of its most iconic product line - lipstick and blush called "Orgasm."

Last summer, NARS teamed up with three artists (DJ Nina Kravis, Azede Jean-Pierre and Sara Shakeel) to create a series of non-fungible tokens. "These works were inspired by Orgasm," explains Dina Fierro, NARS' vice president of global digital strategy. "They were inspired by the concept, the biological response and, of course, the product in its sensory nature."

The NFTs were called "Take Me," "Consume Me" and "Captivate Me." In one, a woman's lips are opened to reveal a tidal wave. In another, a peach-colored liquid (the color of Orgasm products) moves rhythmically and seductively back and forth. As NARS wrote in its Instagram post, "There's an orgasm for everyone."

The success of these NFTs encouraged NARS to make another foray into the metaverse by adding seven custom designs to Animal Crossing, Nintendo's open-ended virtual world. Fierro says that when it comes to new technology, beauty and fashion brands have traditionally been the "laggards," slow to embrace e-commerce and social media. But not with the Metaverse.

"What I'm seeing in the industry," Fierro says, "is that people are determined not to be left behind."

That now seems to be true of the entire economy, and the list of "companies that entered the Metaverse" feels longer than the list of "companies that did not enter the Metaverse." (The "metaverse" is the impossible-to-define concept of a vast digital world, which can mean a blockchain-based environment like Decentraland or even augmented reality at Walmart).

Just a few examples: Sotheby's (BID) opened a gallery in Decentraland. Adidas partnered with The Bored Ape Yacht Club to launch "Into the Metaverse" NFTs. Gucci created an art installation in Roblox (the virtual world of user-generated games played by 50% of teens under 16). Coca-Cola (KO) designed "friendship NFTs" that are "reimagined for the Metaverse." 19 Crimes, the wine label, uses augmented reality so that when you scan the bottle, you see the "criminals" telling a story. Balenciaga brought haute couture to Fortnite. Even SPACs are entering the metaverse. And so on and so forth.

But in recent months, something has changed.

"Last year, a lot of [companies] were doing these things for PR reasons, and the earlier you were in, the more PR pop you got," says Cathy Hackl, a marketing consultant who specializes in the metaverse. "Now the novelty is gone. You do get PR pop, but the effect is more muted. Companies are really focusing on the long term." Companies are no longer just dabbling in metaverse, Hackl says, but are "looking at the most holistic metaverse strategies."

Nike (NKE), for example, has filed a number of trademark applications related to the metaverse. The sneaker maker has also posted metaverse-related jobs, such as a virtual materials designer, created a digital product creation group, and acquired RTFKT (a crypto-wearable studio). When Microsoft (MSFT) announced it was spending $70 billion to buy a video game company, it cited the metaverse as the reason. Facebook today is known for two things: the metaverse (FB) and a crashing stock price. In Apple's (AAPL) January earnings release, Tim Cook said the metaverse is "very interesting to us" and that Apple has over 14,000 augmented reality apps in the App Store, so "we see great potential in this area and are investing accordingly."

But what exactly is this "potential"? And what exactly do mainstream companies hope to gain from it? The obvious answer is "money," as Grayscale estimates the market potential of the metaverse at $1 trillion. (Grayscale is a unit of Digital Currency Group, the parent company of CoinDesk; DCG is also a major investor in decentraland tokens.) But how, exactly? Hackl lists the typical reasons: Publicity, customer acquisition, customer retention, customer loyalty, and - perhaps the juiciest prize - new revenue streams.

Digital clothing. Digital bicycles. A digital renovation of the upstairs bathroom in your decentralized home. Sound crazy? So does the idea of spending $2.9 million on a digital monkey, but there it is. "We are now entering an era where we place the same value on digital property as we do on physical property," says Michael Toner, chief marketing officer of Threedium, a firm that helps companies enter the metaverse.

This world of digital ownership is not so different from our reality today, Toner said.

"Today, people are used to buying digital assets and buying digital books. It's not a strange concept to people," he said. It's not a big leap to extend that concept to digital "clocks, knickknacks, decorations and paintings," he said.

More and more of his customers want to create "digital twins" of real objects, he said. At the upcoming Metaverse Fashion Week, for example, real Hugo Boss clothing can be purchased directly through Decentraland's pixels. Toner says, "We're entering the age of meta-commerce. "

Marketing in the metaverseWhen a

digital orgasm is hard to sell, digital beer seems just as difficult. But in 2020, Lindsey McInerney, then head of global innovation at AB InBev (BUD)-the company that owns Budweiser, Corona, Beck's and seemingly every other beer that isn't a microbrew-had a hunch it could work.

Lindsey McInerney is not your typical marketer. She wrote a dissertation on the 1970s skateboarding scene, studied the rise of hacktivism and was more interested in culture than companies. Then reality struck, and she grudgingly realized that her degree in "cultural studies" had no practical use. So she switched to PR and "almost got kicked out of PR school" because her press releases included links to a new and unproven website called YouTube. Back then, that was illegal; today, it's standard.

McInerney has always been an out-of-the-box thinker, and while she became a social media expert on Web 2 (she led innovation at Hootsuite, the social media dashboard service), she kept an eye on virtual reality and blockchain. When she was hired by AB InBev, you'd think she'd focus on beer, hops and barley. Far from it. McInerney surprised her colleagues by writing a dissertation on Web 3 and the metaverse, believing it was a "seismic shift" the company needed to understand.

"It's a seismic shift," McInerney says, repeating it for emphasis. "It's much bigger than social media was. It's as big as e-commerce, if not bigger." She says that "the convergence of the Metaverse and Web 3 is happening at a pace I've never seen before. It has never happened so fast."

As a pilot program, McInerney convinced senior management to greenlight a partnership with Zed Run, a crypto-horse racing game. (McInerney was certain that the branding of Stella Artois, the company's premium pilsner, was a good fit for the high-end world of Zed Run, which she calls "the most prestigious game in the metaverse." AB InBev released custom Stella Artois skins (items used to customize the appearance of game characters). It auctioned virtual horses. It introduced a new three-dimensional race track. The partnership paid homage to AB InBev's perennial "The Life Artois" campaign, and for the first time, mainstream beer entered the metaverse.

The pilot hit like a bomb. According to McInerney, the brand garnered more than 100 million media views in its first week and received press coverage from Forbes and AdWeek. For her, this is just a small taste of what's to come. "This isn't just about e-commerce," McInerney says. "It's not just about the future of ways to sell on the Internet. It's about the future of all areas."

Another "area": customer rewards programs. It's marketing 101 that customers who participate in membership programs - like frequent flyer accounts - are more loyal and lucrative. There's just one catch.

"We all know how terrible membership programs are," says Kevin Wright, manager of global brand communications at Adidas, which has thrown itself heavily into the metaverse. "Oh man, they're terrible. They're so bad. They're cumbersome. The rewards [can be] irrelevant. They expire." Wright clarifies that it's still early and "we're nowhere near ready to figure this out," but a token-based membership program could potentially offer a better customer experience - such as being programmable and wired to do certain things, or easier to convert and exchange. Other Web 3 experts agree, such as Jeremiah Owyang, who recently gave me this prediction: "Brands will convert their loyalty points into social tokens."

Then Wright suggests another benefit of the metaverse: an accounting play. When companies offer rewards programs, Wright says, those points create a "huge financial commitment for brands." Just as banks must have ample cash on hand, companies must consider the risk that rewards points earned by customers - all those frequent flyer miles - could be cashed out in a sudden redemption orgy.

"That never happens, but if everyone wanted to redeem their Starbucks [SBUX] free drink on the same day, Starbucks would be in trouble," Wright says. That's why accounting becomes a nightmare." A token-based membership program in the Metaverse, Wright says, would solve those financial problems. (The exact mechanics are yet to be determined, but this aligns with a Deloitte report noting that "unclaimed rewards are recorded as liabilities on a company's balance sheet," and suggesting blockchain-based tokens as an alternative.) "We spend so much time talking to product designers about the Metaverse, but I want to talk to our accountants about the Metaverse," Wright says, laughing.

There are other, non-obvious applications as well. Janet Balis, a consultant at EY (formerly Ernst & Young) who focuses on the Metaverse, says most of the early use cases are aimed at B-to-C (business-to-consumer), but she predicts there will be forays into B-to-B (business-to-business) as well. Think of how many trade shows went virtual during Covid. Think of all the Zoom meetings. Many of those events will revert to face-to-face meetings, but maybe not all.

"I think some events in the B-to-B context can either be enhanced by the metaverse or replaced by a metaverse experience," Balis says. (One company that has tried the expansion route: CoinDesk, which streamed one of its virtual events into Decentraland's convention center during the Covid spike).

And then there are the internal opportunities. "It's an opportunity to bring employees on board in a more creative environment, even if they work from home," Balis says. In an article she wrote for Harvard Business Review (another signal of mainstream acceptance), Balis notes that the metaverse could be used to train future surgeons, that Microsoft's "mesh" platform uses avatars in metaverse-like spaces for collaboration, and that chipmaker "Nvidia believes investing in metaverse simulations of things like manufacturing and logistics will reduce waste and accelerate better business solutions. And now Boeing (BA) is designing airplanes in the metaverse.

To find out how far the metaverse extends outside the crypto bubble, I turned to a traditional consulting firm, Want Branding, that has nothing to do with blockchain - its clients range from Gillette to MGM Resorts (MGM). "We work at a high level [with] companies across the board, and everyone is thinking about it," says John Downey, the company's chief marketing officer. "More and more clients have asked us what it means from a brand perspective to move into the Metaverse.

EY has found the same. "I think the vast majority of customer-facing companies have a marketing or customer experience manager who is engaged with the Metaverse," Balis says. EY even has a division dedicated to the Metaverse, and recently wrote a blog post titled "CEOs, it's time to enter the Metaverse."



, Deloitte, has launched its own Metaverse store and announced an "Unlimited Reality" studio to help "educate, inspire, accelerate and implement clients' goals for the Metaverse



"Your logo has absolutely no inherent value. No matter how much you love it, no one cares." She wanted to make sure AB InBev avoided anything that looked like a money grab, like launching 10,000 NFTs and hoping for magical revenue. She understands the lure. Marketing campaigns are almost always cost traps from the outset. They are hard costs with unclear benefits. For this reason, McInerney says, many marketers now think, "Holy cow! We can't be a cost center! That's great!"

There's just one problem. If it looks clunky or greedy, as McInerney says, "no one will buy your stuff anymore."

The concern about not looking money-grabbing was shared by Clinique, one of the first cosmetics brands to go meta-curious. Instead of selling NFTs, Clinique asked consumers to share uplifting stories of optimism on Instagram. (The campaign was called "MetaOptimist.") Clinique gave away NFTs and products for 10 years to winners, such as a mother who was sick and started each day with "hope and optimism" that her son would grow stronger and wiser. The goal was to "modernize loyalty and drive engagement with the brand," according to Roxanne Iyer, VP of global consumer engagement at Clinique, who was pleased to see a 20% increase in searches and brand awareness.

Not every campaign has been this successful. Every marketer dreads the reaction to Pepsi's (PEP) NFT launch. When Pepsi's Twitter handle announced its NFTs, Meta (Facebook) responded: "This will look great in the metaverse," to which Pepsi replied, "You know it, friend!" A brand expert said, "It looked inauthentic. Web 3 responded to it, and it just sucks."

Other companies simply need more data. "I wouldn't call it risks and concerns so much as unanswered questions," Balis says. What are the legal issues? How will taxes be handled? What about regulation? These are the questions Adidas has had to deal with, which is not easy for a global brand.

"We have over 60,000 employees," Wright says. "It is such a large group with so many brand representatives." The internal operations of Adidas' European soccer division, for example, might work differently than those of soccer teams in the United States.

Or think about finances. In Europe, the company uses the euro; in the United States, it uses the dollar, and gas fees must be paid in coins. "It gets pretty complicated, especially at this scale and in so many countries," Wright says. "The logistics were a masterstroke."

Fierro had to overcome all those challenges when NARS released the orgasm NFTs. "They each require a very in-depth production process that is incredibly time-consuming," Fierro says. "Honestly, this requires a budget and investment that many brands don't have right now.

Add to that the fact that the metaverse still isn't entirely clear what it is.

"The reason we don't see a whole spectrum of companies exploring all the different use cases is a scale issue," Balis says. By "scale," she means it's not fully functional yet. And it's fragmented. A 3D image that works in Roblox can be a disaster in The Sandbox. (This is a mobile game, not a real sandbox).

"Part of the metaverse is only accessible via virtual reality headsets. Some of the metaverse is only accessible through desktop computers," Balis says. Some of it is mobile-only, some of it is centralized, some of it is decentralized. Understanding all of that takes time.

For Adidas' Wright, the biggest challenge remains the general skepticism about cryptocurrencies and the long-standing aversion to much of what's involved - fraud, speculation, rip-offs. When it comes to convincing the company, Wright says, "For every story of someone getting scammed at OpenSea, we lose 10 to 15 more people."

In some ways, none of this is all that different from what brand experts typically think about brands.

"I don't think the branding or advertising issues in the metaverse are any different from those in other areas," Balis says. "Is my customer here? Is this an environment where I feel I can create a high-quality experience?"

Other questions are: Can I bring my brand to life in an authentic way? Can I tell my story in a way that fits our values? As Balis says, "Some of the creative formats will be new, but I don't think these questions are different. "

AB InBev's Strange BrewAtAB

InBev, McInerney answered those questions convincingly, and then she noted that bringing a beer into the metaverse makes perfect sense. Which brings us back to the core question: What does it even mean to "take a beer to the metaverse," and why isn't that absurd? At happy hour, I prefer to drink my IPAs on tap, maybe in a bottle or sometimes in a can. Less often than JPEG.

I share my perplexity with McInerney, and she provides a compelling counterargument.

"I can't drink and drive, but you see billboards on the highways all the time advertising alcohol," she says. Or she gets served ads for beer at lunchtime on Tuesdays, "and I work, I don't drink."

Her point is that while a virtual beer can't compete with the cold, icy beverage you actually drink, it may be a better "impression" than you get from traditional advertising.

"We can reach so much more than billboards on the highway or beer tweets on a Tuesday lunchtime," says McInerney, who left AB InBev to start her own company focused on Web 3 and Metaverse. "We can really surprise and delight people who want to play with brands."

And in the future, the beer might even be consumed. McInerney suggests a hybrid digital-physical experience, perhaps while watching a horse race.

"My vision is that you and I could watch a horse race in two different places. She would be in London, I would be in Denver. "And we could log on to Zed Run. And we could pick a couple of races to attend." We share this digital experience. We could also go virtually to the Zed Run bar in Decentraland.

"I would buy the first round, because that's only right," McInerney says. And then in 20 minutes, there's a real beer on my doorstep in Denver, via Uber Eats, and a real beer is at McInerney's in London. "We can have a shared 'digital-physical experience' where we race our horses while enjoying a Stella beer."

Some may find this future exciting. Others will see it as dystopian. But more and more companies are seeing it as something very different: Profitable.

Further reading about the MetaverseEthereumin

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Web3 ideas like NFTs are only part of building the next generation of the Internet, argues the host of the "Hello Metaverse" podcast.

Nintendo president vague on company's Metaverse plan

Shuntaro Furukawa remains non-committal on the Metaverse, while investors target Nintendo stock as an undervalued Metaverse play.