Virtual Beers and Digital Orgasms: Welcome to the Age of Metaverse Commerce
Executives from Adidas, Budweiser, Clinique, NARS Cosmetics and other big consumer brands explain why the metaverse is “seismic” for their businesses.
Guess what holiday falls on July 31? That would be National Orgasm Day. That was the hook for NARS, the French cosmetics brand, to unveil NFTs of its most iconic product line – lipstick and blush called “Orgasm.”
Last summer, NARS partnered with three female artists (DJ Nina Kravis, Azede Jean-Pierre, and Sara Shakeel) to create a suite of non-fungible tokens. “These works were inspired by Orgasm,” explains Dina Fierro, NARS’ vice president of Global Digital Strategy. “It was inspired by the concept, the biological response, and certainly inspired by the product in its sensorial 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 the Orgasm products) moves back and forth, rhythmically, seductively. As NARS wrote on its Instagram post, “There’s an orgasm for everyone.”
The success of these NFTs emboldened NARS to take another swing into the metaverse, dropping seven custom designs into Animal Crossing, Nintendo’s open-ended virtual world. Fierro says that when it comes to new tech, traditionally, beauty and fashion brands were always the “laggard in the conversation,” slow to embrace e-commerce and social media. But not with the metaverse.
“What I’m observing around the industry,” says Fierro, “is that people are determined not to be left behind.”
That now seems true of the entire economy, and the list of “companies entering the metaverse” feels longer than “companies that haven’t entered the metaverse.” (The “metaverse is that impossible-to-define concept of a vast digital world, which can mean a blockchain-based environment like Decentraland or even Augmented Reality in Walmart.)
Read More: A Crypto Guide to the Metaverse
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 filled with user-generated games, played by 50% of kids under the age of 16.) Coca-Cola (KO) designed “Friendship NFTs” that are “reimagined for the metaverse.” 19 Crimes, the wine label, used augmented reality so that when you scan the bottle you can see the “criminals” telling you a story. Balenciaga brought haute couture into Fortnite. Even SPACs are entering the metaverse. And on and on.
But something shifted in the past few months.
“Last year, a lot of [companies] were doing these things for the PR pop, and the earlier you were, the more PR pop you would get,” says Cathy Hackl, a marketing consultant who specializes in the metaverse. “Now the novelty is gone. You might get PR pop, but it’s a more muted effect. Companies are really focusing on the long term.” Companies are no longer just dabbling in the metaverse, says Hackl, but they’re “taking a look at the most holistic metaverse strategies.”
Nike (NKE), for example, filed a flurry of metaverse-related trademark applications. The sneaker manufacturer also posted metaverse-y job openings like a Virtual Material Designer, launched a Digital Product Creation group, and acquired RTFKT (a crypto wearable studio). When Microsoft (MSFT) announced it would fork over $70 billion to buy a video game company, it said the reason was the metaverse. Facebook is now known for two things: going Meta (FB) and a tanking stock price. In Apple’s (AAPL) January earnings call, Tim Cook said the metaverse is “very interesting to us,” noting that Apple has over 14,000 Augmented Reality kit apps in the App Store, so “we see a lot of potential in this space and are investing accordingly.”
But what is this “potential,” exactly? Just what, exactly, are mainstream companies hoping to get out of this? The obvious answer is “money,” as Grayscale estimates a $1 trillion market opportunity in the metaverse. (Grayscale is a unit of Digital Currency Group, the parent company of CoinDesk; DCG is also a significant investor in Decentraland tokens.) But how, specifically? Hackl ticks off the typical reasons: Publicity, customer acquisition, customer engagement, customer retention, and – perhaps the juiciest prize – new streams of revenue.
Digital clothes. Digital bicycles. A digital renovation of the upstairs bathroom in your Decentraland home. Sound bonkers? So did the idea of spending $2.9 million on a digital ape, but here we are. “We’re now entering this era where we’re placing equal value on digital ownership as we do on physical ownership,” said Michael Toner, chief marketing officer of Threedium, a firm that helps onboard companies into the metaverse.
This world of Digital Ownership is not that different from our current reality, said Toner.
“Today, people are accustomed to buying digital assets and buying digital books. That’s not a weird concept to people,” he said. It doesn’t take a giant leap, Toner said, to extend that concept to digital “watches, knickknacks, decorations, and paintings.”
More and more of his clients want to create “digital twins” of real-world objects, he said. In the upcoming Metaverse Fashion Week, for example, you can buy actual clothes from Hugo Boss directly from the pixels of Decentraland. As Toner sees it, “We’re entering the age of meta-commerce.”
Marketing in the metaverse
If a digital orgasm is a tough sell, digital beer seems just as tricky. But in 2020, Lindsey McInerney, then the head of global innovation at AB InBev (BUD) – the company that owns Budweiser, Corona, Beck’s and seemingly every other non-micro, Joe Sixpack beer – had a hunch that it just might work.
Read More: How to Invest in the Metaverse
Lindsey McInerney isn’t your typical marketing executive. She wrote a thesis on the 1970s skateboard scene, she studied the birth of hacktivism and she cared more about culture than corporations. Then reality struck, and she grudgingly realized that her degree in “cultural studies” had no practical utility. So she pivoted to PR and “almost got kicked out of PR school” because her press releases included links to a new and unproven website called YouTube. At the time that was forbidden; now it’s standard practice.
McInerney has always been contrarian, and while becoming an expert in Web 2 social media (heading up innovation at Hootsuite, the social media dashboard service), she kept her eyes on virtual reality and blockchain. When she was hired by AB InBev, you would think she would focus on beer and hops and barley. Nope. McInerney surprised her colleagues by writing a thesis on Web 3 and the metaverse, as she considered it a “seismic shift” that the company needed to understand.
“This is seismic,” says McInerney, repeating it for emphasis. “This is way 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 clip I have never felt. Nothing has ever been this quick.”
As a pilot program, McInerney convinced senior leadership to green-light a partnership with Zed Run, a crypto horse racing game. (Think: a virtual Kentucky Derby.) McInerney had confidence that the branding of Stella Artois, the company’s premium pilsner, neatly fit the high-end world of Zed Run, which she describes as “the most prestigious game in the metaverse.” AB InBev dropped custom Stella Artois skins (items that customize game characters' looks). It auctioned virtual horses. It launched a new three-dimensional race track. The partnership paid homage to AB InBev’s multi-year “The Life Artois” campaign, and for the first time, mainstream beer entered the metaverse.
The pilot test exploded. McInerney says the brand scored over 100 million media impressions in the first week, garnering press from Forbes and AdWeek. She views this as just a tiny glimpse of what will come. “This is not just about e-commerce,” says McInerney. “This is not just about the future of your ability to sell on the internet. It’s the future of all of the buckets.”
Another “bucket”: Customer rewards programs. It’s Marketing 101 that customers in membership programs – such as frequent flier accounts – are more loyal and lucrative. There’s just one catch.
“We all know how terrible membership programs are,” says Kevin Wright, the manager of global brand communications at Adidas, which has leaned heavily into the metaverse. “Oh man, they’re awful. They are so bad. They’re cumbersome. The rewards [can be] irrelevant. They expire.” Wright clarifies that it’s early and “we’re nowhere near figuring this out,” but a token-based membership program, potentially, could offer a better customer experience – such as being programmable and wired to do certain things, or easier to convert and swap. Other Web 3 experts agree, such as Jeremiah Owyang, who recently gave me this prediction: “Brands will convert their loyalty program points into social tokens.”
Then Wright suggests a sneakier upside to the metaverse: an accounting play. When companies offer rewards programs, says Wright, those points create an “enormous financial liability for brands.” Just as banks need to have ample cash on hand, companies need to reflect the risk that the rewards points customers have accumulated – all those frequent flier miles – could be cashed out in a sudden orgy of redemption.
“It never happens, but if everyone wanted to [redeem] their Starbucks [SBUX] free drink on the same day, Starbucks is in trouble,” says Wright. This is why the “accounting becomes a nightmare.” A token-based membership program in the metaverse, says Wright, would solve this financial headache. (The exact mechanics are still TBD, but this squares with a Deloitte report noting that “unclaimed rewards are accounted for as liabilities on a company’s balance sheet,” and suggests blockchain-based tokens as an alternative.) “We spend so much time talking metaverse with product designers, but I want to talk metaverse with our accountants,” says Wright, laughing.
There are other non-obvious applications. Janet Balis, a consultant at EY (formerly Ernst & Young) who focuses on the metaverse, says that while most of the initial use cases have targeted “B-to-C” (Business to Consumer), she predicts we’ll see forays into B-to-B (Business to Business). Think of how many trade shows became virtual during Covid. Think of all the Zoom meetings. Many of those events will return to in-person, but perhaps not all.
“I do think there’s an opportunity for some events to either be enhanced by the metaverse, or to be replaced by an experience in the metaverse, in a B-to-B context,” says Balis. (One company that’s tried the enhancement route: CoinDesk, which, during peak Covid, streamed one of its virtual events into Decentraland’s convention center.)
Then there are the internal possibilities. “It’s an opportunity to onboard employees in a more creative setting, even as people work from home,” says Balis. In a piece she wrote for The 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 injects avatars in metaverse-esque collaboration spaces, and that chip manufacturer “Nvidia believes that investing in metaverse simulations of such things as manufacturing and logistics will reduce waste and accelerate better business solutions.” And now Boeing (BA) is designing planes in the metaverse.
Curious to see just how far the metaverse extends outside the crypto bubble, I reached out 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 all across the different verticals, and everyone is thinking about it,” says John Downey, the firm’s chief marketing officer. “More and more clients have asked us, what does it mean from a brand perspective to move into the metaverse?”
EY found the same thing. “I think for consumer-facing companies, the vast majority would likely have a marketing or customer experience executive with the metaverse on their mind,” says Balis. EY even has a metaverse-centric department, and recently wrote a blog post entitled “CEOs, it is time to enter the metaverse.” EY’s competitor, Deloitte, launched a metaverse shop of its own, announcing an “Unlimited Reality” studio to “help educate, inspire, accelerate and execute on client goals for the metaverse.”
Money-grubbing and the metaverse
“Just because you can do it, doesn’t mean you should,” says McInerney. “There is absolutely no inherent value in your logo. Despite how much you love it, no one cares.” She wanted to ensure that AB InBev avoided anything that looked like a money grab, such as launching 10,000 NFTs and hoping for magic revenue. She gets the temptation. Marketing promotions, by design, are almost always a money sink. They’re hard costs with fuzzy benefits. This is why McInerney says that many marketers are now thinking, “Holy s**t! We can not be a cost center! This is great!”
Just one problem. If it looks clunky or greedy, as McInerney says, “No one’s going to buy your stuff again.”
The concern over not being money-grabby was shared by Clinique, one of the first beauty brands to get meta-curious. Instead of selling NFTs, Clinique asked consumers to share uplifting stories of optimism on Instagram. (It called the campaign “MetaOptimist.”) Clinique gave away NFTs and 10 years of products to the winners, such as a mom who was sick and started each day with “hope and optimism” that her son was getting stronger and wiser. The goal was to “modernize loyalty and drive engagement with the brand,” says Roxanne Iyer, Clinique’s VP of global consumer engagement, who was happy to see a 20% spike in search and brand awareness.
Not every campaign was as successful. Every marketing executive dreads the reaction to Pepsi’s (PEP) NFT launch. When Pepsi’s twitter handle announced its NFTs, soon Meta (Facebook) replied, “This is going to look great in the metaverse,” to which Pepsi replied, “You know it, fren!” As one branding expert said, “It seemed inauthentic. Web 3 reacted to that, and it’s just Cringe.”
Other companies simply need more data. “I would characterize it less as risks and concerns, and more about unanswered questions,” says Balis. What are the legal considerations? How will taxes be handled? What’s happening with regulation? These are the kind of questions that Adidas has had to tackle, which is tricky for a global brand.
“We’ve got over 60,000 employees,” says Wright. “It’s such a large group with so many brand representatives.” The internal operations of Adidas’ European football division, say, might work differently than the soccer teams in the U.S.
Or consider the finances. In Europe the company uses the euro, in the United States, the dollar, and then gas fees need to be paid in tokens. “It becomes rather complicated, certainly on this scale and across so many countries,” says Wright. “The logistics of it has been a feat.”
Fierro had to sort through all of these challenges when NARS released the orgasm NFTs. “They each require a very in-depth production process that is incredibly time intensive,” says Fierro. “Frankly, this requires a level of budget and investment that a lot of brands don’t have allocated at the moment.”
Then there’s the fact that the metaverse is still figuring out what it is.
“The reason why we’re not seeing a full spectrum of companies exploring all of the different use cases is a scale issue,” says Balis. By “scale,” she means that it’s not yet fully functional. And it’s splintered. A 3D image that works in Roblox might be a disaster in The Sandbox. (That’s a mobile game, not a literal sandbox).
“Some of the metaverse is only accessible through virtual reality headsets. Some of the metaverse is only accessible through desktop computers,” says Balis. Some of it is only mobile, some is centralized, some is decentralized. All of it takes time to understand.
For Wright at Adidas, the biggest challenge remains the overall skepticism about crypto, and a longstanding aversion to much of what it connotes – scams, speculation, rug pulls. In terms of getting corporate buy-in, says Wright, “For every story of someone getting swindled on OpenSea, we lose 10 to 15 more people.”
In a sense, none of this is that different from how branding experts usually think about brands.
“I don’t think that the branding or advertising questions about the metaverse are different from any other space,” says Balis. “Is my customer here? Is this an environment where I feel I can create a quality experience?”
Other questions: Can I bring my brand to life in a way that’s authentic? Can I tell my story in a way that fits our values? As Balis says, “Some of the creative formats are going to be new, but I don’t think these questions are any different.”
AB InBev’s strange brew
At AB InBev, McInerney resoundingly answered these questions, and then she determined that, yes, it does make sense to bring a beer into the metaverse. Which finally brings us back to the core question – what does it even mean to “drink a beer in the metaverse,” and how is this not absurd? At happy hour, I prefer my IPAs on draft, or maybe in a bottle, or sometimes in a can. Rarely as a JPEG.
I share my befuddlement with McInerney, and she gives 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’ll get served ads for beer at noon on a Tuesday, “and I’m working, not drinking.”
Her point is that, yes, a Virtual Beer might not rival the cold frosty beverage that you actually drink, but perhaps it’s a better “impression” than you get from traditional advertising.
“We can do so much better than billboards on a highway, or than beer tweets at noon on a Tuesday,” says McInerney, who has left AB InBev and is now starting her own Web 3 and metaverse-focused firm. “We can really surprise and delight people who want to play with the brands.”
And in the future, maybe the beer could actually be consumed. McInerney suggests a hybrid digital-physical experience, perhaps while watching a horse race.
“My vision is that you and I would be able to each race our horses in two separate places.” She’d be in London, I’d be in Denver. “And we’d be able to log onto Zed Run. And we’d be able to pick a couple of races to enter.” We share that digital experience. We might also, virtually, go to the Zed Run bar in Decentraland.
“I would buy the first round, because that’s only right,” says McInerney. And then in 20 minutes, an actual real-life beer shows up at my doorstep in Denver, via Uber Eats, and an actual beer shows up at McInerney’s home in London. “We can have a shared ‘digi-physical experience’ where we’re racing our horses while enjoying a Stella beer.”
Some might see that future as exciting. Some will see it as dystopian. But more and more companies see it as something else altogether: Profitable.
Further reading on the metaverse
DeFi, NFTs, stablecoins – most of it started on Ethereum. What about next year?
Web 3 ideas like NFTs are only part of building the next generation of the internet, argues the host of the “Hello Metaverse” podcast.
Shuntaro Furukawa remains noncommittal to the metaverse, while investors target Nintendo's stock as an undervalued metaverse play.
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