Forget FOMO, KPIs are driving the comeback of the metaverse
Why Macy’s and a slew of lifestyle brands are investing in the much maligned metaverse
During the pandemic it was the next big thing in digital circles, the end all be all of FOMO, a sure thing: the Metaverse. That hype, however, quickly fizzled out. Perhaps no one gave two you-know-whats about virtual shopping malls of the future or maybe—just maybe—people do after all like seeing friends and acquaintances with people eyes. OMR took a closer look at the hype that was and found bullish optimism in spades, with fashion brands and a New York department store once again pumping cash into building their own metaverses. Today, we’re tracing the re-rise of the Metaverse—but don’t call it a comeback. It’s been here for years.
Nothing ages as poorly as buzzwords gone by the wayside. And trying to convince you, dear reader, to invest your precious time reading some random blurbs about the metaverse in the year of our lord 2000 and 23 seems as apt as gushing about the internal combustion engine, sliced bread or the lab-grown meat.
A promise unkept
Sure, there was, in the long, long ago, this mad euphoria from 2020 to 2021. Everyone who was anyone wanted a piece of the metaverse. Virtual gigs by mainstream musicians like Travis Scott, Ariana Grande and Lil Nas X in Fortnite and Roblox attracted audiences in the tens of millions. Fashion brands, too, were getting in on the act, as Gucci, Balenciaga and Ralph Lauren opened stores in the various metaverses and open game worlds, hawking virtual wares.
Many people, including more than a few of us in the OMR editorial office, envisaged an emerging multi-billion market for digital clothes and a collection of encrypted binary art, aka NFTs. Those hallucinations came crashing down to earth nearly as fast as my crypto wallet, once people had the option of joining the legions of sweat-soaked fans at real concerts, rocking their real Jordans and rubbing shoulders with, well, real shoulders. The party in neverneverland was over before it stared. At least it was for the B2C folk. Because behind the scenes, the technology has continued to evolve.
The work never stops
There's Mark Zuckerberg, who made his bet on the metaverse clear not only by renaming his company to Meta in 2021 (not that any of you ever stopped using the F word, but I digress). No, moreover, Zuck pumps a billion dollars annually into verse. The latest generation of the group's own Metaverse device has just been launched. Microsoft, too, whose CEO Satya Nadella justified the recently completed takeover of the game developer Activision Blizzard at the announcement at the beginning of 2022 by saying that this takeover would "provide building blocks for the Metaverse."
Ok, wowsers. What then, praytell, is then this Metaverse at present? And how it god’s name do these Silicon Valley geniuses expect to recoup their beaucoup bucks of invest in the metaverse? Berlin-based startup Journee, which describes itself as "the world's leading provider of metaverse technologies and immersive end-to-end web solutions for businesses and the creative industries," the project has already ran up a tab in the six-figure range, Journee co-founder and co-CEO Thomas Johann Lorenz told OMR.
Blind euphoria replaced by ROI
However, Lorenz emphasizes that the focus is always on ROI. "We only offer use cases that we believe can deliver real business value," says CEO Lorenz. It's about increased conversions, higher engagement metrics or lower costs compared to other campaigns, he said.
That this is not just empty words is evinced by a recent case that Journee had for cosmetics brand Clinique. The Berliners created a kind of fantastical flagship store for the brand. Visitors could enter it from the Clinique website via the browser and move around inside. There were games, individual product advice from virtual assistants, and the opportunity to buy items directly.
A fact sheet available to OMR shows that this approach does in fact appear to be working. Compared to the brand's web store, sessions increased by 270 percent, conversion rates rose 54 percent, and average shopping cart spend grew by 10 percent. The PDF does not say whether the virtual world, which had been in the works for two and a half years, recouped its costs. However, according to the Journee website, there are plans to reactivate and expand the currently offline experience on certain occasions.
Billion-dollar market of the non-so-distant future?
The Clinique case shows that after the initial metaverse enthusiasm devolved into skepticism, where some CMOs concerned with their own vanity went too far, while others were perhaps not in enough, driven simply by FOMO but not by conviction, there is now valid reason to invest in Metaverse projects: Revenue.
Expectations are immense. A study initiated by Meta concludes that the Metaverse will contribute between USD 420b and USD 760b to the U.S. GDP by 2035. Consulting firm McKinsey was even more optimistic in an analysis published in mid-2022. According to this, the Metaverse could generate around USD 5t in additional value added globally as early as 2030—that would be around five percent of global revenue.
Normalizing the metaverse
Even if you discount the bias of the eyes with which a self-proclaimed metaverse group and a consulting firm gaze at the future market, there are still a number of arguments in favor of the metaverse actually having a viable commercial future. Starting with future consumers. They already spend many hours every day in digital environments, whether in the infinite Tiktok stream or immersive gaming worlds.
Then the adaptation of Metaverse-like experiences increases. Market research firm Gartner predicted in early 2022, against the backdrop of a return to post-pandemic conditions, that as early as 2026 a quarter of all people would spend an hour or more a day in the Metaverse. The main occupations there: doing everyday things like work, socializing—or shopping. If you take the last point out of the equation, this is perhaps the strongest argument for the metaverse.
Shop like the 90s
What argument is that exactly? Let’s go to the source and ask the internet’s leader interneter for the answer. "Our online shopping experience is stagnating at the point where it began in the mid-1990s," Amazon digital strategy expert Stéphane JG Girod was recently quoted as saying in Forbes. In other words: When shopping on the Web, an overwhelming selection meets an experience that has hardly changed for years and is rather dull overall.
Journee's current project Mstylelab, which went live on October 18, 2023, shows how the company envisions a counter-design. The US department store chain Macy's sends its customers into a virtual New York street canyon. Huge versions of clothes from the current collection of Macy's new own brand On 34th float above the streets—a reference to the address of the flagship store.
As with the Metaverse, which Journee built for Clinique, the integration into the existing eCommerce platform of Macy's as well as the possibility of being able to store directly for the real versions of the virtually displayed items of clothing are central. But not as a one-to-one replica of the real department store, but as a platform that spectacularly reshapes familiar items from the real world and enriches them with interactive elements. "Blurring the boundaries between style, discovery, fashion and technology," is what the project for Macy's is all about, says Journee CEO Lorenz.
The perfect metaverse mix?
If you take the scenario the Berliners have created for Macy's, add AI-based product advice as in the Clinique case, and expand that to include the ability to tailor content to users' interests, such as purchase history—nothing unheard of if we’re being honest—you come pretty close to the vision that eCommerce thought leader Girod proclaimed as the goal for the shoppable metaverse in the aforementioned Forbes article: "Imagine a virtual store that feels like you're in a physical store, but incorporating data, insights (about customers) and storytelling on steroids."
We already mentioned that McKinsey is really bullish on oodles of future revenue thanks to the metaverse. Results from a survey published in June 2023, showed how McKinsey fleshes out the issue to the crucial question: How can the commercial potential of the metaverse be tapped?
Mixing the meta with the real
This provides some explanations as to why the visions of virtual worlds typed during the pandemic, in which people supply their virtual surrogates with virtual clothing for which they spend a lot of real money, have largely flopped.
For example, respondents were significantly more willing to pay if the products offered there had some kind of link back to the real world. This doesn't necessarily mean that after buying a virtual sneaker, the real shoe will be delivered the next day. It's about some added value outside of the metaverse, such as access to events or similar IRL perks. The same is true for activities within virtual reality, the summary of findings says.
Virtual clubs? Hard pass
In this context, it is interesting to see what the respondents find important—and what they can go without. In the fashion and beauty sector, for example, digital try-on in stores are extremely popular. By contrast, the metaverse’s first darlings, virtual fashion shows and purely digital stores, were more meh than anything else. When it comes to experiences, trips to unknown places or to other times struck a nerve, virtual clubbing just perturbed—possibly explaining one of the metaverse most high-profile failures. And in the sector called "Home," people love the idea of investing time in getting a virtual tour of a home, but not in investing real money in virtual real estate.
"Our overall finding is that consumers are attracted to metaverse use cases that are fun or entertaining, just perhaps not in the way brands might have expected," the McKinsey report says. What does this suggest for the future of eCommerce in the Metaverse?
What's to become of the metaverse?
First, a rather cautious optimism regarding Journee's virtual pop-up stores and flagship stores. It seems rather unlikely that they will replace the classic web store. It therefore makes a lot of sense that the Berliners are on the right track when they propagate the closest possible integration into the existing e-commerce ecosystem of their customers.
At the end of the day, virtual worlds are more like digital flagship stores for brands—with the crucial difference that you can enter them with just one click from the disdainful 2D web store branch. And at the end of the day, it is still completely uncertain whether the iPhone-like killer device will soon fall from the sky and trigger a real metaverse boom.
Analog meshed with digital
And secondly, that the future of the metaverse is not in the virtual world alone. The self-contained bubble detached from the rest promises less success than the clever extension from analog to digital and the mutual linking of both spheres.
How this can look beyond the integration of shoppable products is currently being demonstrated by Artificial Rome, another Berlin-based metaverse creative agency. For a new sub-brand of the Italian lifestyle label Diesel, they have knitted an entire campaign around the Metaverse, avatars and NFTs. The latter give owners access to a special model of a watch. There is also a virtual world called Metamorph with an adventure game and a virtual concert. While all these things are not new, they are consistently linked around a brand that could be described as metaverse-native. We will see how well this works after the official launch on November 2.
Metaverse, VR, AR, whatever
And thirdly, the McKinsey survey suggests that the metaverse has to be taken out of virtuality, so to speak. It is debatable whether virtual try-ons should still be considered a metaverse at all. More important than the question of whether VR, AR, or whatever, is quite obviously that the customer is provided with utility value. Tying success to concrete KPIs, as Journee does, certainly seems helpful.
In any case, they are certain that the metaverse will play an increasingly important role in eCommerce in the future. "We believe that people will shop where it's most convenient, comfortable and accessible," says co-CEO Lorenz. And that's exactly what his platform offers, he adds.
Turning art into commerce
It was not created with commerce in mind, but as a presentation space for art. It was originally developed because the two founders of Journee needed a place to display a marble sculpture designed by an AI, at least virtually, during the 2020 lockdown. Thus was born the core of the technology, which uses graphics engines otherwise used in gaming to create virtual worlds in real time that are then streamed to devices via the browser.
But they quickly realized the potential for immersive web applications in the enterprise space, said Lorenz, who has experience in digital commerce. So they looked for ways to be "perceived as a serious enterprise software provider," he said. Looking at Journee's customer list and the fact that the startup already has 100 employees in year four after its founding and has invested a mid-double-digit million amount so far, that seems to have worked out quite well.