As everyone is discussing and outlining the importance of Web3, I thought it would be helpful for us to see what reality is as of now: Is it starting to go mainstream or is it market noise?
First of all, what exactly is Web3? Let’s look at the history and evolution of the internet.
Web 1.0: In the early days of the internet, it was static and text heavy (think “read only”). Users were not actively contributing to the internet but rather just passively taking in information, and displaying it like online catalogs.
Web 2.0: This is the current era where the internet as a space for social connection/interaction really took off and users became active contributors and participants (think rise of social media, ie Facebook, YouTube). The invention and mainstream adoption of smartphones brought this social connection into the palm of everyone’s hands and made it an integral part of how we communicate, interact, work, shop, etc. The internet becomes dominated by platforms like Facebook, Google
Web 3.0: This is the next step in the evolution of the internet that is unfolding and metamorphosing in real time. There is no clear definition of what Web3 will be; right now it can be loosely defined as the next generation of internet services for sites and applications driven by AI and machine based learning with the goal to provide a more intelligent and interconnected web experience. The key difference is the return to true peer to peer usage with no centralized platform or central governance/control mechanism; this gives privacy and control back to users.
One of the most talked about faces of Web3 is the concept of “the metaverse”; an internet based virtual world that runs parallel to the physical world. While this is still a future based vision of what the internet can be, there are tools being used today to bring us closer to a true blending of physical and virtual reality; some of these tools include virtual reality and augmented reality.
When thinking about concepts such as Web3 and Metaverse, the initial reaction may be to think that these are mainly used today for gaming and that business use cases and applications are still a long way from being reality.
However, this is not the case.
There are many ways in which leading companies are leaning into Web3 / the metaverse and boards would be well served to speak with management about how the company can lean in and apply these forward-facing innovations.
Let’s look at present day use cases:
Digital Twins: The concept of a digital twin is to create a virtual replica of a real-world element whether that is a warehouse, a physical product, a factory floor etc.
This digital replica (digital twin) has many real worlds uses and applications. For example, you can leverage digital humans to simulate different scenarios and see what the outcomes are, you can test environments such as factory floor layouts and simulate the flow and interactions of various machines, supply chains, etc.
This concept of creating digital twins is already gaining a lot of traction with various companies leaning into the idea:
– Lockheed Martin
BMW has also partnered with NVIDIA’s Omniverse and the result is a digital twin of the BMW factory floor to better optimize production time and cost. BMW is able to virtually simulate what the best paths around a floor are during peak production and what is safer for employees.
Corporate Training: Another important real time way companies can lean into Web3 and the metaverse is to look at taking corporate training, development, and upskilling into the metaverse.
With companies moving towards hybrid / remote having a platform for virtual remote learning can be a strong differentiator to weave together a cohesive company culture. This is an opportunity to engage a millennial and Gen Zero workforce and improve employee experiences.
One study has shown that employees who trained in VR simulations learned four times faster than classroom learners.
Adoption of virtual training for employees allows them to gain real world experience in a relatively risk-free environment that allows for of multiple scenarios and outcomes.
– Bank of America
Training in the metaverse is incredibly effective as it allows for the flexibility and convenience of eLearning without the previous drawbacks that made in person learning more attractive.
Entertainment: Covid-19 accelerated the popularity of virtual concerts. Virtual concerts allow creators to reach a much greater fanbase (there is practically no limit to the size of the audience on a digital platform vs the space limitations of an in person venue). This expanded reach is not only valuable from an earnings perspective, but also from an audience building perspective. Virtual concerts allow artist to engage in a new way with fans and also tap into a whole new fanbase.
Epic Games Fortnite has been an early pioneer / winner when it comes to virtual concerts:
– Travis Scott had a 5 concert global tour in Fortnite which enabled him to reach a global audience of 27.7 million viewers (compared with 800K fans who attended his in person Astroworld Tour in 2018-2019).
– Ariana Grande also joined Fortnite and her metaverse concert experience had an estimated 78 million users in attendance.
Roblox has also seen great success from virtual collaborations with top artists:
– Artist Lil Nas X held a two day concert experience on the platform that consisted of 4 virtual concerts and garnered 33 million views.
– Swedish singer Zara Larsson teamed up with Roblox to hold a virtual dance party to promote her latest album “Poster Girl”. Fans were able to join in on this virtual dance party and even purchase her virtual merchandise which brought in an estimated $1M in revenue. This is incredibly impressive when you factor in that the price of each item was around $1 – this signals a huge activation of a virtual fan base that is willing to spend physical money for merchandise such as virtual hats and skins for their avatars.
Fashion: The fashion industry has been making headlines as it enters the digital world. Brands such as Gucci, Ralph Lauren, Nike
There is a huge opportunity to monetize “in-game” fashion through skins (customizable clothing / accessories that allow you to change the look of your avatar). The market for skins is estimated to be as much as $40Bn a year.
– Gucci’s virtual Dionysus Bag with Bee sold for more than its IRL (in real life) version in an online event on Roblox called Gucci Garden which ran concurrently with the unveiling of House’s Gucci Garden Archetypes – an immersive multimedia experience in Florence, Italy. The Gucci Garden experience on Roblox was open for 14 days and visitors were able to purchase exclusive limited edition items for their avatars.
– In 2021 popular retailer Ted Baker joined the virtual clothing market by creating a virtual space in the popular Nintendo game Animal Crossing called “Ted Baker Island” which enabled Animal Crossing players to experience five different virtual realities – players are able to customize their avatars and try on 20 items from the new Ted Baker collection.
Corporate Real Estate: Covid-19 accelerated digital transformation and was the catalyst for the shift from primarily in person work to work from home or a hybrid set up being the new norm.
For many top companies, their physical headquarters are a representation of their company culture and are a central hub for employees to come together, work, ideate, and problem solve.
As we shift to a remote work mindset corporations are beginning to create virtual headquarters in the metaverse:
– Big Four accounting firm PWC
– ConsenSys Software (creators of the popular digital wallet MetaMask) has a virtual headquarters in the metaverse platform Decentraland
For many mainstream directors who are from the Gen X or baby boomer generations, Web3 / the metaverse may not be an obvious area to focus corporate resources, but here are a few fun facts that help frame the magnitude of the opportunity:
– Here is the metaverse’s market size:
2021 – $63.83 billion
2022 – $100.27 billion
2029 (expected) – $1.5 trillion
– There are 350 million global Fortnite players who have collectively played the popular game for 10.4 million years—that means that people have spent 91 billion hours as avatars within Fortnite’s virtual world.
– Let’s remind ourselves that in the US today Gen Zero and Millennials comprise 42.28% of the population. These are the generations that are native users of avatars and digital currency thanks to popular games they played such as Webkinz and Club Penguin.
– Roughly 59.1 million Americans have digital assets in some form.
– NFTs saw a $2.5 billion increase during the peak of the pandemic.
Call to action: If we learn from the lessons of the past, we now know that companies that were early adopters of tech cycles like the internet, mobile, AI, etc. Clearly outperformed their peers and were the top decile performers whose embrace of technology allowed them to accelerate growth while legacy companies who were laggards in each cycle adoption performed in the bottom half.
Given this as we look at Web3 it’s important to be proactive and ask the management team to put this on the agenda to identify where it may be possible for your company (depending on its industry) to lean in to the expansion of the metaverse and see what use cases may apply to your business.