Made-in-China Metaverse: Yea or Nay?

Metaverse is a technology buzzword that has been trending since Facebook’s decision to rename itself to Meta. We see similar hype in China. Major Chinese tech players are all venturing into the space as Tencent launched digital avatar and virtual space capabilities, and Alibaba experimented with Metaverse social commerce in 618 this year.

You might be dismissive of Metaverse, but Metaverse is inevitably becoming mainstream, and dollars (and RMBs) are being poured into the space. Brands from Gucci to Forever 21 are all investing in Metaverse campaigns, creating digital avatars and launching NFTs.

However, the PR value for being early movers in the Metaverse space is diminishing and Metaverse-concept campaigns oftentimes come out without clear brand value propositions. So how should brands go about developing a Metaverse strategy especially for the China market?

What is Metaverse, really?

First things first, let us make clear on what we mean by Metaverse. Here we are adopting a convergent definition by Matthew Ball, an investor in the Metaverse space. As Ball puts it, the Metaverse is:

“a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”

In short, Metaverse will be the 3D virtual worlds that activate all senses. Users will be experiencing it, rather than just looking at it or listening to it. Metaverse remains a distanced future and requires significant technological advancement to achieve such vision. For those who are interested in a deeper dive in what Metaverse is, we recommend giving Matthew Ball’s newly released book a read.

Will China have a separate Metaverse?

China has always had its own Internet ecosystem, which leads us to the question: will China develop its own version of the Metaverse as well? The answer is yes, and here’s what we think will make it different:

• Crack down on gaming industry: In 2021, moving against the gaming industry, China put a pause on issuing new gaming license and restrict teen players’ gaming time. While the growth of virtual worlds in the rest of the world is spearheaded by gaming platforms, players in China are all cautious when tapping into gaming. Virtual worlds will need to find other drivers and use cases for it to receive mass adoption in China.

• China’s siloed Internet ecosystem: Web 2.0 Internet in China already looks different from the rest of the world. Roblox paused their service in China(a joint venture with Tencent called LuoBuLeSi) after five months of operation in Dec 2021. Even then, LuoBuLeSi was isolated from the global Roblox platform. We expect that similar market entry challenges will remain for other global players and local players will dominate.

• Legal concerns around crypto currency: China declared crypto currency trading illegal in 2021, which means that monetizing tradable digital assets is unlikely to be part of China’s Metaverse ecosystem.

So, for Metaverse strategies to succeed in China, fellow innovators will need to adopt a localized strategy based on China-specific trends. Before we dive into that, we will walk you through some common plays for brands in the Chinese market.

The China Metaverse playbook

Based on what we observed in the market, approaches to China Metaverse campaigns mainly consist of three components.

• Digital collectibles: Digital collectibles are popular with luxury brands as they connote scarcity and exclusivity. Alibaba launched a new platform within Tmall dedicated to them. Brands including Burberry, Balenciaga, Longines and others all launched digital collectibles in collaboration with Tmall. However, we have yet to be able to evaluate the value-add to both the brands and the customers given that these digital collectibles have no financial values and are primarily introduced as free giveaways that come with purchases on the Tmall platform.

• Digital avatars: Digital avatars have the most potential to reach the wider public audiences and to find a viable monetization out of all three. For example, Ayayi, the first “meta-human“ in China introduced in 2021, has quickly garnered over 600K followers on Weibo and has secured multiple brand deals including Burberry and BOSE for its popularity, especially among the youth. For the brands, Digital avatars provide lower barrier to enter as brands do not have to design, produce and own them, but to work with them for short-term collaborations.

• Virtual spaces: Out of all three, we’ve seen the least movement in the virtual space area. While virtual world is already part of the standard playbook globally, Dior, up until very recently and amongst the early players, appeared in the Chinese ecosystem by working with Xirang (希壤), a Baidu-owned AR/VR virtual space, to host their Fall 2022 Men’s wear fashion show. This is the closest we’ve seen for brands to tap into virtual space to create experiences.

For the most part, brands are still leveraging WeChat or Alibaba’s ecosystem to create Metaverse-like experience. For example, Coca Cola launched the Coca-Cola Zero Sugar Byte limited edition products in China right after its global launch. Instead of going for a land in Fortnite, its China strategy is to creat a AR-enabled Metaverse-like game in WeChat mini-program that remains far from creating a truly interactive and immersive experience.

Based on our observations, most Chinese brands have only been testing the waters with the three components mentioned above in their Metaverse marketing strategy.

What are the challenges?

• Metaverse campaigns are costly to produce, especially when brands start to launch NFTs, digital collectibles, avatars, and virtual spaces. To launch a full-fledge Metaverse campaign with NFTs and virtual avatars, the price can go up to seven figures for a single campaign.

• New Metaverse channels have yet to emerge in China, and most campaigns still follow traditional marketing methods, requiring engagement in media channels such as WeChat or Weibo. There is no such thing as “marketing in Metaverse“ yet, rather, under the disguise of the Metaverse concept.

• Metaverse campaigns are tightly associated with community, and existing brands, because they are the ones establishing brand campaigns with ROI that’s hard to calculate, and are also tapping into existing communities. Naturally, mature brands are better positioned to adopt Metaverse campaigns.

Playing Metaverse to win

Instead of pouring money into recreating the full-fledged Metaverse playbook as introduced above, we advise taking a more calculated and sustainable approach based on what Metaverse is good for. Here are a few things we’ve identified:

• Use Metaverse for brand refresher: We expect that new players will emerge in the Metaverse space providing a new channels for customer reach and branching out to new customer segments. Metaverse originated in games and are especially popular amongst younger demographics (eg: nearly 50% of Roblox users are below 13 and over 60% of Fortnite users are between 18-24). We expect that this trend will be similar in China.

  Virtual worlds open up a new and untapped field for brands to reach audiences, adopt new modes of engagement (eg: new ways of interacting with your audience) and provide new takes to refresh your brand image given its playfulness.

  That being said, brands should not blindly launch campaigns in Metaverse. It is still about applying first-principle thinking to ask: are your audiences in Metaverse? can you find brand fit in Metaverse? It’s essential to think through how to best leverage the voice brought by Metaverse and see fit to combine it with current brand value propositions.

• Use Metaverse for immersive e-commerce: Live-streaming e-commerce has achieved massive success in China especially in categories like cosmetics as it is a more effective medium that conveys more information than others.

  Similarly, Metaverse brings additional layers of sensual evocations, activates more senses and communicates product information that cannot be conveyed effectively otherwise. Metaverse opens up immense opportunities to further digitize the sales process, especially for industries that still rely on offline sales.

  Take automotive as an example. Offline showroom and test drive remain indispensable as the physical experience of driving cannot be adequately conveyed via images or videos. But Metaverse has the potential to enable users to go from one test drive to another without ever leaving their rooms.

• Use Metaverse for social selling: Metaverse could also be an enabler for a truly online social and shopping experience. Despite all the hype around social commerce today, online shopping experiences today remain largely asynchronous and lonely. With Metaverse, friends can shop together in virtual spaces and recreate offline shopping scenes virtually. Imagine asking a show host for product opinions or get your friends’ comments synchronously without leaving the platform. Metaverse enables consumers to complete the journey in a social manner.

  The point is to build multi-dimensional virtual experiences that provide real value to customers whether that be human connections or enhanced product experiences.

  

Final thoughts

Metaverse will likely continue to trend, with a version of its own emerging in China. Innovators in the Chinese market can’t just simply copy and paste the global strategy. They should be driven by first-principle thinking and focus on identifying brand fit.

Ample opportunities exist, but the underlying challenges of customer engagement remain. Until we fully realize the Metaverse vision (which is still unclear at this stage), we’re likely to see marketers leverage Metaverse for branding, community marketing or social selling.

Together, we’d all like to be the observer, explorer and initiator to make Metaverse worth the “Chinese-hype”, stay tuned.