Space Pods and Digital Twins: How Virtual Ownership Drives Revenue Growth in Web3
When we own something it immediately becomes more important to us. It’s a core principle of behavioral economics called the endowment effect that is just as powerful in the metaverse as the real world.
Considering that one of the most compelling constructs of web3 is its ability to facilitate true ownership through the blockchain, brands can generate revenue through the sales of virtual goods and connect with consumers in ways that were never before possible. The potential is profound and we’re about to hit a tipping point. Billions of consumers will soon have the ability to mint, buy and sell virtual goods as Instagram, Facebook, Twitter, TikTok, YouTube, and Coinbase have all announced their plans to support NFTs. Now is the time for brands to focus on the near future and leverage this shift to drive growth.
What portability was to the rise of the mobile internet, ownership is to web3. The ability for consumers to verifiably own a tokenized digital asset however represents an even larger whitespace. While mobile provided the ability to purchase anywhere a smartphone could get a signal, the products were the same ones sitting on the store shelf. The channel (mobile access) was the innovation. With the metaverse, the innovation lies in both the channel and the product, as brands can now create “digital twins” of their physical products that consumers can buy on the block chain.
This dematerialization of consumption not only extends product lines, it also multiplies margins. How? Virtual goods have zero incremental costs of production. A digital t-shirt is made once and sold millions of times. No materials to source, no packaging, no shipping, and no inventory to hold. Web3’s ability to provide true, verifiable ownership on the blockchain changes the game and examples from early innovators point to significant potential.
Ralph Lauren wooed younger shoppers with its Roblox Winter Escape World that featured an exclusive digital clothing collection. The shoppable experience included eight gender-neutral winter sportswear looks that took inspiration from the 1990’s era Polo Sports line (tapping into Gen Z’s love for 90’s nostalgia). Prices ranged from 150 to 300 Robux (approximately $1.25 to $3). The results were anything but virtual. Digital customer acquisition increased by 58% and the activation (along with a similar collection release on Gen Z metaverse platform Zepeto) fueled revenue by 27% to $1.8 billion.
Nike is making similar moves into the metaverse with the recent acquisition of virtual fashion brand RTFKT. As its first NFT, Nike airdropped a mystery box called MNLTH to current holders of RTFKT’s CloneX avatar NFT collection. At a current market value $130 million, this free gift to clone holders drove immediate value and strengthened the brand’s relationship with 8.7k members of the RTFKT community.
Additionally, RTFKT launched a 20k piece NFT collection called Space Pods which are fully navigable, customizable homes in the metaverse where owners can display their NFT artworks, collectibles, social media content, and [soon] hang out with friends. Many of these Space Pods owners are customizing their immersive virtual homes and showing them off across social media driving demand and boosting value. [This includes us here at MI&C, we'll soon be opening our Space Pod to showcase our portfolio and showreels in 2D and VR.]
Since these owners can re-sell their Space Pods on the secondary market, this higher value represents a significant financial upside that’s only possible in web3. With the collection already valued at $37 million, there is plenty of room for owners to make a sizable profit if they decided to sell.
As other early movers like Barbie, Budweiser, PacSun, and Patron embrace digital ownership, consumers will find themselves connected to the brands they love in deeper ways that transcend product alone. The positive impact of this new form of marketing on KPIs like advocacy, loyalty, and customer lifetime value will accelerate adoption – a win for consumers and brands alike. Alternatively, brands that choose inaction over innovation won’t be able to offer that same level of value and will likely find themselves on the wrong side of the endowment effect.
This article originally appeared in the February 15, 2022 issue of Moving Image & Content’s agency newsletter. Subscribe here.