Strategic arguments for brand in the metaverse
Should brands get involved? There's a few questions to ask first
Being agnostic is quite useful when it comes to marketing. This is one of the rationales of The Dispash.
Onwards
Can the metaverse ever work for brands?
It's nearly a year since Facebook rebranded to Meta. A year later, its avatars got legs. Sort of.
In between, McKinsey has predicted that the metaverse will generate up to $5trn in value by the start of the next decade. There are a lot of marketing articles now outlining exactly why brands who are not involved in the metaverse today will be history tomorrow.
It's seduced a lot of well-known names.
Walmart launched two worlds in Roblox. Argos now has out-of-home advertising in Somnium Space and Decentraland. Luxury brands such as Vogue and Gucci have their own spaces.
You don't have to look far to find reports claiming that some marketers are expecting to spend up to 50% of their budget on AR, VR, and the metaverse in the next two years (without a hint of irony, the next sub-head on the previous link says "Marketers Still Lacking Influence Over Budget Decisions.").
There are a few issues here. Firstly, it's very easy to make long-term predictions as nobody is likely to hold that $5trn figure to account in 2030 but there's plenty of business to be had for those who offer solutions for unlocking that $5trn. Nobody ever got rich quick by saying nothing much will change.
Secondly, most conversation around the metaverse is really a conversation about gaming or VR. Fortnite and Roblox are games with metaverse elements but aren't actually the metaverse, while Meta's Horizon and Somnium are primarily VR applications first and metaverse second.
There are plenty of other media than have metaverse elements, but largely the conversations and problems are not metaverse conversations or problems. Using Roblox or Fortnite to target their large userbases is a marketing conversation rather than a metaverse conversation. Growing Horizon's users is a VR problem rather than a metaverse problem.
But brands are willing to spend money on 'metaverse' activations. That much is clear. Should they spend money on metaverse activations? That's also a relatively clear answer, if the marketers have done their strategic homework.
Reverse engineering marketing in the metaverse
Apologies. For the purposes of brevity below I'm going to use metaverse as a catch all word for all discussed above. It's not, but it's easier not to have to qualify this in every sentence.
Any decision to spend money in the metaverse currently is, first and foremost, tactical. These tactics stem from the strategic choices that come from your qual and quant research, and your segmentation targeting and positioning.
So taking Argos's out-of-home adverts in Somnium and Decentraland, there would be a rationale and a strategic objective. The metaverse channels clearly aren't lead channel (that would be physical Out Of Home), so we can assume this is a value add aimed at incrementally improving the outcome.
So what is the outcome Argos hopes to drive and what's the overall objective? From the trade press coverage, it seems to be to drive "consideration and awareness of more premium products and brands that some people don’t think of Argos for."
That gives us a bit to work on, along with some of the creative itself. The problem to solve is that some [implying a target segment rather than the mass market, potentially?] shoppers who already use Argos a) aren't aware that Argos sells premium products such as high end TVs; and b) even if they are aware that Argos sells high end products such as top-of-the-range TV, Argos has low mental availability for those people who are in-market for a high end TV.
Any objective should be single minded, so for the purpose of this email, let's assume that consideration is more of an issue that overall awareness of Argos' product range.
The objective might read something like: "Improve consideration of Argos as a retailer for high end electronic goods in the Emerging Young Online Affluents segment by 15% by EOFY 22-23."
So far so good. A relatively clear objective, and a target segment with a SMART goal and financials at the end of the funnel. This is the point where it gets a bit fuzzy.
Problem Number 1: target audience
The OOH creative example from the campaign (below) has the tagline "It's not just our trampolines that are massive." This is next to a picture of a top-of-the-range TV.
At risk of over analysing the creative, the one word that stands out here is trampolines. It's an oddly specific product and implies one of two things.
One explanation is that large trampolines are a key product and hugely recogniseable as a 'classic Argos purchase'. Like the Sports Direct giant mug or the Starbucks Christmas cup, it's become a distinctive brand asset.
I've not lived in the UK for five years, but it's not something I'd immediately associate with Argos (toys and cheap jewellery, yes. Giant trampolines... probably not).
The other more likely option is that this copy is written to speak directly to pre-school and primary school parents and this audience appears somewhere in the original brief. Perhaps there's an insight somewhere that these parents will use Argos for big toy purchases but haven't considered them for big 'adult' purchases like TVs.
This is where Decentraland and Somnium become a slightly odd channel. I've done work targeting the young parents segments in the past. I've even created some segments myself based on substantial qual and quant research. The one characteristic they all have in common is they are exceptionally time poor.
Immersive VR or metaverse activities would fall more on the gaming side that virtual worlds like Decentraland and Somnium
The bottom line here: if a media agency proposed metaverse platforms as part of a campaign targeting a young parents audience, I'd want to see the data and research that indicated that this was a channel the audience over-indexed on, offered competitive CPMs and had enough of the target users to make this worthwhile.
Problem Number 2: numbers
The first question media planners usually ask after a brief is around reach, namely 'how do we get in front of as many of our target audience as possible for the best possible CPM.'
You're then also looking at the frequency and impact and how it can hit the brief. So cinema may be expensive but it's very high impact while display advertising is cheaper but easier to ignore. Out Of Home, done well, can be highly impactful with reasonable CPMs.
Decentraland's users are, by any standards, low. The platform itself claims 8,000 daily active users and just under 57,000 MAUs, which sounds like a reasonable amount until you factor in the UK's population of 67.2m, including the 19.4m families. Even as you narrow that down to young families, that's not a large reach. And doesn't take into account whether or not they're based in the UK.
As an aside, James Whatley, Chief Strategy Officer for specialist games agency Diva, counted 500 active users at a random sample, and Somnium Space had three users on Steam in one particular day. I saw 77 people in the platform's most popular parcel when I logged on late evening AEST.
They're not numbers that a marketing manager would get excited by. In contrast, OFCOM's 2022 news report estimated 3.3m people read print magazines.
While, say, Grazia's 92,061 readership is not high, it has much clearer targeting demographics for a brand like Argos than Decentraland or Somnium.
Ultimately marketing is a numbers game. It's not necessarily always about short term ROI, but it is about budgets, reach, sales and profit. Or in this case, increasing consideration of Argos for high end items.
Try as I can, I can't see how the numbers would justify stacking up for this particular execution, especially as the production costs are likely to be higher than an average advert.
I have no insight into the spend with the two metaverse platforms, but unless it was free (unlikely), it's hard to see how it would have given Argos value for money.
This still doesn't mean metaverse platforms such as Decentraland and Somnium have no value to advertisers. After all, with some particular products (mostly B2B) the audience is small but the targeting can be tight and the rewards high.
So a brief that targeted early adopter crytpo or VR enthusiasts may end up with either of these two platforms on the media buy list - although there are probably other channels that still offer better value for money. But at least it makes strategic sense.
The counter argument: the need to f**k around
There is a counter argument to the hard media metrics and that is sometimes brands need to commit time and money to new or emerging untested platforms. There is value in experimenting and there is value in being a first mover on platforms before they grew.
I have some sympathy to this argument. A lot of my early career was spent in social media before the platforms accepted adverts. There was a bit of trial and a lot of error.
It might have led to some blind alleys - hello, engagement - but it also helped understand what good looked like on these platforms.
But there are fundamental differences with the early days of social. The barriers to entry - and creation - were lower. User growth was rising. It was an entry point into cultural conversation that crossed into the mainstream in a way that platforms like Decentraland have yet to do.
The worst that would happen was a day of wasted work as opposed to media budget (still a cost, but a lesser one). And there was enough data to pull out insights.
In one instance, at ITV, we found a niche but scalable community who were unlikely fans of a show struggling for ratings, and managed to give it a sizeable bump for online catch up as a result.
Non-gaming metaverse channels don't have this momentum. The user base is still too fragmented and small, unless you have a very specific target or objective in mind.
It’s interesting to understand how it works but that doesn’t make the metaverse tactically useful to a lot of brands and audience at this point in time. Coinbase advertising in the metaverse makes sense.
Mass market retailers such as Argos and Walmart make less sense strategically. Being a first mover in this space may win column inches and even awards, but whether it will drive profit, margin, long-term brand effects, and the like is another question.
One day the metaverse may well be an obvious answer to a strategic brief, but unless you're clear on exactly who you're targeting today, then the potential of buying a very expensive low traffic virtual billboard is high.
Interesting reading
Algorithms and the double jeopardy rule
If you’ve read How Brands Grow, you’ll be familiar with the double jeopardy rule: brands with a lower market share have fewer buyers and those buyers are less loyal than those of big brands, who can survive a % of their buyer base also purchasing their competitors better than a smaller brand. Econometrics specialist Dr. Grace Kite applies this rule to algorithms as well. Big brands are more likely to be displayed than small brands. Tescos has high brand visibility in Google in a way the local corner shop doesn’t. Laws developed for offline market often aren’t that different for online marketing. LINK.
Influencers as lobbyists
Wholly unsurprising that politics and lobby groups are splashing the cash with influencers. There’s enough people who will say anything for the right fee. The same is also true of celebrities in general, but they generally have agents to help them avoid some of the more problematic requests. LINK.
Why are children so sad?
Mental health in children has nosedived in recent years. It’s a trend that doesn’t necessarily have an easy diagnosis or simple solution. Phones and social media probably don’t help, but they’re not the only problem. There’s a lot of well-meaning initiatives but they tend to focus on the symptoms rather than the cause. LINK. (Bonus link: Charles Arthur on the Molly Russell ruling).
The rise of online returns and the death of fast fashion
One of the fashion industry’s biggest issues is online returns. Environmentally, they’re problematic, but this is as much about profit and margins as it is about sustainability. Free returns is one of those easy-to-implement consumer value-adds that started out as a point of difference and has now become expected, but eats into the bottom line due to everything from wasted manufacturing costs to people hours sorting the return. Ecommerce and DTC clothing retailers still haven’t figured out how to address one of the fundamental flaws in the model: until you try on a piece of clothing, you’ve no idea how it will fit. If AR was the answer, it would probably be more widespread by now. LINK.
Streaming service sharing
Research from Bain suggests nearly 1 in 4 streaming subscriptions are shared. Fascinating - or frightening - time to be in the streaming business. We may have reached peak content, or at least peak subscription. Lower priced ad tiers will help but it’s easy to understand why Netflix is clamping down on password sharing. LINK.
As ever, thanks for reading this far. Hopefully you’ve found it slightly interesting.
Playing us out this week: Gabriels - Angles and Queens. There’s been a spate of impressive albums, and Gabriels’ recent offering will probably end up in a lot of top 10 lists. If you like boundary pushing soul, this is definitely a track you’ll enjoy.