Large organizations and institutional investors are snapping up prime digital real estate as a result of their fear of missing out on the next great thing. In fact, virtual properties are being purchased almost as quickly as environments can be built.
Sales of digital property in the networked virtual and augmented reality environments known as the metaverse reached $500 million last year, with prices for space skyrocketing. By 2026, the trend can grow the market for virtual real estate to $5 billion.
Many companies see opportunities to sell their brands and interact with customers via digital real estate. However, other analysts claim that the influx of money and optimistic predictions about the financial potential in the metaverse are signs of a bubble.
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According to Philip Rosedale:
The creator of Second Life, a multimedia online world where users can also purchase virtual land, "the value of virtual real estate, which is not zero in the long term, is certainly hyped and inflated right now by this frenzy of interest that is perhaps out in front of what the technology can actually deliver."
"We have to overcome a really enormous gulf," Rosedale said. "That chasm is from what young kids are doing and ready to do in multiplayer games to adults wanting to be together socially in a virtual environment." And we're far further away from it than many of the optimistic people in the market now believe.
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Large brands assert their claim
More than 200 consumer-facing corporations, including Gucci, Atari, Wari Music Group, and HSBC, have already purchased virtual land in the metaverse, though a fully functional virtual environment where adults can socialise and interact with businesses is still years away.
Sebastien Borget, co-founder and COO of The Sandbox, one of four key platforms that trades in digital real estate, asserted that "the utility of virtual property is real." Together, Decentraland, Somnium Space, and Cryptovoxels, the other three largest platforms in meta real estate, control almost 269,000 pieces of virtual land.
He continued, "The possibilities are enormous because there are no longer any physical or imaginative boundaries, and it makes sense because users want to participate more deeply with the brand community.
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New Marketing Channels:
Numerous businesses are utilizing the virtual world to develop new marketing channels through sponsored content, immersive experiences, and digital goods like NFTs. To continue engaging with customers, brands will want to be close to where they are, according to Borget.
However, the cost of purchasing prime real estate in the metaverse, the first and most important stage, is rising.
In a six-month period, last year, the average cost of a plot of land across the four major platforms doubled to $12,000, according to a research by Republic Realm, which monitors metaverse-related projects.
Location on a map can have a big impact on property prices in the metaverse, much like in the real world. According to reports, a piece of land close to musician Snoop Dog's virtual property in Sandbox sold for $450,000 in December. The size of the plot and the reputation of the metaverse platform you decide to construct on are additional elements that affect the value of real estate in the metaverse.
Numerous new users are being attracted by the excitement, which is also reviving interest in crypto wallets. Access to a crypto wallet, a location where converted dollars are stored, is necessary for participation in these virtual worlds where crypto currencies serve as the primary medium of exchange for transactions.
Half of the more than 2.5 million registered cryptocurrency wallets on The Sandbox are owned by users who generated their first wallets when registering for the service, the business claimed.
According to Borget, of the approximately 166,000 pieces of land in Sandbox, almost 70% have already been sold to more than 20,000 people. A single parcel in the Sandbox is the equal in size to a buildable area that is 315 feet long, 315 feet wide, and 420 feet tall in the real world. There are different parcel sizes available on each platform, ranging from 50 square feet to more than 400 square feet.
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Massive Influx of Cash
Financial firms are being drawn to the online arena swiftly by the escalating hype.
PricewaterhouseCoopers (PwC), a professional services firm, bought virtual property from Sandbox in January. One of the biggest financial institutions in the world, HSBC, made a virtual land purchase last month and then launched a fund to take advantage of investing opportunities in the metaverse.
Suresh Balaji, chief marketing officer of HSBC, Asia-Pacific, stated in a statement, "We see significant potential to create new experiences through emerging platforms," adding that it's a branding opportunity for HSBC to engage new and existing consumers.
Other platforms, such Decentraland, Somnium Space, and Cryptovoxels, in addition to The Sandbox, also provide plots of virtual land that can be utilized to create virtual experiences.
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Market worth $1 trillion
JP Morgan bought virtual property in Decentraland after declaring lately that "the prospects afforded by interactive, digital worlds seem infinite." According to the global banking firm, the metaverse industry will soon generate over $1 trillion in yearly income, and enterprises that invest early have relatively modest financial risks.
In a research released in January, JPMorgan stated that the "astronomical risk of being left behind is worth the incremental expenditure needed to get started and explore this new digital world for yourself," adding that virtual real estate offers businesses the chance to "massively scale."
A major shop might create a worldwide center in the metaverse that can serve millions of customers instead of opening locations in every city, according to JPMorgan.
That is one tactic that Prager Metis, a significant accounting company, plans to use. In Decentraland, Prager Metis recently acquired virtual property, and it is now erecting a three-story virtual structure that will house its metaverse headquarters.
As its Chief Metaverse Officer, the company selected Jerry Eitel, a certified public accountant with more than 40 years of expertise who also oversees the firm's real estate practice. He works with companies and individuals to help them deal with the financial difficulties presented by the metaverse real estate market.
Eitel told CBS News, "We're building a consultancy profession around this. It will disrupt just as many industries as the internet did years ago, and that is what this will do.
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Ethical and Technical issues
Digital real estate is not a new notion; in fact, it has been around for about 20 years despite the present virtual land boom. On Second Life, a well-known multiplayer online game that debuted in 2003, users can also purchase land.
The economy of Second Life, according to its creator Rosedale, is $650 million a year, but the typical transaction only costs $2. In terms of the value of virtual commodities, he said, that "gives you an indicator of what we're going to see in the long run."
Virtual Land in the Future:
Rosedale acknowledged the existing difficulties that platforms must overcome in order to scale, along with a cautious optimism regarding the potential of virtual land in the future. He added that Second Life had only been able to get 100 users together in one area, citing the difficulty of gathering many user avatars in one location at once.
Furthermore, he foresaw horror scenarios in the event that advertising takes over as the primary way to generate revenue in the virtual world.
"The virtual worlds are very, very likely to inflict significant harm to people if they use advertising as a way of monetizing themselves," Rosedale remarked. A virtual reality headset's ability to track a user's body and eyes reveals amounts of information to an advertiser "that you should not be comfortable with," the speaker continued.
Rosedale responded, "We can't go that direction. We cannot use advertising as the metaverses' economic engine as a sector or as an ecosystem.
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