Episode 7

Through the looking glass:

Into the emerging world of the metaverse.

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“I think the biggest misconception about the metaverse is that it's “Ready Player One.” It's a virtual reality game, it demands that you buy scuba goggle-like equipment, and you have to outlay a lot of cash and, and we see this misconception not quite from the mainstream, yet the mainstream has heard of it and is curious about it. I think that the wave that's coming through right now, we can quickly dispel those misconceptions by talking about the promise of the metaverse, how it breaks down and how it can benefit people.”

Dave Carr, Head of Business Development and Creative Strategy at Parcel

"We can quickly dispel those misconceptions by talking about the promise of the metaverse."

In this episode

The metaverse.

The name likely draws up all kind of ideas for it means, from Marvel and Ready Player One environments to virtual concerts and shopping malls.

While this vast digital landscape is still largely unregulated, ungoverned, and simply full of promise for what could be, it’s also a space that major brands are already taking early bets on – capturing land and creating experiences and products you can’t get anywhere else.

How are evolutions in the metaverse impacting the current landscape of our built world? How could it impact our lives and days in the short-to-near term?

And how might our real and virtual worlds collide?

In this episode of Changing Places, host Mariam Sobh goes through the looking glass and into the emerging world of the metaverse with guests Peter Johnson, Director of Growth Technology Practice, and Leah Zafra, Associate, Growth Technology Practice at Avison Young, with additional insights from Dave Carr, Head of Business Development and Creative Strategy at Parcel, a virtual real estate marketplace.

Highlights

  • 3:48 Leah Zafra explains how items in the real world can be complemented with virtual replicas and experiences in the metaverse.
  • 6:33 Dave Carr shares how real estate within the metaverse has moved along and generated sales.
  • 26:29 Peter Johnson describes how brands have adapted to selling to consumers in the metaverse through “KYC” models and more.  

Click here to expand transcript

Speaker 1 [00:03] Coming to you from Mount Pleasant, one of Vancouver's fast growing tech industry neighborhoods. The sun is shining brightly on the mountaintops in the distance, overlooking this light industrial zone. It's also a very windy day. Hopefully, we can catch somebody before they blow away here.

Speaker 2 [00:22] I think it could be a real alternative. I look at it as we already live in a form of metaverse. We come home, we sit down, we're on our phones. We spend a lot of time on our phones, which is not reality, but it's a form of reality. So it's already augmented in a way. I don't really see much of a difference except for more of our daily time and routine being spent in a so- called metaverse.

Speaker 3 [00:42] I think the metaverse could become an alternative to real life. Whether that's a good thing or not, I think, could be up for debate.

Speaker 4 [00:49] So in Marvel, there's different metaverses where the characters can travel to different worlds. And they're also different versions of themselves in that world. So when you're saying metaverse, that's the first thing that comes to my mind.

Mariam Sobh [01:06] The metaverse. What is the first thing that comes to your mind when you hear that word? Virtual worlds populated with avatars, a Travis Scott concert, a giant virtual shopping mall where you can meet friends from around the world? All these definitions are correct, yet they're all shifting and changing as the people and companies behind the metaverse shape this new world.ParagraphBreakAfter all, the metaverse isn't just one thing owned by a singular company. It's many different worlds that interact with our so- called real world in interesting ways. But the question is, do you even want to live in the metaverse? Or have you already built your house in the Decentraland virtual marketplace and you're just waiting for the new neighbors to arrive?ParagraphBreakMcKinsey recently reported that the metaverse ecosystem could be worth $ 5 trillion by 2030. According to the World Bank, that's more than the gross domestic product of Italy and Canada combined. With retailers like Nike and Chanel moving into the metaverse and Travis Scott performing for 40 million fans in the metaverse, this space will certainly grow in the coming decades. Who knows? Maybe growth in the metaverse will smash McKinsey's prediction.ParagraphBreakToday, I'll be looking at how the metaverse is informing and interacting with our built world. I'm going to speak with Leah Zafra and Peter Johnson from Avison Young about all the deals, real estate developments and more happening across the metaverse. Plus, we'll hear from Dave Carr, formerly of Decentraland and now head of business development and creative strategy with Parcel.ParagraphBreakI'm Mariam Sobh and this is Changing Places. To get a sense of where we are in the far reaching corners of the metaverse, I'm speaking with Leah Zafra and Peter Johnson from Avison Young. Throughout this episode, we'll also hear from Dave Carr, head of business development and creative strategy at Parcel. Leah Zafra and Peter Johnson, welcome to both of you.

Leah Zafra [03:06] Thank you. Thanks for having us.

Mariam Sobh [03:07] Leah, I'll start with you. What is happening across the metaverse more specifically in Decentraland right now when it comes to real estate? I know this is a really big broad question, but with everything moving so quickly, can you tell us what you're hearing and seeing right now?

Leah Zafra [03:20] Yeah. Decentraland as a real estate platform, I would say, has a bit more avenues of value than compared to other metaverses. Decentraland, similar to others, there is a sense of scarcity, which is similar to real world real estate. There's a finite amount of parcels, and there are no plans to release more unless every member of the decentralized organization votes to do, which isn't necessarily beneficial to any of them. So we don't see that happening.ParagraphBreakIn terms of trends within Decentraland, there is certainly digital twinning that occurs. So we replicate a real life property in the metaverse and with that, we complement the Web3 aspect of creating an experience in that space, although it's a digital twin of the real world asset that you can't create in the real world. So if that's an exclusive launch of a product, similar to what Samsung has done, or if it's some kind of larger than life exhibit or fashion show or whatever that may be. So there's some kind of aspect that we take the real world, but we complement it with things that physically can't exist. And I think that's a huge trend that's garnering a lot of action, which derives value in Decentraland specifically.

Mariam Sobh [04:30] That's really interesting. And I want to get more into details a little bit later just about the different types of experiences and things that we may see in the metaverse. Peter, what are you seeing right now when it comes to real estate in Decentraland?

Peter Johnson [04:42] Yeah, absolutely. And I think just to piggyback off Leah here, the important thing that people should keep in mind when entertaining diving into the metaverse, be it Decentraland, Sandbox or one of the 170 other metaverses out there, is the fact that you should not just be thinking about it as purchasing land and then waiting for the value to come and then flipping it because the biggest key here is that you need content to be created on that land for it to be monetized.ParagraphBreakSo the value is actually derived from community and engagement. The only way that the community and the engagement will come to these different metaverses is if there are creators building out experiences and content that will attract the masses, essentially. So until that point happens, and we're still in the very beginning stages of trying to understand, listen, how do we monetize this?ParagraphBreakIf it's a brand, how do we monetize this? Because right now a lot of groups are using this as purely a marketing advertising branding play versus an actual way to for economic benefit right now. It's, "My competitors are doing it. I have to get in the game. Let's dive in" And the easiest, most simple way to do that is to go and find whether it's you purchasing land, having the developers build it out, or utilizing the broker, someone like Leah and myself, to help them custom curate a metaverse strategy and then implement that through our other backend users, being that the landowners or developers on the backend.

Mariam Sobh [06:27] Let's hear from Dave Carr of Parcel, which is another kind of metaverse directory slash marketplace.

Dave Carr [06:33] Right now, if you look at the real estate sales, virtual real estate sales in the metaverse, slowed a little. They're still moving along. Prices are still up there. And I think the projects like Other Side are still really buoyant and are probably generating the most number of sales because it's such a high profile project. It's so new. And very recently they released a trailer of what users could expect when they go into the world. So that is the dominant world that is generating the most number of sales at the moment.

Mariam Sobh [07:06] So one thing I've been thinking about just when I've heard about these different metaverse virtual worlds, it seems like everybody's got their own platform. So let's say you want to buy a piece of property in places like Upland, for example. And then there's somebody else who has that same piece of property in their metaverse. So how is it even exclusive if everyone is able to build this out? Is there a plan to have one central, I don't know, overseer of all of the online real estate?

Peter Johnson [07:34] Interoperability. It is the key word. It's a buzzword within the Web3 space. Facebook Meta will be coming out with their own metaverse called Horizons. It's in beta, but they have not actually released the metaverse yet to the general public. Their whole goal, being Facebook's, is to make this an interoperable world because typically, okay, you hear that there is going to be this total upholed of the metaverse. Decentraland and Sandbox, being the top two metaverses out there currently, will be totally upholed once Facebook launches Horizon. The interoperability between both worlds does not exist yet. That is something that I know that all of these metaverse owners operators are striving for because everyone wants to work together to make this all work. And, honestly, it will not work unless there is interoperability between all metaverses.

Mariam Sobh [08:34] Leah and Peter, I really want to dig into how branding and other deals are shaking up the metaverse. But before we tackle that topic, let's hear from Dave Carr of Parcel.

Dave Carr [08:44] I think the concept of interoperability is, yeah, it's starting to happen, but as a seamless mechanism, it's quite a way off. I know that the open metaverses are keen to work alongside the closed metaverses, like the Fortnights and the Robloxes of the world. And then if you take into account moving between the AR side of things and the virtual, that's a whole other problem to solve.ParagraphBreakI know that a platform like Over, which is one of the augmented reality platforms, you can bring assets across from the Sandbox into Over and move them around on that platform. So there's an example of early interoperability, but I think, yeah, in terms of a seamless experience, that's quite a ways off.

Mariam Sobh [09:27] A recent McKinsey report predicts a $ 5 trillion market for the collective metaverse by 2030. What sort of growth or expansion in the space or among these many worlds do you see on the horizon, Leah? They're clearly expecting adoption among everyday people will help fuel horizon spaces like Sandbox and Decentraland to get to a $ 5 trillion market. How do you think we'll get there from where we are today?

Leah Zafra [09:51] I think tying in our real lives with what we can make in the digital world will, and I think of it as a trickle effect. So in the smallest ways right now, where we don't necessarily, not every metaverse is compatible with VR and AR at this juncture. So how do we start to get people familiar with this idea of a metaverse world? For example, in Meta, for Facebook's metaverse, Horizon, they have these avatars that I just recently noticed have appeared on Instagram. So it's the first sign of getting people familiar with it. And I think it's not going to happen overnight.ParagraphBreakProjects like Jimmy John's, for example. They are a sandwich franchise. They had a metaverse store in which all the users could go in and vote for a sandwich that would then be created on the real world Jimmy John's menu. Interesting that your word creating it digitally, it's appearing physically. It's starting to get people familiar with the trends that exist in Web3.

Mariam Sobh [10:48] But Peter, any thoughts on that?

Peter Johnson [10:50] I believe to actually stay on track with the numbers that McKinsey's quoting, you have to have the technology and the platform in place for these creators to be able to seamlessly put this content in those different metaverses. And then, secondly, I think the big key when we're looking at the $5 trillion number is seeing where is that $5 trillions derived from? Over half of that, they're saying, is going to come from the e- commerce market. And that is where e- commerce is going. So where fashion, retail, and especially the big block retailers, thinking of Macy's, Nordstroms, all of these large producers, they spend millions and millions of dollars every single year just on their retail locations. In one of these metaverses, and you will still have the ability to attract those same consumers, whether they're in Beijing, Saudi Arabia, London, New York, it doesn't matter, they can go in play, work, and especially with the retailers, you can try on the clothing. And that's why the technology piece is such a big portion of this because we can't have the e- commerce go where we think it's going to go until we have the ability to actually try on these clothes. I think the fashion and retail industry is most poised to change here and drive that economic growth. But, again, it will take the technology behind this and driving the platforms to allow these operators and these retailers to curate experiences and eventually allow them to sell these products virtually and get them physically.

Mariam Sobh [12:28] Again, Dave Carr.

Dave Carr [12:31] I think the biggest misconception about the metaverse is that it's Ready Player One. It's a virtual reality game. It demands that you buy scuba goggle- like equipment and you have to outlay a lot of cash. And we see this misconception not quite from the mainstream yet. The mainstream has heard of it and is curious about it. I think that the way that's coming through right now, we can quickly dispel those misconceptions by really just keeping on talking about the promise of the metaverse and how it breaks down and how it can benefit people.

Mariam Sobh [13:04] Stay tuned for the next part. And just a reminder, Changing Places is a podcast brought to you by Avison Young that continues to explore and question our complex relationship with the built world around us. I'm your host, Mariam Sobh. I hope you're liking the show so far. If so, please share Changing Places with your friends.ParagraphBreakWelcome back to Changing Places. Before we get back to my conversation with Leah Zafra and Peter Johnson, let's go to Vancouver to hear what people on the street think about the metaverse.

Speaker 5 [13:38] Okay. So for real estate and the metaverse, I don't know if we should be putting money into it. Is it going to be cheaper than real estate right now because no one I know can afford a home. So is this going to give us some actual equity to be able to buy things in the real life? Maybe not. I'd be interested to see how that would go. I can't say that I would for sure put money into it or not, but it would be interesting.

Speaker 2 [14:01] I actually own some land I bought in the metaverse a couple years ago. Have you guys heard of Earth 2? The whole thing is you could buy land in the metaverse, but we don't know which platform is going to be the one that's successful. You could have invested in the Duck Duck Go or something years back and Google ended up being the main search platform. So who knows which one is the right one to choose, right?

Mariam Sobh [14:22] Leah, how far away are we from being able to try on a pair of sneakers or pants in the metaverse and then having them arrive at our door?

Leah Zafra [14:31] The reality is that technology does exist. VR technology exists, AR technology exists. It's the merger of that with interoperability that I think is what really needs to happen in order for us to be able to go into our virtual worlds, try on clothes on our avatar that mimics our real world body and have them sent to us physically. That's 12 to 18 months timeline, realistically. I'm not going to say that in 12 to 18 months, there's going to be this mass adoption that everyone's going to want to engage with that. But I do think that will be available then and then that's when we'll start to see that kind of snowball effect, that once it hits with one retailer, which a lot of them do have planned to or they're already starting to sell digital NFT fashion. That's huge play in Decentraland, really. DRESSX, for example, they sell NFT clothes in the little shop. You walk in, you click on them and it redirects you to a link and you can buy clothes for your avatar. For that avatar to look like me and then click on the link and have it sent to my home, I would say we're about a year and a half out.

Mariam Sobh [15:33] Well, is this a place where maybe it's more affordable for someone to buy a Gucci handbag? Now I don't have to shell out a couple thousand dollars. I could pay, I don't know, a hundred bucks and be able to show it off?

Peter Johnson [15:44] So Gucci's selling their virtual handbags for more than their physical handbags in real life.

Leah Zafra [15:48] They're physical twins, too.

Peter Johnson [15:51] Correct. So, yeah.

Mariam Sobh [15:53] Okay. So stick to the real.

Peter Johnson [15:54] And that's exactly. And it is crazy, but there's a market for it. And that's the whole thing is there is a marketplace and I think the brands are realizing. It's the two prong thing. It's something we have to... It's coming whether we like it or not and we have to adopt this and figure out how it fits into our business line and will generate us money down the line. But right now, every single one of my competitors is exploring the space. Most of them are already operating in one of these metaverses whether we like it or not.

Mariam Sobh [16:28] Leah and Peter, before we get into what the future holds in store for the metaverse, let's hear from Dave Carr.

Dave Carr [16:34] I think we're a long way off from Ready Player One levels of fidelity and experience. I think a period that we're in now with the downturn, I think you'll see a lot of the tech get better. You'll see a lot of the accessibility ease of entry improve. I think, up until now, even with the most established project like a Decentraland, it hasn't been traditionally that easy to get into. If you're from the mainstream, you might stumble across setting up a wallet or you might have tech issues. And let's not forget that the metaverse doesn't just have to be a virtual reality necessitating the clunky headset, if you like. So I feel like that technology and that side of the metaverse is probably going to be the thing that onboards the most number of people.

Mariam Sobh [17:20] We talked a little bit earlier about the interoperability. So how will the intricacies of the metaverse work? How do they work when Samsung or Apple launches a new product in Decentraland, but not in Sandbox? Will it become frictionless where folks can take their avatar to one world or another without having to do all that?

Peter Johnson [17:39] Yes. And that's Facebook's biggest goal. They're not in this to just monopolize their metaverse and take over everything. They understand that their metaverse, Horizon, may be better suited for X, Y, and Z users. But, again, that's why there is Sandbox versus Decentraland because they both have their best use cases. Where there's a more gaming centric focus in Sandbox. I think Dolce & Gabbana and Balenciaga both have metaverse presence that are in Sandbox, which again, you wouldn't necessarily think would be the area that they would want to play in.ParagraphBreakSo the interoperability is something that I know that every single metaverse platform is pushing for and it will only make us all better because we can pick up other technologies from other groups. But, essentially, the way to think about it is it's the evolution of the hyperlink. It will be the same thing where, if I'm in Decentraland and I need to pop in, you can navigate and click on something to just drop you into Sandbox. And that will allow the brands to also play in these different spaces without having to make a decision. Do I — one or the other? It doesn't have to be.

Mariam Sobh [18:48] Leah, how are folks going to deal with the gate keeping of these technologies? There are no rules, so how does that look? How does the future of the metaverse look in terms of someone monitoring what's being done in these places? Let's say somebody comes up with replicas and starts selling them in the metaverse.

Leah Zafra [19:05] Regulation is a hot topic. There's a fine line between having a governing body to have some sort of regulation versus keeping it truly decentralized and about the greater masses. It's really a balancing act. There are companies that securitize certain parts of it, so in terms of hacking or stealing or things like that, there are companies that will securitize processes, transactions to avoid those things. And that's a huge kind of KYC theme that Peter can speak more about. But that even in terms of real estate, for example, if I'm owning my real estate and I'm renting my building or mall, for example, it's how do we really know who's on the other side of the transaction?

Peter Johnson [19:43] And the KYC is exactly that. Knowing your client. Know the client. Who bought this? Who sold it? Where'd my money go when I bought it? And that's, again, that's why I think a lot of the truly institutional type companies, really the financial services, insurance, the big five. These groups can't have Ethereum, crypto, block on their balance sheets. And I don't think that's necessarily a fundamental issue right now in the way that we transact.ParagraphBreakI think that it's allowing the developers to create leaseholds where they are the owners of said land, and they can create on top of that, but then they will lease that out to the customer and we can create smart contracts if you wanted to develop the land, create a retail mall and then sell virtual NFTs, goods, whatever that is. They can create the smart contracts. They can create the mall. They can design and create the architecture behind it and then deliver on it. Again, there are a lot of different use cases, but interoperability, regulation and KYC are the biggest of topics for where this goes, because those things will put a stranglehold on the ability for the metaverse to advance as quickly as we expect it to.

Speaker 6 [21:11] People are already investing in real estate in the metaverse, right? People are opening shopping malls. But it doesn't mean it's actual real life. So I don't know where it's going to go. For me, personally. I don't think in my lifetime. I'm 45. I don't think it's going to be a substantial real life alternative anyway.

Speaker 7 [21:28] I think the focus should be on the built environment. I think there could be higher priorities, personally. If we're going to pour resources into things. I think there are bigger issues than that myself.

Mariam Sobh [21:37] The metaverse is moving super fast and before we close up our conversation, I want you guys to get that crystal ball out and tell us about some of the trends you think will be with us over the next five or 10 years. Leah, we'll start with you.

Leah Zafra [21:55] So something that I've recently discussed with a couple people that I can see being a huge trend, and I haven't seen a lot of, is within sports and gaming. So stadiums could have, in their real world stadiums, have cameras, let's say, that you can access in a metaverse stadium. And then when you go into the metaverse stadium, we can then layer in things that can't necessarily all happen in the real world at the same time.ParagraphBreakSo purchasing NFT jerseys and maybe having those delivered to you in physical goods or interacting with celebrity sports players, that their avatars are there, you can interact with them. And those are things that can be prerecorded and then displayed as holograms and hologram myself just two blocks away here in midtown in Manhattan. The technology definitely exists and I think that could be a huge opportunity, especially because gambling and casino and gaming is already a huge hit in metaverses. I mean, 60% of usership in Decentraland is in Decentral Games, in ICE poker. So I think layering in real world sports is going to be a huge trend. Definitely bullish on that. And I see a lot of opportunities, something we're looking to do with our mall. Fashion is just going to be a huge one once we have AR and VR, as Peter mentioned before. But I'll stick with my gaming. I bet on gaming.

Peter Johnson [23:10] If you're looking at it with the long term lens, the sheer amount of dollars that can be saved by these companies on just scaling back that annual spend on their existing real estate need, the brick and mortar retail in particular. Malls were dying before the metaverse came. So it's inevitable. It's coming. How are these brands adopting it? It's fascinating because the metaverse, the possibilities are infinite, right?ParagraphBreakNike has their own Chief Metaverse Officer, their new CMO. So these companies, the trademarks are being patented daily. That's something we track. So there's things going on behind the scenes that no one even knows about that these companies are – new avenues and new pathways new metaverses, what have you. It's a fascinating time. It's an exciting time. It is fast paced and changing every single day because there are so many different avenues and there's still a lot of work to be done. But, again, I think it's focused on the community and the money will come.

Mariam Sobh [24:17] Leah and Peter, thank you for joining us on Changing Places. This has been great.

Peter Johnson [24:22] Thank you, guys. Thanks Mariam.

Leah Zafra [24:23] Thank you.

Mariam Sobh [24:24] And finally, let's hear from Dave Carr one last time.

Dave Carr [24:28] I would hope if we're looking five or 10 years ahead, I would hope that the decentralized metaverse projects survive and are able to crack interoperability and make movement between those projects a seamless experience. There was a recent announcement of the Open Metaverse Alliance, which is decentralized virtual worlds and metaverse projects joining together and figuring out the best ways to work together and support the various projects.ParagraphBreakAnd having spoken to the people spearheading that project, they're very keen to work with the closed metaverses to ensure that we all move ahead together and create something whereby you are not left with one kind of giant or handful of very corporate and closed experiences that are curating content for the masses. The whole notion of Web3 and decentralization and metaverses is that it empowers creators to own a piece of the worlds in which they're building, but also to monetize and see the benefits from what they create. And I hope that people keep really focusing on the creator class and the ability for people to really produce some special content and experiences that can be experienced if you go into a virtual world or there to enhance our physical lives. I think we can't even imagine what it's going to be like in five to 10 years. The pace of it is pretty extraordinary.

Mariam Sobh [25:47] It seems that so many of us have contrasting views about what the metaverse is or what it could be that maybe that's the point. For some, it'll be an intense virtual reality landscape, even more immersive than Ready Player One. For others, it'll be an addition to everyday lives, which merely complements a trip to the grocery store or a quick team meeting with someone across the world. I don't think there's a solid answer about what the metaverse is. And that's okay. Our built world is constructed on rules, order and tacit agreements about how, why, when and where everything from trash collection to senior proms take place. In the metaverse, those rules don't exist. Or maybe they do in one land, but not in another. Decentralization has the ability to upend one aspect of our lives that seems to be coming faster than anyone realizes. But are you ready? Am I ready? Or will our adoption of whichever metaverse you call home be as familiar as Grandma's house on your birthday, which you may be able to recreate with a few lines of code. I'll see you on the other side of the looking glass in the metaverse. I'm Mariam Sobh. This is Changing Places.ParagraphBreakChanging Places is brought to you by Avison Young. Our producer is Andrew Pemberton- Fowler. Our sound engineer is Patrick Emile. Our producer assistant is Hugh Perkic. Additional production support is provided by JAR Audio.

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