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Virtual real estate in the metaverse? There’s a burgeoning market for that

Virtual real estate in the metaverse? There’s a burgeoning market for that
Written by publishing team

View of an office tower being built by Tokens.com in Decentraland. A handful of startups are spending millions to buy land in online realms.Tokens.com

The past year has seen the emergence of several new and confusing investment trends, such as the Reddit-driven frenzy over meme stocks and the explosion in non-fungible tokens (NFTs). The latest is no less confusing for those out there: real estate in the Metaverse area.

A handful of startups are spending millions to buy land in online worlds that can only be visited on computer screens or through virtual reality headsets. – Worlds with names like Decentraland, Sandbox and Somnium Space. These virtual real estate moguls plan to monetize their pixels through real estate development, rental income and advertising.

One company seeking to become a digital baron is the Toronto-based Metaverse Group. “I went into the metaverse rabbit hole about a year and a half ago, and decided that this was the future of the internet,” said Michael Gord, the company’s co-founder and chief operating officer. Today, the Metaverse Group’s digital real estate portfolio is worth about $10 million.

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Virtual Earth is not easy to explain to beginners, but let’s start with metaverses. The defined term can be loosely used to describe any online world in which several people can live at the same time. Some multiplayer video games can be said to fall under the metaverse umbrella. So can less organized virtual spaces like Second Life, the online world that repeats the normal tasks of everyday life, like shopping and talking with friends.

Facebook helped popularize the term when it changed its name to Meta in October. The brand is an emblem of the company’s long-term bet that users will spend more time in virtual worlds.

Buying digital land is not a new concept. But as the hype around the metaverse builds this year, so does the interest in virtual real estate. There are different areas on the Internet that buyers can choose from. One of them is Decentraland, whose creators raised nearly US$26 million in 2017 and opened Their stadium is online to the public in February 2020.

Decentraland is a 3D cartoon city where users, acting as avatars on the screen, can chat with each other, gamble, attend concerts and other events. In October, Canadian electronic musician Deadmau5 gave a show There, so did Paris Hilton. Well kinda. The avatar of Paris Hilton has appeared on a digital platform, jumping and sometimes flapping her arms to pre-recorded dance music, while stored footage of the real Mrs. Hilton plays in the background.

One of the primary activities for Decentraland users today is shopping. They can purchase digital clothing and accessories for their avatar, or digital artwork. Every virtual object is an NFT – a digital asset whose ownership is recorded in an online public ledger called a blockchain. NFTs can only have one owner at a time, which means they can be traded and resold almost as if they were a physical thing.

Sotheby’s held an exhibition in Decentraland last year to auction off NFT artwork, and video game company Atari built a casino. In other virtual worlds, fashion brands like Gucci sell NFT clothing. Nike Inc. A company in December that makes virtual shoes.

Virtual plots can also be NFTs. And virtual worlds, just like the real world, have a limited supply of real estate.

Mr. Gord at the Metaverse Group has always been interested in cryptocurrencies and digital assets. He started organizing events, clubs, and get-togethers in 2013. More recently, he has started accumulating a small portfolio of lands in virtual worlds and combined his assets with Jason Cassidy, a friend and business partner, to form the Metaverse group.

Last year, they sold half of the company to Tokens.com, a Toronto-based crypto investment firm, in a deal worth $1.68 million. Tokens.com has since invested an additional $5.5 million, bringing its ownership stake to 67 percent.

Tokens.com CEO Andrew Kegewell, who previously co-founded bitcoin miner Hut 8 Mining Corp.

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He also saw similarities with cryptocurrency. Just as the total number of bitcoins has been determined, the number of plots of land in Decentraland is limited to 90,000. “If we can buy into this space,” he said, “it sure has value” — particularly to advertisers, who are constantly looking for new ways to reach consumers and can Attracted to buy space on digital billboards.

In essence, the Metaverse Group is no different from an actual real estate developer. He searches for plots of land close to where the users actually congregate, and builds there. Transactions are usually made in a cryptocurrency that is unique to each digital world.

Metaverse Group is nearing completion of an office tower in Decentraland, and in November paid about $2.5 million – at the time, at a record price – for plots of land in the internet world. Fashion District. “We’re building a Rodeo Drive neighborhood or a Fifth Avenue type neighborhood where there will be famous stores,” said Mr. Gord. He’s betting retailers will pay Hire to create digital storefronts where they can sell NFT wearables.

In March, the company plans to organize a Metaverse Fashion Week. According to Mr. Gord, the virtual fashion show will work just like the one in the real world – except for the avatars designing the NFT outfits available for purchase.

There is actually a shopping area in Decentraland, anchored by only two digital retailers selling NFT clothing. The construction company, an American firm called Republic Realm, hired a real architect to design the area, which was modeled after Tokyo’s Harajuku district.

Janine Yorio, CEO of Republic Realm, said sales have been slim so far. “Anyone who does something in the metaverse today is doing it to build brand awareness,” she said. “They’re not necessarily doing it to earn tons and tons of money.”

However, companies spend large sums on stock claims. In November, Republic Realm spent $4.3 million to purchase land in another virtual world, Sandbox, breaking Tokens.com’s record for largest digital land sale. In total, Republic Realm owns 2,700 plots of land in 24 virtual worlds.

The risks of such purchases are plentiful. There is no way of knowing which virtual world will succeed in the long run, or even if the entire metaverse concept will have lasting appeal. And while the virtual land area in Decentraland may be limited, the community developers may decide to add more, which could lead to lower property values.

Mr. Gord noted that Decentraland is run as an independent decentralized organization, which means that there is no one leader. He said Decentraland will only add more land if users support it.

He doesn’t casually spend much time in the metaverse itself. “There is still a lot of experience to do,” he explained.

During a recent visit to Decentraland, some neighborhoods were sparsely populated and few users were interested in the conversation. At a virtual holiday party held by a US social media marketing agency, several avatars, like zombies, stood before signs of others directing to follow the agency on Twitter and Instagram.

Supporters of the metaverse have a long-term view, according to Ms. Yorio. Kids and teens already spend hours playing online games like Minecraft and Roblox.

“All you have to do is imagine what the world will be like when these kids are out of Minecraft, and you still want to have an interactive and immersive tech experience,” she said.

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