The concept of the metaverse is changing the way we interact with the digital world. What was once a futuristic sci-fi concept has today emerged as a real economy where value can be exchanged for virtual property and digital goods. Technology, in conjunction with blockchain advancements, is helping people and companies find ways to put a value on these digital treasures. But, does such an economy work? Can it indeed match the profitability of a physical economy?
In this article, we will discuss the monetization of virtual real estate and digital goods in the metaverse, based on practical insights and financial metrics.
What is Metaverse?
The metaverse is a collective virtual space in which people may socialize, work, and perform various kinds of activities in the form of avatars. It is like a common digital world that combines features of game networking, social media, and augmented reality. What makes the metaverse so fascinating is its potential for building economic value.
How will the Metaverse Monetize?
In the metaverse, the economy will go around virtual real estate and digital goods in which people will buy and sell and exchange assets. It is a very real-world concept, except that instead of being owned by a human, these are blockchain-based. This achieves transparency in ownership through NFTs, which means it is unique and could, therefore, be traded.
Virtual Real Estate: A Digital Gold Rush?
Probably the most valuable part of the metaverse is virtual real estate. Decentraland, The Sandbox and Somnium Space among many others are enjoying strong growth. Thanks to users and brands investing in digital land. But what makes buying a plot of land in digital make financial sense?
Land, in the physical world, is scarce in supply and that is the reason prices must go up. In virtual worlds, land lots also cannot be issued liberally and scarcity rears its head once again. It has also been complemented with the addition of experiencing land, like virtual art galleries, shopping malls or digital concert venues and thereby increasing its worth.
Using numbers from the nonfungible.com website, the average value of pieces of virtual land up on these sites was around $100 at the beginning of 2020 and skyrocketed to more than $12,000 in 2022. In June 2021, a virtual real estate plot in Decentraland sold for $913,000. By November of the same year, the highest sale of a plot went for more than $4.3 million in The Sandbox and is an example of the high stakes of this digital property market.
How to Monetize Virtual Land?
Virtual land can be made money off in various ways:
- Buying and Selling: Not unlike in the case of physical lands, virtual land could be purchased for a low price and sold for a markup. Lots of early adopters of metaverses such as The Sandbox saw more than 1000% ROI since they bought their parcels.
- Leasing: Virtual landowners can lease their property to other users or brands looking to host events, open digital stores, or build experiences. For example, the fashion brand Gucci has leased virtual land to display and sell digital clothing collections.
- Building and Monetizing Experiences: Companies and individuals can build interactive environments like games, virtual galleries, or even digital casinos. They can generate revenue through entry fees, advertising, or in-world purchases.
Digital Goods as the Other Pillar of the Economy
But while the rest of the world is very busy and occupied with virtual real estates, digital goods matter for a rather huge magnitude. There's avatar skins and clothes, furniture, weapons, but also unique digital art verifiable through NFTs and transferable across different platforms.
The global market for digital goods was more booming in 2021 especially NFTs. According to DappRadar, the total sales volume stood at $25 billion in 2021 but only topped at $94 million in 2020. Some of the digital goods reveal a lot more; such as the Beeple NFT artwork sold for $69 million and more. But now, this game is being infiltrated by casual users. For example, Axie Infinity allows users to earn real money by trading in-game assets like digital pets, which can then be sold for a profit. By 2022, Axie Infinity has already managed to sell $1.3 billion worth of digital goods.
How to Monetize Digital Goods?
- NFT Art Sales: It is possible to create various forms of digital art and sell them as NFTs on online marketplaces such as OpenSea or Rarible. As it has been tokenized, the piece of art becomes a unique product, and buyers can trade or resell it at an appropriate time in the future.
- In-game Items: Users of Fortnite or Roblox games purchase digital clothes, accessories, etc. for their avatars. There is plenty of money in creating and selling distinct in-game assets. For example, in-game sales 2021, earned $500 million from creators in Roblox.
- Virtual Fashion: Brands begin to finally get the message on digital fashion. Balenciaga and Nike have entered the metaverse, producing limited editions of virtual wear and accessories to use for avatars. Virtual fashion designers can make one-of-a-kind pieces of clothes and accessories that sell for hundreds of thousands or even thousands of dollars.
Is Virtual Ownership Here to Stay?
It is still in its infancy, but stats show the metaverse economy is much more than just a fad. Virtual real estate and digital goods here open all-new avenues for earning money for individuals and businesses. The growth potential is enormous, with the estimate saying that metaverse transactions will reach the billion-dollar mark by 2030, reaching $1 trillion from Grayscale.
The risks, however, are very real. The market is unstable, and the prices of virtual assets can fluctuate according to demand by a hundredfold. And then there's the regulatory side of things - not exactly clear in most regions yet. Still, those daring enough enter an ever-expanding, very lucrative space.
Future Outlook: A New Frontier in the Digital Economy
Monetizing virtual real estate and digital goods is slowly becoming a moneymaker in the metaverse. High investments from individuals, brands, and even governments continue to grow the digital world into a legitimate economic force. Opportunities depend on understanding the platforms, taking those early opportunities, and keeping an eye on market trends. Now, while the metaverse has yet to replace the traditional economy, there is little doubt it is shaping future commerce. As for the events that are yet to come, even progress in technology will only serve to further open monetization in virtual worlds, offering yet another new frontier for those willing to enter.
