The metaverse is generating a lot of interest from the world’s biggest brands. But what’s the payoff for companies outside of the tech world? In this video from “The Virtual Opportunities Show” recorded on January 4, Fool analyst Asit Sharma and Fool contributor Jose Najarro address this issue in relation to companies like Nike (NYSE: NKE).
Asit Sharma: The reason I just wanted to briefly discuss this is that this is one of the questions that I come across as an investor in this space, even though I am passionate about it. It’s the usefulness of having this world where there isn’t really a reason for a brand to be there, except that they are eyeballs. The usefulness of a brand having its own space in the metaverse, if that doesn’t help much, it’s a bit disappointing for me, but I understand the business model. Look at Instagram. Why would a brand want to be featured on a site like Instagram? I couldn’t understand the logic of this about three years ago when I saw YETI as an investment. YETI grew their brand exponentially by being on Instagram and bringing together this huge audience of people who wanted their truly high-end items, coolers, glasses, etc. I understand the principle, but I still have a little trouble understanding why a brand would just go into a space without some type of lens or some other type of utility. I guess that’s the nature and the beast of advertising. I’m just curious what you think about it. Doesn’t that make the Metaverse a place people go because [laughs] [inaudible 05:28:30]
José Najarro: I’m going to keep a bit of it that we’re not going to discuss now until the end because it’s going to be part of my future guest. But I think it’s that easy. To a certain extent, the metaverse and the real usefulness of some of these companies like Nike is just advertising, it’s the only usefulness that comes with it. Nike is a pretty interesting game like you mentioned they created this Roblox world, which was quite interesting. But they also recently acquired a small company called Artefact, which created these digital asset shoes. Some of these digital asset shoes have been used in some form of blockchain gaming. I think it’s called The Central, and I forget the real name. But these shoes were actually created on this platform. To a certain extent, Nike can start selling these digital shoes in this game, I guess it could be a move.
But I think in the future we’ll all have these crypto games that are just scattered over each other. But eventually, this will likely become just a game where a single digital asset can be used throughout the game. Being that game being the metaverse with just some form of blockchain game. I think that could be the future movement, but it’s something that I don’t see happening anytime soon. But I can see how they could just plan ahead to go in that direction.
Asit Sharma: Yes, Nike is so far ahead of so many peers in its way of thinking about the world. I think they really get the idea of what scarcity is in the virtual world. They understand these principles. They have an analogue in the real world. Guys who help remember what the name of the platform is? It is an exchange where you can buy and sell rare shoes. Nike and Air Jordan were really the area that made this platform great. Do you know this? There is an online exchange of rare and other Nike shoes where you can buy shoes that are only retail with no rarity value as well as its various branches. I’ll try to watch while we’re here in this session and give you the name of that. But Nike was a big participant in it. I almost think the way they deploy successive generations of Air Jordans, but with the real-world scarcity factor, it just shapes their thinking. They already understand why something intangible would be of value and they are so quick to move on to something like Decentraland, as José mentioned.
Maybe this is a company that we should continue to follow closely because in my eyes it has gone from this very great innovator, it’s a technical innovator, a fabric innovator, if you will, to something. very different thing. There were seeds of it in both, I think Adidas and Nike years ago started out by letting you design your shoes online and have them made one time only and ship them to you much sooner than other companies offered customization and drop shipping. Now, that just seems a very common place. It’s almost like they’ve seen a head start since Phil Knight and his colleagues put waffle irons on the backs of tennis shoes. I don’t think Nike gets enough credit in the investment world for their far-reaching thinking and way of seeing the world.
José Najarro: Another solution I thought of and furthermore, these digital assets are to some extent much cheaper to build compared to a physical asset. It may also be more like a consumer study if they bring these digital assets to an online game and pull out 10 shoes. Out of these 10 shoes, they see that it is the digital shoe that sells the most. Now they have a study that, hey, our consumers love this style. Now instead of developing 10 different shoes for the physical world, we just need to make this one shoe because it is the best selling one and we can get the most out of it. It can also be another utility that can be extracted from it.
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