Advertising in the metaverse

04.10.2022

Whilst the metaverse may still be in its infancy, and although there isn’t yet widespread agreement on what the metaverse actually is or will become, at least a couple of things are clear. First, a range of businesses – from established tech giants to niche start-ups – are investing in immersive technology which blurs the boundaries between real life and a virtual reality world. Second, just as in the boring old world of conventional websites, the opportunities for commercial activity, and therefore advertising, in the metaverse are huge.

In the fifth article of our series, we explore how advertising could operate in the metaverse and the legal and regulatory issues that may arise.

An advertiser’s dream

The metaverse presents significant opportunities for advertising because the number of goods and services that can be advertised in the virtual (versus the real) world is essentially doubled. Unlike in the real world, where consumers are generally only interested in receiving offers of real sandwiches, real rain jackets and real holidays in Tenerife, occupants of the metaverse are likely to be interested in both goods and services for the real world and virtual goods and services for their metaverse existence. For example, if you’ve arranged a first date in the metaverse, you might want to impress your date by taking them to a swanky virtual restaurant, and, of course, you’ll want your avatar to be looking his/her best, so you might want to buy a new pair of virtual shoes for the occasion. If things go really well, you’ll want your date to see the tasteful décor of your new virtual apartment.

In addition to the increased range of goods and services, advertisers are likely to be attracted by the highly immersive nature of the environment – in the metaverse, everything that is seen/heard/experienced (with the exception of other occupants of the metaverse) can be tightly controlled by the provider of the environment. By way of example, a driver in a real world traffic jam can look away from a digital billboard displaying an image she doesn’t like – she might turn her head to stare at a tree or some clouds instead. However, in the metaverse, an advertiser could easily take control of an entire district of a virtual city for a period of time. An occupant of the metaverse might choose to turn away from a virtual billboard and look up at the sky, only to find that a virtual blimp is towing the same advertiser’s message through the air. This might all sound a little creepy, but in practice advertisers in the metaverse might find more subtle ways to make their messaging almost inescapable.

And there could be advantages for targeted advertising (subject, of course, to compliance with data protection/privacy rules). Metaverse advertisers might know even more about the metaverse versions of ourselves than real-world advertisers know about us today, meaning that metaverse advertising could be even more carefully and precisely targeted than advertising on conventional websites.

Taking all this into account, if the metaverse becomes a big deal then advertising in the metaverse will almost inevitably become a big deal too. After all, given the amount of advertising carried by conventional websites, why would we expect to see or experience any less in the more immersive and all-consuming metaverse? It’s interesting to consider the legal and regulatory issues that are likely to arise with advertising in the metaverse – issues including the identification of advertising, targeting and jurisdiction.

Identification of advertising

Regulators have been grappling with the issue of native advertising, i.e. advertising which blends into its surroundings, for years. One of the first forms of native advertising was the magazine “advertorial”, where an apparently bona fide journalist would give a glowing review of a new product without making it particularly obvious that the product’s seller had paid for certain comments/images/paragraphs to be included.

In 2022, influencers can make a decent living from excitedly unboxing toys or “reviewing” a hairspray on social media. Some regulators take the view that if an individual has been paid to talk about a product then it is inevitable they will say positive things about it (even if the final post isn’t tightly controlled by the relevant brand), meaning that the commercial relationship between brand and influencer should be clearly disclosed to the consumer. These influencers should be covering their posts in #ad, but many still don’t.

In the metaverse, the kind of product placement that we’re used to seeing in TV shows and movies could become a significant part of our everyday metaverse lives. If a brand pays the provider of a metaverse environment to place virtual bottles of their beer on the tables of a virtual pub or bar, does that constitute advertising? If one treats the metaverse like a website and the appearance of the bottles like online display advertising, then the answer seems likely to be “yes”. On the other hand, if one treats this kind of activity like the distribution of free product samples, then the answer might be “no”. In due course, regulators will need to decide whether metaverse occupants have the right to know that those bottles of beer are present in the virtual bar because the provider of the environment has been paid to put them there, rather than as a result of other metaverse occupants selecting those bottles for their table. The means of communicating any such commercial arrangement to metaverse occupants would then be a further issue to be decided.

Finally, if a metaverse product can only be purchased using a virtual currency – let’s call it “Metabucks” – that can only be “earned” through activity undertaken in the metaverse, it seems unlikely that real-world regulators would take any interest in the advertising for such a product. But what if metaverse users find a way to purchase Metabucks using Bitcoin or US dollars because they want to be able to use Metabucks without “earning” them? Metabucks would then acquire a value in real-life currency. In these circumstances, advertising for products bought using virtual currency may be of more interest to real world regulators.

Age restrictions

In the real world, advertising for certain products is age restricted. In the UK, for example, no advertising medium may be used for alcohol ads if more than 25% of its audience is under 18 years of age. This rule could, in principle, be applied in the metaverse, so long as the provider of the environment knows the age of each of its users. However, what if an alcohol advertiser wants to “take over” an entire metaverse shopping centre or restaurant for a period of time? Can under-18s then be prevented from accessing the relevant area of the metaverse for a set period of time? And what about the use of virtual (branded) alcohol products in the metaverse? If regulators decide the use of products in the metaverse will encourage use in real-life, then under-18s will likely be prohibited from using certain virtual products. It may be difficult for advertisers to determine the age of their audience in the metaverse environment – and it seems likely that age assurance mechanisms will have a greater role to play.

Jurisdiction

When investigating advertising on conventional websites, regulators decide whether content falls within their geographical remit by reference to factors such as: the top-level domain (e.g. “.uk”) used by the website; whether the advertiser has a registered office in the regulator’s territory; and whether the content clearly targets consumers in their territory (e.g. by providing prices in a specific currency). When it comes to advertising in the metaverse, only two of these factors are relevant, and boundaries are likely to become even more blurred than in the case of conventional internet advertising – especially when the advertised product or service can only be used in the metaverse. The issue will become even more difficult for regulators if (as many metaverse optimists hope) it will eventually be possible to move seamlessly from one provider’s metaverse environment to another. If a metaverse user wants to take a complaint regarding an advertisement to a real-life regulator, will they even be able to work out which metaverse provider was responsible for the display of the ad?

Just as the metaverse will create huge opportunities for advertisers, it’s clear that it will also throw up some difficult questions for regulators. It remains to be seen how regulators will attempt to answer those tricky questions and how they will keep pace with developments in metaverse advertising practices.

Still have questions? Be sure to read our metaverse articles below:

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