The Present and Future of Brand Opportunities In The Metaverse with Justin Hochberg – Step into the Metaverse podcast: EP23

Good day everyone and welcome to the Step into the Metaverse podcast. My name is Marc Van Rimenam and I'm also known as the Digital Speaker. I'm a future tech strategist and I think about how emerging technologies change organizations and society. This podcast is part of my new book called Step into the how the Immersive Internet Will Unlock a Trillion Dollar Social Economy. The book is available as an ebook, hard copy and audiobook. As part of this book I did nearly 100 in depth interviews with the stakeholders involved in creating the open Metaverse, the investors, the developers, the artists, the collectors, etc. And I've turned a selection of these interviews into this podcast as I think that these conversations are too valuable to leave them on my computer. In this episode of the Step into the Metaverse podcast, I interviewed Justin Hofberg, Founder and CEO of the Virtual Brand Group, which strategizes, builds and monetizes brands in fashion, entertainment, sports, retail and lifestyle across all of Web3. Some of their most recognized success include turning Forever 21 into one of the Metaverse Top 10 Brands for 2022, launching the Voice Singing Competition as in 145 territories into Decentraland, and designing Barbie's first ever virtual fashion line, which was one of this year's most successful launches. During the interview we discussed how the Metaverse will completely change marketing and that brands need to take a different approach if they want to be successful in the immersive Internet. We discussed some of the brands that are doing a good job already and we discussed Infinite Loop marketing. Enjoy the conversation.

Maybe you can share a bit how you are involved in the Metaverse.

So I run this company called the Virtual Brand Group and the Virtual Brand Group is a Metaverse creation company. And what that simply means is we basically design, build, operate, market and monetize branded intellectual property from sports to fashion to cars to lifestyle to all the things that we love to use in any shape or form and we put those brands in the Metaverse. So if you go to our website, which I don't know if Jonah shared because it's not public yet, but it still operates, it's the Virtual Brand Group. We put you in the Metaverse and we pick that because we think that's the simplest thing that needs to happen. I come from a background of three things. I have a technology background, I have a Hollywood content background, and I have an extensive background in working with Fortune 1000 brands and rarely do those three things tend to live within one person. But as happens to be that's my life. And the technology comes from working five years at Microsoft, both on interactive TV and streaming media, when streaming media was invented, and interactive tv when, like, digital video recording and all that stuff was invented. The Hollywood background is having run multiple production companies and created about 40 different TV shows. And through that experience, I have worked with brands to help them tell stories. Because, of course, if you're a brand and you're trying to sell Coca Cola or cars, you can buy an ad in the super bowl, you can buy an ad on Facebook. But storytelling has always been the heart of a brand's journey and how they connect with consumers. So I do a lot of work by putting brands into TV shows and advising brands how to tell a better story in a much more immersive way. So that's what I do. The next question you may ask, and I'll let you ask it, is how did I put those three things together to get from that 20 years of history to the virtual brand group? There's the question that someone might ask, but I don't want to put words in your mouth.

So how did you put it all together to create a virtual brand group?

You know, it's funny you asked that. I was just thinking, like, I better have a good answer for that one. So it was the pandemic, and I've always been involved in those three things. So a lot shut down for everybody. And I was sitting there thinking two things. One is, where is the next intersection of technology, storytelling, and brands? And then the other thing that was I was thinking a lot of is, why do all my credit cards have so much money spent on Fortnite and Roblox? Because my kids were playing all the time, and I'm looking at my credit card bills going, what is going on here? I knew about them. I just didn't know that I was basically paying for them, right? So it's one of those things where those two ideas combine. And what does Warren Buffett say? He says, invest in what you know and use. Which is why he owns Coca Cola, because he drinks like three Cokes a day and he doesn't own anything in cloud computing because he doesn't use cloud computing. So there I am sitting, wondering where this intersection is, and it comes to me immediately, huh? This is what my kids are doing right now, five plus hours a day. Don't quote me, but apparently I'm a terrible parent for allowing that to happen. And your kid's too young, but trust me, when they get old enough, you will be a terrible parent too. So don't judge.

Okay.

So basically I started looking into these things which I thought were just modern versions of what I grew up with, donkey Kong or PlayStations, but it turns out they're completely different. And so after a period of about six months of talking to how many people did you say you're talking to?

81 so far.

And then the total's gonna be what, a hundred? Okay, so I talked to 101. I have to be one up one of you. Okay, I talked to 101 people.

Let me find a few more people.

Okay, I'll let you win that one. So I talked to 100 one and a half people about what is the metaverse and how does it work and what's going on. And the result was when I started thinking about how do I get brands into the metaverse, I was faced with three problems. One is brands generally are very confused and concerned and dazed about what this all is and what it means. So how do I make it easy? Two is talking about the metaverse is like saying, let's talk about science. It's a very broad term. Does that mean NFTs? Does that mean gaming? Does that mean crypto? Does that mean DeFi? Does it mean DAOs? What does it really mean? And so they're confused already. And then there's no place. And so what I remember thinking is, do you remember when the Internet was invented and the Mosaic browser came out and you would see an ad and it would say HTTPs://backslash, backslash, www.back coca cola.com and you'd see that, you're like, what is that? And you'd ask someone, you'd say, what is this thing? And they'd say, well, it's the Internet. And then they'd say, well, where is it? And you'd say, everywhere. Well, well, who owns it? Nobody. What do you do there? Anything? It's a very unsatisfying answer, right? And so I had this epiphany, having worked in Silicon Valley, in for Microsoft during that era, that we were basically in the same space because all the answers were the same thing. So I connected those three dots and I thought to myself, why don't I make this really easy? Roblox is a brand safe, closed environment that has massive scale, it has more hours spent per person, and it empowers people to build worlds. And it's at a moment where brands were not really prominent on it. They were basically mostly a creator driven network, which is an arbitrage. And so I love arbitrage. I moved to Eastern Europe when I was in my 20s, when the wall came down, I, I'm always looking for an arbitrage. So that's how I settled on pitching people how to get in the metaverse as one way that leads into always. And this is the dismount. The way I know it's working is when I talk to someone and brand and they, I say, liz, I've got a general metaverse. And their eyes glaze over. When I talk to people about what we're doing to start with, which is placing them into Roblox to start right, I ask two questions. Every C suite person, I say, do you have kids? How old are your kids? And if their kids are between nine and 15, I say one word, I go Roblox. Or maybe I say two, I go Fortnite. And they go, don't talk to me. Forget about it. That's all my kids. So now I don't have to explain it now they don't really know what it is, but they know their kids love it and they know they're spending money just like me. And all of a sudden the conversation goes from some very unwieldy thing to here's a specific way. And let me explain to you, I've done all the hard work of your entire marketing department to figure out where you should be, how you should do it, and then how you expand across all of the things that you want to be from different platforms. NFTs, crypto. That's what I do.

Very interesting and very relevant and I think a ton of opportunity ahead of you with all the various platforms coming, because Roblox is obviously only one, you have dozens coming. So there's, there's tons of work for you there.

Yes. And what I'm finding is it's getting easier and easier. We launch on Thursday with a global fashion brand and we're doing some very clever things that are beyond. Like there have been brands on Roblox, you know, there's been a handful, but we are really pushing the boundaries of what the metaverse should be, which is in my opinion, the combination of the physical and the virtual working in harmony with people going in between or being in both of them at the same time. So for example, let's just take a brand that shall be nameless that launched on Roblox last week and it's a fashion brand. They launched and it's a six week thing now, a six week idea on Fortnite, Roblox, Minecraft and nft. To me, that sounds like a marketing Stunt. What I hear in my head is should we buy an ad? Should we place a Facebook thing? Should we be on Roblox? That's not the Metaverse. It's not a billboard on the side of the highway as you drive down Sydney. What we're doing is building a living, breathing, evolving experience that was built from the community up and takes this fashion brand and makes it virtual to physical, then physical back to virtual and virtual back to physical in an endless loop of activation. And can I tell you what I mean by that?

Yeah.

So we're focused on, first of all, we built this experience with the top game designers, fashion designers, influencers throughout the whole thing. Most brands are very top down. They colonize the space. We are bottoms up. We use the community everywhere about us. And I can tell you some things about this. One of the things that we've done is when you buy an item in our game to design and create your self expression, it triggers a code that allows you to collect an item in the real world. When you get that item in the real world, it triggers a code that gives you an item. In my game, if you collect enough items in that game, it triggers a different code to do a different thing in the real world. Every real world interaction, if you're at the store In New York vs LA triggers a different code and creates a different sequence. So you're incented to go all around LA to different stores to try and get the codes, kind of like searching for Pokemon Go. So that's just one small example of how you use this to create the virtual and physical. So it's not a 360 marketing plan, it's a 720 or actually, and I'm going to coin it right here, it's an infinite loop marketing plan. That's what it is.

That is really, really cool. I've asked a few people, you know, the questions, you know, how should brands join in the method metaverse and step into the metaverse? And you get a lot of experience here. Community, trial and error, just start and learn from there. But this infinite loop of marketing is really cool. I really like that. Okay, and so if a brand comes to you, what do you suggest them to how to start? You can say, yeah, yeah, let's go into Roblox. But then what are the steps that.

You suggest them to start doing?

Well, you know, again my whole process, having worked with brands for a long time is, you know, I know how to speak their language. That's part of any, you know, thing. So one of the things that I try and do is we make it very simple. So we basically sit with them and we say, tell us what you want to get done, like, what's your brand DNA? They, you know, give us some presentation. And I've been doing this for a long time, so I've heard hundreds and hundreds of pitches. So we distill that and we play it back for them. So it's really three steps. We listen to what they said, we play it back to them and then we say, look, here's our embrace and extend way of doing this. So we take everything you gave us and we extend it and say, look, here's what you were saying about your real world brand DNA. Here's how we extend it, which means it's going to morph a little bit, you're going to recognize it, but it's going to be extended. So we embrace and extend every brand and that makes them feel heard, comfortable, and yet they want to explore. Because nobody that we work with or we won't work with people that are like, no, no, no, you don't understand. This is what we're doing in a mall. This is what we need to do in the Metaverse. That's not a client or partner we think understands what we're doing. So the embrace and extend sort of messaging works very well.

Yeah. And so which brands that are currently already in the Metaverse are doing a good job according to you?

Well, there are a lot of brands that certainly across different parts of it. So I think that, you know, obviously, like, you know, you asked about Metaverse, so who's doing good stuff? I mean, you know, look, the NBA is doing great stuff in NFTs with Draper Lab. Right. You know, that sort of cracked the sports marketing aspect of it. I think there's some really cool things happening on Sandbox as a platform. It's much more open, you know, so that's very cool. I think what you see that we built and the way we built that, what we're doing, I think that will set a new direction on sort of what people are going to ask for from a partner who's creating stuff. Who else do I really like? I mean, this is now like, what is the Metaverse? A friend of mine runs a company called Portal where they do holograms to transport you around the world. Right.

I saw an article about that yesterday.

Yeah. So that's somebody that I worked with and have supported for a long time. Like, is that the Metaverse? Well, kind of. Like if you have the ability to beam from Sydney to New York. You have the ability to beam from Sydney to Roblox. Right. So it's sort of all connected. Like I love that stuff and I've been a big fan of his. I think some of the artists that are doing like interesting stuff with NFTs where you know, they're inventing, you know, the rules based idea that an artist can get a piece of their sale every time it's resold. That's very appealing to me as a supporter of the arts. I mean I could go on for a long time on that one because it's so. Because it's open.

Yeah. So now we're talking about brands and the infinite market will look. How do you think that this will evolve within the next three to five years?

Well, five years is an awfully long time right now. Can I stick to the next six months? So here's what I think. I think if you look at the curve that we're on for technology adoption, adoption of the Internet was relatively slow. You know, the adoption of social media was much faster. I think the adoption has already happened on the Metaverse, even though most people above 40 don't know it. You know, Roblox has 50 million players a day, 200 billion players a month. Fortnite has 176 million, I think. What's the other one where you build stuff?

Minecraft.

Minecraft, Minecraft. There are 125 million, you know, I mean you're talking about massive scale that is just snuck up amongst people under the age of 20. So what I think is going to happen is people are going to start going from what is this? To I think I know what this is to oh, this is part of my life. Those I think are the three phases that we go through and have seen people go through on other technology curves as well.

Yeah. And that will happen, according to you, a lot faster than with social media.

Much faster. You know why? Because when social media came out, I don't know when you first heard about social media, but my guess is the first time you heard about let's call Facebook, there weren't billions of people already using it. You probably heard about it earlier. A lot of people are hearing about the Metaverse in literally the last eight weeks. Mostly because Facebook changed its name. Right?

Yeah.

Roblox has been around since 2006, Fortnite for many years, Minecraft for many years. So by the time you're hearing about it, it's already a thing. This isn't like a thing that needs to grow to prove itself. It's here it's a little bit like, you know, in Hollywood, where I spent a lot of time, they talk about movies being so impactful. You probably know this, but video games make more money than all sports rights and TV and film combined. And somehow that snuck up on Hollywood, but it didn't sneak up on anybody who played games, but it snuck up on them. Same thing here. This has been going on. You're just finding out about it, I'm sorry to say.

Yeah, that makes sense. So how important do you think is user generated content for the metaverse?

Well, I think this is one of the great opportunities. Right. You know, when the Internet started, it was open and no one owned it. There was AOL who tried a walled garden, but after that it became just open. Anyone could build anything. And all the brands that we now know and love are not the brand. You know, Amazon, Google, Facebook, you know, pick a brand that's really big on the Internet. It's not anything that existed before 2000. Right. They're all brand new brands. Anybody could do it. So I think the question you're asking is really smart because there's a battle being waged right now between big tech companies, Meta, Google, Apple, to replicate their control over an ecosystem like they have now. And then there's a whole battle of a bunch of creators and other people that make up the rest of the world that have realized having these walled gardens suck. And so the creator economy, which has been brewing for a long time as people lost their jobs and technology became easier to use and mobile and you can have an iPhone and still build things, the creator economy is the quintessential driving force. Because the more people that are empowered to create without walls now, because the creator economy started with Facebook walling everything off, or Instagram walling off, now there's no walls. If you create an nft, there's no wall. You can put it anywhere. You could trade things on the blockchain. So for this moment, we have this intersection where the creator economy is now meeting an open platform. And that will transform the metaverse and be a driving factor, in my opinion.

Yeah. And so you mentioned NFTs. How important are NFTs in this regard?

My answer to you back is to say, I think like anything, it's like saying, how important is the Internet in general? That's useful, but it's not the story. The story is what you do on the Internet. Right. So the good news is anybody can create an nft. So that's awesome. So that's very empowering. And Community driven and creator driven. We like that. Now the problem on the other side is anybody can create something what's going to be valuable. So right now what's valuable is things that are first, right? Like the first piece of art that got sold at Sotheby's or Christie's that went for multiple millions of dollars, stuff that was at Art Basel. What's first? You know, top shot doing NFTs. But as the market settles, it'll just be commonly like an Internet site, right? It's just, do I have an NFT that has real value? Not because it's first or because it's cool. It's did you create it because you're a smart guy or did lebron create it or did a graffiti artist create it? So I think the idea of an nft, which is basically the ability to take what you want and give sell it to somebody with a set of rules that allow them to use it across a variety of spaces, is wildly valuable. Which piece of what people create, that's a market decision. I can't weigh in on that.

Yeah, that's really cool what you say. I totally agree with that. I think the utility of NFTs is crucial and the fact that you can program it is what makes it basically infinite possibilities. So from that regard, then, how do we ensure a rich and vibrant metaverse economy?

You know, that is a great question. So I think the solution is in the decentralized nature of the way the metaverse has developed. I think all the decentralization and the fact that no one owns the blockchain, that new cryptocurrencies can be created at any given time, that anybody can create avatar merchandise and you can wear it in most places. I think right now the good news is the decentralized nature is the rule and the walled garden is the exception. But to also break through that the virtual brand group is working on a variety of technologies where you can create an asset in one time. And even though there are separate programming languages between Unity and Unreal and Lua, which is Roblox, you can drop it into any of those things or an nft. So I think that, that, you know, we're probably not the only people working on it, but that's one of the things that we offer. We call it MetaOne, which is the idea that you create it once and it goes across the entire metaverse and it doesn't matter what walled garden exists or not. So that when we create a fashion avatar in Roblox, it's already been pre created. In an asset format that can be dropped as an NFT or it can be dropped into Fortnite or Sandbox, regardless of what the technology is. So that's one of the things that we've been developing as a sort of IP technology strategy.

I think that's very cool and very much necessary. Be careful that Facebook, that Superbird doesn't go after you with claiming that we're using the word meta.

I am sure they'll go after everybody, so as long as I'm not the 81st person they go after, I'm fine.

Very good. So let's go to the dark side. What kind of ethical challenges do you foresee for the metaverse?

Yeah, well, listen, I think there is as much opportunity for good as there is for evil. Right? You know, you obviously have a lot of people who can express themselves anonymously, which is one of the great values and one of the great potential problems. You know, we've seen that in many ways with social media and what that causes. So anonymity is powerful and if misused, very challenging. So I think that's one of the double edged swords of it all. The other thing I think is really going to be a challenge is, you know, just the sheer fact that there's so much value stored digitally for the first time ever. You know, yes, we all have bank accounts that are online and all that stuff, but, you know, the truth of the matter is the amount of value that's going to shift on where I spend from the real world to the virtual world is going to be exponential. So, you know, think about it like a stock market. Like when things get tough, people used to put money in gold, right? So people are going to start putting stuff in digital assets that are, if you can crack those, become very, you know, you'll never see them again. If someone steals a brick of gold from me, I probably could track it down. So I think the fact that there's just so much money going to shift into this sector will just incentivize people to figure out how do you crack it? And whether it's taking over my entire Roblox account where I've got $3 million from a brand, or figuring out how to hack the blockchain to grab an asset, or even before you hack it, creating what looks like an nft, but it's actually just a back door that allows me into your entire crypto wallet. These are the problems because where there's money, there will be bad actors. So I think those are the two double edged swords of the Hope and the potential pitfalls and the white space is where a lot of people will step in to create the ways to protect those things and regulate those things. But the truth of the matter is it's always easier to play offense than defense. Offense just has to score once. Defense has to stop them every time.

So, yeah, that makes sense. And what is the future of the Metaverse? How do you think that Metaverse will look like in a couple years from now?

I think it will be as common in your daily life, parts of it, as the Internet is in your daily life today. That doesn't mean that you spend every moment on the Internet, but it does mean it's just part of your life. Here's an example. When Amazon and all those early 2000 companies started, every financial institution, they had an analyst group. Some covered auto, some covered health. There was an Internet analyst group. But then people realized it's not Internet or physical, it's just retail. And if you're covering cars, you were covering cars. If they're sold online, if they're sold in a store, it didn't make a difference. So what I'm saying is when people think about something as a silo, it's still in its infancy. Just like I'm using the Internet right now and I'm in the metaverse right now. I'm on Roblox playing a game right now with people simultaneously to talking to you. So that's what I think is it just will be. It won't be. I'm going indoors or I'm outdoors. I'm just. It's part of my life.

Yeah. It's just as present as the air we breathe and energy.

That's right. I mean, if I might just play back, some of the things that I think are super important is I think the idea of anonymity is really important and what that means and what it empowers. I think talking about the financial implications, about the shift to people possibly into their, their savings, their asset allocation, going from hard goods to virtual goods. So instead of me having the most equity in my real house, I may end up having more equity in sandbox on a piece of property. So what does that mean as a generational shift in how wealth is used and distributed and where it exists and how it's created? I think the question mark of walled garden versus open Metaverse will be one of the epic battles of the next 10 years, which is, I think, about the time it will take to solve dramatically. And I think, you know, watching the rise of the virtual brand group from a small unnamed shop that you couldn't even Google to being when you write your next book, the company that you say, look, that guy Justin, they might throw something at you if you don't do it, that's going to be your big story.

Well, thank you so much, Justin for your time and input and insights. I really appreciate it.

And that wraps up the conversation with Justin Hochberg. If there's one thing that stands out for me from the conversation, it is how the role of marketing will completely change in the coming decade and that it will be much more conversation with customers and trying to push a message to your customers. I completely agree with this, which is why in my new book, Step into the Metaverse, I discuss how brands can step into the metaverse themselves. If you enjoyed this conversation, don't forget to hit the like and subscribe button on your favorite podcast platform so you will be notified when any of the other interviews will become available. Thank you and see you in the Metaverse.