Late last year, tech enthusiasts and corporate marketers flooded the metaverse with cash. Alt-coin owners and CryptoPunk NFT collectors with cash in their pockets justified skyrocketing costs by buying properties near celebrities who were using the metaverse for promotional purposes, rather than the view.
The boom was not built on solid grounds.
Snoop Dogg erected a digital duplicate of his California property in the Sandbox metaverse, naming it the Snoopverse. Snoop’s virtual neighbors include DJ Steve Aoki and Atari projects where visitors may play games and attend events. Forbes owns Sandbox.
P-Ape spent $450,000 on a nine-parcel property next door to the Long Beach rapper. An unknown buyer paid 25 ETH—about $60,000 at the time—for a 16-by-16-meter piece. A crypto bear market and slower-than-expected metaverse adoption have decimated prices, down 85% since January, and purchasing volume.
P-parcel Ape’s may be worth $25,000, but having Uncle Snoop as a neighbor surely helps. Digital map of Sandbox shows for-sale properties. Some sellers have hundreds-of-thousands-dollar list prices, but the market suggests it won’t happen.
The average price of a plot at five of the top Ether-based metaverse projects decreased to $2,500 from $21,000 in January, according to WeMeta. Sandbox, the largest metaverse world by land volume, saw a dip to $2,800 from $35,500. The weekly volume of property purchased in the top five metaverse worlds fell to $650,000 for the week of August 7, a decline of approximately 99%.
Risky metaverse investments It’s likely you’ll lose everything, says Fabian Schär, a professor at the University of Basel’s Center for Innovative Finance. Most corporate property owners bought their land for marketing, aiming to post experiential ads or virtual storefronts along metaverse’s busiest boulevards. Samsung constructed a virtual facsimile of its New York store for product testing. Adidas sells digital sporting gear as NFTs in the Sandbox.
These companies paid hundreds of thousands of dollars while metaverse and crypto buzz was high. The worsening economy makes it difficult to justify buying virtual estate. But utility—or lack thereof—remains.
“Most usefulness is still there, but it’s fallen in price for other economic reasons,” says Metaverse Group CEO Lorne Sugarman. Sugarman says he’s not worried about decreasing pricing because his company expects utility to rise with adoption.
“Traffic hasn’t decreased significantly.” Schär claims traffic has never been heavy. Expectations have altered.
Some think they’re sky-high. McKinsey predicted in June that the metaverse may grow to $5 trillion by 2030, equal to Japan’s third-largest economy.
Mark Cuban has been a vocal critic of metaverse land sales despite investing in Yuga Labs, the founder of Bored Ape Yacht Club (BAYC) and Otherside. Yuga raised $320 million by selling Otherdeeds, NFTs that owned 55,000 plots of land in the BAYC’s virtual hangout.
Worst of all, people buy real properties there. “That’s the worst s*** ever,” Cuban stated in a YouTube interview published Sunday. Cuban said buying metaverse land was stupid since you can build endless volumes.
Cuban believes some attributes will be valuable once the metaverse community is stronger. According to Schär and colleagues, the most valuable metaverse land is in locations where communities increase chance encounters.
“Attention economy.” People want the land in regions with a lot of foot traffic, adds Mitchell Goldberg, Schär’s co-author. If global attention wanes, land prices will fall. Goldberg says that while Cuban is right, firms can’t manufacture attention.
Address is also important. Metaverse visitors can teleport using X, Y coordinates. Schär stated 100 degrees by 100 degrees attracted more people than 271 and 73.
Some firms prefer short-term rents to buying metaverse property. Metaverse Group rents land and has a team of developers to build renters’ aspirations.
The Australian Open rented virtual land from another metaverse corporation to stage a festival. Digital stadiums let fans watch past matches together.
Sugarman anticipates adoption to rise in the next one to three years, but not without more traffic-driving features like better games. Metaverse Group took advantage of the price decline to build on cheaper land, and Sugarman said other enterprises should follow suit.
Sugarman thinks the metaverse needs new tools and experiences to increase traffic. We believe critical mass will occur as understanding and learning increase.