Let’s face it: kids are obsessed with their devices and they use them often. Even parents who are trying to limit screen time need to realize that their kids are living in a digital age more advanced than the dial-up internet sessions with which older generations grew up. Generation Alpha socializes and plays in a network of virtual worlds called the metaverse, and even the internet itself is evolving into a new stage called Web3.
This new lingo may sound like a bunch of mumbo jumbo to those who are less technologically inclined, but it’s crucial for the toy industry to stay on top of these trends because consumer behavior is shifting. Brands need to be where kids are. After all, you can’t ignore your target audience. So, what exactly is the metaverse and Web3?
The Associated Press (AP) added “metaverse” and “Web3” to its widely used AP Stylebook in February. According to AP, the metaverse is an “immersive, all-encompassing online world where people can gather virtually for a range of activities.” This can incorporate technologies such as virtual reality (VR) and augmented reality (AR), and people can use online avatars to travel to virtual settings to play games, communicate with others, shop, and more. Users are not simply consuming 2D content through a screen; they’re experiencing content in interactive ways. The metaverse is a creative and collaborative platform, so companies can partner together for in-game activations or virtual events, or they can create their own digital games and experiential campaigns for users to play or attend.
The concept of metaverse play is not new, but it is evolving to become more multidimensional. Gaming platforms and video games with interactive features, such as Roblox, Fortnite, Minecraft, and Second Life, have been around for quite some time.
Jazwares has been the master toy partner for Roblox for many years, and it was the first toy partner for Minecraft prior to Mattel’s work with the license. “The idea of digital universes opening play opportunities for traditional toy consumers is a more than 10-year-old concept,” says Jazwares Chief Brand Officer Jeremy Padawer. “The metaverse will evolve over the next generation, much like console gaming, from a 1-2 senses offering to a full five senses offering. I’m not saying this will be The Matrix. It will, however, be something much more fantastical than what we currently experience.”
The AP Stylebook describes Web3 as “a catchall term for the prospect of a new stage of the internet driven by the cryptocurrency-related technology blockchain. Although blockchain is best known as a mechanism that makes bitcoin and other cryptocurrencies possible, it can also store data and even software code that can self-execute under certain conditions.” People can create Web3 applications, such as bitcoin, without involving the metaverse, but the two are often intertwined.
If you’re wondering what came before Web3, let’s take it back to the early days of the World Wide Web. Think of Web 1.0 as the read-only web, a place used mainly for information sharing on static pages without much interactivity. In Web 2.0 — which is the internet as we know it today — interactivity, including user-generated content and sharing on social media, became central to the experience.
THE TRENDS, THEY ARE A-CHANGING
Just five years ago, the growing trend in toy technology was for companies to create a companion app for their brands. Now, toymakers are turning to new technology to market their brands within the metaverse and Web3, whether that be through virtual events, non-fungible tokens (NFT), blockchain games, or activations within Roblox or Fortnite.
David Kleeman, senior vice president of global trends for Dubit, a research and strategy consultancy and a metaverse studio, believes that the concept of screen time has become outdated because Gen Alpha is made up of digital natives. “There is no longer a binary choice between physical play and digital play,” he says. “This is important for the toy industry as it considers how to create logical and seamless connections between products and their virtual extensions.”
Since the native format of the metaverse is more interactive than the video storytelling of TV, marketing needs to be more complex in order to be effective. Kleeman says that there are three primary forms of effective marketing within the metaverse: integrating a brand into an existing game; creating a short-term (1-6 weeks) branded event; or creating a game as a service, including ongoing updates. “The first two have the easiest opportunities for returns on investment,” he says, while “the last is perhaps the most effective in the long run, but also the biggest investment.”
Promoting a brand within a metaverse game is more cost effective than creating a companion app for a toy line. “Based on Dubit’s experience creating Roblox activations around intellectual property (IP) that might, in the past, have launched an app as an interactive strategy, the cost of prompting a new app store download can be up to 100 times as expensive as attracting a new player to the Roblox experience,” Kleeman says.
VIRTUAL ECONOMICS 101
Roblox is a digital platform featuring more than 40 million games that are free to download and play. Kids can customize their avatars and meet up with friends to play games and hang out, just like in the video games Fortnite and Minecraft. These games are not technically considered Web3 because they do not integrate cryptocurrency, although some people consider them “Web 2.5” because they do have their own virtual currency — called “Robux,” “V-Bucks,” and “Minecoins,” respectively — that players can purchase using real money.
Gamefam develops metaverse games and experiences, with an exclusive focus on Roblox at the moment. “I think ‘Web 2.5’ is a really interesting way of putting it because there is a persistence to the virtual goods on Roblox,” says Gamefam Chief Executive Officer Joe Ferencz. “There is a delineated rarity of those virtual goods, there is a trading economy for virtual goods, and there is interoperability across all of Roblox’s content for the most part. In that regard, Roblox has all of the aspects of Web3, except that it’s not on the blockchain.”
The blockchain uses decentralized technology to cut out the middleman, allowing participants to trade cryptocurrency and information directly between users without passing data between third parties, such as banks. “Because the Web3 platforms are truly decentralized, there is less opportunity for safety oversight and moderation, and for ensuring fair play and protection of owned items,” Kleeman says. “These platforms, therefore, are less appropriate for kids’ exploration and play, at present.”
Safety becomes a concern when companies marketing to kids have to consider the Children’s Online Privacy Protection Rule (COPPA). “We’re so far away from a proper Web3 being COPPA-compliant that when toy companies are looking at playing in the larger metaverse — not in Roblox — it’s in a very parent-focused, very cautious way to see where the trends are going because Web3 is still in its infancy. We’re all still navigating it,” says Sydney Wiseman, vice president of brand development and creative strategy at WowWee. “Our Web3 strategy that we’re focusing on internally next year is 80% Roblox and 20% questioning how we dabble in the bigger metaverse.”
Where kids are concerned, Roblox offers a controlled way of buying and trading virtual goods while parents still have the upper hand. There are tools like parental controls that adults can use to curate age-appropriate experiences for their kids, monitor account activity, and track monthly spending in a secure way.
That being said, Roblox does have some rare virtual goods that are worth a lot of money — some even worth thousands of dollars — in the platform’s trading economy. What compels consumers to spend real money on digital collectibles in free-to-play games? Metaverse economies are driven by progression, self-expression, collection, and clout. The desire for bragging rights, personalization, and ownership play into consumer behavior — and that’s true outside the metaverse, too.
Some people spend money to customize their metaverse avatar or style their characters’ outfits or “skins” to stand out in a game. Some players buy virtual equipment, accessories, or special powers for the sake of progression, giving them new abilities to help them advance in the game, while some people strive to complete a collection. Many people are fueled by influence, wanting to own things for bragging rights, simply because they are rare and limited.
“One of the things that we’re thinking about as a company in Roblox specifically is how we do things to support our toy partners using limited runs, even if it’s not on the blockchain,” Ferencz says. This summer, WowWee is launching a line of collectible dolls based on Gamefam’s Twilight Daycare game on Roblox. Gamefam will support that in-game with digital goods that are limited to the number of dolls sold. Players will be able to walk up to these “super collectibles” in the game and see exactly how many will ever be sold and exactly how many are left.
In true Web3 gaming, players can build up their in-game collections and sell items for cryptocurrency, which they can then exchange for other currencies, including USD. Gamers really own their virtual goods and they can potentially earn actual money by selling their digital assets.
STOP, COLLABORATE, AND LISTEN
Collaboration is an important part of the metaverse and Web3. Toy companies don’t need to build their own games or virtual events from scratch, although they can if they want to. Manufacturers or IP owners will often partner with game developers to cross-promote their brands.
“For smaller companies, it’s not necessary to create an extensive world for a brand to have a metaverse presence. It’s possible to launch a smaller experience and then build out depending on how players use the game,” Kleeman says. “It’s possible to work with existing popular games to insert your toys, environments, or designs, either for a short-term activation (say, to bring attention to a new product launch) or on an ongoing basis (a branded space within the world).”
Fortnite is a metaverse video game platform that often drives its story elements through collaboration with a range of content IPs, including character skins and experiences based on Marvel, DC, Star Wars, The Walking Dead, Universal Monsters, the NFL, and more. While Fortnite often hosts pop culture brands geared toward older kids and teens, Roblox seems to be the platform of choice for many toy companies and kid-focused IPs, with appearances from WowWee’s My Squishy Little Dumplings, Jazwares’ Squishmallows, Spin Master’s Purse Pets and Mermaid High, MGA Entertainment’s L.O.L. Surprise!, HEXBUG’s Junkbots, Hasbro’s NERF, and Ryan’s World in various games and events.
LIVING IN A PHYGITAL WORLD
Online experiences may have physical extensions that extend the metaverse and Web3 experiences beyond the screen via tech like AR, social platforms that continue offline, or tangible merchandise. This is bringing new innovation to toys and collectibles. According to a Dubit trends survey, physical products still dominated parents’ spending over digital and experiences last year.
If kids are already playing with digital versions of toys, as they do in Twilight Daycare, they’re going to want to play with the real-life versions when they see them in stores. On the other hand, the physical toys can also act as an entry-level step for parents who are hesitant to let their young kids participate in the metaverse. “It’s a safe product for parents if they’re not ready for their kids to be immersed in the metaworld of things, but also if your kid is obsessed with a metaverse game, then this is something that you’re going to buy in addition to buying Robux,” Wiseman says.
In March, Jazwares inked a multi-year, global licensing deal to serve as the master toy and collectible partner for the World of Women (WoW) NFT collective. Set to hit retailers next year, Jazwares will have exclusive rights to design, manufacture, and market dolls, figures, plush, playsets, role-play items, costumes, and accessories inspired by the WoW NFT universe — a realm that celebrates diversity and inclusion across more than 10,000 pieces of digital art.
There is a reason that there aren’t many toys based on NFTs yet, according to Jazwares’ Padawer. “Barriers to entry in the NFT space are minimal. For every program that existed 12 months ago, there are 100 programs today. The space is exploding and it takes time to spot the blue chip programs,” he says. Blue chip NFTs have records of growth and value, and are considered safer long-term investments. “World of Women is a blue chip with an extraordinary market cap, transactions, and, just as importantly, a clear play pattern and theme: fashion and empowerment. It is a true visual point of difference from other fashion-oriented dolls.”
Padawer says it’s worth learning about licensing in the NFT space, but he heeds this warning: “If picking content on TV or movies was difficult in the 1990s–2010s, where most content doesn’t relate well to consumer products, this is a whole different level. You must educate yourself intensely before diving into this segment.”
Designer toy manufacturer Mighty Jaxx is exploring the phygital trend as well. Each Mighty Jaxx collectible comes with a digital authentication, and the new AllStars F1 2022 Collector’s figures based on Formula 1 race car drivers also come enabled with a Mighty Jaxx Xtended Xperience. Collectors can use this feature to tap into gamified offerings, showcase their pieces, and customize digital displays through various skins.
Mighty Jaxx is also working on designing Web3 experiences in the form of a journey or a roadmap that gives fans curated privileges in phases. In phase one, consumers will be able to receive digital badges, wallpapers, and a virtual vault for them to store and manage their collectibles. Mighty Jaxx is working with partners and brands to provide other experiences for future phases, such as exclusive drops and event invites.
“We believe Web3 will be the future of consumer engagement and is becoming increasingly relevant to the new generation of consumer collectibles,” says Mighty Jaxx Chief Strategy Officer Bryan Tan. “Digital collectibles and experiences such as NFTs, AR, and VR are becoming more commonplace, so it is important to ensure our products are Web3 ready.”
We’re in a new era of metaverse marketing that allows brands to get more inventive and for fans of those brands to connect in more interactive ways. Kids are growing up, playing, and socializing in these digital spaces, and brands have the opportunity to increase their exposure like never before. Take flight into these new corners of the web while they’re still fresh, and prepare for the innovation that’s bound to erupt.
This article was originally published in the June 2022 edition of the Toy Book. Click here to read the full issue!
