META This! Series Ep. 1 - Justin Hochberg Delves into his Successful Launch of Brands in the Metaverse

Illustration by @max_gps

META This! Series Ep. 1 Transcript:

Series Open

Welcome to Nolan Heimann's LOOK.legal podcast. This  the first episode of our Meta This! Series. At the time of this recording, it’s estimated there are over 470 million people who are  using metaverse platforms monthly. Roblox alone has over 200 million monthly active users. The global metaverse market is estimated at over $40B and growing rapidly. This presents a new and unique opportunity for both creators and brands to engage with their customers, if they can figure out how. 

Podcast Transcript:

David Schnider

My name is David Schnider and I am a partner at Nolan Heimann. Today I am joined by Justin Hochberg, the CEO of Virtual Brand Group. Justin is a former Microsoft executive with over 25 years experience in brand and content creation. His company, Virtual Brand Group - has been recognized by Cryptonews as one of the top 10 metaverse marketing agencies. Justin is one of the few people who has experience implementing a successful brand strategy in the metaverse. I’m excited to have him join me today to share some of his thoughts on the metaverse and the opportunities it presents. Justin, thank you for joining me.

Justin W. Hochberg:

David, a pleasure to be here. I just can't believe that we're doing a metaverse interview in the real world. I feel a little out of sorts that I'm not staring at you with pink hair riding a French fry magic carpet.

David Schnider:

Well, I think maybe we missed an opportunity there. I have to get a VR headset when we do that next time.

Justin W. Hochberg:

Okay, well, let's make that a plan for number two.

David Schnider:

I want to start with a really basic question, which is when we talk about the metaverse, what does that mean to you? What is it?

Justin W. Hochberg:

I think on the most basic level, and I always approach this from a consumer perspective, the metaverse is simply a new set of technologies that will enable you to do a variety of new business and personal things just like the internet was. I think if you just think about what it was like 25, 27 years ago when the Mosaic browser was invented by Marc Andreesson, he ushered in an era where there was this thing called "the internet."

If you look this up, and I highly recommend doing it, there was a great interview with David Letterman, a iconic talk show host from the '90s and 2000s, where he interviewed Bill Gates about what was this new internet thing. On that show, they comedically dissected this same question. I don't know that you and I will have the same rapport or credibility, but I can repeat this, and I think it lands, which is, what is the internet? Then Bill Gates would describe it as a bunch of technological things that connect to a bunch of computers that allow you to do a bunch of this and that. Then David Letterman, of course, said something like, "Who owns it?" The answer is, "Nobody." "What can you do?" and the answer was, "Anything you want." Now, as a general consumer, of course, David Letterman had a lot of fun with Bill Gates on that because that really doesn't tell you anything and it's actually wildly frustrating.

If you think about where we are today, we're kind of in that same space. What is the metaverse, who owns it, and what can you do with it? All the answers are exactly the same. So on some level, I could tell you technically what it is, but most people, unless you run the IT department, don't care, just like I don't care how Amazon gets me the book faster, I just use it because it gets me the book faster and cheaper. So from my perspective, the metaverse, simply put, is the next leap in e-commerce and social interaction, both from a consumer perspective and a business to business perspective.

The key fundamental things that make it the next leap are two dominant variables, which are, one,  it allows you to exist in a three-dimensional world, i.e. I as a character and avatar as they're called, dressed any way I want, can interact with people. I can talk to them, I can socialize with them, I can play with them, I can work with them, I can do presentations with them, and I can interact in a way that doesn't exist in a two-dimensional website like Amazon.

The second fundamental piece of this is that this piece of technology is called "decentralized," which is to say nobody owns the infrastructure. It is out there like the internet is that no one owns the internet, it's just everybody's computers connect to everybody else, and there's wires everywhere. But what this decentralization allows you to do is it allows you to actually own your intellectual property.

Now, why is that important? In particular, as a consumer, we have been lulled into a state of domination by a bunch of companies like Apple, Facebook, and Google who have told us we could use their platforms in exchange for simply letting them show us some ads. What that is turned into is we as humans have become the product. Our lives, our  likes, our interactions are all mined for data, and then sold to the highest bidder. In that instance, you own nothing. If you built your business on Facebook or the Apple Store and Apple changes the algorithm, you're absolutely out of luck. In this world, the decentralized nature of this means that you will always own that picture you posted of your grandmother, and so you will be able to move that picture from the metaverse version of Twitter and Facebook, which is not allowed. That's what metaverse is to me, a simple way for consumers to have new experiences, new business opportunities, and actually own their own intellectual property, unlike they do today.

David Schnider:

I want to get into some of that, but before diving too deep, I want to talk about just practically what exists today that you would think of as metaverse platforms. How are people accessing the technology right now?

Justin W. Hochberg:

That's a great question, and I think there it's often confusion between people who have seen movies like Ready Player One, made by Steven Spielberg, where you live in a world that is dystopian and you have a set of goggles on your face all day and think that that may be the metaverse. I don't think, again, as I would like to say, "If you ask 10 people, you'll get 11 different answers."

Here's what I would say about today's metaverse: It is generally undefined, but most people spend the majority of their day staring into what one calls the black mirror, named after the show, of course, on your phone. Right now, we're on a Zoom, you probably have half your meetings now on a Zoom, you probably rack up six hours a day looking at your phone, or a PC, and so whether it's strapped to your forehead or staring into a device, that is the access point to the metaverse, right? It's just you go on a device anywhere in the world, a PC, a laptop, a PlayStation, doesn't make a difference, it all connects to what you know as the internet, and then it leads you someplace. That's the access point.

Today's most common metaverse platforms or things that people use because they're just at scale, are things like Roblox, the game that went public last year, and Fortnite, which is also a game, and Minecraft, which is also a game. Now, those are the most popular because they have actually been around, and this is something most people don't know, the metaverse is not new. All of the things that underpin the metaverse have been around between 10 and 20 years. Roblox was founded in 2005. The big difference is most people just learned about it when Facebook changed its name. Right now, there are places where hundreds of millions of people are gathering to transact, play, build, do brands, et cetera, like Roblox, Fortnite, and Minecraft. That's the most common reference metaverse amongst, shall we say, people who are not deeply involved in this space, the average consumer.

David Schnider:

I think what makes those platforms distinct from technologies that came before them is that they're persistent universes, at least in some sense, where people can go on and interact and have experiences beyond just the game itself, and in the case of Minecraft, not even so much a game. Do you think that's a distinction between pre-metaverse and metaverse?

Justin W. Hochberg:

Well, again, I don't think there's really a defined definition of the metaverse, I mean, because unlike defining the internet, which actually has a definition, some version of a series of connected, interconnected computers, da, da, da, da, the meta versus more of a philosophical description of it. What I would say is these experiences like Roblox and Fortnite are virtual worlds which people interact on. Brands are now on it. I launched the fashion brand Forever 21 on Roblox. It's the third brand ever to be there, what today seems like a very simple basic idea, a year and a half ago was considered risky, and unproven because no one had done it, which is exactly why I did it. It turned out to be wildly successful. We have millions of hours of consumer engagement. We generate revenue on the platform from in-game purchases and virtual fashion, so those are the most common persistent worlds where you exist and it lives and it thrives.

I think the big difference between what they are and what we're used to in a prior version, which we would call maybe Web2 as opposed to metaverse, which is Web3, is that in web two, when you play the game Call of Duty or when I was a kid, you play ColecoVision or Donkey Kong, there was a script written by a bunch of people at gaming companies like Activision or whatever it was, and that was what you had to stick to. In these worlds, what makes the metaverse different is it's like Disneyland. You go and there are planned things that happen, but once you're there, your experience with them, how you interact with Goofy and what you do for the day is up to you.

Now, take the concept of Disney World or Disneyland and now remove the laws of gravity from it where it's not just planned by some corporation what games you can play, but the tools are there for anyone from a six-year-old to a corporate entity like the Virtual Brand Group to build and innovate at any time. Roblox is often mistaken for a game, but it's not. It is a platform with very simple tools that actually now has 50 million games on it and so that's what makes this very different is the empowerment of the consumer to build and control their own world.

David Schnider:

Yeah, I wanted to ask you specifically about the launch you and your company did for Forever 21, and I was going to describe it as launching the Forever 21 store, but that's really not a fair depiction. It's really a brand project within that platform. Can you talk about what you guys did and what lessons you learned from that?

Justin W. Hochberg:

I think one of the mistakes people think of is that when they think about brands, they think, "Well..." Again, we're all prone to this. We tend to use the terminology and thought process from whatever we're very used to and then project it onto the next thing, which is inevitably not the way it's going to play out. If you were a retailer and you came to me, you would likely say, "We operate stores or e-commerce. How do we create a store on Roblox?", and I would say, "That would be a giant mistake because Roblox is not about a store. Roblox, consumers value play."

Again, back to my Disney experience, I think the average consumer on Disney World only rides for 18% of their time. 82% is they're playing, they are hugging goofy, they are running around, they are taking pictures, they're whatever they're doing, and so you don't want to build a store, which implies transaction. You can turn a retail brand that is constrained by square footage and insurance, and how do you design an aisle, or a cash register into something that is Disney-fied?

When we built Forever 21, that experience is a game. You build your own store, you merchandise your own store, you work with customers, you get to put on fashion shows. All the best experiences in the metaverse, whether it be Forever 21 or we worked with Barbie, or whether it's on Roblox, or it's on Minecraft, is about building out the experiential way that people can interact. Think of Coachella. Why is that different than listening to the radio, or to a podcast, or a Sirius XM? It's because you're there. It's live, it's fluid, there's different people, you meet up, there's different activations. That is what the metaverse enables and that is where brands are seeing most of the success is building out worlds that keep you in there.

Just to give an example, one of the top-rated experiences besides Forever 21 on Roblox is Sonic as in the character and the movie with Jim Carey. I can't remember the timeframe, but less than a year, they've had 540 million visitors into their experience, 540 million visitors. That's unbelievable statistics. In fact, just to add some more numbers to, because I'm sure people are looking for data, the average consumer, a lot of companies invest in social media, in fact, it's probably one of the biggest spends in anybody's marketing budget, and that would be TikTok, Facebook, Instagram, et cetera, if you add up the top five social media platforms, including TikTok, YouTube, et cetera, the average consumer spends about 60-some-odd hours a month on those platforms. The average consumer spends 78 hours a month on Roblox.

When you start thinking about building your business, or this as a opportunity to reach consumers, I would start telling people in the marketing department, "Stop spending so much money on social media and start spending money where people are not only spending more time, but they're interacting in deeper ways because it's not just to like a post, it's playing, it's got play patterns, and it's very different."

David Schnider:

That resonates with me because our firm, we have deep experience in location-based entertainment, and we've been talking for years about how experiential entertainment is converging with everything in retail, in virtual reality, in brand licensing, entertainment, things like the Star Wars cruise that Disney is doing, even within retail establishments trying to create an experience for the customer. It seems like the metaverse offers a whole new level, a way to connect with consumers without limitations, and to amplify brands and create an experience for consumers.

Justin W. Hochberg:

That's exactly right. Here's the good news and the bad news is oftentimes the people who are dominant in one industry, let's say all the location-based entertainment people, whether it's a studio like Lionsgate, or Disney, or Pixar or whatever, they're often the slowest ones to then see this sea change in this. You would think that somebody like Disney with all of its IP or all that stuff would've been an early mover in this, but they're just not. I like to say, having worked in the entertainment business for decades before the metaverse, is the entertainment industry is always seeks the last mover advantage, and I don't know that it is an advantage. Historically, they never adopted. They fought television, they fought VHS, they fought DVDs, on and on and on, and they are always the last mover.

Just the other day, I think Bob Chapek from Disney said, "We're not even going to use the word 'metaverse,'" because they think that it scares people because they don't understand it. That was echoed by also Tim Cook, and in fact, the CEO of Nvidia, which is so ironic to me because those are three companies that should be at the center of leadership on the metaverse given that they provide experiences, technologies, and consumer brands. I wrote a post the other day that said, "When Tim Cook issued the idea of, 'I don't use the word metaverse,'" I said, "Steve Jobs would tell him he's wrong if he was alive," and that's because I don't think people are against the metaverse. I think some of the things may have started off on the wrong foot, but it takes somebody like Tim Cook at Apple or Disney to explain to people in its simplest forum and then show them with products what the metaverse is.

Instead of backing away from this thing that if you google search, it has billions of views, I would pose to them, you should build building experiences that explain it and show it just like Steve Jobs built the iPhone and the iPad, which by the way, everyone ridiculed the name of the iPad, they thought it was a sanitary product, and now, no one even questions it. That's why, and Steve Jobs did this because he's famous for the following thing. Someone once asked him, "Why don't you ever listen to consumer marketing groups?", and he said, "Because it's not people's job to know what they want. It's my job to tell them," and that is what people like me and other builders in this ecosystem are doing. We are not waiting for some data and some corporate analytical strategy. We are out there building experiences in a matter of weeks or months instead of years and decades to test out what consumers want so that we can become the next version of Lululemon, or Amazon, or Facebook, or whatever it is.

David Schnider:

Well, it seems like that slow-mover advantage or disadvantage creates a real opportunity for small and mid-size brands to jump in and start trying things out and be the first movers.

Justin W. Hochberg:

Well, I would say that's consistent with every new shift in technology, right? I mean, think of all the brands that got displaced by the internet, right? Let's just take Amazon and any book company, right?

David Schnider:

Yeah.

Justin W. Hochberg:

Let's just take the shift to streaming. I mean, I worked in Silicon Valley for Microsoft in the '90s and 2000s and everybody knew that broadband was going to happen and everybody knew that there was going to be a moment, whatever day that was, where you were going to be able to stream TV. In fact, one of my jobs there was working in the TV division of the streaming division of Microsoft to come down to Hollywood and say to people like Peter Chernin and the heads of all the talent agencies, "Guys, you were going to be able to watch any show on a device that is this fits in your pocket and there will be an entire business around that just like there was with TV. You're going to probably tell me that nobody will watch TV because everybody's used to watching movies and yet everybody was used to watching TV because what was great about TV? Convenience. What will be great about this is convenience and choice." I had everybody tell me there was no way in a hell that would ever happen.

These moments in time are the perfect moment to, as a challenger brand, to establish yourself and circumvent large corporate entities. In fact, it's happening already. There's over 2,000 racing games on Roblox, so if you're a NASCAR or a Formula One, and you're thinking, "I'm eventually going to get to this," by the time you do, there might be thousands of other racing leagues, dozens of really well-established leagues that are all funded that already have hundreds of millions of people playing globally, and so every shift creates that opportunity for a challenger brand.

David Schnider:

I read an article just yesterday that was a study on Gen Z consumers and newer consumers. It was saying that they are not so much engaging in pop culture as they are in niche cultures and that to be successful, brands are going to have to drop into subcultures and speak to a specific audience using their language to be authentic and connect with them. It's entirely consistent with what you're saying and the metaverse seems like it's going to be a fantastic tool to do that.

Justin W. Hochberg:

Yeah, I think that thought has existed for a while. I think it was most popularized by the idea of the long tail, i.e. once you started breaking down barriers between people, which used to exist because everything was physical and geographical, you'd have to go to a store to buy a magazine, and the magazine in New York might have been different than the magazine in Mexico City or Japan. Once you started breaking down things with the internet, groups that had affinity for the same thing could easily find each other, and that developed slowly through blogs and Reddit subgroups and all that stuff. Like CBS versus Netflix, CBS needs 10 million people in basically 10 states to watch a show for it to be a hit, and if they can't get that mass market to do it goes away. Netflix does not need that. It can survive on a couple of million people in 50 different countries who happen to this, that, or the other thing, and so the long tail is definitely it.

It's also because the cost to create content from making a TV show 20 years ago to making a YouTube video today are nominal. I mean, people are building empires like MrBeast off of an iPhone and that's it, so that is enabling anybody with anything to say to put it out there. Now, the big problem with that of course is with everything out there, how do you find something that you like? Well, discoverability is obviously an issue, so one of the things in the metaverse that will be challenging is search. Where is the search engine for the metaverse? If you tried to figure out who owned what NFT, or all the different NFTs available, or all the different games on Roblox, there's no such thing for that yet, and so then that brings back us to the original question of will the metaverse be centralized because you can't have search unless there's some way to organize the metaverse or decentralized, which is to say people will poke around at it and find what they can? That answer is yet to be written.

David Schnider:

There's a lot more we could cover here, and we'll have to do another podcast another day to get to some of it, but I just want to ask you one more question before we wrap up, which is for companies and brands who are looking to get into the metaverse and figure out how to get started, what are the first steps for them, and how do they contact you if they want to find out more from you?

Justin W. Hochberg:

The best thing to go is to virtualbrandgroup.com. You can look at case studies with actual data on Barbie and Forever 21. You can see some of the things that we do from strategy, to onboarding brands, to helping them navigate virtual fashion loyalty programs, et cetera, which is the full range of opportunities. There's a very prominent Work with Us button, and you can go right there. You can find me on LinkedIn, Justin Hochberg, and you'll see postings about everything from today was why isn't there insurance in the metaverse? How do I protect the fact that my daughter just lost four years' worth of goods on Roblox and there's no recourse? That's on a personal note.

On a broader note, so because everything is so bespoke, because the data is so rare, you really do need to find someone who is not your typical agency. I know no one gets fired for hiring McKinsey, as they like to say, but most of these agencies, McKinsey, Publicis, Havas, CAA, they are advisors. There is a long list of people who would like to advise you. There's a very, very short list of people who are in the trenches, working with the technologies, suffering the taking the arrows in the back, learning how to search algorithm works on Roblox, and you need to find those, and so whether you work with a company like the Virtual Brand Group or not, you've got to find somebody who is in the trenches right now because that's where all the really important things are. The idea of some big strategy company is not going to help you actually make your brand's entry a success.

David Schnider:

Well, Justin, thank you for your time today. I really appreciate you sharing your views on this stuff with us. I look forward to seeing what you guys do in the future.

Justin W. Hochberg:

David, it's always a pleasure and I will say your counsel and advice in this new space has been very valuable to our company. I always think of when we think of people that are leading thought leadership in your sector, I think of you often, so happy to do it, and look forward to the next one.

David Schnider:

I appreciate that. Take care.