Last week, Nike announced that it would create a new virtual world, Nikeland, on the metaverse platform Roblox. Modeled after its real-life headquarters, Nikeland will consist of stadiums, fields, and arenas, where players can compete in dozens of virtual games such as tag and dodgeball. They will even be able to dress their avatars in the latest Nike sneakers and apparel, which they will buy at a virtual shop nested in the platform. 

There’s a reason the Collins Dictionary declared “NFT” the 2021 word of the year, and why “metaverse” made its annual short list. Like Nike, several companies—from luxury players such as Balenciaga, Gucci, and Sotheby’s to mass-market ones such as Coke, Chipotle, and Wendy’s—are rushing to create, or use, the metaverse. That term encompasses the idea of persistent, immersive, and shared virtual 3D spaces that people can explore with a sense of their own presence. NFTs are deeply connected with the metaverse, and business has also invested in NFTs, with Christie’s recently auctioning a digital artwork by Beeple for $69 million, while a plot of digital land in Decentraland sold last week for $2.43 million worth of the platform’s cryptocurrency (618,000 MANA)—higher than the price of the average “real-world” Manhattan apartment.

The concept of the metaverse is no longer under the radar, but grasping its concrete implications may not come naturally to many companies. While digital-first brands can apply their existing skill sets to the metaverse, using their digital personas and content to connect with consumers, other companies will have to learn quickly if they are to stay abreast of rivals. Our recent analyses and experience threw up two guardrails that will help companies think through their metaverse strategies.

The metaverse—and its underlying platforms—need brands more than brands realize. Building new worlds, even virtual ones, is costly and time-consuming; Meta (formerly Facebook), for instance, will invest $10 billion in metaverse construction in 2021, more in future years, and expects to lose money on it for the foreseeable future. Like other multisided markets, metaverse platforms (or m-platforms) rely on network effects, and brands help trigger them so they can grow.