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Advertising in the Metaverse: a New Virtual Legal World

The concept of the Metaverse is as divisive as it is elusive, but brands are still backing it as the next evolution in digital marketing, despite the teething issues felt in 2022.

But...what is the Metaverse?

Perhaps one of the issues with the Metaverse is that it is still a developing concept. It’s fair to say we don’t have one conclusive definition of what the Metaverse is or will become. Its critics would dismiss it as nonsense, something unable to be imagined and therefore not possible.

Yet its champions would characterise the Metaverse as the evolution of today’s Internet. A transformation of our online lives from something we look at, to something we are immersed in, and a deepened blurring of the lines between the physical and the digital. And it’s not so difficult to imagine. We now live so much of our lives online – working, socialising, shopping, dating, banking, and more.

These aspects of digital living are the building blocks that the Metaverse is built on but take it a step further. The Metaverse is envisaged to use new technologies such as augmented, virtual, alternate and simulated reality to create virtual worlds across multiple platforms. In the Metaverse, people have virtual presence and “agency”. It’s a reflection of the real world, experienced virtually.

What happened in 2022?

After the buzzword Metaverse media frenzy of 2021, 2022 saw a slow-down. The crypto-currency and NFT markets saw a sharp decline in value last year. Digital fashion, outside the world of gaming or cult brands, was yet to go mainstream and the future of the Metaverse started to raise doubts.

2023: a new year of opportunity?

As noted in the Business of Fashion, it is at this stage in the “hype-cycle” of any emerging technology that we should be paying particular attention. As with the commercialisation of any new product, there will always be successes and failures as it comes to market. Start-ups need to adapt, and developers need to re-think as consumers begin to respond to what works, and what doesn’t. It is only then that we begin to see useful and commercial products and strategies emerge. It is also true that we need to look at the consumer behaviour of Gen-Z and beyond when we are considering the potential value creation of the Metaverse. It might be misunderstood by Boomers and Millennials, but that doesn’t mean it isn’t going to be big in years to come. You only need to consider the so-called “i-Pad” babies and their entrenched upbringing in technology, to see that it is a real possibility.

Despite its doubters, Bloomberg analysts expect the Metaverse to be worth 800 billion dollars by 2024, and McKinsey anticipates that the global value creation of the Metaverse could ultimately be in the trillions.

Law and the Metaverse, a contradiction in terms?

"A key feature of this metaverse concept is that the way we present ourselves, both in terms of our avatars and our clothing, won’t need to obey the norms and restrictions of the real world." BoF.

As a construct outside of the “real” world, the Metaverse creates some complex legal questions. How can the Metaverse be regulated? What is the legal status of an avatar? What are the risks to children? Does it create a worrying loop-hole for big tech to escape the tightening of legislation it rejects? How is our personal data going to be protected in this new world? Brands need to be alive to these issues and must respond to any changes to the law as they happen.

Meta Advertising: looking ahead

Digital marketing pioneers are certainly not slowing down when it comes to the Metaverse and no brand has bought into this concept more visibly than Facebook, now, Meta. You only need to look at some of the TV ads that Meta has released over the past few years to understand the scale of Zuckerburg’s vision. The adverts show how the Metaverse might transcend the worlds of art, education and medicine to become a catalyst for positive change. For example, surgeons will learn how to operate in the Metaverse using virtual hospital beds and patients and students will learn together in virtual classrooms.

The Advertising Standards Authority notes: “as with all great shifts in technology, the Metaverse promises advertisers new and exciting ways of marketing their goods and services, which in turn raises issues for ad regulation.” In the Metaverse, how easy is it to insert “#ad?” Ad placements in video games are now as common as those on motorway billboards and virtual influencers are on the rise, with brands using computer-generated personalities to enhance their online personalities and appeal to younger consumers.

Computer generated influencers are likely to appeal to children, and as we have seen with the explosion in child influencers and YouTubers, they are influenced by this type of content. In the US, gaming platform Roblox was subject to complaints to the Federal Trade Commission for failing to adequately distinguish between gaming content and advertising content. However, the ASA asserts that the CAP Code “applies just to the realms of data as it does to those of brick and mortar” and so it’s likely that many of the legal ad issues we have seen with social media will continue to be the foundation of regulation of the Metaverse, updated as the virtual situation evolves.

What about data?

As the use of AR headsets becomes more prevalent, predictions have been set that this could pose a data protection risk. Writing for Newsweek, D.H Feedman states that a headset owned by Meta would create an “explosion” of knowledge about consumers’ online behaviour. Meta, it is believed, it set to include face and eye-tracking in future headsets. This creates a personal data challenge, in that users’ anonymity would be restricted. If businesses adopt these technologies, they will need to add an extra layer of scrutiny to their privacy assessments. The UK GDPR may need to evolve to ensure that these types of personal data are captured and privacy notices updated to ensure that key rights are maintained, such as the right to request copies of data, minimisation of its retention and adequate deletion procedures.

Regulating the Metaverse at large

Surely if an avatar is controlled by a natural person, the law will need to provide a mechanism that links the person’s real and virtual identity together so as not to create a liability loop-hole enabling criminal activity such as fraud, identity theft, defamation and IP infringement. The social media identity verification requirements contained in the Online Safety Bill will need to be replicated to ensure users of the Metaverse can be identified and criminals can be prosecuted.

Perhaps in the future, we will see that certain avatars are granted a separate legal personality, just as in corporate law, a company is. The “shareholders/directors” of the avatar could be one or more natural persons, to which liability would attach.

That said, there won’t be one definitive law for the Metaverse. We will need to pull together elements of existing laws around IP, consumer protection, data protection and advertising and technology regulation to make sure we have a legal framework that works just as well in the virtual world, as it does in reality.

Our thinking

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