Episode 2

full
Published on:

7th Dec 2021

2. Microsoft Hates NFTs, Virtual Land Sales, NIKELAND in Roblox, $75M Play Future Fund

In this week’s episode, Phil Spencer (head of Xbox at Microsoft) says NFTs are "exploitative", virtual land sales bring in millions of dollars for various companies, Nike joins forces with Roblox for NIKELAND, Play Ventures launches a $75 million Play Future Fund, and so much more!

Transcript
Paul Dawalibi:

From the boardroom to the metaverse, this is the meta business podcast. I

Paul Dawalibi:

Paul Dawalibi. The master of the metaverse will lead you through the biggest business stories in

Paul Dawalibi:

the metaverse. Join us as we break down the news and trends from the C suite lens, bringing you

Paul Dawalibi:

insights, analysis and discussion that you can't find anywhere else. Every single week. Welcome to

Paul Dawalibi:

metta business. Welcome to the metta Business Podcast, episode two. I am Paul Dawalibi. I'm

Paul Dawalibi:

joined today by my friend and co host, Jeff the juice Cohen. Jeff, how's it going today?

Jeff Cohen:

I'm doing good. For those of you listening, this is actually take two of Episode

Jeff Cohen:

Two. No that but take was ruined by my english bulldog Bradley, who decided that he really needed

Jeff Cohen:

a walk right in the middle of the day. So that happened, we had to stop taping and now here we

Jeff Cohen:

are two hours later. So

Paul Dawalibi:

the viewers now won't know on the seven minutes of just absolute fire that they

Paul Dawalibi:

missed out on. A good roll Bradley Bulldog.

Jeff Cohen:

And then there was it sounded like a wounded goat in the background. Which Oh, Paul is

Jeff Cohen:

a professional he played through. I lost my cool. And it was like, well, we'll do it live kind of

Jeff Cohen:

moment. You know the old Bill O'Reilly. So here we are now. Here we are now better.

Paul Dawalibi:

Just as a reminder, guys, this is episode two of the metal business podcast. If

Paul Dawalibi:

you're fans of the business of esports, if you're here because of that welcome. If you're here just

Paul Dawalibi:

because you saw Metaverse and business together and thought it was interesting. Also welcome. What

Paul Dawalibi:

we do here is we're covering all the big stories coming out of the metaverse, sort of industry now

Paul Dawalibi:

world and looking at all of it from a business and C suite perspective. So if you're a fan of the

Paul Dawalibi:

business of esports podcast, hopefully you're gonna love this. It's it's a lot of what we do

Paul Dawalibi:

there but focused really very much on Metaverse, themes and topics from a business perspective.

Paul Dawalibi:

Jeff, why don't we jump into? You know, we did, we had a bunch of stories that we didn't get to cover

Paul Dawalibi:

from week one from episode one. And I know we want to touch on a couple of them today, as well as

Paul Dawalibi:

some new stories from this past week. So let's get let's get started here. And let's start with a

Paul Dawalibi:

story that actually was a bit of a holdover from late last week. And this is Phil Spencer in the

Paul Dawalibi:

news, Phil Spencer, who's the head of Xbox at Microsoft. He's a very important person at

Paul Dawalibi:

Microsoft basically in charge of everything gaming. And the headline here I think is real

Paul Dawalibi:

clickbait it's it's it's incredibly kind of inflammatory in some ways. And the headline is

Paul Dawalibi:

Xbox head, Phil Spencer, and FTS in gaming feel very exploitive right now. And let me just read

Paul Dawalibi:

quickly, the whole the whole sort of interview question and answer that happened. So this is Phil

Paul Dawalibi:

Spencer speaking, it was an interview with Axios. And he says, what I'd say today on NFTL up is I

Paul Dawalibi:

think there's a lot of speculation and experimentation that's happening. And that some of

Paul Dawalibi:

the creative that I see today feels more exploitive than about entertainment, I don't think

Paul Dawalibi:

it necessitates that every NFT game is exploitive. I just think we're kind of in that journey of

Paul Dawalibi:

people figuring it out. And I can understand that early on, you see a lot of things that probably

Paul Dawalibi:

are not things you want to have in your store. I think anything that we looked at in our storefront

Paul Dawalibi:

that we said is exploitive would be something that we would you know, take action on. We don't want

Paul Dawalibi:

that kind of content. So Phil Spencer here, Jeff taking kind of a pretty strong viewpoint on NF T's

Paul Dawalibi:

in games or NFT games based games. And, and has sort of come out very clearly in my mind saying,

Paul Dawalibi:

we don't want to have anything to do with it right now. What's your take on this? Is he you know?

Paul Dawalibi:

Well, it's trying to create conversation here. What do you think he's trying to accomplish with

Paul Dawalibi:

this?

Jeff Cohen:

I think, you know, we kind of have the battle lines drawn a little bit now where, you

Jeff Cohen:

know, on one side, you have Steam and Valve, which I would say came out even stronger than this and

Jeff Cohen:

basically banned all NFT games on their platform completely. I don't see Phil Spencer doing that

Jeff Cohen:

here, I see him kind of putting up a red flag and saying, hey, there are some things we need to be

Jeff Cohen:

aware of. And there are some parts of these games and some titles within this new genre, if you want

Jeff Cohen:

to call it that, that may be problematic. And so he's sort of like putting the caution flag up. And

Jeff Cohen:

then you have Tim, you know, our favorite Tim Sweeney, who seemed to kind of even though he has

Jeff Cohen:

actually to be fair made similar comments to what Phil Spencer just said, I think he called you

Jeff Cohen:

know, these games said there were many scams in the NFT and kind of crypto industry right now. But

Jeff Cohen:

he seemed to welcome those type of games with open arms after Valve made their announcement which,

Jeff Cohen:

you know, you could maybe a cynic would say that he was sort of saw an opening and took it a little

Jeff Cohen:

bit, but you sort of do have now this spectrum of these of these different game stores and

Jeff Cohen:

platforms, kind of, with what their, you know, opinions are around blockchain gaming and an NF

Jeff Cohen:

T's to kind of get to the point of what Phil Spencer said, I, you know, for me, I think

Jeff Cohen:

exploitative is a bit of the wrong word. It's kind of a little strong to me, because in my mind, when

Jeff Cohen:

I hear the word exploitive, that kind of gives me the impression that people don't know what they're

Jeff Cohen:

getting into, like I think of, you know, a grandmother who gets a call from, you know, the

Jeff Cohen:

IRS, quote, unquote, and then gives their their sort of credit card and social security number

Jeff Cohen:

because they were getting scammed. When I think of NFT games and the kind of the dirty side of it.

Jeff Cohen:

Right now, it's a little bit more of like a speculative, driven mania, rather than

Jeff Cohen:

exploitative scam. I think a lot of people come into these things with eyes wide open, knowing

Jeff Cohen:

that, you know, it's a little bit of a tulip mania to some extent where people are buying in just to

Jeff Cohen:

get into the speculation, but I don't necessarily see that as exploits. Is it just to kind of, I

Jeff Cohen:

think, throw that out there. Yeah, sorry. Go ahead. No,

Paul Dawalibi:

I'm sure there are some small percentage that would qualify as scams or

Paul Dawalibi:

exploitative, right like that would meet that in the same way, like there are mobile games that are

Paul Dawalibi:

scams or exploitative. Right, like it exists. But I see your point that it's too broad of a brush.

Jeff Cohen:

I think the bigger question and I think this is part of the reason why Valve maybe

Jeff Cohen:

has some issues with it is just the the red flag around around gambling, you know, when you take

Jeff Cohen:

some of these game mechanics, and you have like a gotcha mechanic, or what really is kind of like a

Jeff Cohen:

random number generator, loot box, and then you have those items, and you're allowed to cash them

Jeff Cohen:

out. It seems to me that that that could definitely be construed as gambling. Like I know,

Jeff Cohen:

one of the defenses in the past for why people say loot boxes are not gambling is because they always

Jeff Cohen:

you know, the companies always defend themselves by saying, Well, you can't cash them out. So

Jeff Cohen:

there, there's not really anything of value that you can cash out. But in this case, if you are

Jeff Cohen:

able to cash these things out, which clearly that is one of the premises of blockchain gaming and

Jeff Cohen:

pay to earn high in my mind that very quickly could become regulated under gambling. So I think

Jeff Cohen:

there are reasons to kind of people to take a step back and see how this is all gonna play out as a

Jeff Cohen:

platform holder.

Paul Dawalibi:

Yeah, to me, and your your camp analogy was a good one, right? I do see two camps

Paul Dawalibi:

forming here. The you have not just epic, but I would argue like EA Ubisoft on one side who have

Paul Dawalibi:

come out and said, This is the future. We're putting all our efforts here. We're going to be

Paul Dawalibi:

blockchain gaming companies, we're going to make a bunch of these games, right? Like, fundamentally,

Paul Dawalibi:

they've taken a stance, that's very positive, no mention of exploitation, no mention of turning

Paul Dawalibi:

anything away. No, right. Like, and then you have here the head of gaming, essentially at Microsoft,

Paul Dawalibi:

pouring a bunch of cold water on that, right being in a very different camp, saying Hold on a second,

Paul Dawalibi:

we're not putting any of this on our store yet. Right? Like, does, you know Microsoft stance here

Paul Dawalibi:

potentially puts the brake brakes on this industry wide? Right, because they do carry a lot of

Paul Dawalibi:

weight, they do have a lot of influence. If you can't play these games on an Xbox, you know, that

Paul Dawalibi:

takes away a good size, good chunk of the market. The question is who's sort of going to be on the

Paul Dawalibi:

right side of history? Is the sort of the interesting question here, right? Like, is it you

Paul Dawalibi:

know, Spencer, and Microsoft and steam? Or is it Ubisoft and EA and, you know, epic.

Jeff Cohen:

It is interesting. And it's it kind of gets to the heart of one of the biggest I would

Jeff Cohen:

say problems with Blockchain gaming right now, in terms of reasons why adoption, maybe hasn't been

Jeff Cohen:

as hasn't picked up as much. And I think that is the friction of the user experience. I mean, the

Jeff Cohen:

onboarding process, like if you look at a game like xe infinity, to get into the game, it is a

Jeff Cohen:

challenging process, you have to download a wallet, you have to upload money into the wallet,

Jeff Cohen:

you have to then actually go purchase, I believe three axes, which the price clearly moves on

Jeff Cohen:

those, but it can be several $100. So when you look at that, versus downloading a free to play

Jeff Cohen:

game in the app store, there is a lot more barrier to entry literally, for players getting into your

Jeff Cohen:

game, which is obviously what you do not want as a studio or a publisher of a game, you want the

Jeff Cohen:

transition into your game to be as seamless as possible. So I do think the fact that some of

Jeff Cohen:

these app stores are and actually most of these blockchain games, you have to sideload or play on

Jeff Cohen:

like a browser. So the fact that you can't kind of go into the Apple App Store or Microsoft Store and

Jeff Cohen:

download these games and play them is actually a major hurdle. So I do think that is a problem.

Jeff Cohen:

However, it opens up an opportunity potentially for an aggregator of blockchain games to be sort

Jeff Cohen:

of like the App Store of blockchain games. I think there are a number of companies that are kind of

Jeff Cohen:

approaching that Tam.

Paul Dawalibi:

I agree. You know, it's, I personally think when someone as big as Microsoft,

Paul Dawalibi:

though, takes a wait and see approach this, this will have a bit of a calming effect, right. Like,

Paul Dawalibi:

I think, I think Phil Spencer knew that by coming out and saying something like this, there would be

Paul Dawalibi:

an industry wide reaction or consequence or effect. Like, I don't think his words are just

Paul Dawalibi:

going to go out into the void. And no one no one sort of changes what they're deciding they're

Paul Dawalibi:

going to do.

Jeff Cohen:

I think that's probably fair, but I feel like a lot of the bowl case and a lot of, you

Jeff Cohen:

know, I think the hype in the industry would probably the, their mindset would be well, of

Jeff Cohen:

course, that the dinosaur who controls the old school console market, like, yeah, like,

Jeff Cohen:

obviously, they're gonna say that this is bad. And it's classic Innovators Dilemma problem, where I

Jeff Cohen:

think some some people might take that to be sort of like, clearly he's gonna say that no muss, like

Jeff Cohen:

I'm more bullish, because he's saying that it proves how far ahead we are and how right we are

Jeff Cohen:

that he's gatekeeping us and saying, Hey, this is bad. I'm not saying that's my opinion. I'm just

Jeff Cohen:

saying like the people who are probably forward leaning into this industry might take that. Have

Jeff Cohen:

that opinion.

Paul Dawalibi:

That's fair. Let's move on. Let's talk about real estate. And the metaverse because

Paul Dawalibi:

there's been a bunch of stories, and I'll just I'll put some of them up here, but it's a few

Paul Dawalibi:

different stories, this one from Singularity hub.com. The headline is virtual land in the

Paul Dawalibi:

metaverse is selling for millions of dollars. And they quote tokens.com Corp, a Canadian investment

Paul Dawalibi:

firm that's focused on crypto assets, announced that it closed the largest Metaverse land

Paul Dawalibi:

acquisition in history through its subsidiary Metaverse group. The land acquisition was in the

Paul Dawalibi:

form of 116 segments, each equivalent to 52.5 square feet a total of about 6000 square feet of

Paul Dawalibi:

land. And they paid 2.4 million. This is in decentraland fashion street district. And

Paul Dawalibi:

according to them, they're going to use the space to facilitate fashion shows and commerce within

Paul Dawalibi:

the exploding digital fashion industry. I want to put this story by the way that this was a record

Paul Dawalibi:

for the most money spent on a plot of virtual land. Until literally so this was this was

Paul Dawalibi:

literally days apart. Another sale in the sandbox sold for 4.3 million. So record after record being

Paul Dawalibi:

set literally just in the last week, where this was a plot of land bought in the sandbox. It was

Paul Dawalibi:

bought from video game company Atari who owns who owned this plot of land. And the this, this this

Paul Dawalibi:

one at least didn't say what they're going to do with it. Other than what they sometimes do with

Paul Dawalibi:

it. It says the company sometimes decides to sit on vacant Metaverse property and wait for it to

Paul Dawalibi:

appreciate. Other times it will pay an architect to design virtual homes or malls, and then hire a

Paul Dawalibi:

game developer to build them. So no idea what's going to happen with this 4.3 million plot in the

Paul Dawalibi:

sandbox, but very clear strategy with the plot here in decentraland. Now I Sorry for the long

Paul Dawalibi:

sort of intro here. But I want to put this against an article from The Wall Street Journal, which

Paul Dawalibi:

said, brands no longer see Metaverse like worlds as abstract gimmicks. Chipotle vans and Verizon

Paul Dawalibi:

turned to Roblox fortnight in an effort to build brand recognition. So you have brands engaging in

Paul Dawalibi:

sort of these Metaverse, kind of Metaverse esque platforms. What do you make Jeff of these land

Paul Dawalibi:

acquisitions? First of all, in general, but second of all, I what I thought was most interesting to

Paul Dawalibi:

me at least was that the the two point 4,000,001 There was a clear like plan what to do with it. It

Paul Dawalibi:

wasn't like buying an NF. T hoping like relying on greater fool theory here that someone else was

Paul Dawalibi:

gonna pay a lot more for it. Like there seems to be a clearer vision around what they wanted to do

Paul Dawalibi:

with that. I'm curious if that sways your thinking whether you liked it before you didn't like it and

Paul Dawalibi:

now you know, it's one or the other.

Jeff Cohen:

There's a lot to unpack there. You have virtual fashion I think we could talk about

Jeff Cohen:

Yeah, the land sales which is super interesting. And then the brand's land sales Yeah, I think the

Jeff Cohen:

land the land sales we start with, you know, for me that the numbers are just seem a bit out of

Jeff Cohen:

whack. And it's the concept of buying virtual land actually makes make some sense to me, the problem

Jeff Cohen:

that I have is, is just, it seems to me that these platforms are selling this land like, it's a

Jeff Cohen:

little bit of it, if you build it, they will come strategy like I don't. And I, this could be me

Jeff Cohen:

being, you know, ignorant, I'm just not sure how many users they these platforms have, where you

Jeff Cohen:

could justify saying, Hey, I'm going to spend 4.2 million for this plot of land, and I'm going to

Jeff Cohen:

build something on because I just don't know if they're that many people in these universes

Jeff Cohen:

interacting and kind of actually spending time there. Like, I would be a lot more bullish if this

Jeff Cohen:

was something, you know, a brand building within Roblox or something where I knew there were sort

Jeff Cohen:

of users on the platform. Whereas I see some of these land sales and these other platforms like

Jeff Cohen:

the central land, and the other one where it feels to me like a little bit more of speculation. Even

Jeff Cohen:

though the one obviously, the one clearly was because they literally said they might not do

Jeff Cohen:

anything with it, they might just wait for the value to appreciate that is like literally the

Jeff Cohen:

definition sort of charitably investment, but also, you know, speculation if you're buying

Jeff Cohen:

something with the only hope that the value is going to go up. So yeah, that's that's my initial

Jeff Cohen:

thought on the lenses. I just don't know, the one, I don't know how many people are literally, you

Jeff Cohen:

know, populating these worlds, whether it's enough to have an economic impact, where you're going to

Jeff Cohen:

make your value back. The other. I'm just not sure how much scarcity there is where it's like, what

Jeff Cohen:

happens when the next platform comes up and start selling virtual land? Like, is there really enough

Jeff Cohen:

scarcity? In everything in digital goods? Kind of the value comes from scarcity and then with real

Jeff Cohen:

estate location? So location? I'm not sure on because I don't know if people are actually in

Jeff Cohen:

these worlds. So to use that metaphor, are they buying in the right location? And then scarcity?

Jeff Cohen:

Well, I'm not sure that this is scarce, because you could just have more land or someone could

Jeff Cohen:

build a new platform that quote sells different land. So I, I wouldn't be super bullish on on

Jeff Cohen:

this.

Paul Dawalibi:

So let's address those two points, because I think it's an interesting way of

Paul Dawalibi:

breaking it down, right? Like, the value in the land is partly dependent on location. And what

Paul Dawalibi:

location really means in this context is how many eyeballs exist on this platform? Right? How many

Paul Dawalibi:

people are using decentraland versus Roblox versus fortnight on a daily basis? Now decentral lands

Paul Dawalibi:

interesting that the number the last number I saw was from March of this year, where they hit 10,000

Paul Dawalibi:

daily active users, which is relatively small, right? Like that's not a compared to Roblox or

Paul Dawalibi:

fortnight, that's a relatively small number. Now I can we can assume, because they went from, you

Paul Dawalibi:

know, January to March, they went from 1500 to 10,000. So we can assume, probably pretty exciting

Paul Dawalibi:

growth. You know, let's say they're at 100,000.

Jeff Cohen:

A million. I'm not sure. Yeah. Right. That's

Paul Dawalibi:

still one order of magnitude smaller than a fortnight or Roblox so it's a

Paul Dawalibi:

relatively small platform. But clearly, they're making a bet that the audience there is of greater

Paul Dawalibi:

value. They're early adopters, they maybe have money to spend, right, they're, they're

Paul Dawalibi:

knowledgeable about the space like to me decentraland is more niche than a Roblox or a

Paul Dawalibi:

fortnight and so you're going to have a different set of eyeballs there. And so I could sort of buy

Paul Dawalibi:

that strategy, right, like have that pitch may go to if you're trying to convince Gucci to do their,

Paul Dawalibi:

the, you know, their Metaverse fashion show on in decentraland versus a Roblox. Like, I buy that.

Paul Dawalibi:

And I would, I might think I could make the argument that decentral ends the better place for

Paul Dawalibi:

that than a Roblox. But this it's the second point that I think is also interesting, which is that of

Paul Dawalibi:

scarcity. I know decentraland I can't remember the exact number I was I was actually looking for it.

Jeff Cohen:

It's like 5000 or something. I may have made that up, but they limit the number

Paul Dawalibi:

are limited. There you go. It's 90,601 parcels of land. I was pretty close. Okay,

Paul Dawalibi:

and so there, there's an artificial limit to create scarcity. To your point 2.4 million for

Paul Dawalibi:

6000 square feet is like we're talking, you know, almost like New York real estate kind of prices.

Paul Dawalibi:

Yeah. In a world where a big part of the problem is you to your point, it's not so much that

Paul Dawalibi:

decentraland could go create more because they may they may keep their word and never make more than

Paul Dawalibi:

90,000 parcels available which, unlike real world land, they could go back on that right and decide

Paul Dawalibi:

they want to release 10,000 more parcels but it's you and I could start a virtual sort of Metaverse

Paul Dawalibi:

real estate play tomorrow, and offer 100,000 parcels of land. And all of a sudden, the

Paul Dawalibi:

decentraland parcels are in some ways less scarce, right, even though it's a different platform.

Paul Dawalibi:

Right. And so the big question is, is the 2.4 million worth it here? Right? That's, that's the

Paul Dawalibi:

business question I come back to. What's your view on that? Right. But if breaking it down from a

Paul Dawalibi:

scarcity and location standpoint,

Jeff Cohen:

from a pure speculation standpoint, I mean, it's, it's possible. The question that I

Jeff Cohen:

have is, what are they going to build on the land? And then, you know, I think they talked a little

Jeff Cohen:

bit about that. And then what tools are, do these platforms have? Do these games have to allow

Jeff Cohen:

people to build on the land? Right? Can they build anything? Can they build a game experience within

Jeff Cohen:

the game? And then it becomes a question of, again, to use the real estate analogy, like, a

Jeff Cohen:

big, very important part of real estate value is what's around you. Do you have a school next to

Jeff Cohen:

you? Do you have a sewer pit next to you? Or do you have a nice family and a beautiful house?

Jeff Cohen:

Right, like, whatever that is?

Paul Dawalibi:

I don't know if that's as much of a consideration though, because travel in virtual

Paul Dawalibi:

worlds is instant. Right? Like there is the reason

Jeff Cohen:

why I say that is what happens if the next you know, you're assuming that everyone else

Jeff Cohen:

in the rest of the decentraland land plots are going to build interesting experiences where

Jeff Cohen:

someone wants to come spend time, I think you have to assume that comes from All right, yeah. And the

Jeff Cohen:

only way the user base grows is if other people buy land and create interesting experiences that

Jeff Cohen:

are different than yours slash valuable to people. Right. So I think you're taking a pretty big risk

Jeff Cohen:

that other people are going to kind of buy in and build things.

Paul Dawalibi:

Can I make the short term argument here though, that I think this is a huge bargain.

Paul Dawalibi:

And that is, you were in an in a period of the industry where everyone's experimenting, right?

Paul Dawalibi:

And especially the brands like we saw that other story that I brought up, right? They talked about

Paul Dawalibi:

Chipotle vans, Verizon, like all these brands are experimenting building experiences inside of

Paul Dawalibi:

Roblox fortnight, decentraland and others, right. I could see a world where, you know, if they build

Paul Dawalibi:

something cool in decentraland, from a fashion standpoint, then being able to get, you know,

Paul Dawalibi:

marketing dollars from Gucci, and Louie Vito, and Chanel, and whoever else, right? A ton of luxury

Paul Dawalibi:

brands, who all want to have maybe a retail presence in a virtual world want to have a

Paul Dawalibi:

experience experiential presence, who want to have do their fashion shows their like, it's not hard

Paul Dawalibi:

to sort of back out and say, How many, how many of those kinds of luxury brands does this company

Paul Dawalibi:

need to sign up to, to pay it to have paid off sort of their $2.4 million purchase? I think the

Paul Dawalibi:

ROI here is very high and very fast. Right? To me, they probably recoup these costs in a year or two.

Jeff Cohen:

But but here's the question, why. And so I see I see

Paul Dawalibi:

when they own the land free and they own the land like it's paid for.

Jeff Cohen:

I see what you're saying, but as a brand, why would you do that versus build your own

Jeff Cohen:

experience? Unless Unless that they are going to bring more people in? Because it's like, it's

Jeff Cohen:

gonna be very cheap for someone to go build the robots experience of Chipotle or Nike, which we've

Jeff Cohen:

we've seen both those do. Yeah. I'm gonna pay rent effectively, you don't have to pay rent if you

Jeff Cohen:

don't want to, if I do it with, you know, the decentraland folks, I have to then pay rent. Why

Jeff Cohen:

would you do

Paul Dawalibi:

Roblox you have to pay rent to write you sort of, if you want it to be sort of

Paul Dawalibi:

featured in Roblox like, you could just put up an experience that you build or hire some programmers

Paul Dawalibi:

to build. I think here what they're betting on is the eyeballs that exist on decentraland today,

Paul Dawalibi:

they're betting on this idea that they're first to market with this sort of Fashion District concept.

Paul Dawalibi:

Right there's a lot of like sexy kind of spin around this that I think makes it appealing to

Paul Dawalibi:

those luxury brands and it's not Hey, Roblox, you know, is the average age really like 14 like the

Paul Dawalibi:

they sort of don't have that stigma is even though it's untrue for Roblox, they don't have that

Paul Dawalibi:

stigma. And this feels more premium. So I see it as just this deal in isolation. I think is a home

Paul Dawalibi:

run. It may sound like a big, like a big price tag but I actually think the ROI on this is going to

Paul Dawalibi:

be very high.

Jeff Cohen:

Do you think so? In your view this this deal makes money not not like hey, they sell

Jeff Cohen:

it for 8 million at some point because someone else decides

Paul Dawalibi:

has this will but they also make money before that x

Jeff Cohen:

that you think that they will be like Jen Writing significant? Yeah, I think so. Yeah.

Jeff Cohen:

I've been using cash flow.

Paul Dawalibi:

Yeah, I do. Interesting. Now, I don't know if they do for the next 10 years. But I

Paul Dawalibi:

definitely think today because I, I think part of it is this the lounge, the landscape gets more

Paul Dawalibi:

crowded as more and more people sort of integrate themselves into these meta verses. And so you just

Paul Dawalibi:

get more players, more platforms, etc. But the, if the question is short term is this is success, and

Paul Dawalibi:

will it generate revenue and be sort of net positive to the buyer that I think definitely,

Paul Dawalibi:

yes.

Jeff Cohen:

So I think if there's one thing, it seems to me, what you're saying is like, there's a

Jeff Cohen:

knob, there's a there's the benefit of novelty here. And I think this is something correct. Call

Paul Dawalibi:

it like, first, correct me if I'm wrong, like,

Jeff Cohen:

he kind of has a negativity kind of thing. The question I have, and this kind of ties

Jeff Cohen:

into our next few stories are the one you already preface about brands. It just strikes me and we've

Jeff Cohen:

always been very positive about brands, you know, creating robots experiences and stuff like that.

Jeff Cohen:

And I do think, right now, because of the first mover because of the novelty, it is a good

Jeff Cohen:

strategy. But I just wonder how far it seems like so far, the metaverse is currently just a digital

Jeff Cohen:

shopping mall. And it's like to me I, I sort of like see this and I'm like somewhat disappointed

Jeff Cohen:

where I'm like, is this really kind of the best we can do? So far? We're essentially we're all

Jeff Cohen:

getting excited about going to a digital shopping mall, which is effectively like slightly better

Jeff Cohen:

than just going on Amazon like ECommerce. Like, effectively, you're just shopping. But in a

Jeff Cohen:

digital world like I don't know. And I'm, I'm very onboard. I'd love that brands are getting into the

Jeff Cohen:

metaverse, but it scares me a little bit that like, it seems like they're just creating what you

Jeff Cohen:

just described is literally just a digital store, like I'm a landowner, and I'm going to lease my

Jeff Cohen:

store to a retailer who's going to sell goods. Like that is not that exciting to me.

Paul Dawalibi:

I mean, it's a metaphor. This is why we call it an alternate universe essentially,

Paul Dawalibi:

right? It's not a reinvention of the wheel, it's a digitized version of what we already do. I just

Paul Dawalibi:

want to sort of before we get into the brand side here, I just want to sort of wrap up this idea of

Paul Dawalibi:

the virtual these virtual land stories from this week. To me, there was a clear distinction between

Paul Dawalibi:

these two, right, the two point 4,000,001 in decentraland had like a clear strategy and purpose

Paul Dawalibi:

around it. I think where I'm more skeptical, and maybe a little more negative is the $4.3 million

Paul Dawalibi:

purchase in the sandbox with no strategy, right, where the I think the the underlying message there

Paul Dawalibi:

is, we're hoping someone's gonna pay us 8 million for it, you know, two years from now. And that,

Paul Dawalibi:

that that becomes sort of speculation, right, that that's this is this is like betting on nothing

Paul Dawalibi:

that's tangible or concrete in any way. I don't know. Do you make that difference between the

Paul Dawalibi:

200 100%?

Jeff Cohen:

I think diving, you You hit the nail on the head where at least one is saying I don't

Jeff Cohen:

know that that trend is gonna work. You seem pretty bullish on it. I would say. I'm a little

Jeff Cohen:

bit less bullish on it, but I do agree that at least they have come in with a plan that doesn't.

Jeff Cohen:

And to be fair, the other one probably does too. It just didn't mention in the article. But there

Jeff Cohen:

is definitely that distinction where one seems to be speculating whereas the other is building and

Jeff Cohen:

investing.

Paul Dawalibi:

Well, let's let's bring up this story, which is again in the same vein, and it's

Paul Dawalibi:

from CNBC, Nike teams up with Roblox to create a virtual world called Nike land. And again, I'm

Paul Dawalibi:

sort of stretch this is a perfect sort of continuation from the previous conversation. Do

Paul Dawalibi:

you like this better than buying land and decentraland and trying to lure brands to this

Paul Dawalibi:

virtual fashion district like would you rather see brands be activating directly in Roblox or

Paul Dawalibi:

fortnight and here are just some of the bullet points it says, Nike is teaming up to create a

Paul Dawalibi:

virtual world called Nike land and Roblox users will be able to dress up their advert avatars in

Paul Dawalibi:

Nike branded sneakers and apparel. It'll be free for now, but could be a place to try out new

Paul Dawalibi:

products and gauge consumers interests.

Jeff Cohen:

Yeah, so I am a lot more bullish on this. And I think, you know, kudos to Nike for for

Jeff Cohen:

taking a step to do this within robots. I'm more bullish on this because it's, you know, it's not

Jeff Cohen:

the if you build it, they will come strategy. It's the people are there and we're sort of giving them

Jeff Cohen:

what they want a new experience within a platform where they already are. I will be and maybe you

Jeff Cohen:

can already do this, but I will be a lot more boyish. When you can go into this world, buy a

Jeff Cohen:

digital pair of Nikes and then run out into a new Roblox experience and have your digital avatar

Jeff Cohen:

wearing those shoes. I'm not sure in the article whether it said whether that's the case or not. I

Jeff Cohen:

know they said you could put on fun too. The Digital shoes. But I think that I would be a lot

Jeff Cohen:

more excited about, you know, then then just having people in there playing around for Nike

Jeff Cohen:

that that firt. You know, the second piece that is clearly good branding, just having brand

Jeff Cohen:

awareness. But I think as we move forward in the metaverse and kind of big themes that I think I

Jeff Cohen:

get excited about, and we should all get excited about, you know, is is sort of that direct avatar

Jeff Cohen:

kind of consumption where it's like, Hey, you're selling a digital good to someone's avatar, and

Jeff Cohen:

you're not tying it to anything in the physical world. Like to me Nike is trying to tie this to

Jeff Cohen:

sales in the physical world where it's okay a kid goes into this Roblox experience, sees Nike gets

Jeff Cohen:

excited about Sunday, Nike, and then they tell their mom next time we're at the mall, oh, there's

Jeff Cohen:

the Nike store, what's go go buy something there. That's that's all well, and good. I think that

Jeff Cohen:

will actually that strategy will work for Nike, what I think would push the, you know, the

Jeff Cohen:

metaverse forward is the first thing I mentioned, which would sort of be someone comes in, they sees

Jeff Cohen:

see a really cool pair of digital shoes and say, I want to buy that pair of digital shoes. So I can

Jeff Cohen:

wear them in this Roblox in the metaverse not so I can go buy them in the real world. And then what

Jeff Cohen:

would be really interesting, you know, this is kind of where all this is heading is that you are

Jeff Cohen:

buying those. And then it's an asset that you own because it's an NFT. And it's on the blockchain

Jeff Cohen:

and then you can sell it. That's clearly where I think all this is heading. I don't know how

Jeff Cohen:

quickly Nike wants to get it there. Or even if Roblox has interest in having NF T's within their

Jeff Cohen:

platform, but I think it's it's very clear that that's that's where this this game is heading.

Paul Dawalibi:

Yeah, I'm with you on the vision 100%. I'll take it one step further and add, you

Paul Dawalibi:

know, at some point, we need the the metaverse equivalent of like standardized electronic health

Paul Dawalibi:

records, right where your avatar is stored in some standardized way that's portable between meta

Paul Dawalibi:

versus between platforms, etc. Right. Like, again, I've talked about I talked about this in episode

Paul Dawalibi:

one, like standards and sort of interoperability from a tech perspective are critical to make some

Paul Dawalibi:

of these visions and business models work. I think from the Nike story, what I get is, sort of backs

Paul Dawalibi:

up the point I made on why I like the decentraland land purchase is brands are just in an

Paul Dawalibi:

experimentation phase, right? This said very specifically, they they're they want to gauge

Paul Dawalibi:

consumer interests on new products like they, they see this as like a virtual focus group. And like a

Paul Dawalibi:

way to do cheaper focus groups maybe or right, they're thinking in very conventional terms, not

Paul Dawalibi:

seeing maybe all of the options that pure virtual pure digital allows them. And I would say this is

Paul Dawalibi:

a theme we see in the gaming and esports world, right? Like people love to be tethered by

Paul Dawalibi:

traditional sports kind of you know, the way traditional sports usually does things, when in

Paul Dawalibi:

reality esports being a purely digital product doesn't need to be tethered in that way. You know,

Paul Dawalibi:

I think I see a lot of brands entering the metaverse. That's how all these articles start,

Paul Dawalibi:

right? Like Nike enters the metaverse by just adopting sort of things they're doing in the real

Paul Dawalibi:

world and transporting it to the virtual world and doing it same same, you know, one to one. And

Paul Dawalibi:

that's okay, right? To me, there's nothing wrong with that being step one. I just don't agree with

Paul Dawalibi:

you necessarily that this is better than the decentraland one, right? Like, from a business

Paul Dawalibi:

perspective. It doesn't really matter to me like if you're if, if you believe your audience as a

Paul Dawalibi:

brand is in Roblox, then go and activate on Roblox directly if you believe that the central lands

Paul Dawalibi:

where your audiences like go activate their through, you know, someone who may be purchased

Paul Dawalibi:

land and can can build it for you or at the end of the day. I think it's go where your consumer is as

Paul Dawalibi:

a brand and not don't get too caught up into this Metaverse that Metaverse direct, not direct,

Paul Dawalibi:

whatever the you know, whatever the case may be.

Jeff Cohen:

I think you brought up a good a good point there. That kind of got me thinking just how

Jeff Cohen:

early we are in this space. And brands really are sort of, it's almost like the analogy. They're in

Jeff Cohen:

the dark room. And they're kind of fumbling around looking for the light switch that similar to when

Jeff Cohen:

when sort of social media started. I think a lot of brands you saw they put up a Facebook page, and

Jeff Cohen:

it just had some information about them and had their webpage, whatnot. And you think about what

Jeff Cohen:

that has gone from that to what you know brands do on social media now. And it really it really is

Jeff Cohen:

just night and day. You're going to see that exact same transformation here within the metaverse and

Jeff Cohen:

right now I'm sure most of this is all outsourced to agencies stuff like that. Over time. I you

Jeff Cohen:

know, you're gonna see every single company that has a direct to consumer and a marketing business.

Jeff Cohen:

They're gonna have to hire game developers, they're gonna have to hire people who understand

Jeff Cohen:

NFT is blockchain the metaverse and you are starting to see that a little bit. I believe I saw

Jeff Cohen:

somewhere Nike has like a chief Metaverse, Officer or some director of Metaverse, which kudos? A lot.

Jeff Cohen:

Yeah, I mean, it's it's some somewhat mind blowing, but at the same time it also, if you

Jeff Cohen:

believe in this future, you're going to need that person. Same way. You know, 1015 years ago, it

Jeff Cohen:

probably would have been ridiculous if someone said, Oh, well, you're the VP of social media at

Jeff Cohen:

some at a company.

Paul Dawalibi:

E commerce before that. Yeah, I've seen a single

Jeff Cohen:

company has someone who runs their social media be ridiculous. If you didn't, it'll

Jeff Cohen:

be the same thing with the metaverse.

Paul Dawalibi:

Let's fit. Let's finish, Jeff, on this last story here, which it's always

Paul Dawalibi:

interesting to cover these kinds of things, because in some ways they anchor a lot of the

Paul Dawalibi:

early stage piece of the industry, right that they help foster in what we call the metaverse industry

Paul Dawalibi:

from the ground up, and I think they're really important stories to cover. And this one's the

Paul Dawalibi:

headline here from VentureBeat play ventures launches play Future Fund, with $75 million in

Paul Dawalibi:

commitments. So play ventures revealed that there they have a new fund for blockchain gaming

Paul Dawalibi:

investments. The fund has made three commitments already it's focused on the intersection of web

Paul Dawalibi:

three, aka Metaverse and gaming. They're fully subscribed with $75 million. And they say we

Paul Dawalibi:

believe the future of Metaverse trust lives on blockchains whether it's payments, assets,

Paul Dawalibi:

identity, or human coordination, the companies we invest in will have crypto native solutions. It's

Paul Dawalibi:

worth mentioning that the fund earlier this year raised 135 million as part of a second fund to

Paul Dawalibi:

invest in game startups. And they've invested in a dozen dozens of game companies since 2018. So play

Paul Dawalibi:

ventures This is a fund that has invested in game developers, and now has raised an entirely new

Paul Dawalibi:

fund an entirely separate vehicle focused on Metaverse and, and gaming and the intersection of

Paul Dawalibi:

those two things. What is your general thought on? VC funds, venture capital funds that are focused

Paul Dawalibi:

strictly on this area?

Jeff Cohen:

Ah, I mean, I don't I think it makes the right size

Paul Dawalibi:

soon is it? Is it perfect timing is it

Jeff Cohen:

almost to be honest, I'm surprised it's not bigger, just because of how massive and I

Jeff Cohen:

know these funds take a while, you know, they didn't spin this up three weeks ago, and Facebook

Jeff Cohen:

changed his name or whatever that was. So these things take time. But I think we're gonna see

Jeff Cohen:

significantly even larger funds, and we have seen several bigger ones, you know, in the past couple

Jeff Cohen:

months, because it's just such a massive opportunity. And the whitespace is there. And I

Jeff Cohen:

think for LPS, you get the opportunity to invest kind of in pure plays in this space. I do think,

Jeff Cohen:

you know, this, we're gonna see a lot we're gonna be covering a ton more of these stories, I would

Jeff Cohen:

imagine.

Paul Dawalibi:

No question. And I, I, I would guess we see a dozen funds like this, in the next,

Paul Dawalibi:

you know, between now and sort of the end of first quarter of next year, like this kind of sort of

Paul Dawalibi:

pace. Size of the fund. You know, this is one of those things where it's like, how much how much of

Paul Dawalibi:

the how many of the opportunities that exist out there are really good and investable kind of

Paul Dawalibi:

venture scale businesses. That's always a question mark, for me when you're early in a in an industry

Paul Dawalibi:

right, which we are mad at that's, you know, meta versus a my mind that 1020 year play, the outcome

Paul Dawalibi:

is guaranteed, but you're still talking about 1020 years where, you know, the industry will mature

Paul Dawalibi:

and grow. Is it well suited for ventures, you know, type of investing

Jeff Cohen:

the one the one thing I would say that is that is interesting when you have a lot of

Jeff Cohen:

these blockchain games, just the nature of the way the game works in terms of the having tokens, a

Jeff Cohen:

lot of times the you see very quickly, these tokens start to have value. And because of the

Jeff Cohen:

money that the tokens that the company has in Treasury, these companies can already have quite a

Jeff Cohen:

sizable war chest, that doesn't mean they can actually turn that into cash or use it for

Jeff Cohen:

operating expenses. But very quickly, if you start to have a token that goes kind of get some

Jeff Cohen:

traction, your company can selectively start to put those some of those into the ecosystem and

Jeff Cohen:

really raised cash very effectively, essentially, from their customers. So you know, it's not that

Jeff Cohen:

clear like that a lot of these crypto blockchain games are going to need to raise the amount of

Jeff Cohen:

funds that maybe a mobile gaming company would have had to, you know, because of UA costs and

Jeff Cohen:

development costs. I think it's a little bit more of a capital efficient. Just that's the first

Jeff Cohen:

point, if you think about it that way.

Paul Dawalibi:

Yeah, I think for me, it's a bit of a balance in my head where I'm sort of afraid for

Paul Dawalibi:

them, just from a stage of the industry standpoint, right VCs rely on billion dollar exits

Paul Dawalibi:

to return their funds and, you know, achieve a significant kind of rate of return for their

Paul Dawalibi:

investors. But I'm I balanced that with where I kind of like this story because they have years of

Paul Dawalibi:

investing in game developers under their belt. And I think that helps, right? Like, fundamentally, we

Paul Dawalibi:

can call it blockchain based games, we can call them NFT games, we can call them. Fundamentally, a

Paul Dawalibi:

lot of these investments are still games, right? There are some infrastructure plays and things

Paul Dawalibi:

like that, that's fine. But I think the game investing experience investing in real actual

Paul Dawalibi:

games, game developers is a is an advantage here, and probably why they were able, you know, to

Paul Dawalibi:

raise a fund earlier in the year and now another fund, sort of piggybacking off of that. And so

Paul Dawalibi:

this one, I think, is an interesting one to watch. I'm, I'm a bit a little bit sort of more

Paul Dawalibi:

optimistic here than some of the others I've seen, I think. And, you know, I, I would be curious to

Paul Dawalibi:

see how the exit picture evolves over the next two or three years, that that to me is the crux of the

Paul Dawalibi:

success of these funds.

Jeff Cohen:

Absolutely. And I think you hit on a theme that I'm sure we'll we'll come back to a

Jeff Cohen:

lot. You know, which, which is really, in order for these blockchain games to really take off and

Jeff Cohen:

gain scale and massive user bases. The games fundamentally have to be entertainment

Jeff Cohen:

experiences, and be fun. And I think what we've seen early on in the space, and maybe just because

Jeff Cohen:

of the complexity of blockchain and kind of the the people that it brings in as early adopters,

Jeff Cohen:

you've seen a lot of the early blockchain gaming companies and blockchain gaming games really be, I

Jeff Cohen:

would say, more basic experiences. And this is some something that I think we saw with mobile

Jeff Cohen:

gaming and free to play gaming very early in the beginning. So this will evolve. But I think the

Jeff Cohen:

teams that you want to bet on And conversely, the VCs that you would want to bet on as an LP are the

Jeff Cohen:

ones that have experience understanding how to build great fun engaging games, because I think at

Jeff Cohen:

the core of it, if your game is not fun and engaging, eventually all played, earn becomes a

Jeff Cohen:

job. And that will lead to a massive upswing and then a massive downswing. Because you're

Jeff Cohen:

fundamentally, you're you are fundamentally, you need more people to be coming into the game in

Jeff Cohen:

order for your tokens to continue to increase value. Just if you think about it, it stands to

Jeff Cohen:

reason. Not everyone can come in and make money right? That is the definition of a Ponzi scheme,

Jeff Cohen:

there needs to ultimately be some people that are paying coming to the game and just paying money

Jeff Cohen:

because it's entertaining. Otherwise, in order for you to make money, someone else has to come in and

Jeff Cohen:

spend more money. So I think that is something we'll come back to as a team Aton about played

Jeff Cohen:

around and blockchain gaming, but it's it's a good point in this context to

Paul Dawalibi:

break out. I love ending on that thought, Jeff, for our listeners or viewers. First

Paul Dawalibi:

of all, thank you guys, if you've tuned into the first couple of episodes here, we'd love your

Paul Dawalibi:

feedback. If you're loving the format, loving the content, let us know if you if you have

Paul Dawalibi:

suggestions, we're totally open to it. Make sure to subscribe, like on YouTube on Apple podcasts

Paul Dawalibi:

wherever spread the word, send it to your friends. Tell everyone you know who's interested in the

Paul Dawalibi:

metaverse and what's going on here. Even if they are not that knowledgeable. This is a great way I

Paul Dawalibi:

think for people to get embedded in the space and learn a lot. Jeff, thank you as always. And we

Paul Dawalibi:

will see you guys next week. Thanks for watching this episode of meta business. Make sure to

Paul Dawalibi:

subscribe to the podcast on Apple podcast, Spotify, Google Play YouTube or wherever you get

Paul Dawalibi:

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Paul Dawalibi:

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About the Podcast

META Business
From the metaverse to the boardroom...
Meta Business tackles the most important Metaverse industry news. Business experts dissect and discuss all of the hottest topics and happenings, from a unique C-suite perspective.

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Paul Dawalibi