The fashion world has taken notice of the metaverse, with the launch of the first ever metaverse Fashion Week in 2022. High-end brands such as Dolce & Gabbana have seized the opportunity to advertise in this new digital space.
However, advertising in the metaverse is not the same as advertising in other media, and it raises legal issues that brands need to be aware of.
Metaverse ad campaigns can take various forms, and they are expected to evolve even further. Some brands have chosen hybrid events, such as Gucci Garden, which is an interactive virtual exhibit that mimics a physical experience in major cities.
Other brands, such as Tommy Hilfiger, have created metaverse pop-ups where users can purchase clothing NFTs and redeem them for physical items.
Balenciaga has created wearable NFTs for avatars, who can model pieces and be featured on billboards in Fortnite.
One of the first steps in understanding advertising rules in the metaverse is figuring out which countries' regulations apply. The decentralized nature of the metaverse may make it difficult to determine this.
However, existing rules on online advertising, such as the Advertising Standards Authority's 2021 Online Remit Guidance in the UK, can be relevant. Paid-for ads that target UK consumers are within the ASA's scope.
Language and currency are used to establish targeting, but in a metaverse scenario where products may be priced in crypto, it may be more challenging to determine targeting. Non-paid-for ads fall under the ASA's scope where the advertiser is based in the UK.
Regulators are likely to need to collaborate with their counterparts in other jurisdictions, such as through the European Advertising Standards Alliance, to address metaverse ads due to their cross-border nature.
Existing rules apply to advertising in the metaverse, but the new context may change how these apply and their significance.
Brands should be aware of key risk areas, including ensuring advertising is recognizable as advertising, as the immersive nature of the metaverse increases the risk of consumers not recognizing what is advertising and what is not.
Content displayed in ad spaces that replicate the real world, such as billboards, is less likely to be mistaken for other content.
However, when NFTs, clothing, advergames, and avatars are presented in the metaverse, it may be unclear what is advertising and what is not, with text-based labels potentially harder to incorporate. Influencer advertising has been a focus for regulators for some time, and avatar influencers can expect no exception.
Advertisements that claim to replicate how a real-life article of clothing would fit or look, such as displayed on avatars, could give rise to claims of being misleading.
Brands deploying gamified advertising should consider the rules on in-game purchasing, particularly the need for clarity on terms and to avoid unduly pressuring users.
Brands that release NFTs should be aware that they may be treated as cryptoassets, so additional obligations apply, such as making investment risks clear and not taking advantage of consumers' inexperience.
Overall, while the issues posed by advertising in the metaverse are not new, the medium certainly creates heightened risks in some areas, particularly given its immersive nature, appeal to young people, and connections with NFTs and gaming.
Therefore, regulators are likely to pay attention to this new space for the foreseeable future.