VerseProp founder and CEO Joel Coren and founding partner and COO William Polisano join Ben to talk about digital real estate’s gaming roots, where the value of virtual properties comes from, and why they think digital real estate is on the cusp of a supercycle.
VerseProp is a digital real estate platform where users can buy, sell, and rent virtual properties.
New to the concept of digital real estate? The Motley Fool has a useful primer for you.
If you need to brush up on your investment terms, a supercycle is “a sustained period of expansion, usually driven by robust growth in demand for products and services.”
Joel is on LinkedIn.
Will is on LinkedIn.
Follow VerseProp on Twitter, where the team welcomes questions.
Today’s Lifeboat badge is awarded to Omar, for helping 44,000 people and counting with their answer to Event handlers on Message box buttons.
Ben Popper So for the skeptics out there, walk us through. In some of the bigger places, I've seen stories about eye-popping sales for digital parcels that go for millions, but I myself have never met anyone who owns virtual digital real estate. And while I'm familiar with people who might spend a lot of money on their World of Warcraft skin or something in Fortnite, because like you said, this is where they spend many hours a day and have made great friends and have a guild and for them it's social and they've invested in that world, it makes sense that they would want to own a digital artifact from it. Is this similar where people who buy digital real estate then go hang out in a town square and talk? Or what would give it the value? In gaming I understand what gives it the value. It's the people's passion, the amount of time they spend there, the social connections they make, but for a piece of digital real estate, beyond maybe it's scarcity, what gives it value?
Joel Coren It's a great question and Will and I talk about this all the time, not just with people interested in our company, but our own investors. And the analogy that we use is the market that we’ve just kind of been in or may be in is similar to the dotcom bubble of the ‘90s.
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BP Hello, everybody. Welcome back to the Stack Overflow Podcast, a place to talk all things software and technology. I am your host, Ben Popper, Director of Content here at Stack Overflow. Today we have a really interesting episode about digital real estate. So we've talked on the show a bunch about the metaverse, we've talked about NFTs, and we've talked about how people really attach a high value to certain digital items, sometimes in games, sometimes in other areas. Digital real estate is not something that we've gotten too deep on, but today we're lucky enough to have two folks who are working in the industry. Gentlemen, please introduce yourself to the audience, let them know who you are and what it is you're up to.
JC Sure. I'm Joel Coren. I'm the CEO and founder of VerseProp, which is a digital real estate platform. My background is traditional real estate. I’ve been in the industry for 20+ years. And we as a company believe that we're the start of a supercycle and something we're trying to capitalize on.
Will Polisano I’m Will, I'm the COO and a founding partner of VerseProp, also from, I guess what you'd call a traditional real estate background on the financing and development side. I spent 10 years working on some major mixed use real estate developments here in London. I’ve been working with Joel almost since the kind of beginning, since VerseProp’s very early days. And we actually used to work together in the real world as well back in 2015, which is how we know each other.
BP So for folks who are listening, give us a little bit of a history here. I mean, I know we could go back in time to The Sims and to other sort of online worlds that existed in the ‘90’s and the 2000’s. But more recently, what is sort of the short history of digital real estate? And I know a lot of this connects to places like Decentraland and the blockchain and folks who want to own things sort of in that metaverse or on chain or as part of kind of their Web3 identity. So can you give us a short history of sort of how this kicked off? And then I guess you mentioned a supercycle, so where you think it's going.
JC I mean, you are absolutely right, Ben. It sort of was born out of a gaming community, and as technology has evolved, and blockchain specifically, I think it's opened up the sector to a more mainstream audience, giving people the ability to own digital assets within particular metaverses as they’re known now. We very much see them moving more towards a kind of professional business environment as well. I think we are looking at the past but we're also looking at the future, and we see that future evolving into what we believe will be a standalone asset class and what we believe will be attached through its digital ownership to real estate assets and/or companies with real estate portfolios. So that's our thesis.
WP I was just going to say, as you touched on this, the idea of immersive communities or immersive worlds is not a new one by any means. We've all long since enjoyed socializing and playing in these online spaces. I think what is new over the last few years, as Joel alluded to, is the commercialization or monetization of these spaces beyond just the social and leisure use, which is why it's now evolved to a position where most of the world's major financial, insurance, retail, art names are in the space in one way or another to capitalize on that.
BP So for the skeptics out there, walk us through. In some of the bigger places, I've seen stories about eye-popping sales for digital parcels that go for millions, but I myself have never met anyone who owns virtual digital real estate. And while I'm familiar with people who might spend a lot of money on their World of Warcraft skin or something in Fortnite, because like you said, this is where they spend many hours a day and have made great friends and have a guild and for them it's social and they've invested in that world, it makes sense that they would want to own a digital artifact from it. Is this similar where people who buy digital real estate then go hang out in a town square and talk? Or what would give it the value? In gaming I understand what gives it the value. It's the people's passion, the amount of time they spend there, the social connections they make, but for a piece of digital real estate, beyond maybe it's scarcity, what gives it value?
JC It's a great question and Will and I talk about this all the time, not just with people interested in our company, but our own investors. And the analogy that we use is the market that we’ve just kind of been in or may be in is similar to the dotcom bubble of the ‘90s where there was this thing called dotcom addresses and people just rushed into them and paid millions of dollars for the ability to own a dotcom address. And it wasn't until the early 2000’s that the way in which those dotcom addresses became valuable was through their utility. And I know there's a lot of talk about utility, and it’s like, “Well, what does that actually mean?” My definition of it is a way in which it can appeal to mainstream adoption, because that's the only way that you get the sort of utility that I think we're both talking about whereby you have a kind of stable growing market making sector. And I think the last thing I would say is that a lot of these numbers that you hear that are being bought and sold and traded, I think there's a trader's mentality to some of that and I think there's a lot of sort of hope value to what it can be. It's almost a form of gambling in some respects. I think the businesses to really watch out for are the ones that are either starting their own metaverses or creating their own digital environments, but have a very defined business case around what that utility is and how it relates to the digital environment. Just to own land for the sake of it doesn't make any sense.
BP Yeah, I mean, I think the entire space, as you said, in some ways resembles dotcom in that we went through two or three years where the crypto industry, the Web3 industry as a whole got up to 3 trillion in valuation and people were reading stories about multi-millionaires from the world of Ethereum and Dogecoin and others. That's now been cut down by maybe two thirds and it seems that we're in a bit of a crypto winter, not that we haven't been here before. Is the same true in the world of digital real estate? I mean, have asset prices sort of spiked and then collapsed along with Ethereum? And where are they now? Are they back where they were three years ago? Are they still above that? What does it look like from your point of view?
WP The short answer to your question is yes, they have broadly followed the same trendline, both in terms of land values and in terms of trading volumes. So there was a period of hype over the course of 2020 into 2021, where people were speculating on land. You could buy a piece of land in Decentraland and wait a few months and sell it for a serious profit without much mind as to its utility. But I think in the same way that we don't actually necessarily, or we don't at all see that as a negative thing, we actually think it is a healthy part of any process. So in any sector that is going to go on to become an established sector or asset class in its own right, you get this kind of pendulum effect where something starts and is wildly popular and hundreds of millions pour into the market and the pendulum goes like this, and then because there's actually very little often underpinning that hype, the bottom falls out. It hits a base level and then that's really where it builds from and where it settles in a kind of equilibrium. And I think what we're seeing now is the pendulum swinging back to the middle, and we see that as a good thing. So we see the fact that a lot of the kind of bad players and mistrust is being swept out of the broader crypto markets. We think that's probably encouraging for what we would call more professional, more institutional players to enter the Web3 market, which we think is necessary for wider adoption. So for us it's kind of part of a broader trend of professionalization of the world of Web3 growing up, I guess.
BP Yeah. So I can relate to the utility of something like Fortnite where all of these people can be together simultaneously, and some of the most interesting sort of virtual events that I've seen happen there, where a performer would come in, they would change the dynamic where now the performer can be gigantic and it's this experience and suddenly 10 million people are there experiencing it simultaneously, they'll remember that. When you say ‘utility’ in your world, talk to me about a client example. Who's bought stuff through your platform and you've seen them use it to make social connections or further their commerce or whatever it may be? Can you give me a few tangible examples of utility or are you still, as you said, kind of searching for the utility?
WP I mean, again, just briefly and then I'll let Joel jump in, but there is no single answer to that question. The utility completely depends on the business that owns the land or is using the land. So that the utility for Nike or Adidas is very different to the utility for Sotheby's and it's going to be tailored completely to them. They'll both be trying to connect to their audience and their consumer base in a more immersive, experiential way. We've talked about, in the real estate world, brand experience or experiential retail for a long time, and this is essentially the follow on from that. So the answer is that the use case is completely different depending on the brand. So whether that's a gambling company creating more immersive gambling experiences, whether that's music, art, retail, whether that's fashion or whatever it is.
BP No, no, I totally understand, and I agree with you that there could be multiple uses and that they would change for different people. I guess my question was, can you give me some concrete examples from clients you have of what they've done? I don't know if Nike or Sotheby's is a client, but how did they leverage the digital real estate to make the price they paid worthwhile, and in what way were they using it? Because, again, not to be challenging, although I said I would have you on the show, but I'm kind of a skeptic. Meta has invested 10 billion per year in this and sort of said outright that they haven't achieved the results they want, the sales of their headsets are down. There are new players like Apple entering this space which may give it a huge jolt. And obviously when a company like Apple enters the space, spatial computing could change things the same way the iPhone changed things. But as it stands, are people gathering in these spaces or are these brands finding success getting people to come have a virtual event and then buy art? That's kind of what I'm driving at. Give me some of the tangible examples so that you can meet my skepticism and convince me. I'm a perspective buyer, I rode the crypto wave early, I'm not a Web3 hater, I have some money set aside that's just for investment. Why would I buy anything through you? Where should I buy it? And what are some examples of people who have done it that you can give to me?
JC It's a good question and I think it's a question that really resonates in a market where use is down significantly, trading is down significantly. And I think to Will's point, a lot of the kind of bad actors are out now and it's kind of what can the sector kind of evolve into. Let me tell you about conversations that we're having outside of what I would call decentralized sort of metaverses, so to speak, and that's around more of a kind of B2B business model. So in other words, private companies creating their own private virtual environments that they gate with NFTs, that they then tokenize and that they then own. Now we started this business because the use case was very much in the decentralized metaverses. They embedded the technology and they frankly, let's be honest here, they use their land sales as a form of funding. Instead of going out to the equity markets or the VC markets, they sold land as a form of funding mechanism and it was a cheap cost of capital and now those companies have to deliver on their promise, and some have performed better than others. And I think we've seen that in the usage numbers. We are servicing that market. We think that we're there and we're kind of saying to these companies, “Look, you do have a user base. It may not be a particularly high user base relative to what it was a year ago, but at some point if you do all the right things, these individuals will continue building in the space, they will require more analytics, more handholding, more intellectual knowhow around what to do with those parcels or estates.” Now to some degree we're a bit beholden on how those metaverses evolve, but where we are spending a lot of our time is in two areas. The first is working with businesses as we'll use the term, sort of grown up businesses who have built their own virtual environments, have experiential workshops in there or private retail offerings and are now thinking about how to monetize it. The challenge you've got there is that crypto is still a little bit of a dirty word when it comes to large sort of regulated businesses, and so as a result, when you start talking about tokenization and blockchain and the need to use crypto, then you start getting into the whole, “Okay, how can we simplify this process with an on ramp, off ramp type solution?” That infrastructure is still being built. So a lot of what we're doing right now has an eye on B2B. We also have a foot in the decentralized world, but we are somewhat beholden to their community and what advances they make. We're kind of saying, “Look guys, we're here to provide professional service. We're here to tell you what's a fair price or what's a good price or what's a ridiculous price, but we're not sure yet who's going to be the MySpace and who's going to be the Facebook in three or four years’ time.” So when we use the term ‘digital real estate,’ I think we're looking at the now, but we’re also looking at what's to come, and what we're seeing that is kind of less obvious and is not in the press as much with these big headlines about being someone paying $5 million or $2.4 million for virtual land, is a lot of major businesses are building out virtual environments to serve not just their clients, but also their staff. And that is an area that we see becoming pretty exciting over the next few years.
WP Yeah, so just to kind it back to basics, we started this business as a brokerage, a brokerage and a marketplace. It was started when trading volumes and land values were very high in these decentralized spaces. And as time has gone on, and we only launched our marketplace very recently so it's actually fortuitous timing because we've been able to see that pendulum settle, we’ve worked to expand our business model to cover private virtual environments or any kind of immersive virtual space beyond the traditional decentralized metaverses. And increasingly, we are positioning ourselves at the kind of intersection of real world real estate and virtual real estate. I'll talk about a specific client of ours now just to get to that point, because this is where we see the convergence of what we talk about as virtual and real. So we've been working with a large multifamily, I guess what you guys call multifamily, what we call built-to-rent in the UK, developer. So these are big communities of apartments that are amenitized with facilities and amenities to bring the community together, whether that's a gym or a leisure space or a coworking space or whatever it is. So this developer has several thousand units within their portfolio and we are working with them to create a virtual environment, again, gated using NFTs, that will provide access to the residents of their apartments with a kind of digital or virtual replica of the amenity spaces that they can access in real life. Now, obviously I'm not talking about having your avatar go to the gym or having your avatar go swimming. I'm talking about spaces where residents of these communities that might never meet or get a chance to meet in real life can attend online events in a more immersive way. It's a way for the developer and the management company to communicate things to their residents in a more immersive, in a more gamified way. I think for them, a few years down the line, nobody is going to even know this stuff is kind of powered by blockchain at all. It's just going to be how you access a space and we won't even think about the word ‘NFT.’ We won't think about the word crypto, and these things won't be such alien concepts to the majority of the population.
BP So I guess in that one, you're talking about it being sort of a community and that's what brings them together. So they would hang out there using what kind of tools? Would they have to be in a VR headset? Would they be on a browser?
WP Yeah, it's on a browser. It's all browser-based for now. The technology is already there to have fairly high quality browser-based experiences. I think when you start adding hardware into it, you start to alienate good portions.
BP Well, that's honest of you.
WP No, I mean, you do, because there's a cost barrier then, and as things stand right now, quite a significant cost barrier. So that's not an option right now. And I'm not one of these people that will sit here and say, “Well, we're all going to be sat in our armchairs in five years with headsets on living life that way,” and I don't want to live my life that way and I don't think anyone else does. I think the way that we see any kind of virtual environment is something that's ancillary and complementary to real life. And whether that's an element of, I don't know, a buying experience, whether it's a community experience, it just brings you something that makes your real life better. It's the same way I love gaming, not Fortnite or Call of Duty gaming, but kind of sports gaming. So FIFA for example, I spend a good amount of my time playing strangers online and I get huge enjoyment from that, but it doesn't mean that I also don't go out on a Sunday and play football or what you guys call soccer, because I do that every week religiously as well. So it's complementary. It's not a replacement.
BP So in some sense, what's interesting about this is you're sort of saying two things, which to me address some of my skepticism. One, you don't expect people necessarily to go into these spaces wearing a VR headset, and that's not a prerequisite. That space has struggled to get adoption, although like I said, Meta continues to push there and Apple has entered the fray. And then two, that it's not necessarily about people who are in this because they believe almost in a passionate ideological way in DAOs or decentralized communities or whatever. You're saying that this will be much more like a social network or the guild that you make online or the people that also love FIFA, and the house will be almost just like a membership in a club, and that way you'll be socializing with these people or forming bonds with these people, and that's where the value of the property comes from?
WP Or the value of that property could come from. There's been quite some significant adoption by the medical community, for example. Because actually in a similar way to the design community but without the consequences, it allows experimentation in a 3D immersive environment without having to take any kind of real life risk, design risk or medical risk. So that value could come from its utility for educational purposes, for medical purposes, for design purposes, but much in the same way as real life, the value doesn't come because it's valuable to everyone. It's not because it's valuable to all communities. It's because it has a specific use that's valuable to a community. In the same way that office skyscrapers in the city of London in our financial district are valuable to the insurance and legal and financial communities, but they're not valuable to the design and tech communities because they don't want to be in that part of London. It's dependent on the community.
JC I think, Ben, think of it as a modern day website or a modern day forum, but importantly, one that is owned by that forum or one that is owned by that building owner, or one that is owned by that tenant. I think there's no point building a business today that fits a purpose today. I mean, take AI for example. I'm sure you turn on your computer every day and you see a new launch of an app that's associated with AI on a daily basis. You're too late. I'm sure you have exposure to this far more than we do, but part of starting a business is about looking ahead a couple of years and saying, “What is life going to be like in three years?” And our strong belief is that the world is moving towards a more digital kind of setting and it's also moving towards a tokenized setting as well. And if you look at what a lot of the market leaders are doing, whether you agree with their business models or not, like BlackRock and others, the world is moving towards tokenization and so it's only going to be a short time before real estate in the virtual form and physical form follows and we want to try and lead.
BP I hear what you're saying. You believe in tokenization. I'm not sure I fully believe it, but I definitely agree that a lot of major players from finance and real estate, and as you point out, fashion or art are experimenting with it. I think it's interesting to think about it not as a virtual world or an NFT creation, but as you said, what is the next evolution of the websites and online communities that people have come together in, or the games where people have come together. I'll say the value of the game is the pleasure you get out of it, but we know what the utility of the game is. It's helping you relax after work. I think maybe we're still searching for a little bit of that in the world of digital real estate, but I think that at least it seems like your perspective is that the world is definitely headed this way. We've been through a hype cycle. Now you kind of have to wait for some of the smoke to clear and see which of these experiments work, and then maybe you would know, “Well, this is the place to invest because we think prices will go up here.” At this point in time, it's hard to say, “We think this is a good investment because of X, Y, and Z,” because prices have dropped off a cliff and we don't have those strong examples yet of, “Here's how you provide utility and community like you could in Fortnite.” I mean the thing that people don't like about games versus decentralized is that it's owned by one company and they could change the rules. But I'm sure if they started selling houses in Fortnite and that meant you'd have the front seat at the concert, people would buy them because that's where their friends are and that's where they spend a lot of their day. So I guess you're hoping that that will happen but broader. Or in Roblox, Roblox partnered with Nike to create a world. So you're hoping that those spaces will continue to proliferate and that you'll be able to get people in on the ground floor as they say?
WP Yes, but equally, I think our role as an intermediary is to try and identify interesting businesses that are making use of a metaverse or a virtual environment and to provide users of our platform with access to those businesses. So we are spending our time trying to forge relationships with creators of these spaces and some of them are super new and super nascent. For us, we're kind of sitting in the middle of it all. We're constantly learning, constantly meeting new people, the sector is evolving every day, and the kind of traditional metaverse is really the tip of the iceberg. That probably consumes less than 10% of the time we spend learning about this space.
BP Gotcha. So you're trying to find the communities where, outside the spotlight of what's happening with Meta or Apple, people have been and are building successful digital communities, some of which happen to be in more of a metaverse-type environment. Like you said, medical can benefit from 3D, or architecture and design, and then say, “All right, well does real estate make sense here?” I mean, I'm not sure I see why people who are meeting in a metaverse to discuss medical stuff and look at 3D representations, why they need to have a house there, but I leave it to you to make that sale.
WP No, it's not about having a house. It's if you are a, I don't know, a medical school and someone has built a very useful 3D tool in a metaverse and you want to rent that space to run a seminar with your students for the afternoon, you can do that.
JC I think, Ben, one of the things I would say is that there's this common misconception. I don't think real estate is the right word. What is real estate? It's kind of like a footprint. In the virtual sense, I think what we're really talking about is a kind of ownership in whatever community or virtual world you're talking about. And I think the common misconception is you say ‘real estate’ and most people's brains go to, “Where do I sleep? Where do I eat? How many floors does it have?” And that's not quite what it is in the virtual setting. Yes, you can kind of expand that into digital twins and that does have a kind of virtual real estate context to it, but I think in the sort of NFT-gated, tokenized type environment, what we're talking about is an ownership in a sort of virtual setting, which blockchain allows you to do.
BP What we like to do at the end of every show is show out someone who came on Stack Overflow and help to spread a little knowledge. Awarded two days ago to Omar, a Lifeboat Badge for saving a question. Somebody was having a problem with an event handler on a message box button. Omar had an answer for them, helped them get through this, and has helped over 44,000 people with this little bit of knowledge. So thank you, Omar, for coming on Stack Overflow, contributing some knowledge, and congrats on your Lifeboat Badge. I am Ben Popper. I'm the Director of Content here at Stack Overflow. You can always find me on Twitter @BenPopper. You can email us with questions or suggestions for the show, firstname.lastname@example.org. And if you like the show, leave us a rating and a review. It really helps.
JC Fantastic. Well, Ben, thanks very much for hosting us today. Thoroughly enjoyed the conversation. I'm Joel Coren, CEO of VerseProp. You can us on LinkedIn: VerseProp, and also on Twitter. We're regularly sort of answering private messages on that, so we are willing to be contacted, @VerseProp. And looking forward to fielding any questions
WP And I'm Will, I'm the COO and founding partner. Check out our website and marketplace– www.verseprop.com. Launched last week, so we're super fresh, super excited about that.
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