When last Thursday (Jan. 27) Bernard Arnault announced LVMH’s worthy of envy 2021 financial results, he didn’t miss the opportunity to become part of the hype called metaverse.
Great marketing if it was intended, I mean. If it was not – still, great marketing. More stories were written about Mr Arnault’s suspicion of the metaverse than on the spectacular financial results of his company.
Yes, you heard it right. Mr Arnault is a bit wary when it comes to this new concept. For a visionary like him this may be a surprise but let’s think about this in perspective.
First of all, he didn’t say “I will never engage with the metaverse.” No, who would dare to make such bold claims nowadays. He simply said that the concept is “thought-provoking” but that “we have to be wary of bubbles”.
Well, for those who have been born during the dot-com era, this is clear. For the rest, Arnault meant speculative bubbles that have little or none commercial value in the long run.
The dot-com bubble was caused in the late 1990s due to excessive speculation of Internet-related companies. For instance, the Nasdaq Composite stock market index rose 400% between 1995 and March 2000. However, by October 2002, the index went down 78%, wiping off all the gains during the boom. As a result, many e-commerce and communication companies like Webvan, Pets.com, Worldcom, and Global Crossing shut down. The survivors like Amazon, for instance, lost huge portions of their market caps.
“At the beginning of the internet, there were all sorts of things popping up and then the bubble burst. There may be relevant applications, but we have to see what universes might actually be profitable,” Arnault said, obviously having in mind what happened two decades ago during the massive adoption of the internet.
However, Arnault is not a man of missed opportunities. “It will be interesting to see how it generates profit. NFTs are generating profits, and I’m sure this will have a positive effect if things are done properly,” he said.
Actually, some of the LVMH companies are already taking advantage of the metaverse. Louis Vuitton, for instance,collaborated with Riot Games back in 2019 and created in-game looks, known as “skins”, costing between USD 170 to over USD 5,000. Last year, to mark its 200th anniversary, the company also released the NFT-based game application “Louis: The Game”, which follows the journey of Vivienne, Louis Vuitton’s classic doll. The players had to look for 200 postcards containing Vuitton’s major historical milestones. Through the game, the company was offering a total of 30 free NFTs as collectibles but not for sale. The NFTs were created in partnership with events startup Wenew and are minted from the Louis Vuitton Ethereum wallet.
LVMH reported revenue of EUR 64.2 billion (USD 70.65 billion) for 2021, up 44% year-on-year. Organic revenue growth increased 22% in the last quarter of 2021 mainly due to demand from the USA and Asia.
Whether the world’s largest luxury group will continue to explore the metaverse is almost certain, though, it would be done with caution. However, Arnault is confident that this space would not change his group’s identity. “It’s not our objective to sell virtual sneakers for 10 euros. We’re not into that. But there may be more relevant applications,” he said. The comment is probably in response to Gucci’s release of a series of augmented reality (AR) sneakers for USD 11.99 per pair.