Asia’s largest metaverse platform, Zepeto, is stepping up its global expansion as it looks to compete against the Big Tech groups that are betting billions on creating avatar-filled virtual worlds.
Owned by Korean tech group Naver, Zepeto has attracted 340mn users since it launched in 2018. Unlike rival platforms developed by gaming companies, it is dominated by young female users.
The K-pop and fashion-focused avatar platform, which is valued at more than $1bn, has attracted investment from Korean entertainment companies JYP Entertainment, YG Entertainment and Hybe, as well as from SoftBank’s Vision Fund II.
“We have a long way to go to be more of a globally dominant player, but we are very much on the right track,” said Ricky Kang, head of business at Naver Z, the subsidiary that operates the Zepeto platform.
“We have established a very strong presence in Asia-Pacific, so we want to grow further in the region, but we also place a very strong emphasis on growing in the US and western Europe, [for example] in France, where we have already established high growth,” said Kang.
He added that Zepeto was popular in Brazil, and that it was working on Turkish and Arab language versions of the platform as part of a push into the Middle East.
It comes as groups from Facebook parent Meta to Microsoft are betting billions that the three-dimensional metaverse will become the next big tech platform.
Zepeto has quickly become the largest such site in Asia. It has about 15mn-20mn active monthly users, predominantly in South Korea, Japan and China. Of those, 70 per cent are female and mostly aged between 13 and 21.
But it has a long way to go to catch up with US rival Roblox, the $50bn online gaming company which also has a devoted pre-teen following among its 200mn monthly active users.
Kang said that while Zepeto had focused on users purchasing virtual items, “moving forward, the items and the experience that they can purchase will be more focused on individual virtual worlds . . . it’s a very similar business model to Roblox”.
Other competitors cited by Kang include online social platforms Rec Room and VR Chat, as well gaming juggernaut Fortnite.
But he also stressed that “Zepeto is essentially a social network, not just people chatting while they play games”.
“It’s actually a feed that really looks like TikTok or Instagram, but which only contains avatar content — the first avatar-centric social network of its kind,” he added.
Accessed principally through a smartphone app, Zepeto has monetised its audience by offering users the chance to customise their avatars and to design and trade millions of items — mainly clothing, accessories and hairstyles — as well as to create their own virtual worlds.
Appliances and furnishings for virtual homes can also be bought traded on the marketplace.
It operates a licensing model, forming partnerships with athletic and luxury fashion brands including Gucci, Ralph Lauren, Bulgari, Adidas and Nike.
Samsung appliances are offered and avatars can drive Hyundai cars.
Naver Z has also sealed IP partnerships with Disney and Universal. Girl group Blackpink, which is represented by YG, held a virtual signing on the platform during the pandemic.
“One of our key strengths has been our relationship with K-pop companies,” said Kang.
Last year, the South Korean government launched a “Metaverse Alliance” of more than 200 companies and institutions. It has earmarked almost $8bn from its 2022 budget for the country’s next digital transformation.
But analysts have questioned the sustainability of Zepeto’s popularity, citing its limited user base.
“It needs to expand its user base beyond teenagers, as Facebook and Instagram did,” said Choi Joon-chul, head of VIP Research and Management.
“Teenagers are enthusiastic users but their interest tends to be shortlived. They get satisfaction from the platform by relishing things that they can’t afford in reality. But I doubt if they will keep using Zepeto as they grow older.”
Kang accepted that the platform needed to “grow” with its users as they become older.
“As our users get older, we want to make sure we grow with them. This is true for all the social platforms that have become dominant players, including Snapchat or TikTok,” Kang added. “They always started with teens and then became more of a general audience app.”
But Korean academics and campaigners have raised concerns about the potential vulnerability of Zepeto’s users. While in the EU the minimum age for such platforms is 16, in many Asian countries it is 13 and in some places even younger.
Earlier this month, Naver Z joined the Tech Coalition, a global alliance of companies fighting online sexual abuse and exploitation of children.
Kang acknowledged the difficulties in policing the metaverse, saying that Naver Z had artificial intelligence programs to identify inappropriate behaviour and call centres that users could contact for help. But he accepted that “bad apples can be very sneaky and go through those protection mechanisms”.
Wi Jong-hyun, a business professor at Chung-Ang University in Seoul, said the company needed “to come up with tougher and more pragmatic measures”.
“Many of these teenagers totally identify with their avatars so they get shocked by these unpleasant online experiences,” he said.