Asia’s largest metaverse platform, Zepeto, is stepping up its global expansion to take on the big tech groups that are betting billions on creating avatar-filled virtual worlds.
Zepeto is owned by Korean technology group Naver and has attracted 340 million users since its launch in 2018. Unlike competing platforms developed by game companies, it is dominated by young female users.
The K-pop and fashion-focused Avatar platform, valued at more than $1 billion, has attracted investment from Korean entertainment companies JYP Entertainment, YG Entertainment and Hybe, as well as SoftBank’s Vision Fund II.
“We still have a long way to go to become a dominant global player, but we’re 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 plan to continue growing in the region, but we also place great emphasis on growth in the US and Western Europe. [for example] in France, where we have already seen strong growth,” said Kang.
He added that Zepeto is popular in Brazil and is working on Turkish and Arabic 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 be the next big tech platform.
Zepeto has quickly become the largest site of its kind in Asia. It has about 15-20 million monthly active users mostly in South Korea, Japan and China. Of these, 70 percent are female and mostly between 13 and 21 years old.
But there’s still a long way to go to catch up with US competitor Roblox, the $50 billion online gaming company that also has a devoted pre-teen fan base among its 200 million monthly active users.
Kang said that while Zepeto has focused on users purchasing virtual items, “in the future, the items and the experience they can purchase will be more focused on individual virtual worlds. . . it’s a very similar business model to Roblox.”
Other competitors Kang named include online social platforms Rec Room and VR Chat, and gaming juggernaut Fortnite.
But he also emphasized that “Zepeto is essentially a social network, not just people chatting while playing games”.
“It’s actually a feed that really looks like TikTok or Instagram, but only has avatar content – the first avatar-centric social network of its kind,” he added.
Accessed primarily through a smartphone app, Zepeto has monetized its audience by giving users the ability to customize their avatars and design and trade millions of items – mainly clothing, accessories and hairstyles – and create their own virtual worlds.
Devices and furnishings for the virtual home can also be traded on the marketplace.
It operates a licensing model and forms partnerships with sports and luxury fashion brands such as Gucci, Ralph Lauren, Bulgari, Adidas and Nike.
Samsung devices are offered and avatars can drive Hyundai cars.
Naver Z has also sealed IP partnerships with Disney and Universal. Girl group Blackpink, represented by YG, held a virtual book signing on the platform during the pandemic.
“One of our greatest strengths has been our relationship with K-pop companies,” Kang said.
Last year, the South Korean government launched a “Metaverse Alliance” of more than 200 companies and institutions. It has earmarked nearly $8 billion from its 2022 budget for the country’s next digital transformation.
However, analysts have questioned the sustainability of Zepeto’s popularity, citing its limited user base.
“It needs to expand its user base beyond teenagers, like Facebook and Instagram have done,” said Choi Joon-chul, head of VIP Research and Management.
“Teens are avid users, but their interest is usually short-lived. They get satisfaction from the platform by enjoying things that in reality they cannot afford. But I doubt they will continue to use Zepeto as they get older.”
Kang accepted that the platform needed to “grow” with its users as they got older.
“As our users age, we want to make sure we grow with them. This applies to all social platforms that have become dominant players, including Snapchat or TikTok,” Kang added. “They always started with teenagers and then became more of a general audience app.”
However, Korean academics and activists have raised concerns about the potential vulnerability of Zepeto’s users. While the minimum age for such platforms is 16 in the EU, it is 13 in many Asian countries and even lower in some places.
Earlier this month, Naver Z joined the Tech Coalition, a global alliance of companies fighting against online child sexual abuse and exploitation.
Acknowledging the difficulties of monitoring the metaverse, Kang said Naver Z has artificial intelligence programs to detect inappropriate behavior and call centers that users can ask for help. But he accepted that “rotten apples can be very sneaky and slip through these protections.”
Wi Jong-hyun, an economics professor at Seoul’s Chung Ang University, said the company needs to “take tougher and more pragmatic measures.”
“A lot of these teenagers fully identify with their avatars, so they’re shocked by these awkward online experiences,” he said.