11.15.2021 07:00 AM
How a VR Company Became the Airbnb for NFTs
Yes, that’s really a thing now.
Photograph: Bloomberg/Getty Images
Jacob Loewenstein started off his talk at the Augmented World Expo by apologizing.
It was a small crowd—fewer than a hundred people, masked and spaced apart in Ballroom B of the Santa Clara Convention Center in the heart of California’s Silicon Valley, waiting to hear about collaboration software. Loewenstein is the head of business development at Spatial, a venture-backed startup that has spent the past couple years convincing enterprise clients they needed to strap on headsets and buy into its virtual reality meeting apps. But on Wednesday of last week, Loewenstein launched into a presentation on NFTs, virtual art houses, the Utah Jazz NBA team, and the curse of having been christened a “future of work” app.
“This is kind of a weird situation,” Loewenstein began. “For those of you who have used Spatial, you might be wondering, ‘WTF? What has Spatial become? How many more buzzwords can they throw out …’ And the answer is, infinitely more buzzwords if it helps us make money. Just kidding.”
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Loewenstein may have couched the company’s money-making goals in humor, but Spatial really is following the money. Right now, that happens to be in the direction of the much-hyped NFT art market. NFT refers to “non-fungible tokens,” often described as certificates of ownership of digital assets. Some individual artists are raking in millions by selling not just a piece of digital art itself, but that tokenized proof of ownership. The token is managed on a blockchain, which means crypto is the default currency. According to a recent Bloomberg report, the crypto art market generated $3.5 billion in sales in the first nine months of 2021.
“The industry seems to be rallying around this idea of an interoperable, NFT-driven metaverse, which we think we serve in a unique, super-simple, and fast way,” says Anand Agarawala, Spatial’s cofounder and chief executive, in an email to WIRED. Spatial’s rapid transition from hosting VR board meetings to hosting NFT auctions is emblematic of the fast moves many tech startups have to make if they hope to sell a product that’s better and cheaper than what larger competitors could offer. But for Spatial, which had aligned itself with partners like Microsoft and was selling its software to clients like Mattel and Pfizer, the doughnut drift into the notoriously volatile world of NFT art seems especially risky.
Meta Masterpieces
Agarwala and Loewenstein say the change was more of an evolution than a pivot, to use the Silicon Valley parlance; their users dictated what Spatial would become. Sure, being able to appear as an avatar in a “holographic office” was useful, especially as the white-collar world embraced remote work during quarantine. Some office leaders had been using Spatial to host virtual team events, to give remote workers a sense of presence with one another. (I met with the Spatial team in their own app once, switching from the Meta Quest 2 headset to the web to a smartphone, all of which support the Spatial app. WIRED’s Julian Chokkattu has used Spatial too.)
But something odd happened. When the Spatial app first launched on the Quest 2 headset in 2020, the majority of its users were accessing the app in VR. The company thought maybe the moment had arrived—given that the world was living through a pandemic—where people would be more comfortable wearing a VR headset for extended periods of time. Not so much. Spatial started to receive feedback that people didn’t actually want to take endless meetings in VR and would rather have the option to just click a link and join on the web like they might join a Zoom meeting. So the company built a mobile app and became web-friendly. Now 75 percent of people using Spatial’s virtual reality meeting rooms aren’t using a VR headset at all.
“It’s almost entirely on a desktop computer, sometimes on mobile,” Loewenstein says. “So during this month, when the metaverse has been the most talked-about ever … what most people relate to is not a headset-based experience.”
Then, in January of 2021, something else happened. A Parisian artist named Yacine Aït Kaci had been tasked with building a virtual museum to celebrate the tenth anniversary of ELYX, an entirely digital, genderless, nation-agnostic ambassador created by the United Nations. The artist, who sometimes goes by YAK, chose to host the virtual museum event in the Spatial app.
A few months later, the visual designer Jarlan Perez and contemporary video producer and sculptor Federico Clapis—whose sculptures of babies holding iPhones in utero and VR-headset-clad mothers holding invisible children are a jarring interpretation of the modern world—got into Spatial too. They took the virtual spaces Spatial had built for giant corporations to go over PowerPoints or fiddle with 3D product renderings and created galleries for their artwork instead. And then they began to sell NFTs.
The whole notion is stunningly abstract: Showcasing digital art, a beautiful or beautifully bizarre assemblage of ones and zeros, in an entirely virtual atelier, also a series of ones and zeroes, and then selling it as a blockchain-based non-fungible token to a buyer who may not physically possess the art, but can, at least to a certain audience, prove they own a unique copy of it. No matter: Soon, 90 percent of Spatial’s users were NFT artists using the app’s virtual environments as exhibition spaces.
The Spatial team reacted fast, building what they claim are one-click options for artists to integrate Ethereum wallets, pull in their NFTs, and choose one of the many galleries to host an event in. The app became a virtual Airbnb for artists selling NFTs.
Not all of Spatial was on board; two of the company’s executive team had bought into the frenzy, but most others had to be convinced. Also, Spatial hasn’t shared exactly how many users it has right now or tallied up how many pieces of art have sold, though Loewenstein says there are individual success stories. The artist Tyrone Webb, for example, was able to sell his first 12 NFTs once he started exhibiting in Spatial.
But other decidedly more corporate entities are also using Spatial to sell NFTs. In September, the NBA’s Utah Jazz sold 30 NFT collectibles and offered, as part of the purchase, exclusive access to a meet and greet with the team in a virtual locker room. The franchise hired contemporary artist Krista Kim and AR/VR designer Michael Potts to construct the virtual locker room, which they built using Spatial.
“This was an opportunity for the Utah Jazz to create storefronts that are both physical and digital,” says Kim, who also created one of the first digital homes to sell as an NFT, called Mars House. “This is where the future of these sports franchises will go. The star players don’t have to leave their homes, and everybody wins.”
New Money
A business model in which multibillion-dollar sports franchises are utilizing your software may not be a bad one for Spatial—and perhaps not all that different from selling your software to Fortune 500 companies. In the future, Spatial plans to sell its own custom-designed virtual spaces as NFTs, or it might build out an affiliate business where it gets a cut of the art it sells, Loewenstein said.
But there’s enough well-founded skepticism around the NFT art market right now to ponder whether Spatial’s pivot could be an ill-fated one. Some artists have suggested that their fellow creators are being sold on speculative value and the promise of prestige more than anything else. Others have expressed concern about the real environmental toll crypto-fueled art could have. At the AWE conference, where Loewenstein was presenting his case, some metaverse developers were less than enthused.
“There’s definitely a lot of hype in the NFT art space right now,” says Brielle Garcia, an experienced AR and VR developer. “I think it’s great that some artists are getting well-compensated for their work, but I think many of the real technical advantages that NFT and blockchain provide are being lost in the current gold rush.” (Garcia also spoke to me during a panel about AR at last week’s conference.) The technical value of an NFT is in the token itself, Garcia says, and with art projects the art gets conflated with the token.
Garcia envisions these tokens being more useful if you wanted to, say, build a decentralized competitor to Ticketmaster—which may not be too far from what the Utah Jazz attempted by selling access to its all-virtual locker room.
Loewenstein is nonplussed when asked what happens to Spatial’s business if NFTs turn out to be a pyramid scheme. “We’re not a hammer looking for a nail in terms of NFTs,” he says. “The trends we care about are the creator economy and creators getting paid for their work and the general trend of creators getting access to a market that’s not gate-kept by Sotheby's or Christie’s.”
“Even if the value of Ethereum crashes or a bunch of the top NFTs go down in value, creators are bought in,” Loewenstein says. “They’re not all making tons of money, but they are making money, and no one’s taking it from them.”
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