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Zoe Thomas: This is your Tech News Briefing for Thursday, December 2nd. I’m Zoe Thomas for the Wall Street Journal. Maybe Gucci t-shirts and Dior handbags are out of your budget, but have you tried buying them in the metaverse? That’s what a growing number of young women are doing on the South Korean app, Zepeto. Strong sales of high fashion items for 3D avatars have made the company an appealing target for investors. It’s also helped show why Asian markets may point the way forward for the metaverse. On today’s show, our Seoul-based tech reporter Jiyoung Sohn joins us to discuss Zepeto and how the metaverse is shaping up in Asia. That’s after these headlines.
A group of five educational publishers is suing Shopify for copyright infringement and seeking up to 550 million in damages. The group, which includes Pearon and McGraw Hill says the e-commerce company should be liable for unauthorized textbooks, solutions manuals, and test packs sold by websites using Shopify’s online tools. The lawsuit claims the publishers have asked Shopify to take down sites that pirate their material since 2017, but that Shopify has continued to sell services to them anyway. Shopify declined to comment on the specifics of the lawsuit and said it takes action against web stores that violate its policies.
House lawmakers held a hearing yesterday to consider four bills that would significantly reign in the immunity that big tech companies currently enjoy. Under provision of the 1996 communications decency act known as Section 230, social media firms aren’t liable for harmful content posted on their platforms. Among the changes to Section 230 being considered, tech platforms could be held liable in cases where users are seriously hurt by algorithms, have their civil rights violated or suffer harassment and stalking. Our reporter, John McKinnon says while Congress has been slow to act this year, Wednesday’s hearing shows 2022 may be a consequential year for tech regulation.
John McKinnon: Another committee in the House, the Judiciary Committee did pass a bunch of antitrust bills earlier this year that would have big effects on the tech companies. Those were quickly kind of bottled up though by the leadership because of all the concern among the tech companies and the really intense lobbying that was going on, which just shows you how difficult it is to pass anything that affects the big tech companies. But despite that, here you have another committee in the House really beginning to line up to take some really significant action.
Zoe Thomas: The dating app Match has settled a lawsuit over its purchase of Tinder. Three years ago, Tinder’s co-founders and some executives sued parent company Match and former parent IAC saying they undervalued Tinder in order to reduce payments to holders of stock options and cheat them out of roughly $2 billion. As part of the settlement, Match agreed to pay $441 million to the plaintiffs. And the plaintiffs agreed to drop all claims against Match.
Square is taking a page from Facebook, now Meta, and changing its name. The payment company says starting later this month, it’ll be known as Block. The new name aligns with the crypto and blockchain interest of the company’s CEO, Jack Dorsey, who stepped down as the head of Twitter earlier this week.
And you may remember a few years ago, Amazon founder, Jeff Bezos suggested the Saudi Arabian government may have been involved in hacking his phone. In 2019, Bezos alleged the owner of the National Enquirer tried to extort him with racy photos and texts from an extramarital affair. Bezos’s security team later blamed the Saudis for a hack that gained access to those materials. Now we exclusively report that the FBI has been looking into those claims as part of a broader counterintelligence investigation into Saudi activities, but the probe hasn’t led to any public action on them. People familiar with the probe said the FBI didn’t obtain Bezos’s phone and the question of whether the Saudis hacked it wasn’t a high priority. A representative for the FBI and a spokesperson for Bezos declined to comment.
All right, coming up, the metaverse has no borders, but could it be adopted faster in Asia? We’ll discuss the platform that’s demonstrating the digital universe’s wider appeal. That’s after the break.
The metaverse is still being developed, investors though, they like to get in early. That’s part of the reason why SoftBank just put $150 million into a South Korean app called Zepeto. Now companies like Meta, formally Facebook, as well as Microsoft, Roblox and others are putting billions of dollars into developing the metaverse. But Zepeto and the Asian market more generally could expose opportunities other platforms that may be missing. Joining us to discuss this is our Seoul-based tech reporter Jiyoung Sohn. Hi, Jiyoung, thanks for being here.
Jiyoung Sohn: Thanks for having me.
Zoe Thomas: Tell us specifically about this platform, Zepeto. What makes it look like such a good bet to investors?
Jiyoung Sohn: So Zepeto is a metaverse platform created by South Korea’s biggest internet company called Naver. And inside Zepeto, users can create a 3D avatar of themselves and visit different virtual worlds that are available inside the platform and they can also just interact with other users that are within the same world. And Zepeto was first launched in 2018 as a mobile app and it’s gained a lot of popularity among gen Z users around the world, including China, the Philippines, the US, Malaysia, and also South Korea. And it’s gained a pretty large following of young female users around the ages of 13 and 24. And that has a lot to do with the Zepeto’s emphasis on fashion. So users inside Zepeto can purchase different clothing items and accessories from the store and they can make their avatars look more unique. And a good majority of these virtual items are made by individual creators who can make a profit by selling their creations in the metaverse and also real fashion brands like Gucci and Ralph Lauren have launched their virtual clothing collections within Zepeto.
And investors like SoftBank have basically said that there is good potential for Zepeto to further expand its user base based on its strengths in avatar creation. Naver is also working now to bring on more creators to develop new types of games and interactive apps for Zepeto, which should allow the app to expand its offerings beyond what it has now. And that growth potential is something that investors like SoftBank are taking note of as the metaverse business landscape continues to grow around the world.
Zoe Thomas: You spoke to some Zepeto users. What kinds of things are they doing in this metaverse?
Jiyoung Sohn: So a big part of Zepeto is customizing your avatar from head to toe with different fashion items that you can purchase. And users can also visit different maps that are called worlds, some of which are built by creators themselves or some of which are built by companies. And these maps can be anything from a school classroom to a dance club, to a special house featuring a K-pop artist like Blackpink. So when you go into these maps, you can meet other users and chat with them through voice or text. You can also kind of click on each other’s avatars to check what you’re wearing and also buy that item if you like what you’re seeing. Also, there’s a function called Photobooth inside Zepeto that allows users to take selfies and make videos of their avatars dancing or doing some fun activities that can be shared with others. And you can also find a lot of these user generated content featuring Zepeto avatars on social platforms like Instagram and TikTok. So there’s definitely a community of Zepeto users that are out there.
Zoe Thomas: One thing that struck me about this community is these small creators who are making money off of it because we hear about these big brands like Gucci and Nike who are trying to get into the metaverse and want to sell products there. But how are these small creators making money in Zepeto?
Jiyoung Sohn: Yeah, so Zepeto offers this program for interested creators to use a 3D modeling tool to design different types of clothing items or accessories that can be worn by Zepeto avatars, and then creators can sell these items within Zepeto based on a set price that they set based on what’s called ZEMs, which is an in-game currency within Zepeto. And once creators can earn a certain amount of ZEMs through their item sales, they can monetize those earnings into real cash based on a price rate set by the company. So this might not go for everybody, but a successful items creator that I interviewed said he was making around $8,500 a month from his item sales alone. So we can say that there’s a real economy for virtual goods that’s taking shape in the metaverse today. And it’s not only companies, but individual creators who can definitely profit off of that.
Zoe Thomas: So these are like the first real jobs in the metaverse.
Jiyoung Sohn: Oh, definitely. It’s among the real jobs that are in the metaverse today. We might see other forms of different items that might be sold or traded within the metaverse in the future, but this fashion market that’s kind of sprung up within Zepeto is one good example of that I think.
Zoe Thomas: South Korea has a really big tech scene and it’s impacted the culture there. I wonder, as the metaverse grows, how it’s expected to impact South Korea’s culture or maybe it’s already impacting it.
Jiyoung Sohn: Right. So South Korea has historically certainly been one of those countries where technology trends spread fast and adoption is fairly quick among users. So it has a really big gaming industry where a lot of companies are already pivoting their businesses towards the metaverse. So we’ll definitely see more development happen on that end. And perhaps not surprisingly, the city of Seoul has recently announced the vision to become the first city in the world to enter the metaverse by 2030. It’s still a fairly new initiative, but the city is hoping to offer more government services within the metaverse and to build up services that would allow more tourism to Seoul to happen virtually within the metaverse. So definitely, I don’t think we’re seeing a big metaverse ecosystem suddenly popping up in South Korea, but it’s certainly going to be one of the first markets to experiment with the metaverse I think going forward.
Zoe Thomas: In Silicon Valley, we hear tech leaders saying the metaverse isn’t here yet and might not be here for a while. It seems like South Korea is saying the metaverse could be here now or soon. Why is there such an uptake there?
Jiyoung Sohn: Right. So definitely we’ve heard a lot from Silicon Valley companies like Facebook and Microsoft discuss the metaverse as this next phase of the internet. And that’s certainly a business trend that’s continuing to take shape in Asia as well. One thing I would emphasize is that Asia and also South Korea has always been a big market for online gaming and that already kind of checks off a lot of the boxes for what we would consider a metaverse. And that includes the ability to take on a virtual identity and interact with others in the online realm. So many users in Asia are already sort of familiar with this online culture through the medium of these online games and I think that’s one factor that might certainly expedite the adoption of new … I don’t know, whatever renditions of the metaverse that we might see going forward. And that might be also why development seems to be a little bit faster in Asia compared to the west and on that end. But in the big scheme of things, the metaverse is still a fairly new concept.
Some experts are divided on whether an app like Zepeto or Roblox is actually a real functioning metaverse because it doesn’t have the immersive elements of virtual reality or augmented reality at this point. But definitely Asia is on a faster trajectory in that sense.
Zoe Thomas: All right. That was our reporter, Jiyoung Sohn. Thanks for joining us.
Jiyoung Sohn: Thank you.
Zoe Thomas: And that’s it for today’s Tech News Briefing. If you want more tech stories, check out our website, wsj.com. And if you like our show, please rate and review it. You can do that wherever you get your podcasts. I’m Zoe Thomas for the Wall Street Journal. Thanks for listening.