Morning, afternoon, evening - Joe here - welcome to the 64th edition of The SEG3 Report. The vibes were immaculate at SEG3 London last week, so thanks to those of you that joined us. And for those of you that missed it, you’re in luck as over the next three editions, myself & Jay Stuart will summarise the must-know takeaways from all the sessions from last Tuesday & Wednesday.

Alongside that, Rob Whitehead from MSquared takes a deep dive into what it takes to build brand loyalty in virtual worlds + some super interesting research about children’s use of GenAI in learning, play & day-to-day lives you should all take a read through.

Right, shall we get into it?

Contents: Edition #64

• The key learnings you need to know from SEG3 London 

• How to Build Brand Loyalty in Virtual Worlds

• What’s the impact of GenAI use on children?

Key Learnings from SEG3 London

Given some much was shared last week, we thought it would be helpful to try and synthesise each session from the two days into key takeaways which can hopefully help get you all up to speed and spark some ideas. We’re going to break it into 3 parts, this being 1 of 3!

On that note, the first 6 (of 18) below:

1) Producing & Financing Content: Moving at the Pace of Culture

→ UGC platforms are giving creators incredible distribution, with AI now also reducing their cost of production, but there is credibility and infrastructure to working with traditional channels that many creators find themselves reverting to once they hit critical mass (i.e. Mr Beast & Amazon).

→ Budgets are down. There’s less buyers and not a great deal is being commissioned. That being said, traditional players are pivoting their content strategies to bring more digital-native & non-traditional creators into their ecosystem. For creators that build a community and validation through UGC platforms, there is now a very real pathway to gain financing from traditional players.

2) Building the Next Forever Franchise
You’re all in luck as Will Harrison shared his brilliant keynote on his also excellent ‘Brands to Fans’ newsletter - check it out in full here.

3) Sips & Scripts: When Fanta met Beetlejuice

→ Matching brand identity and voice with the right cultural moment is essential. For Coca-Cola, the Fanta brand is spooky & playful, so supporting WBD’s Beetlejuice gave them an opportunity to amplify their storytelling around Halloween in an authentic way.

→ Just advertising isn’t enough. Be unexpected, creative and make it 360 degrees. Coca-Cola lent into some of the key lore from the movie, and integrated this into their digital and IRL activations, all the way from Beetlejuice-inspired products to an afterlife train experience - all of which added to the suspense around the movie release, added more layers to their storytelling, and enhanced the key cultural moment of Halloween for Fanta.

4) Balancing Innovation & Ownership: The Future of IP Protection

→ AI is making it impossible to keep on top of IP infringements, with the amount of content that can now be created, whether in UGC environments by fans, or more sinisterly by bad actors, IP owners urgently need a rethink to protecting and growing their IP. A new playbook is needed.

→ In creative industries like entertainment that revolve around IP and licensing, the shift needs to go from enforcement and shut-down, to retroactive monetisation & collaboration. This can give birth to new business models and help to introduce your IP to new fans, which will be imperative to remain relevant to future generations.

5) Lights Camera AI-ction: AI in Media & Entertainment

→ Regulation is necessary (and coming), but uninformed, blanket regulation will only hinder innovation. Such regulation needs to find a balance between protecting and correctly rewarding creators (so they are still incentivised to create), and providing tools and services to brands and producers that supercharges their capabilities from a creative and production perspective.

→ Create an AI policy internally now so you know what your do’s and don’ts are when it comes to procuring solutions. This gives the team guardrails. From there on out, experiment, experiment and experiment - find out what works and can be integrated into your workflows. Incremental wins are still wins and moving you in the right direction.

6) Funnels & Flywheels: Storytelling for Gen Z & A

→ Younger audiences do not have an attention span problem. They more than any generation before understand algorithms, and are cut-throat with the content they consume. Brands need to build with intentionality for each channel and platform - understanding the nuance and expectations of the audiences living there - if they are to be successful in gaining their interest. Otherwise, you’re getting skipped!

→ Multi-platform distribution isn’t optional - it’s a necessity to reach fragmented audiences (and should be baked into your strategy from the get-go). You’ll need a flywheel that meets people where they are - from games to socials - because the more touchpoints you have, the more chances you have to build loyalty & fandom.

So, that’s the first 6 of 18. The overarching message?

Generational shifts are underway. Technology and digital platforms have more of a sway and are shaping habits faster than ever. And business models built for the last era are going to need a sharp rethink.

That said, there’s still value in heritage and experience, so legacy IP owners and brands/creators that have strong communities (like many sports, entertainment & gaming brands do) & thoughtful distribution, are in the prime position to lead. Audiences still crave connection, and they’re looking for it across both physical and digital worlds.

How to Build Brand Loyalty in Virtual Worlds

Many brands are exploring virtual spaces - branded islands, digital showrooms, one-off concerts. These activations create memorable moments but tend to be temporary. While they engage audiences briefly, they don’t build lasting value or ongoing relationships.

The future of virtual engagement lies beyond campaigns. It’s about creating live, persistent, high-frequency environments where audiences interact, transact, and build lasting digital identity. In these systems, every interaction compounds into long-term loyalty, rich data and defensible IP. These immersive ecosystems evolve with their communities, not isolated events that fade away.

Sustaining ongoing virtual spaces is technically complex. Real-time, high-volume interaction places significant demands on infrastructure. While traditional multiplayer games are built to handle tens of thousands of interactions per second, blockchain systems have historically faced challenges in reaching similar levels of responsiveness and scale.

However, recent technical advances are starting to address some of these limitations, opening up new possibilities for building persistent, live, and ownable virtual environments.

Why should you care?

TL;DR: The next generation of virtual experiences will blend gaming, social interaction, commerce, and live content into a single real-time layer. To build this, brands need infrastructure capable of delivering live, high-volume, verifiable engagement at global scale.

In full: The opportunity is clear. Real-time systems create:

• Continuous engagement: Always-on spaces that create habitual touchpoints.

• Durable identity: Progress, actions, and ownership that persist across worlds.

• Compounding data: Verifiable records that deepen with every interaction.

• Open extensibility: Ecosystems that evolve alongside your audience.

But real-time interaction at scale remains a core challenge for virtual platforms, especially when decentralisation, ownership, and verifiability come into play. Traditional systems rely on centralised servers to sync game state quickly across users. Blockchain networks, by contrast, haven’t historically been optimised for that kind of live responsiveness.

This gap has often held back creative and commercial ambition. It is difficult to build persistent, engaging digital worlds, let alone full economies, when the infrastructure struggles to support live interaction at scale. But things are changing.

Turning a complex technical brief into a live experience

Somnia, a next-generation blockchain built for gaming, asked us to take on an open challenge: could we take their infrastructure and demonstrate what was actually possible in a live, real-world setting? We took that brief and ran with it.

In just three weeks, our team of engineers designed and delivered Chunked, a fully playable multiplayer experience that made complex real-time systems feel simple and intuitive for the player. Over 70,000 players generated more than 250 million live on-chain events, all processed in real time.

Under the hood, this required solving some of the hardest problems in distributed real-time infrastructure. We built entirely new systems to handle high-frequency on-chain interaction, while maintaining accessibility, performance, and global scale. But for the player, none of that complexity is visible. What they experience is seamless, live, and persistent interaction, exactly the kind of effortless digital experience brands want to offer.

For brands, Chunked offers a glimpse into what’s now feasible: persistent worlds where every interaction is owned, visible, and extendable, where loyalty, identity, and commerce can compound over time.

This opens the door to virtual worlds that are not limited to one-off activations, but built as living ecosystems.

This is the strategic layer that will define the next wave of virtual engagement. The first wave was about presence - having a logo or an experience inside someone else’s platform. The next wave is about control: building systems that generate compounding audience, data, and IP value over time.

That requires rethinking infrastructure. It means:

• Building on high-performance, decentralised systems.

• Using open standards that make data portable and usable beyond one platform.

• Prioritising real-time, verifiable interaction at global scale.

Virtual worlds are no longer theoretical. The question is no longer if brands should build in them, but how - and whether their infrastructure can handle what comes next. The brands that master real-time systems now will own the network effects of tomorrow.

What’s the impact of GenAI use on children?

The Alan Turing Institute has launched a new research project alongside LEGO exploring the impact of generative AI on children.

Some key stats:

• Nearly a quarter of children aged 8-12 report having used generative AI, with the most used tool being ChatGPT.
  

• 43% of children report using the tools for creating fun pictures and to find out information or learn about something, and 40% report using it for entertainment and playing around.
  

• 52% of children attending private schools report using generative AI, as opposed to 18% of children in state schools.
  

• 76% of parents and carers indicated they were concerned their children may be too trusting of the technology and not think critically about the information it provides

And much more, making it our recommended read for this week 👇

In other news this week…

• FIFA & Mythical Games launch FIFA Rivals: see here.

• NASCAR & Voldex bring Mexico City track to Driving Empire: read here.

• Mattel partners with OpenAI to help design toys: read here.

• PSG bring Kevin Durant to Roblox Obby experience: see here.

• Tottenham’s Son Heung-Min comes to Fortnite: see here.

• Paramount Game Studio, Peyo Company & Atlas Creative launch Smurfs Grow a Village: read here.

• International Ski Federation (FIS) shows record growth across owned platforms: read here.

• Pudgy Penguins passes 50 billion views on GIPHY: read here.

• 20th Television Animation’s Hank Hill, Bob Belcher and Cleveland Brown arrive in the Fortnite: see here.

• Super League & Chartis team up to launch ‘Hi-Chew Creator Incubator’ in UEFN: read here.

• Bandai Namco Entertainment America launches Creator Collective: read here.

• SL Benfica launch virtual experience with Infinite Reality: read here.

• Funcom & Legendary Entertainment launch Dune:Awakening - has strong start on Steam: read here.

Working on anything cool, or have a press release you would like us to cover? Send it in for the chance for it to be covered in next week’s edition!

That’s all for now folks - thanks again for reading the latest edition of The SEG3 Report and if you found it of interest, do consider sharing with a friend!