By Danielle Gale, VP Strategy & Media at AUDIENCEX
This is not a trick question, but it could be: What is Web3? Depending on who you ask, you’ll get a different answer.
To fully understand Web3 it’s best to start with looking at how the world wide web has evolved. Web1 was read only and existed roughly from 1991 to 2004. With websites like AOL, MSN, and Yahoo dominating the majority of users were simply acting as consumers of content. Web2 began around 2004 and still exists today as read and write. This brought us more consumer participation with user generated content and social media which platforms like Facebook, YouTube and eBay flourished. Web3, coined in 2014 but the idea gained interest in 2021, is the next generation of the internet. And although it is still being defined, it is read, write, and own.
With the advancement of blockchain technology and decentralized ledgers, we can assign digital assets to wallets that don’t require a custodian, and allows a user to fully own the asset and transfer it across to the web.
Decentralized applications are built to talk to the wallets and allow users to log into these applications without the need to create an account or port personal information.
What That Means for Brands and Marketers Is Some Pretty Cool Stuff.
It means we can all transact in virtual worlds with digital assets. With non-fungible tokens (or NFTs), users can buy and trade digital assets like images, art, gifs, videos, songs, with authenticated ownership.
And the NFT space is exploding. The NFT market was worth $232 million in 2020 and ballooned to more than $40 billion in 2021, according to this article on Bloomberg. And already, people have dropped $37 billion on NFT’s this year, as reported here on Reuters.
Why now? The technology and infrastructure are finally here to make it possible to take that stuff with you around the web. An NFT gives you ownership and authenticates that ownership in a data, media, or image file. And if you buy something scarce, it’s written in the smart contract of the blockchain that there will only ever be x number of these things ever. In other words, Web3 and NFTs create a monetary value for things in a digital ecosystem that never existed before.
Why Should My Brand Pay Attention to This?
NFTs are digital tokens recorded on blockchains which link to specific images, stored on decentralized servers.
The problem with digital assets vs physical assets has always been scarcity. Once created, a digital picture can be replicated and shared an infinite amount of times. NFTs solve this and therefore open up the potential of digi-physical commerce.
Luxury brands like Gucci, Nike and Adidas have been quick to recognise the potential of web3. They are backing a future world where consumers care just as much in how their metaverse avatar is branded, as to what they wear in real life. And that creates a huge market for these brands to capitalize on. They need to adapt their brand positioning and product offering for the digital native consumer of tomorrow to stay relevant.
NFTs Unlock a Whole New Internet and That’s Something Brands Can Build On.
Brands can therefore create commerce in the digital world like they’ve done in the analogue world.
There are several ways some brands are already using NFTs:
Granting special privileges: Starbucks announced the launch of its own Web3 NFT because it wanted to offer membership value to its customers. Any customer that bought an NFT got a distinctive custom flavor and model design customized to them. They also got membership voting rights for the next upcoming flavors and lifetime 15% discounts. And that’s a very common way that brands are starting to use NFTs.
Incentivizing engagement: Already, there are ad networks that are creating their own formats. First, you watch a video about the brand or take a survey, and then you can mint an NFT in the ad format. And that’s important because brands shouldn’t be creating NFTs just create them; they should be looking to promote content or nudge behavior.
Connecting the physical and virtual world: Nike, Prada, Coachella, Dolce & Gabbana, and Gucci are just a few of the luxury brands releasing very bespoke, very limited-edition collections of NFTs that their most avid fans collect and trade. At Prada, for example, Fast Company posted here that consumers who buy one of only 100 black and white button-down shirts by Cassius Hirst, son of artist Damien Hirst, will receive an NFT (a GIF) as part of the experience.
Building revenue: Digital media companies have vast archives, all of which are rich fodder for creating NFTs. For example, CNN Vault sells pieces of their archive library of significant historical events. But you can also imagine physical retailers creating virtual goods that you can gift to friends like birthday flowers, music, or virtual art. The options are limitless, especially as virtual spaces (aka metaverses) also come online.
And there are hundreds more examples and use cases on Block 6’s site. But none of these is a just watch-an-ad-for-art or buy-a-thing-for-a-token technology.
Web3 Includes Two Critical Ingredients Missing in the Old-Fashioned Web: Identity and Money.
A decentralized mechanism guarantees trust in a system not controlled by a central entity. So an NFT is uniquely for you, and it’s connected to your wallet instead of a Facebook, TikTok or Roblox login. And that becomes your portable identity.
NFTs and wallets are also interesting because they tell us about the future of identifiers. If we know there is one ID per wallet user, we can start collecting information about that user in a very privacy-safe way. And this solves the issues right now with cookies and other UIDs: You can track that wallet throughout the internet, whether the owner is logged in or not, and still protect them. And because it’s on the blockchain, the NFT is authenticated. It’s more reliable than a mobile device ID, and it’s more true than any other technology that exists today. As part of the blockchain, it’s immutable and it’s persistent (unlike cookies which are neither). In other words, it’s the future identifier we’ll all likely be using someday and at the end of 2021, there were already more than 28 million wallets trading in NFTs, according here on Reuters.
There are still some hurdles to using NFTs and Web3 easily for brands and advertisers. You need illustrators and designers, you need developers that can build on the blockchain, and you need a marketplace partner that can deliver the NFTs. But those are all easily surmountable with the right partner and the payoff is worth it.
The biggest thing brands need to do, especially after the pandemic, is connect more directly with their consumers. NFTs and Web3 are investments that really allow that one-to-one brand-to-consumer connection to happen.
And that, as they say, is priceless.
About the Author
Danielle Gale is VP of Partnerships at AUDIENCEX, the leading performance platform built for omnichannel marketers.