The Metaverse: A Paradigm Shift In Marketing
Issue 2
If you’re just joining me here, welcome to Issue 2 of the 0xCc17 Newsletter. I write about the evolution of consumer marketing in Web3 - the intersection of crypto, culture, and communities.
Blockchain, the infrastructure technology layer has enabled a new cultural primitive where humans are organising themselves on the internet and convening to take collective actions that build value. In the last couple of days, after marvelling at the astounding value being created by certain1 NFT projects, I deep-dived into the world of autonomous communities to better understand the intricacies of human behaviour in the metaverse and became a part of the conversation.
In this issue, I discuss the remarkable aspects that drive web communities to come together, and why every brand manager needs to watch and understand this phenomenon closely.
Introducing Decentralised Autonomous Community (DAC).
DAC’s are communities that self-select, gather, and conform around a narrative packaged as a token or an NFT. Members are incentivised by exclusive privileges and take collective decisions that benefit the DAC. Some are loyalists who are motivated by a unique sense of belongingness and eventually become evangelists, unified by a common goal of asset appreciation and maximisation of returns.
A brand strategist will define this as the ultimate goal of community marketing to build long-term value. In the metaverse, this is happening organically - without the need for advertising dollars.
Let that sink in.
Also, here’s the present state of the market: The total sales volume of NFT’s on the trading platform Open Sea surpassed $3B in August, up from $300M in July. The trading frenzy or ‘NFT Summer’, was largely driven by institutional interest and brands like Visa, Coca-Cola, Budweiser, Marvel, Time magazine, and others experimenting with NFTs. The high sales volume was a direct outcome of the star-power of the Top 30 NFT projects like Loot (For Adventurers), CryptoPunks, Bored Ape Yacht Club (BYAC,) and others with highly engaged communities.
Let’s look at the network effects by a very cool community-centered project, Cool Cats NFT and apply their community practices to Brand Brave, who is keen to explore DeMar (Decentralised Marketing).
You may ask why would any brand want to purposefully create decentralised communities that they have no control over? I’ll answer that subsequently, but here’s a 3 stage process for Brand Brave to develop an NFT strategy.
Stage 1
Below is a visual representation of Brand Brave’s relationship with a digital entity that operates as an autonomous unit outside of the traditional realm of the centralised corporate (Brave) - yet acts in a manner that enhances Brave’s brand reputation, drives new audiences, and creates an additional revenue stream independently for it.
What is being demonstrated here, is that the DAC can have specific roles and responsibilities within the metaverse that benefit Brand Brave without its direct involvement. After all, that is what decentralisation means and if corporate HQ is interested in leveraging the full potential of Web3 in marketing, a shift in mindset is needed.
Stage 2:
Outlined below, is what each stakeholder in the value chain would be responsible for, what percentage of the value they create for the overall DAC, their communication approach, and the key performance indicators.
Take a moment to gaze at this composition chart because it’s here that the economic value will start to get created - the majority by the community at 70%.
Stage 3
How does Brand Brave get started with forming their DAC?
The answer to getting started lies in the age-old familiar concept of brand licensing. It’s a great revenue stream and it’s what the smartest consumer brands do to amplify their marketing efforts. For instance, The Walt Disney Company has been recognised as the world’s most influential licensor with revenues upwards of $54B in 20182 for their consumer products unit. Licensing is big business for brands with iconic identities, assets, titles, or characters that command a high recognition.
Brands can extend the brand licensing concept to builders in the NFT space and give them licensee rights, governed by a smart contract on a blockchain. What this means is essentially passing the control over to the decentralised ecosystem and allowing the stakeholders to thrive.
Additionally, Brand Brave can provide seed capital and contribute intellectual capital to the founding team, thereby building an ecosystem that continues to be income-generating.
Here’s Brand Brave’s new DAC ecosystem:
Seen above are Brand Brave’s input factors - the brand license, seed capital and intellectual capital (as needed) provided to the founding team. The founding team then builds the decentralised ecosystem by aligning incentives with the community and forming a narrative with an NFT project. Over time, Brand Brave starts to accrue benefits, as seen in the output factors above, and the model generates revenue. Brand Brave is also able to fully automate receivables such as royalties on sales through code on a smart contract.
Now that we have an operating framework, we can access what’s so unique about DAC’s, and how a brand can benefit from adding a decentralised approach to its marketing strategy.
In a landmine of hundreds of NFT projects and digital artwork being released every day, some aspects that clearly distinguish the diamonds from the rough.
Community-based NFT projects are built by a launch team who incubate a storyline, give it meaning and life visually with digital art, and add intrinsic characteristics (rarities) that generate over time. The most popular NFT projects today have been thriving due to strong communities that have bought into the narrative and benefiting from the NFT’s utility, beyond just the art.
Fundamentally, the process of an NFT project development and building the GTM plan is similar to consumer brand marketing, but there’s a key difference in ideologies.
So what truly separates community-first NFT projects from enterprise-level product marketing?
The difference is that of ownership versus consumption, the goal of shared success versus satisfying individual needs and fulfilling the psychological desire to belong to a community.
These are important facets that motivate brand loyalty.
What can Brand Brave take away from the Cool Cats NFT project in terms of Web3 crypto culture?
Relatable Narrative: Just like Cool Cats, Brand Brave is 3GMI ‘Going To Make It’ if it connects with potential supporters with a purposeful origin story. The NFT project needs to confirm with the cultural norms, demonstrating scarcity value, and be built on the genesis of blockchain. It’s not just about how iconic Brand Brave’s identity is or even how beautiful the art is. The key here is if the narrative continues to be relevant for the NFT to retain or rise in value.
Continuous Utility: The star feature that can potentially differentiate Brand Brave’s NFT project from other NFTs, is the enterprise flex (i.e the utility value) that can it can bring to the table. Think about utility as Brand Brave’s loyalty program on steroids - timed new product drops, merchandise, event tickets, backstage passes, meet and greets with talent and so much more packaged in an NFT. Today, most consumer brands have their loyalty programs but they are struggling and, NGMI (Not Going To Make It) due to diminishing utility value and a drop in brand engagement over time. On the other hand, what makes NFT’s unique is that they can continue to add value to the holders with continuous experiential possibilities, powered by smart contracts.
Community Connect: There’s a consensus amongst those who closely watch and analyse NFT’s, that the ones that continue to hold value have engaged communities. Cool Cats built a strong community from the start by creating an initial pool of early adopters and quickly ramping awareness through endorsements by influencers who bought and then changed their social profile picture to display the Cool Cats NFT. The founding team demonstrated that they were community-centered with a solid WAGMI (We Are All Going To Make It) message, as they promised to reinvest 20% back of the raise into future projects. Through a well-monitored Discord channel, they connected 24/7 with a global audience. The winning move was the Cool Cats X Time Magazine collaboration that gave the project an aspirational value. A Cool Cat NFT was picked up recently for 110 ETH (approx. US$360K!)
In summary, NFT adoption as a marketing and growth strategy is like tokenising the brand value and distributing it to customers who hold the NFT. It’s linked to a financial asset value that can appreciate or depreciate, depending on market conditions. For an enterprise, an NFT is a product extension into the decentralised digital world and an additional engagement channel with a crypto native audience.
If you’re an investor in a customer focussed business or an executive responsible for the growth of a consumer brand, it’s impossible to ignore the crypto culture demographic that’s shaping the future of digital asset consumption. Here’s an insightful interview by FWB (Friends With Benefits) DAO’s (Decentralised Autonomous Organisation) members where they talk openly about the culture and inner workings of their DAO. Not all are structured and shaped the way FWB is, but it’s a similar operational mindset.
More brands being a part of the decentralised world is something the crypto industry is bullish about. The path ahead is not as straightforward as developing a marketing plan and executing it, yet, the potential rewards are worthy of anyone’s time and investment. To be clear, adopting the crypto architecture is not meant to be a replacement for a strategic marketing campaign using the current media channels, but an enhancement to it. NFTs will eventually emerge as an indispensable marketing channel.
The NFT approach for Brand Brave and the integration charts developed above are for concept framing purposes only. Brands must have their own KPI’s and motives behind adopting an NFT strategy. The good news is that we are all very early to this, the more chances we take, the more we learn. (A/B testing - for those familiar).
From pop culture, sports, music, film, or gaming, NFT’s can be game-changers in building globally interconnected communities and creating relationships with customers beyond what you can possibly imagine today.
Join me and play a role in the evolution of marketing in the Web3 era. To learn more or to develop a custom NFT strategy for your brand, please reach out.
Thanks for reading! Please leave a comment below if you have thoughts or questions. To receive future updates and newsletter releases, please sign up:
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GMI, NGMI, WAGMI are community created crypto acronyms seen often in social media
Love it! Very useful to start putting some frameworks together as to how web3 tools can add to businesses' existing marketing strategies. I'm looking forward to your Roundtable with JUMP in a couple days!