If you want to understand Web3, look at the strategic opportunities beyond NFTs.
Web3 is a new source of economic value. It’s a marketplace, a new revenue stream, a fuel for business growth, and a source of competitive advantage. To help you explore the full potential of the Web3 economy for brands, here is a Web3 playbook (pictured above and populated with examples below).
The playbook has four quadrants, and two axis. On the horizontal axis, there’s user focus and market focus. On the vertical axis, there’s incremental value-add and transformative value-add. Transformative value does not exist yet in the company. Incremental value add builds upon company’s existing products and services.
This approach uses Web3 to add value to a brand’s existing business. For example, all recent NFT drops and Fortnite and Roblox brand activations belong in this category. It’s the most populated quadrant. Here, Web3 is just another marketing and brand comms channel. However, it has potential to become a new revenue stream if it moves into any of the other three quadrants.
This approach revolves around connecting products and services in a new way to create transformative value. Product value now resides in the service and experience designed around it, as is the case where value is in connecting physical and virtual worlds. The value for Fendi x Ledger is not only selling Silvia Venturini Fendi accessories at luxury fashion prices, but in the crypto services that these accessories provide. Fendi is effectively designing behavioural change by connecting Web3 utility (digital asset management) and luxury design and brand power.
Another scenario, employed by LVMH, Microsoft and ConsenSys, a blockchain startup, is to authenticate luxury goods through blockchain. The authentication platform, AURA, provides information on products from design to distribution, effectively protecting customers from buying counterfeit goods.
Guerlain sold four original NFTs, commissioned from artists, to fund the creation of a self-sustainable agriculture laboratory garden and a 28-hectare biodiversity reserve.
This approach revolves around customer-led innovation. Provide customers with a new, better, different way of doing things in the additive manner. For example, OpenBazaar developed a decentralized blockchain utility to connect buyers and sellers without a middleman (and the associated charges). Tokenization of the ownership of physical products reduces e-commerce transaction costs. What is sold is a token representing a physical good. The payment protects both parties, reduces counterparty risk, and authenticates goods. When a buyer redeems a token, they get a physical good they bought, or they resell the token. This mechanism is a new way of building trust in retail marketplaces. Instead of trusting Amazon or TheRealReal, buyers directly build trust with sellers, which opens all sorts of new opportunities for brand-building and commerce.
Beyond these, there are other scenarios within the Design approach that add consumer value. For example, Neon DAO and Red DAO are created with a purpose of buying metaverse assets like fashion skins, pieces and virtual land. Similarly, Global Designer Network connects 100 fashion designers focused on creating digital fashion. Associated Press’ new NFT marketplace offers NFTs of works from the AP’s photographers. Planned are also “Pulitzer Drops,” the Pulitzer Prize-winning photography. Together with NFTs, AP also provides metadata with information on the photo details. Prior to AP, New York times and Quartz distributed their content in the NFT format.
References: Open Bazaar, The Fabricant, Friends with Benefits, Neon DAO, Top Shot, Global Designer Network, AP NFT, NYT NFT, Red DAO, Open Sea, Super Rare
This approach disrupts the value chain in an existing industry and creates value that didn’t exist before. For example, rather than disrupt the auctions marketplace via just Web3 technology, the cultural marketplace Otis disrupts the entire collectibles market. How? By seizing control of its critical asset: ownership. Otis’ goal is to build “the leading exchange for cultural assets,” powered by the collector community. This vibrant and growing network of collectors is rooted in the fundamentally participatory model that Otis built. Culturally hot collectibles become transparent and accessible, in contrast to the experience of the established auction houses. By putting forward a new way of creating, delivering, and capturing value in the collectibles market, Otis doesn’t only deliver superior products and services — like “party bidding,” where bidders can join forces — but instead an entire new market.
Another example of Disruption is Distributed Autonomous Organisations (DAOs) moving into physical assets. LinksDAO, a decentralised group aimed at buying a golf course for its member. The first batch of LinksDAO NFT sales accumulated $10.5M, and provides its holders membership in the future golf course. Imagine if a GUCCI jacket came with a token. Buyers can either redeem it to get hold of the jacket, sell it again on the marketplace, or fractionalize it.
References: Otis, Links DAO, LooksRare
The questions to ask about Web3
These quadrants we’ve explored — Addition, Systems, Design and Disruption — are some of the scenarios for strategic expansion of legacy brands in the Web3 economy. To move in the right direction, ask: “why is this a problem and how can I use Web3 to solve it?” Do not ask: “What NFTs should I drop?” Go beyond isolated initiatives like a fashion show in Roblox.
Instead, create a durable value generated by the growing brand ecosystem of services, physical and digital experiences, information, entertainment, community and collaborations that connect physical and virtual worlds.
Ana will be appearing on the NEXT Show on March 17th.