Should companies bet it ALL on web3? Not so fast…
By Greg Kahn
Emerging Tech Exchange
Founder & CEO
Published on August 16, 2022
Spend a few minutes on a platform like Twitter and you'll leave thinking everyone is bullish on web3.
Raise a skeptical point about the metaverse and you might risk being labeled a dinosaur – do you really know better than the burrito barons at Chipotle and the toy tycoons at Mattel? Some of the biggest names in the business have rolled out NFT- and crypto-centric experiences within the last year, making it appear as though web3 is on the cusp of overtaking Web 2.0.
At least, that's how the discussion has been unfolding on the surface.
An era of dissonance
I’ve attended a number of events in the last two months alongside leading brands and marketers, and the focus has remained squarely on web3. There were partnership and launch announcements aplenty, and this emerging area – which hinges heavily on community, fan experiences, and virtual goods – drove the conversation on Madison Avenue, in Cannes, in Silicon Valley, in Miami and beyond.
Behind closed doors, however, I've observed a different kind of conversation taking place -- one that sees executives torn between the resources they've already committed to their existing platforms (i.e. Facebook, Instagram, Snap, Twitter, and TikTok) and the next phase of digital marketing as we know it.
Caught in the middle
Especially for big-name brands, the Web 2.0 world is a gateway to millions or even tens of millions of followers. Businesses have spent nearly a decade slowly and deliberately building virtual audiences on social media, as well as content and business models that were designed to serve those platforms. Casting all of that effort aside wouldn't be savvy in a business world where volatility is becoming more and more of the norm.
To further complicate things, some executives are feeling incredibly skittish in light of the recent crypto winter and, prior to that, the market volume of NFT sales and the value of the tokens finding themselves in freefall.
What do you do when you're caught between a tried-and-true, heavily funded Web 2.0 marketing strategy and the allure of web3's promising (yet unpredictable) brand-boosting firepower?
You compromise.
My recommendation
Web 2.5 is the most sensible approach you've never heard of – but you can certainly expect to see the term popping up more and more.
Brands should be keeping one foot in each world, not overcommitting to one or the other, but instead leveraging the resources they've already invested while strategically exploring new marketing avenues. Businesses must remain agile regarding how they allocate their capital instead of betting it all on a single strategy.
As it stands, the paths to revenue in web3 are still fairly unclear, besides selling virtual goods like in-game skins and NFTs. Web 2.0 is still the cash cow in terms of integrated commerce features, so from a purely revenue-related standpoint, it remains essential. On Instagram, for example, 44% of people shop on the platform weekly.
While very few brands have found resounding success in the web3 space as of now, there are a few shining examples of companies who have connected the two worlds with unified experiences. Here are a couple of my favorites.
Brands to watch
NIKE
A brand perpetually followed around by hype and buzz, Nike is all in on the metaverse. It created a virtual hoodie, released as an NFT in collaboration with RTFKT: this physical-plus-digital clothing item can be worn by the token holder’s Clone X avatar in the metaverse, with a physical garment for themselves in the real world.
What’s more, the hoodie includes an AR component. When the QR code on the front of the garment is scanned, its AR functionality will be brought to life in the form of visual effects – say, a pair of wings sprouting from the back of the sweatshirt. This is one of multiple Nike collaborations with RTFKT, a Web3 studio that the shoe brand acquired in late 2021.
At the same time all of this is happening, Nike is still doing an incredible job engaging its 234 million followers on Instagram – a fanbase so massive, they would need to be out of their skins to leave it behind. The shoe titan is still posting photo and video content to the ‘gram every day, showing absolutely no sign of slowing its roll on this key Web 2.0 property.
STARBUCKS
The most iconic coffee brand in the world is on the cusp of rolling out a Web3-based rewards program. Fans can expect coffee-themed NFTs that unlock access to exclusive benefits and content – they’ve been tight-lipped about the details, but more information should be forthcoming next month.
Instead of spinning off an all-new NFT-centric offering, Starbucks is carefully and strategically using tokenization to build on its existing rewards program. Interim CEO Howard Schultz says this move is the gateway to “one-of-a-kind experiences that you can’t get anywhere else, [and] integrating our digital Starbucks Rewards ecosystem with Starbucks-branded digital collectibles as both a reward and a community building element.”
Starbucks is no stranger to exploring new digital horizons. Before Apple Pay was introduced, the coffee chain was the first to launch a virtual wallet with Mobile Order and Pay. Their foray into digital payments was a lucrative one: in Q3 2022, 72% of Starbucks’ revenue was driven by drive-thru, mobile, and delivery orders. This brand is, and will continue to be, a shining example of how to explore the future while remaining firmly planted in the present.
Experiment...with an eye on the future
Individuals across the US are spending more and more time with creator tools. They want to own their creations and are eager to support initiatives that reward them for their work. It’s essential for brands to embrace the cultural, behavioral and content shifts that their customers are making.
While many Web 2.0 platforms continue to thrive -- Google's YouTube and ByteDance's TikTok in particular -- newer companies such as Roblox, Epic Games (Fortnite) and Dapper Labs are quickly gaining prominence. These newer platforms offer many unique opportunities for experimentation.
Where should businesses draw the line between investing in Web 2.0 and web3? Is a 90/10 split feasible?
There isn't one magic formula for innovation investments. Each company will have to evaluate the risks and potential rewards for moving budgets from Web 2.0 to web3 offerings. Regulatory risks, complexity of executing new strategies, privacy concerns and economic/inflationary/geopolitical pressures will all play roles.
That being said... don't put off planning for Web 2.5.
It's time has come.
