How Brands are Embracing Web3
The history of brands on the web to date is a bumpy one. After the invention of the web in the late eighties, the potential for brands was largely unrealised – until the development of graphical, user-friendly, web browsers enabled the dot-com boom around the millennium. The subsequent bust helped bring about Web 2.0, where centralized platforms such as Google, Facebook and Apple reigned supreme, codifying the ways brands and consumers interact via advertising on social media.
This brings us to the status quo of today, where brands have largely discovered how to best work within the constraints of Web 2.0 in order to thrive. That comfortable position that brands and their marketing departments now inhabit is being threatened by the advent of Web3, however. And a shakeup may be coming just in time. Increasingly, brands are backing away from Web 2.0 platforms as they become mired in controversy. Just look at how consumer goods giant Unilever paused its Facebook and Twitter advertising in 2020, citing the polarized atmosphere in the US, with other companies including Coca-Cola following suit.
Web3 promises a more direct relationship between brands and consumers. But just as brands missed the opportunity at the very beginning of Web 1.0, there is a risk that the enormous opportunity Web3 represents will be passed up by brands that aren’t brave enough to experiment with the new technology. To that end, let’s take a closer look at the best practices brands need to bear in mind to make the best use of Web3.
As brands explore new ways to use their existing IPs in the Web3 world, one of the most intriguing possibilities is via the use of NFTs. If you’re unfamiliar with exactly what an NFT is, here’s a quick recap. Simply put, NFTs (or non-fungible tokens) are blockchain-based items which prove ownership of digital assets – everything from a piece of digital art, a weapon in a videogame, or a trading card. The key benefit of NFTs is that they can be traded on the open market, meaning they are simultaneously investments as well as art objects.
The attraction of this format to brands with existing stores of content is obvious, with one of the more successful attempts coming from the NBA with its Top Shot digital collectables that package highlights from games past and present. The sports world has been a rapid adopter of the technology, with the Chicago Bulls having minted and sold NFTs featuring their championship rings.
NFTs are perhaps most embedded in the public consciousness as the inescapable profile picture collections such as Bored Ape Yacht Club or CryptoPunks. But NFTs can be far more than that – offering all kinds of utility that brands might find of interest. Take musician Deadmau5, for instance, who created a collection of wearable NFTs compatible with metaverse platforms such as The Sandbox. More than just being clothing items, the NFTs also confer access to a guest list for the musician’s shows.
That additional element is key to your NFTs having staying power (and not quickly burning out as so many have) – including utility alongside aesthetics. According to a report from Cointelegraph, NFT sales topped $17.7bn by the end of 2021. If brands want to cash in on that without crashing the market, they must think about connecting NFTs with real-world experiences and services, whether that’s in travel, food, gaming, banking, or any other sector.
Real examples of what that utility might look like include recent NFTs from clothing brand Coach, which featured characters from a game it had created. The launch was tied into the company’s 80th anniversary, with NFT owners being granted a real-world physical bag. Crucially, the NFTs were given away for free, garnering goodwill with the company’s community. Of course, utility needn’t always be a physical benefit, with the flipside of that approach being ensuring NFTs have utility in the metaverse.
Surely one of the most enticing possibilities for bands with a certain amount of customer recognition is in creating virtual experiences within the rapidly growing arena of the metaverse and its many virtual worlds. Indeed, the global metaverse market is estimated to grow from $45.4bn in 2019 to $1.5tn in 2030 according to PwC’s Seeing is Believing report. Such initiatives prove attractive to both a brand’s existing customer base and the digital communities already existing within the metaverse, significantly expanding the potential audience they can access.
The metaverse’s continuing growth has been spurred by world events. During the height of the COVID-19 pandemic and the associated lockdowns that led to the closure of many physical retail stores, many pivoted into digital spaces. One such example was sportswear brand New Balance, which partnered with SportsShoes.com to open a virtual store accessible via a web browser back in 2021. The store was fully explorable, enabling users to purchase clothes after trying them on via a Ready Player Me avatar. Thanks to the interoperability of their offering, the outfits can be used across all the many apps and games which support the platform.
That was a fairly rote, metaverse-lite reimagining of a physical space, but other brands have pushed the boundaries of what is possible in the metaverse much farther. Yahoo, Selfridges, Pokemon and fashion designer Charli Cohen developed a metaverse experience known as ElectricCity, which allows consumers to simultaneously purchase real and digital copies of the same piece of clothing, again making use of Ready Player Me’s interoperable avatars.
That’s far from the only instance of clothing brands entering the metaverse (a process to which they are well-suited thanks to the easily digitisible nature of garments). Pull&Bear, for instance, launched a simultaneous campaign across its real store and the Pull&Bear virtual world.
A step above that is owning virtual land in a dedicated multiverse platform like Somnium Space or Decentraland. Occupying land on an established platform means more eyeballs on your space, as well as less development work with the platform having already done the heavy lifting.
If actually owning the land is too much risk for a brand to take on, services exist to take the worry away by providing virtual land for rent. Volatility in the digital land market has opened up opportunities to rent virtual spaces rather than purchasing them outright, in order to mitigate the risk of being left with a useless asset. Landowners such as Admix, which holds property across a range of metaverses, help brands to lease land for as long as is necessary. That might coincide with the duration of a particular marketing campaign or event, for example, allowing brands flexibility while ensuring they aren’t exposed to the risk of holding virtual land themselves.
That’s not to say that brands can’t create metaverses of their own, even setting them up in such a way that they can act as brokers for other brands. Volkswagen subsidiary CUPRA, a manufacturer of sports cars, is creating its own metaverse known as METAHYPE, which it describes as “a universe that acts as a collaborative space where brands, start-ups, and content creators provide a wide variety of events, gatherings, and experiences for individuals to create and share culture.” The metaverse platform is planned to enable brands and individuals to highlight NFTs, display digital and physical products, and host virtual events, with CUPRA saying that it intended to collaborate with others such as Barcelone-based music festival Primavera Sound.
It needn’t only be brands in “cool” sectors like fashion, gaming or the automotive industry that can make waves in the metaverse. Look no further than banking giant HSBC, which earlier this year announced a new partnership with The Sandbox to help users engage with the business inside the metaverse. HSBC duly acquired a piece of virtual real estate, which it said it would use to engage sports, esports and gaming enthusiasts.
Suresh Balaji, Chief Marketing Officer, Asia-Pacific, HSBC, said: “The metaverse is how people will experience Web3, the next generation of the Internet — using immersive technologies like augmented reality, virtual reality and extended reality. At HSBC, we see great potential to create new experiences through emerging platforms, opening up a world of opportunity for our current and future customers and for the communities we serve. Through our partnership with The Sandbox we are making our foray into the metaverse, allowing us to create innovative brand experiences for new and existing customers. We’re excited to be working with our sports partners, brand ambassadors, and Animoca Brands to co-create experiences that are educational, inclusive and accessible.”
And while making this leap might seem daunting, we’ve seen plenty of brands dipping their toes via tie-ins with games with metaverse aspirations such as Fortnite or Roblox. whether it’s Marvel skins in Fortnite or the Nike Land experience in Roblox. While it’s true these aren’t truly Web3 partnerships, they suggest the level of interest that already exists in the possibilities of the metaverse for brands, and herald what is to come.
Another stalwart of Web3 is, of course, cryptocurrency. And when it comes to brands, cryptocurrency tokens are gaining ground as a replacement for traditional fan clubs, with fan tokens for football clubs being particularly prominent. Ownership of the tokens typically confers some benefits such as discounts in club shops, and the possibility to win tickets.
Socios is the largest entity in the space, facilitating the club coins of some of the world’s biggest football teams, including Barcelona, Juventus and Arsenal. One intriguing possibility the fan tokens represent is bestowing upon holders the ability to vote on decisions the team make, with the example proffered by Socios being deciding what is written on a captain’s armband. According to the BBC, more than £262m ($350m) had been spent on virtual currencies by December 2021.
This approach can also serve to regenerate a brand’s image. The storied video game company Atari is just one example, having launched its own Atari cryptocurrency token on the Ethereum blockchain, with the ambitious aim of becoming “the token of reference for the interactive entertainment industry”.
We would be remiss not to mention the difficulties brands face when entering Web3. At the time of writing, the Web3 world is reeling from a cryptocurrency price meltdown, with the Terra Luna cryptocurrency (a key element of one of the most popular examples of a so-called “stablecoin” in TerraUSD) losing almost all of its value. Tally that with huge drops in the price of Bitcoin and Ethereum and it’s thought that over $200bn was erased from the crypto market in a day – potentially spooking brands who might not want to be involved with such a volatile sector. Of course, the fact that the market is currently in the doldrums means the barrier to entry has been significantly lowered – with the price of virtual land also crashing down.
Brands should also be aware that venturing into NFTs might not prove popular with certain audiences. In the gaming space particularly, vociferous opposition to NFTs on the basis that they are simple cash grabs has forced a number of companies into embarrassing climb-downs, including British development studio Team17 and publishing giant Ubisoft.
Aside from the aforementioned issues of the current cryptocurrency climate and a trenchant disdain for NFTs, because paid advertising will become increasingly difficult in the world of near-anonymous users that Web3 encourages, brands will have to shed their existing Web 2.0 expectations and understand how to engage communities of users with similar interests.
Image-conscious brands will also have to reckon with the decentralization inherent to Web3, and what that means in terms of regulation and unintended reuse of your content. On the centralized platforms of today, moderation is a given, but Web3 is rendering these existing approaches to safety unusable.
In the metaverse, virtual land is populated by anonymous users who are free to do whatever they want with their spaces and behave accordingly. While the kinds of content that advertisements might appear alongside today is endlessly varied, in the metaverse brands will have to contend with that same variability in the actual platforms hosting the content as well. And in worlds where branded items might be equippable, brands face the risk of unintended association with potentially undesirable behaviour and activities – adding a whole new dimension for brands to consider.
While the unpredictability inherent to the space will mean brand managers have to be on their toes, it’s likely riskier to just wipe your hands of Web3. Instead, brands should be leading from the front to ensure control of their message, heading off users and creating whole new associations for existing properties. In the worst case, we can use the example of Winnie the Pooh, who became the subject of a popular meme used to insult President Xi Jinping of China – resulting in a ban on releasing the film Christopher Robin within China.
The ultimate takeaway is that the brands already succeeding in Web3 are the ones that are able to create communities of passionate users, as opposed to the passive audiences they are used to advertising to in the Web 2.0 era. It’s clear that Web3 is bursting with potential new ways for brands to attract customers, but seizing the opportunity will require bravery and a willingness to adapt new modes of thinking.