Roadmap to the Metaverse: How to Win Web3 with a Simple Framework
Below is a summary of our three-part series on ways that brands can enter the metaverse through building a strategy that creates long-term value based on the three pillars of web3: identity, ownership, and community.
We’ve been here before. Call it a case of digital Déjà vu. The rise of the internet in the ‘90s. The migration to mobile, and the surge towards social that followed. During these shifts technology transformed culture, changing human behavior forever. Now, as metaverse-mania reaches new heights, it signals a new shift – this time it’s immersive.
As the internet evolves into the metaverse it will impact every aspect of our lives from how we look, work, and socialize to what we buy and why. Brands once again have a massive opportunity before them. Winning means adapting quickly and developing a focused strategy that delivers value in new ways based on the defining elements of web3: identity, ownership, and community.
Ownership
Before web3 the only digital asset we could own and resell was a URL. Thanks to the blockchain, products no longer need to be physical to hold value. Digital assets in the form of NFTs can now be verified, purchased, and resold across a shared global platform.
For the first time, brands can create virtual products with real-world value. As we wrote in our web3 series article on ownership, “This dematerialization of consumption not only extends product lines, it also multiplies margins because virtual goods have zero incremental costs of production.” A digital t-shirt for example is made once and sold millions of times. That translates to significantly higher margins. Digital production means no materials to source, no packaging to design, no shipping costs, and no inventory to hold. Brands also earn high margin revenue in perpetuity through secondary sales of NFTS on marketplaces like OpenSea, often this averages 10% of each transaction.
Ownership is a defining element of web3 that impacts us on a human level. When we own something it immediately becomes more important to us. It’s a core principle of behavioral economics called the endowment effect that is just as powerful in the metaverse as the real world. It’s why virtual goods have become a $40 billion market and why brands across categories are starting to stake their claim.
Dolce and Gabbana released a nine-piece hybrid (IRL and digital) collection generating $6 million in a matter of days. Gucci launched a digital version of their Dionysus bag on Roblox that sold for more than 4x the price of the physical product. Avatar creation platform Ready Player Me has partnered with brands like Dior and New Balance, giving consumers new ways to style their digital selves across worlds. Once consumers become owners, their connection to the brand deepens, creating an opportunity to amplify advocacy through community.
Identity
Unlike any other time in history, our digital selves are seen by more people than we’ll ever meet in person. As we’ve previously written, most of us now spend 8 hours a day online, amplifying who we are through our avatars, social posts, and profile pictures.
The rise of NFTs is reinventing self-expression and fueling a $50 billion market space as we define our digital lifestyles. This is why profile picture collections like Bored Apes Yacht Club, CryptoPunks, and CoolCats are the new status symbols contributing to most of the $17 billion spent on NFTs in 2021.
For identity to inform a web3 strategy, brands need to first develop data-driven behavioral profiles of their highest value customers. Where do they spend their time and money? Who are their favorite creators? What are their passion points? From there, brands can begin to answer key web3 questions such as: What utility would customers want most in our NFT project? Which brands and creators should we collaborate with for a drop? How can we ensure our launch reflects our customer’s values? Understanding how consumers want to be seen unlocks insight into what drives them to buy.
Community
One of the most powerful aspects of web3 is how it enables brands to build true communities of fans. Unlike Web2 platforms like Facebook and Instagram that limit a brand’s organic reach to only 3% of their followers, web3 communities offer an always-on connection to 100% of their base.
This is why brands like Adidas, Gucci, and Time magazine are building their own communities on platforms like Discord. Known as the “Soho House of Web3” Discord connects to the blockchain allowing brands to provide high-value customers with early access to exclusive content, reward active community members with free NFTs, and serve as a hub for co-creation.
While it's still early days, one truth is becoming abundantly clear – brands that understand how to build a community are well-positioned to master the metaverse. As we wrote in our article focused on the importance of community in web3, Prada and Adidas teamed up to turn UGC into NFTs as an extension of their IRL Re-Source collaboration. Community members who had their work featured were rewarded with the ability to sell their NFT on the secondary market at an average value of $900 each. Not surprisingly, their Discord community quickly swelled to 50,000 members.
To effectively build community and deliver real value that goes beyond virtue signaling, brands can also partner with DAOs (decentralized autonomous organizations) like MyBFF.xyz, which was created to help women and non-binary individuals learn about web3. Socially focused NFT projects whose missions align with their customer’s values like World of Women, Boss Beauties, Women Rise and Women and Weapons also represent ways for brands to begin their metaverse marketing in way that aligns with their customer's values.
The Takeaway
Developing a digital strategy to enter the metaverse may seem complex, but brands can simplify the process by focusing first on where they can add the most value. This means developing initiatives that tap into who their customers are and how they want to be seen (identity), what they buy and how they signal status (ownership) and how they connect with their tribe (community). As the metaverse sparks another shift in consumer behavior, breakthrough brands will need to learn from the past to lead the future.
This article originally appeared in the March 16, 2022 issue of Moving Image & Content’s agency newsletter. Subscribe here.