Every year at SXSW there's one big tech trend that dominates the conference and it's no surprise that this is the year of Web3. There's a lot of discussion about the industry's current approach to Web3, NFTs and metaverses, as short-term novelty and hype, being misguided.
Professor Scott Galloway called some of the Web3 hype "yogababble". Super-futurologist Amy Webb talked about us "chasing the shiny" and spending our money in the wrong place, such as the recent Metaflower Super Mega yacht NFT in Sandbox selling for $650,000.
But, as the novelty of NFTs potentially wears off, the view was that digital collectibles alone are not the long-term trend here, but the infrastructure behind them is—as Web3 allows shared mutual value and ownership via blockchain/crypto technology and tokenisation. Web3 is potentially the start of a new cultural economy and forward-thinking brands are starting to see its full potential.
Here are four observations from SXSW for brands to consider:
Members, not users
Kimbal Musk said at the conference: "The secret superpower of Web3 that I don't think people realise yet, is the power of the community building."
While Web2 was dominated by the platforms, Web3 gives brands the opportunity to explore creative offerings and forge deeper connections with communities. At ScienceMagic Inc we connect brands to communities, so I was keen to hear how brands engaging meaningfully in Web3 require a shift in how they see their relationship with customers evolving to engage with their community. In a Web3 world, a brand's community will need to feel that it can have influence with the brand and through the brand. It's about a value exchange: what's in it for them at the end of the day, what utility can you provide.
Brands and organisations at SXSW were demonstrating how they are giving value back to their community, from exclusive merchandise, social opportunities and unique experiences, through to meaningful shared value creation and mutual ownership through tokenisation.
The big hit activation at SXSW this year was the Doodles experience with Doodle Noodle Bar set among a trippy cartoon rainbow vomit installation and accompanying rainbow nail bar. The Doodle NFT community can scan their Doodles passport to access VIP events, content, collecting unique merch and more. The price of Doodles NFTs are soaring to c.£20,000 thanks to "the strength of the community", a bit like being an exclusive social club, where members are organising their own meet-ups fuelled by passion for the community. It's a good example of what a digital asset can do for a community, from access to content and POAPs (a sort of digital memento).
Move over NFTs, the DAOs are here
The next, next big thing at SXSW were Decentralised Autonomous Organisations (DAOs)—a new sort of organisation, where everyone owns it, everyone governs it, decisions are made collectively, underpinned by blockchain/crypto technology. Akin to a group chat with a bank account.
Nadya Tolokonnikova of Pussy Riot set up @UkraineDAO to fundraise via NFT and get funds to Ukraine quickly, while being transparent with where money goes, avoiding bureaucracy and solving roadbloacks with the help of the DAO members. The DAO allowed people to bid collectively on a Ukraine flag NFT, raised $7m in a few days and was able to distribute money really quickly. People in Russia could donate anonymously without being tracked and prosecuted. "It's a big step from crypto being seen as cartoon images that can be sold... we can solve global problems," she said. FYI if you have a crypto wallet check out @ukraineDAO to support.
Musk summarised: "DAOs for the first time feels like a third choice between capitalism and communism. It's a different community-oriented approach to deploying capital."
What does this movement mean for brands? Forward-looking brands should be thinking about how they participate with their community and more value sharing. We may, according to Christian Ward of Stylus, see a rise of "headless brands"—DAOs without a traditional hierarchical structure.
We could see co-created experiences by brands with communities, where creators equally profit from creating amazing brand experiences for the community. We may see new decentralised brands emerge where all decisions from values to product roadmap are made by the community.
We will likely see entirely new market disrupter brands created out of these opportunities—for example what if a new localised energy company emerged with all decisions made by the community in the best interests of the community with no external shareholders?
The rise of the new cultural economy
It seems that we are at the start of a new era where creators and communities can monetise what they do in a way never done before. We may be at the start of a new cultural economy, where value can be assigned to creators through tokenising with assets.
Alex Zhang, Mayor of Friends with Benefits (where crypto meets culture), talked about how they are using Web3 tools to build a 6,000-strong artist/creator community, with their own token allowing the community to collectively own and govern community endeavours, launch products and share the value they create together. Think of it as a crypto social club of artists and creators.
Friends with Benefits is a DAO owned by the creator community and is "an exploration of how you allow value to accrue to the edges of a cultural network or community". For example, artists get paid and could get healthcare and other benefits and utility as part of the community. Now one of the largest social tokens, Friends with Benefits holds events, teaches tech tools and brings together the community as an "exploration of what a community-owned brand means".
What does this mean for brands? Blockchain, Web3 and NFTs can change forever how we create and own value. How can brands empower independent artists, musicians and creators and give creators income for coming up with amazing experiences?
Transparency and trust
While the optimists are hugely excited about how Web3 could democratise access, decisions, ownership and how the rise of the creator economy will allow diverse creator voices to shine—the fear about who is creating the future is real.
Emerging technology tends to outpace the law. Regulation cannot keep pace with this period of accelerated change. Who are the people building new spaces? How do we make sure we are planning and designing with diverse talent? How do we ensure new spaces are safe and for the benefit for all, if the power is decentralised? Will we spot flaws before they do damage? Who is in charge of policing?
What does this mean for brands? We need to focus on radical inclusivity and representation when thinking about building new spaces or new experiences. If we get it right, Web3 could be about transparency and trust.
While we are all chasing the shiny, this new era is not just about a metaverse PR stunt in time for Cannes Lions; it's really about why we are here and for whom (or with whom).
And while some of the changes that Web3 ushers in feel seismic and scary, we must lean in, learn about the opportunities and be thinking about the negative consequences.
As General Eric Shinseki said: "If you don't like change, you'll like irrelevance even less."
Hannah Matthews is chief brand officer at ScienceMagic.Inc