Web3 State of Brands — 2023

In a landscape transformed by emerging decentralized technologies, brands find innovative pathways to interact with their audience. The proliferation of web3 technologies since 2021 signals a paradigm shift in business operations, revenue streams, and customer relations.

TL;DR:

• NFTs have become popular for incentivizing loyalty and boosting engagement.
• Tech giants like Google Cloud, Spotify, Shopify, Salesforce, and Ticketmaster are enabling Web3 integration for brands and users.
• Brand use cases include NFT-based loyalty programs, tokenizing ownership, token-gated commerce, metaverse advertising, and purchase incentives.
• Web3 offers opportunities for interoperability, harnessing the power of data, empowering ownership, redefining engagement, and exploring new markets.
• Challenges can be overcome by prioritizing user-friendly interfaces, fostering a culture of continuous learning, staying updated on regulations, prioritizing security, and targeting niche markets.
• Brands could strategically harness these technologies to maximize their outcomes and unlock their potential

I. The Emergence of NFTs in the Brand World

NFTs have gained traction amongst brands due to their ability to incentivize brand loyalty, re-engage customers, and boost revenue. About 40% of Web3 projects have chosen these digital assets as their technology, utilizing them as tools for reaching new demographics and enhancing engagement.

Nike exemplifies how a brand can leverage NFTs and web3 technologies to engage with consumers and enhance brand loyalty. With Nikeland, a purpose-built metaverse space on the Roblox platform, the company has ventured into the digital realm, offering fans an interactive platform to socialize, participate in promotions, and explore various brand experiences. Here, visitors can buy exclusive digital products to adorn their avatars, transforming them into digital brand ambassadors. Each visitor also gains a personal “yard” in Nikeland to showcase their collectibles and personalize them to their liking.

Nikeland on Roblox

Nike’s engagement extends beyond the metaverse. Capitalizing swiftly on the NFT side, the company acquired RTFKT Studios, a creator of “next-generation” NFT collectibles, in December 2021. One of RTFKT’s standout achievements includes the sale of 600 pairs of NFT sneakers within six minutes, netting $3.1 million. Nike and RTFKT Studios collaborated to produce Nike’s first NFT sneaker collection, CryptoKicks Dunk Genesis. Users can personalize these sneakers using “skin vials” created by various designers, adding unique effects and patterns to the base sneakers.

RTFKT x Nike Dunk Genesis CRYPTOKICKS

II. Facts and Figures

Nike serves as just one example of a brand embracing Web3 technologies. To further illustrate the impact and potential of this digital revolution, let’s dive into some data and facts that shed light on the topic.

Metaverse Fashion Week

1. 90% of brands have chosen Ethereum Virtual Machine (EVM)-compatible blockchain, mainly choosing Ethereum and Polygon.
2. 25% of brands launching Web3 projects in 2022 were in the retail sector, with 58% in the fashion industry. Some companies are Nike, Adidas, Gucci, D&G, Budweiser, and Norwegian Cruise Lines.
3. The fashion industry is driving metaverse adoption, with 52% of fashion brands launching metaverse projects, fashion shows, and other activations.
4. LVMH was the most 2022 active brand, launching 17 Web3 projects across nine subsidiary companies.
5. Sports were also active in Web3, with 75% of sports projects choosing NFTs over other technologies and 90% launching projects to engage fans. Notable examples include NBA Top Shot, Sorare, Cristiano Ronaldo, and MLB Champions.

III. Web3 Enablers

With the growing demand and momentum, several tech giants have stepped up to facilitate tech integration for brands, those including:

Google Blockchain Node Engine

• Google: Google Cloud’s Blockchain Node Engine running blockchain nodes. Clients include Aptos, Arbitrum, Solana, Coinbase, Dapper Labs, and Hedera.
• Spotify: Piloting NFT-gated playlists. The feature allows musicians to release exclusive music to their superfans or provide early access.
• Shopify: Merchants can sell NFTs directly through their storefronts and use NFTs to gate access to exclusive products.
• Salesforce: Connects NFTs to the company’s CRM system, enabling new customer insights and ways to identify and reward loyalty.
• Ticketmaster: Allows artists to NFT-gate ticket sales, giving holders of an artist’s NFT priority access to tickets and commemorative NFTs.
• Robinhood: Launched a self-custodial digital wallet.
• Opera: Released a crypto browser to simplify Web3 UX for mainstream users and an NFT analytics platform.

These strategic moves highlight the growing interest and investments in the Web3 space as tech giants position themselves as enablers for brands venturing into this landscape.

IV. Brand Use Cases

With the infrastructure being built and progressing, different use cases have emerged; some of the most interesting are below:

Source: CBInsights

1. NFT-based Loyalty Programs: Brands leverage NFTs to reward loyal customers, offering exclusive benefits and opportunities. Starbucks’ Odyssey program, for instance, introduces tradable NFTs, monetizing customer loyalty while fostering collaborations between brands and projects through interoperable assets.
2. Tokenizing Ownership: Illiquid assets are being revitalized through tokenization. In industries like wine and spirits, brands issue NFTs granting ownership rights, unlocking new market dynamics, and enhancing asset value.
3. Token-Gated Commerce: NFTs are utilized to connect with loyal customers, providing exclusive access to merchandise and experiences. By leveraging NFTs, brands deepen customer engagement and cultivate a sense of exclusivity.
4. Metaverse Advertising and E-commerce: Retail companies are tapping into the metaverse, combining the benefits of in-store commerce with the convenience of e-commerce. They advertise products and releases in immersive virtual environments, offering unique and interactive shopping experiences.
5. Purchase Incentives and Rewards: Digital collectibles and tokens are adopted to incentivize purchasing behaviors. Customers receive digital twins, vouchers, and raffle tickets, enhancing brand loyalty through gamification and rewarding interactions.

V. Uncharted Opportunities

As venturing into unexplored territories, a new era of possibilities unfolds.

Connecting Assets and Platforms — The Power of Interoperability

Some of the main benefits offered by blockchain technologies are:

• Interoperability and Unleashed Creativity
  Picture a vast universe of Lego blocks where digital assets morph and adapt to various platforms and environments. This dynamic landscape empowers brands to devise innovative experiences that shatter conventional boundaries, enabling a level of user engagement that was previously unattainable.
• Harnessing the Power of Data
  Web3 has turned data into a strategic asset. Every transaction and interaction logged on the blockchain provides invaluable insights into customer behaviors and preferences. These data-rich narratives enable companies to craft more personalized and future-oriented customer experiences.
• Empowered Ownership and Novel Monetization
  Users now own their digital assets, providing new monetization avenues. For brands, these users are in a fresh business model where they can profit from selling products or services and create valuable assets that find life in the open market.
• Engagement Redefined
  A new paradigm shift in how brands engage with their users. You can create experiences that are not just consumable but highly interactive, fostering a deeper sense of community. This sense of ownership adds a new layer of engagement.
• Exploring New Horizons
  Unlocking previously unexplored markets and creating opportunities that redefine the traditional digital landscape. With innovations like decentralized finance (DeFi) and non-fungible tokens (NFTs), brands can penetrate new domains, tap into diverse audiences, and create unique offerings that distinguish them from the competition.

VI. Mastering the Challenges and Strategies

Navigating the blockchain ecosystem involves unique challenges that call for strategic and dynamic solutions. By comprehending these obstacles and adopting bespoke tactics, projects can triumph over these challenges and excel in their campaigns.

1. Simplicity is key
   Challenge: Complex platforms and unfamiliar user experiences can impede user adoption and engagement
   → Prioritize intuitive and user-friendly interface design to create simple interactions. Make it less complicated, let the blockchain complexity on the backend benefit the user, but offer a conventional customer journey.
2. The Learning Curve
   Challenge: The fast-paced evolution of technologies necessitates constant learning and awareness to stay ahead
   → Foster a culture of continuous learning. Empower your team with knowledge of blockchain, smart contracts, new standards, and more. Partner with industry experts, attend relevant events and utilize educational resources for informed decision-making.
3. Navigating Regulatory Waters
   Challenge: The ever-changing regulatory landscape presents legal complexities and uncertainties.
   → Strategy: Keep a pulse on regulatory changes and work closely with legal experts in the field. Proactively modify policies to align with new regulations, enhancing transparency and fostering stakeholder trust.
4. Building Trust and Security
   Challenge: Web3 platforms present new security considerations.
   → Strategy: Prioritize robust security measures to safeguard user data and assets. Regularly engage trusted security auditors for assessments and vulnerability testing. Communicate transparently about your security practices to instill confidence and demonstrate commitment to user safety.
5. Niche Market Penetration
   Challenge: Web3 technologies cater to specific niche markets, requiring focused targeting and understanding.
   → Strategy: Conduct thorough market research to identify target demographics and their unique preferences. Develop tailored marketing strategies that resonate with these niche markets. Collaborate with relevant communities and influential figures to amplify brand awareness and engage the target audience effectively.

In a nutshell, Web3 isn’t merely a technology — it’s reshaping how brands interact with users, understand their needs, and generate value. By harnessing its potential, it can pioneer an unprecedented digital engagement era anchored in creative flexibility, data-driven strategies, and user empowerment.

At Owl Protocol, we are committed to helping companies and projects navigate these complexities and providing the platform and tools for easy onboarding in this digital landscape.

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