Radicle China: Lan Shi, Founder and CEO of Cocafe on what advantages China has in Web3 adoption

By Jianqian Lin

Welcome to Breaking Through China, Radicle China’s series of interviews with companies at the forefront of the dynamic, disruptive, and fast-growing Chinese startup markets that matter to you. If you are interested in learning more about Radicle China, please reach out to: lynn@radicleinsights.com

(Lan Shi, Founder, and CEO of Cocafe)

In today’s conversation, we cover:

• How did Cocafe collaborate with Oreos and Porsche China to create NFT/Web3 marketing?
• What consumer behaviors prime the general public in China for Web3？
• How can brands start to embed metaverse and NFT marketing into everyday social shopping?
• What are the challenges that brands are facing to adopt an NFT strategy in China?
• And more.

Enjoy!

It’s become an undeniable truth for corporations both large and small: Web3, and all of the new advertising channels that come with it, are inevitable. Companies are coming to the realization that they have to get in on the game while it’s still early. The rejection of Web3’s emergence or its impending international prevalence is at best a missed opportunity and at worst a death knell for a company that stubbornly refuses to keep up with the times.

In China, regulatory policies surrounding cryptocurrencies have made it difficult for companies to know what is and isn’t possible on the decentralized internet. To learn more about the domestic marketplace and how companies are finding ways to legally innovate within this sphere, Radicle’s China Lead, Jianqian Lin sat down with Lan Shi, the founder, and CEO of Cocafe. Dedicated to metaverse marketing and the creator economy, Cocafe has abundant experience providing a one-stop NFT service to its clients, guiding them from the first stages of creative production all the way to distribution and sales. They’ve worked closely with leading brands in the entertainment, consumer, automobile, and retailer sectors, and their current clients include high-profile companies like China Guardian, McDonald’s, Oreos, Porsche, and Nayuki.

Ms. Lan Shi is a thought leader in education, entrepreneurship, and innovation who has extensive professional experience in Chinese markets. In addition to being the founder and CEO of Y-City Innovation Academy, she’s currently serving as a board member at MIT’s Sloan School of Management. She is also a judge for several innovation-centered accolades, including Forbes China’s “30 Under 30,” the Hult Prize, and the MIT Inclusive Innovation Competition. Her background working at the helm of Cocafe has made her a leading voice in the world of NFTs and digital assets, and we were delighted to learn from her insights.

So what exactly is Cocafe?

Cocafe is actually a brand new company — we started this year with the intention of devoting ourselves to the NFT metaverse. Today’s younger generations were born with access to a digital world — they’ve never known a life without it — so as they grow older and account for a larger share of the marketplace, their perspective is going to cause unprecedented shifts in commerce and advertising. In fact, those shifts are already underway: the general public in China, in Asia, and all across the world is becoming increasingly invested in digital media. So we started this company in the past year with a particular focus on NFT development in China, because we see that a lot of that energy is being directed towards NFTs, and we know that companies need help developing and executing regulation-compliant NFT strategies.

With this focus, we’ve planted ourselves firmly in the worlds of metaverse marketing and the creator economy. I’ll explain what metaverse marketing is later, but it’s vital that all marketing professionals understand how this new arena is different from traditional marketing, or even for that matter internet marketing or digital marketing.

How does Cocafe collaborate with brands?

We approach collaborations from two angles: our creative studio, CoDeco, helps brands build a creative design strategy, while our blockchain studio, CoLab, helps brands develop and execute strategies for blockchain technology and products. Between the two, we have ample personnel, ranging from designers, artists, and creators to Web3 developers and marketers. We draw on these talents and their insights to help our clients understand what the younger generations want, and how they can use the resources of Web 3 to distinguish themselves from competitors. Then, once we have the information we need, we work with clients to create a narrative marketing campaign that will evoke enthusiasm amongst their consumer base and we directly integrate that campaign into their digital goods. For instance, we’re finding innovative ways to roll out NFT collectibles while materially attaching them to the services or physical products that a company is offering. This approach has proven successful time and time again, as consumers appreciate the rich content and its holistic delivery.

Can you tell us about some of Cocafe’s recent brand collaborations? How do those partnerships take shape?

(Cocafe created 5,000 unique digital Oreos that Chinese consumers can store on Wechat Mini-program)

Here’s a project I’m extremely excited about — this year, we created the world’s first digital cookies in collaboration with Oreo. Since they’re in the process of rolling out white Oreos, their central marketing theme for the year has been black and white. So with that in mind, we picked Chinese Shanshui(山水) as our aesthetic framework while we built a 360-degree digital show that consumers can view from anywhere on their mobile phones. There’s also an existing physical exhibition, but since not everyone in China can come to Hangzhou to see it, we created a mini-program in WeChat that any consumer can access on their phone to view these beautiful works from anywhere in the world.

As a complement to this show, we also created 5,000 unique digital cookies that we’re calling Non-Fungible Oreos, or NFOs. Each of the NFOs comes with a unique Chinese Shanshui painting attached. It’s quite beautiful, and the consumers have loved it. So when consumers buy cookies through the mini-program, they receive a lucky number, and a select few of those lucky numbers give access to one of the five thousand digital cookies. It’s already been an extremely successful marketing campaign for Oreo.

Cocafe has also been collaborating with Porsche, right?

That’s right! We’ve been working with Porsche China’s strategy department to see how they can leverage their brand. Now, a lot of brands that get into NFT marketing are taking a pretty superficial approach to the whole thing: they find an artist or an internal designer, build one creative work, put it out for auction, and then donate the proceeds to a charity. That’s a great way to dip your toes into the world of NFTs, the metaverse, crypto, and Web3, but it’s just a start. At Cocafe, we make it our job to build far-reaching, versatile campaigns that create strong connections between our clients and the crypto world. We find value in hidden corners, weave that value into marketing campaigns, and then build a community around their brand image

(The first-ever “Porsche Art Salon” event focuses on the cutting-edge concept of NFTs and explores their implications and impact from both an artistic and corporate perspective. )

In Porsche’s case, we started with a multi-faceted Proof of Concept that contained an HTML, an NFT wallet, and an exhibition platform. All of these features, I might add, needed to be compliant with the online regulations in China, which are unlike any other in the world because cryptocurrency trading is strictly forbidden here. Let me be clear about this — it’s legal to hold coins like Ethereum or Bitcoin, but no one can conduct crypto transactions in China. So everything we build for Chinese markets needs to comply with these very tricky legal parameters. With all this in mind, we’re carefully planning on how to deploy Porsche China’s campaign on the metaverse, which includes the virtual delivery of Porsche-related gifts to new car buyers. Porsche recognizes that all of these innovative technologies — crypto, web3, and NFTs — represent a new, important trend in the market. They’re determined to understand what direction future markets are headed in and where consumers are going to put their attention in the years to come. And by doing this, they’re positioning themselves to remain industry leaders.

It sounds like this Porsche campaign is going to give Porsche owners the opportunity to deepen their relationship with the brand. In addition to having a Porsche key, for instance, they’ll have an exclusive digital asset like an NFT that indicates they belong to this special Porsche community.

That’s right. There’s a great Morgan Stanley report that explains how luxury industries are connecting to the crypto world and the metaverse. Luxury brands already have strong reputations with both current and potential customers. With these dedicated fanbases, it makes total sense for them to interact with their fans through digital channels, because that’s where those fans are spending so much of their time. Younger generations are spending more and more time online, and they’re blurring the lines between the virtual and the physical worlds. They’ll meet their friends on the internet or at a bar — the two are practically the same in their eyes.

Let me put this a little more bluntly — in order to hold onto their market share, brands have to launch strong metaverse marketing campaigns. Because regardless of whether or not they do it, their competitors and the emerging newcomers who are unafraid of experimentation surely will. And those companies, the ones who create strong brand identities on the decentralized web, will end up being the industry leaders in the next five or ten years. We already see new consumer brands exponentially expanding across China, in almost every industry: cosmetics, food and beverage, sports, you name it. Incumbent leaders need to take note and get ahead of the curve while they still have the chance.

Are there any consumer preferences or behaviors that global brands should be aware of as they design their virtual marketing campaigns?

Great question. The Mobile Marketing Association delivered a report that was specifically focused on metaverse marketing. In the report, they mention that Gen Z and Millennials will comprise half of all consumers in Asia by 2025. In order to win over the consumer class, companies need to focus as much attention on what’s next and new as they do on what’s currently happening. And there’s no denying that the future is already coming into focus — it’s an interconnected virtual world based on web3 technologies. As society becomes more interconnected, it will continue to gravitate towards the cloud. Consumers won’t distinguish between the physical and digital worlds; they’ll expect all of their friends, schools, and experiences to be accessible in a virtual context. This phenomenon is popularly referred to as the persistent virtual world, and it’s gained even more traction since Facebook changed its name to Meta.

Of course, there are some differences between how things are progressing in China and Asia and how they’re progressing in the rest of the world. In China, for instance, people rely on mobile payment apps like Alipay and WeChat Pay for almost 90% of transactions — the rest of the world is headed in that direction, but they’re nowhere close. Also in China, KOL sales on social media are the driving force in online marketing — 80 or 90% of people’s time online is spent watching videos, which means that influencers hold a lot of sway in the market. Both of these stats strongly indicate that companies should focus on content consumption and social engagement as they transition their marketing attention towards the metaverse, because these are the forces that will prime the general public for the world of Web3. International brands especially need to understand that mobile penetration, social shopping, and content-based consumption are generating a huge demand for online content — that’s where people are focusing their attention, and that’s where the market will continue to go. But we’re also transitioning into an age when no company can create their own content by themselves. On a decentralized internet, marketing campaigns are co-created and disseminated by the company, sure, but they can’t do any of this without fans, customers, and external contractors.

So how do we start to embed metaverse and NFT marketing into everyday social shopping?

To succeed in metaverse marketing and NFT marketing, it’s essential to engage KOLs early and often. First a company creates content or some virtual products, and then they need to rely on KOLs to share that content or those products on social media. By posting about the content on their pages, the KOLs demonstrate that these are cool virtual products. They start a social trend as their followers look at the content and say, “Hey, I want to get one of those!” And this starts a self-perpetuating cycle, in which fans whose interest has been piqued get the product, and then share the product with their friends on social platforms, thus starting the cycle all over again.

Cocafe works to catalyze these kinds of communities by creating chat groups on social media that surround a specific topic or brand image. It’s just like beekeeping — if you create the right conditions for the bees (your consumers), they’ll make honey for your brand in the form of content. As soon as fans and customers join these chat groups, they start co-creating content with the brands, and that content generates more interest and excitement. Disneyland recently rolled out a pink fox called Lindabell, and they hardly had to do anything to generate an enthusiastic community around this new branded image — they made some chat groups, and their fans on social media are already creating and sharing thousands of pictures, videos, and reviews. This kind of self-spreading behavior picks up momentum in a very short timeframe. If you’ve laid the proper groundwork and built the right conditions ahead of time, your fanbase will take care of so much of the work. That’s the beauty of metaverse marketing, and that’s why it’s vital that companies utilize the tools available to them on the internet. Don’t work harder, work smarter. Consumers are ready to help spread the word.

Now, when Cocafe creates a virtual product with a client, it’s not just a jpeg — it’s a non-fungible token, which means it’s a digital asset that your fans can feel a sense of ownership over. So between the chat groups and the NFTs, not to mention digital twins, you’ll create a digital identity that will bring your fans together and fuel your CRM.

Why should brands adopt an NFT strategy? What advantages does it present for big incumbent brands? Does it also present any unique opportunities for DTC brands?

We already have a ton of customers, because companies know what they stand to gain by deploying an intelligent NFT Strategy as soon as possible. You know, it’s no coincidence that our first wave of customers is mostly made up of industry leaders — they became leaders in the first place by keeping their finger on the pulse of the market and mastering emerging technologies before their competitors could beat them to the punch.

That being said, we’re also getting a ton of requests from emerging companies and startups. These companies are extremely active in the market and their growth rate is oftentimes astronomically high. The big brands know that these smaller companies are hot on their tail and that the only way they can maintain their leading positions is by trying something new. To be truly innovative, you have to be willing to break some rules of the industry and disrupt past habits — only then can a company position itself at the crest of the wave. If, on the other hand, they’re stubborn and unwilling to change, the newcomers will keep growing very quickly and eventually overtake them as market leaders.

This is the best advice I can give to leading brands today — if you don’t do it now, then you’ll fall behind, and the newer companies that are preparing for the future will eclipse you. The emerging brands see this opportunity, and they’re ready to capitalize — every company, big or small, is suddenly on a level playing field. Any small company that approaches marketing intelligently and bravely is positioning itself to become market leader at some point down the line.

Here’s another example. Amongst China’s younger generations, new generation tea consumption is a huge sector. There’s a company named Nayuki, which is the first new-gen tea company to go public. Despite only being in business for six years, they’re already a huge company. To celebrate their sixth anniversary a few weeks ago, we worked with them to create a digital marketing campaign with a new digital icon, along with seven Nayuki NFT blind boxes. This was an extremely successful marketing campaign: within 72 hours, their sales reached about 200 million RMBs, which is equivalent to 30 million US dollars, and the NFTs we created were sold out within one second! Meanwhile, the success of this whole campaign generated attention from news media, social media, and broadcasts of all kinds, none of which are created or commissioned by Nayuki. All of this extra publicity is created free-of-charge by news reporters, industry analysts, consumers, and public figures. At that point, the machine is running itself.

(Nayuki Tea dropped 300 NFTs for its 6th anniversary. The virtual character, Nayuki, hosted a livestream session selling store gift cards and achieved $31m in revenue in 72 hours. )

These marketing campaigns have so many benefits: they generate GMV, they celebrate the brand image, they influence the industry at large, and they create deep, lasting connections with consumers and fans. And it’s not just for new brands. We work with McDonald’s, which has been operating in China for over 30 years. Oreo, too, has been around for over 100 years. Nayuki is only six years old, but it’s growing extremely fast. Established companies and startups alike stand to gain so much from these new marketing tools.

As I understand it, Nayuki has an avatar that acts like a normal KOL and broadcasts this new marketing campaign on the internet. And they’re also selling gift cards to celebrate the six year anniversary. Is that where the 200 million RMB sales within 72 hours came from?

Yes, but this isn’t just happening online — it’s also offline. They’re selling gift cards in their shops as well. It’s a great case study for any consumer brand that relies on offline sales but is still interested in metaverse marketing. As in the case of Nayuki, it’s extremely feasible to integrate online marketing and offline channels into one cohesive marketing campaign. Together, the two can work wonders.

How is an NFT marketing strategy different from a Web 2.0 marketing strategy?

When we talk about from migrating from Web 2.0 to Web3, we need to emphasize the importance of decentralization. In Web 2.0, internet giants such as Google, Facebook, and Amazon monopolize internet traffic. They’re each using different variations on the freemium business model to attract consumers — people watch advertisements and use internet tools for free while giving up all of their personal data to those internet giants. In China, companies like Tencent, Alibaba, and Baidu are doing the same exact thing, and those giants make most of their money by charging brands and enterprises who want to harvest and take advantage of this traffic. But in the world of Web3 and blockchain technologies, things will be different — a decentralized internet means that data belongs to the consumers, to the users, and to the brands. Not just the giants.

All of this makes the metaverse an entirely new marketing ecosystem. Brands need to be much more proactive while creating their virtual identity than they have been when working on past digital endeavors. This is so much more than another digital transformation. If brands truly want to tap into the trends of today and tomorrow, not the habits of yesterday, they’ll need to create new experiences that authentically resonate with their online communities. I don’t know how else to say it: you need to be genuine; you have to be sincere; and you need to understand the value of the community. A major paradigm shift is underway. And it’s not just top-down — a brand can’t just create a story and expect to have the final say. Instead, they have to enter into a community and treat consumers as equals.

Let’s look at Visa. They recently bought a Crypto Punk, and they also issued a report on NFTs. They bought that Crypto Punk to let the world know that they’re humble, they’re open to change, and they’re making a genuine attempt to understand crypto communities. Budweiser did something similar by purchasing one of the iconic Bored Ape Yacht Club portraits. The new metaverse marketing ecosystem requires brands to create new experiences within the framework of the metaverse, but also to be humanize themselves. And there are so many potential ways to do this: avatars, digital goods and collectibles such as NFTs, virtual programming, augmented reality, and virtual shows. The sky is truly the limit.

How far along do you think NFT adoption is in Chinese markets? How do you foresee the development of the NFT market in the next few years?

I think that this is only the beginning. I mean, so many of our clients are breaking new ground with metaverse marketing: McDonald’s was the first to roll out NFTs in the restaurant industry in China, and Oreo was the first snack company. A lot of brands are trying to be metaverse pioneers in their vertical sectors, and as a result, there’s an influx of new brands entering the metaverse. And it’s not just the leading brands, or the brands with a large customer base, or the brands with a storied history that are trying to get in on the action. It’s everyone, from small companies to big ones, from established brands to young ones. The projects can be massive or localized in scope, they can be directed toward young or old consumers. If you don’t have an NFT plan already, you at least need to pay careful attention to the market trends. You need to talk to industry experts such as Radicle China, and you need to connect with companies like Cocafe that specialize in metaverse marketing. First, understand what they’re doing, and then you can start to roll out your own plan.

We’ve talked a lot about the advantages of adopting NFT strategies, but what are some of the challenges that brands are facing, especially in China?

The first challenge is a lack of awareness, talent, and insights. I’ll be the first to admit that NFTs and the metaverse are both hard to wrap your head around. Is it just a bubble? Do these trends have any bearing on our everyday lives? There are a lot of people who still don’t grasp what’s going on. But beyond awareness, talent is even more scarce because blockchain engineering is extremely expensive in China. People who understand the Chinese crypto industry know that the engineering community is limited here.

The second challenge is understanding Chinese regulations and, with that, managing risk in a country where crypto trading is illegal. If a company doesn’t take these regulations seriously when rolling out a metaverse marketing campaign, it could spell disaster. I won’t mention the name of the brand, but there’s an automobile company that tried to roll out a campaign here this summer, and unfortunately, the partner they chose to work with has a history of legally dubious behaviors, specifically when it comes to Chinese crypto regulations. Within hours of announcing that campaign, they got a call from the Chinese government and had to delete it. This just goes to show that you have to understand the regulatory framework before diving into this new platform. In order to do that, you need to find a partner who’s familiar with the Chinese market and already has ample experience working with leading brands.

The third challenge is shifting your mindset. When marketing in Web 2.0, especially in China, companies expect that they can pay a certain amount of money in exchange for some amount of traffic. There’s a transformation rate, a conversion rate, and at the end of it all, you can look to see how much revenue you generated as a result of the marketing campaign. But if you look at Web3 and metaverse marketing through the same lens, you’ll end up very disappointed. It’s not like Web 2.0, where you buy traffic, and that traffic leads directly to sales. Instead, you’re creating content, and that content leads to engagement from consumers and fans, which then engenders a sense of community around your brand. You need to build the vision, you need to share your story, and you need to co-create that story with your customers. If you choose to keep buying traffic to generate revenue instead, you’re going to dilute the power of your brand. Consumers are becoming increasingly sensitive to promotions and prices, which means that conventional modes of advertising are losing traction.

So in the past, companies would pay a huge amount in marketing fees to get exposure, but today this practice can have adverse effects on the process of building a brand image. In this new wave of marketing techniques, companies should focus more on engaging with their communities and really understanding what their interests are so that they can create more meaningful connections with them. They should no longer expect traffic to convert so easily and quickly into revenue. Instead, they should focus more on community building and authentic connection. Is that right?

Yes, that’s exactly right. Metaverse and NFT marketing give creators more opportunities, and innovative brands more communities to tap into. In today’s day and age, with the emergence of Gen Z and millennials, consumers won’t have a sense of loyalty if they just purchase your product once and know nothing about your brand. This is especially true when you consider the fact that almost every company in a given industry probably uses the same outsourcing producers — it’s almost impossible to make your physical product seem superior to that of your competitor, since you both get your product from the same place. For that reason, companies need to tap into their histories and tell their stories to differentiate themselves. In today’s day and age, emotional attachment is what sells. And that’s what NFTs, the metaverse, and Web3 are all so good for. These are the platforms for new content, new social contexts, new scenarios, and opportunities for companies to cultivate emotional connections with customers and fans.

What’s next for Cocafe?

We’re always serving industry leaders, and I don’t see that slowing down anytime soon. In addition, we’ll launch a more standard NFT marketing service package that caters specifically to SMEs. We’ll also be creating more virtual tours for creators.

Web3 and the metaverse are the new home for the creator economy, which means we’ll be improving our hybrid releases of NFTs and working to integrate more utility into our existing NFTs. By embedding more functionality, exclusivity, and social networking opportunities into NFTs, then the general public can have an easier time understanding how revolutionary the decentralized web truly is.

This is all so exciting. Thank you for taking the time to chat with us, Lan. It’s been a real pleasure.

Thank you, Lynn, the pleasure is all mine. It’s so important that the marketers of the world hear these messages. The time to create the metaverse for a new generation is now.

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