From Short-Termism to Longevity: Why marketers should use web3 for brand building
Newsletter #14 - October 24th, 2022
It’s been a while since I last wrote. I’ve been quite focused on getting the Podcast up and running which took more attention than I had expected so apologies. Despite the silence, I’ve still had a lot of new subscribers, so a big welcome and thanks to all of you. As an introduction to the Brand N3xt newsletter, I focus my writing on three areas:
Educating people and brands about the value that Web3 and metaverse technologies will offer to businesses, to marketing, as well as to people, communities, and the world.
Highlighting use cases that are likely to drive scale and adoption.
Spotlight the innovators who are leading and building in the space.
If you are reading this and haven’t subscribed yet, please do. I would love for you to join our growing Brand N3xt community. 🚀
You can also subscribe to my Podcast on Spotify, Apple Podcasts, or YouTube to hear interviews with the builders, innovators, and marketing pioneers who are shaping web3.
This is the first article in what will be a five-part series. In this article, I explore the challenges of short-termism and how we got here. This includes an analysis of the strengths offered by marketing technologies pre-internet, during web1 and web2. Arriving at web3, I touch on how it will fundamentally change communications, sales, community, and measurement, and how it creates to opportunity for marketers to focus on long-term brand-building.
The next four articles in the series will further explore how web3 will impact communications, sales, community, and measurement.
This is an in-depth article. For those of you who just want the TLDR summary, please go here.
Web3 and NFTs will bring about a new golden age for brand building. That said, success will be predicated on a marketer’s ability to use the technology and effectively engage with people through entirely new engagement models.
Are you already rolling your eyes with doubt, or are you expecting the rest of this newsletter to further validate a sentiment that you already hold? The truth is that NFTs and Web3 can be quite polarising. On one hand, you have people like Mark Ritson who stated his opinion quite bluntly (he is not one to mince words) by saying that “NFT’s are just marketing’s latest idiot magnet”. On the other hand, you’ve got Nike, Gucci, Disney, Time Magazine, Starbucks, and many other brands who are hiring in the space, developing real engagement, and in some cases driving significant value through incremental revenue.
If you read crypto Twitter or dive into Web3 on LinkedIn, it might be hard to see why the subject is polarizing. It might even be hard to see how there could be any doubters about my statement at all. After all, it won’t take long scrolling in those places before you find a multitude of lists outlining all the amazing use cases for NFTs and how they are going to transform business through:
Utility
Ticketing
Health
Identity
etc …
If those words sound vague to you, well that’s because they are. So many lists are published without any detail leaving the reader to wonder how it will work, or why it will be better than the tools and services we have today.
Don’t get me wrong, I believe in this technology and its power to deliver real value for both people and businesses in all these areas. But if we are honest with ourselves, much of the web3 community does a pretty terrible job of making the case for these technologies. Instead, they typically sound like a bunch of cheerleaders saying that something is better without any appreciation or understanding of the complexities and the realities of the businesses they are saying must change. Despite the ambiguity and complexity, brands and agencies are rushing in as they search for what’s next. And yet, if you ask everyday people on the street, most have never knowingly engaged with blockchain, NFTs, or with web3 technologies of any kind. In most cases, they aren’t even aware of the technology, and if they are aware of it, there’s a high chance they are apprehensive and feel it’s all a bit risky.
But if everyday people are unsure and even apprehensive about this technology, why are brands and marketing agencies rushing in?
A BIT OF HISTORY & CONTEXT
I will try to answer this question as best I can, and I won’t resort to just quoting Henry Ford or Steve Jobs, in saying that consumers don’t know what they want if they haven’t seen it yet.
Instead, I will give you the even more obvious answer: Brand. We all know that strong brands outperform weak brands, but in case there are any questions, here is a chart that shows you what I am talking about.
As you can see, between 2006 and 2019, BrandZ’s Power Brand portfolios dramatically outperformed the MSCI World Index and S&P 500. Of particular importance is the fact that even during the stock market declines between 2007 - 2009 the BrandZ index held up better and continued to outperform the benchmark indexes. Building a strong brand is therefore of paramount importance as it provides pricing power, inelasticity of demand and a result improved resilience to external market pressures and downturns.
Building a strong brand
Seth Godin defines a brand as the expectations, memories, stories, and relationships that influence customer choice. Building those expectations, memories, stories, and relationships is the job of the marketer. To achieve this goal, they have a dizzying number of different tools in their tool belt.
In fact, with so many channels and tools to choose from, brand building is a complex job so let’s look at the different phases of evolution and judge them against their ability to deliver on Seth Godin’s definition of brand.
Pre-internet
People would regularly watch TV for multiple hours a night. This was the birth of what came to be known as Prime Time TV because viewer numbers in the evening were so high. With no internet or other distractions in place, TV ads had a captive and receptive audience.
Primary medium and channel:
30-second TV commercials
Marketers would buy TV commercials that offered limited targeting capabilities but maximized reach. These were then played repeatedly in order to both maximize the size of the audience exposed and increase the chances that the audience would remember the brand and product.
Seth Godin's definition test:
TV commercials are short films that tell stories. They had a captive audience as there was no second screen at this time, and through frequent repetition, the stories implant memories and set expectations.
Relationship at this time only comes only after purchase.
What it does really well:
BRAND BUILDING
To this day, 30-second short films are still the primary way in which many people think about building a brand, even if today they are often delivered via the internet instead of TV.
Web1 - 1990 – 2005
TV viewing behaviors did not change, but consumers now increasingly had desktop computers with internet connections all marketers to connect with them through a new set of tools and ad types. This was the early days. Ads were mostly static and were bought through a very similar process to the way TV and print had been bought earlier. No one would really say that these ads were great for building a brand.
Medium and channel:
Display Ads + Search Ads
Websites would provide marketers (and media agencies) with rough data about the audience demographics of their traffic, and with this marketers would place direct buys on websites (or website networks) in order to reach the desired audience. At the same time, search ads were also developed allowing brands to bid for keywords against which they could place text-only ads.
These were new channels and tactics and as such a heavy reliance on TV remained.
Seth Godin definition test:
Early banner ads were hardly effective at storytelling as they were mostly static. The same is true for search ads. As such, they fail to create the shorts of memories, stories, expectations, and relationships that are core to a strong brand.
Yes, if people were to follow the ad, it would bring them to the brand’s website where some stories could be told, but this hardly makes them a strong brand-building tool.
What it does really well:
REACH + AWARENESS
Web2 - 2006 – Present
The combination of social media, and persistent cheap mobile data changed the game. People keep their phones next to them. Second-screening ended the era of passive consumption as consumers now always had a distraction they could turn to during ads. Consistency of engagement provided social platforms with huge volumes of data about people that they could use to improve ad targeting and response.
Medium and channel:
Display, Social and Online Films
Through programmatic advertising, marketers can buy audiences whose behaviors indicated that they are likely prospects for the brand. Messaging is often short as formats are either skippable or optimized for shortened attention spans. Further to this, the ads are often delivered through a “news feed” where scrolling can be fast so viewability is sometimes a challenge.
Seth Godin definition test:
While there are many ad formats in the web2 space that offer genuine brand-building benefits, I would say that overall the formats developed in this period have been optimized for targeting, speed of delivery, ease of action, personalization, and short-term performance measurement - not for brand-building.
Yes, six-second bumpers ads and carousel ad units that people scroll past quickly in a timeline can be dynamic and engaging, but they are unlikely to be the strongest tools for building memories and expectations.
What it does really well:
ENGAGEMENT + ATTENTION
In short, TV has been the greatest brand-building tool to date, Web1 was never about brand-building. Instead, it just helped with top-of-funnel reach and awareness. And Web2 shifted the narrative from brand-building towards a new priority: short-term performance and engagement metrics that are measured at the moment.
THE GROWTH OF SHORT-TERMISM
Before we look at web3, let’s first take note of how web1 and web2 technologies, along with the emergence of mobile as an access point have led to a decline in TV viewing.
This decline has in turn been reflected in ad spending with total TV spend declining from a 42% to a 26.1% market share. Digital (web, mobile, social, OTT, etc) on the other hand has more than doubled its share going from 24.6% market share to 55.5% market share over an eight-year person.
I’ll over-simplify, generalize and conflate a bit of correlation and causation by saying this, but overall this resulted in media strategies shifting from being principally long-term brand-building focus to becoming short-term performance-focused. And while I know that is a fairly broad and sweeping statement, the shift to short-termism is a trend that has been fairly well documented. Peter Field, author of The Long and The Short of it, even said “Wherever you go, we are pulling billions out of brand-building for long-term growth in order to fund this obsession, this addiction to short-term sales activation because we think it’s cool.”
If you are interested in learning about short-termism, the following articles offer a strong POV on why this has happened and the impact we have seen as a result:
The problem with this shift to short-term performance-focused media is that while it can provide a sharp spike in sales, its effects are short-lived. When viewed over time, a lack of investment in brand building will result in reduced overall brand power which has the knock-on effect of reducing the impact of the performance media. As such, the brand winds up in a trend of declining performance.
I am not saying that there aren’t great brand-building products available in the world of web2. There absolutely are. When used right, huge brand value can be created through the reach, targeting, and creativity that these platforms unlock. Just look at Liquid Death. A water brand that was launched only three years ago and which has grown almost entirely through social media powered brand building to a value of $700 million USD.
SHORT CASE STUDY ABOUT LIQUID DEATH
Water is a commodity product that offers very little differentiation outside of brand. Liquid Death has grown by building a strong and highly differentiated brand built almost entirely on Instagram and other social platforms.
Most brands have not experienced the success of Liquid Death. I believe their purity of focus on brand building and on using the channel for effective creative storytelling helped them to succeed. Unfortunately for most brands, competing priories and short-term pressures have meant that they often try to drive both brand building and short-term performance simultaneously with limited success. Unfortunately, a dual strategy approach typically fails to deliver on both fronts.
If you want to read about this, Mark Ritson wrote a nice article recently called “Can you achieve long and short at the same time? Usually, no”.
The challenge for marketers and brands is that as they follow the consumer migration from TV to digital by shifting an ever-increasing portion of their media spend to digital, they are left with fewer tools for effective brand building and as a result increase their focus on short-term activities at the expense of brand strength.
ENTER WEB3
Web3 is an evolving space and if you look online you will likely find quite a few differing definitions, but overall what you are likely to hear is that web3 builds on the read / write capabilities of web2 by adding an ownership/execution layer whilst also removing the middleman.
While this is accurate, what does it mean for marketers? For that, let’s go back to Seth Godin’s definition of brand building.
Web3 - 2020 - Future
Web3 is often referred to as the next generation of the internet. Built on blockchain technology, web3 will put power into the hands of individuals by giving them control of their data and ownership of digital (or digitally linked) assets.
Medium and channel:
Community, tokenized relationships & crypto wallets
NFTs and other tokens will not be things that we buy and forget about, they will be guideposts to our interests, passions, and behaviors. They will align people and brands with common interests allowing them each to contribute to a community in ways that offer tangible value to all. The value may be through access to people or things, or it may be through value appreciation. But while the source of value will likely vary, what will be consistent is that it will be felt and delivered through experience and engagement over time.
Seth Godin definition test:
So far the most powerful tool for creating memories in a marketers tool belt has been film and storytelling. Instead of telling stories, Web3 will work by enabling experiences (potentially across channels and even IRL) over time. When it comes to creating memories, storytelling is a powerful tool, but experience can be even more powerful. After all, we remember what we do even better than what we are told. And beyond just memories, experience is at the heart of relationships. So all in all, Web3 appears to be well-positioned to build brands according to Seth Godin’s definition.
What it does really well:
BRAND BUILDING + RELATIONSHIP + TRUST
Web3 will offer brand marketers a new way of connecting that is designed for long-term relationships and interaction rather than short-term performance. Working in combination with Web2 channels and tactics, Web3 promises to provide marketers with the tools to rebalance long-term marketing activities and short-term performance-focused activities in order to fuel both brand power and sales growth over time and at key moments in time.
Getting this balance right is vital to brand growth as shown by Binet & Fields in their work “The Long and The Short of it”. What they demonstrated (as is visualized in the image below) is that while brand-building activities deliver growth more slowly than performance-focused activations, the effects last much longer thereby allowing for the based level strength to grow continuously.
When long-term brand-building and short-term performance activities work in combination we see a path to optimal growth and effectiveness.
While most of the digital media formats created to date have been developed to deliver short-term performance, Web3 will provide marketers and brands with new digital tools that are best positioned for long-term strategies including relationship development, brand building and ultimately trust. This will allow marketers and brands to:
Be present in the channels (digital) where consumers are spending the majority of their time
Continue with the trend of shifting budgets toward digital
Maintain access to the data, and even grow the number of sources and trustworthiness of the data that powers optimization, insight, and effectiveness
Create strong brands that are built for the long-term
So when we look at web1, web2, and web3 from the perspective of marketers, it is not just a functional expansion from “read”, to “read/write”, to “read/write/own”. Web3 represents a fundamentally strategic rebalancing from the short-term to the long-term that is delivered through higher value engagement. More specifically web3 is an evolution from Reach, to Reach + Engagement, to Reach + Engagement + Trust.
HOW MARKETERS WILL SUCCEED WITH WEB3
It’s worth saying that while this technology is still quite nascent, I believe it will scale to global adoption faster than most people expect, but this remains to be seen. My rationale can be simplified down to three points.
Loyalty marketing spend is expected to grow at a 12.6% CAGR globally. This is a demonstration of the focus brands and marketers are putting on long-term and relationship marketing.
Despite the focus on loyalty and relationship, marketing has many challenges. For example, the average consumer has seven active loyalty memberships in their wallet, but more than half of these are inactive. This is because almost half of all people feel these programs are not effective as pointed out by the Forrester Research stat saying that only 54% of consumers feel that loyalty programs bring people closer to a brand. And yet by the fact that 46% of people will remain loyal to a brand even after a bad experience, we know that people want long-term relationships with brands.
Web3, through its focus on the long-term, offers a solution. And with over $500 billion in VC capital currently sitting on the sidelines, we can see the war chest of investment that needs to be allocated in ways that promise the potential of real business growth. While not all of this money will go to web3, recent trends would indicate that significant investment will go into the space.
There are many more reasons I could list for why I believe in the future growth of web3 technologies. The above points however demonstrate that the business conditions exist for the long-term focused capabilities of web3 capabilities to gain adoption, usage, and to scale quickly. Given the possibility of rapid adoption, it is vital for marketers and brands to build up their understanding and to prepare now should they want to keep up and succeed in this evolving space. It is after all important to remember that succeeding with transformative technologies requires more than just implementing the tools, it requires marketers to adapt their ways of working to fit with the new expectations that these technologies will inculcate in people as they empower them and the communities they are connected to.
Looking ahead, I see changes across communication, sales, community, and measurement that brands and marketers will need to adapt to.
COMMUNICATION: From audience to protagonist
Consumer behaviors change along with media formats. By and large, people are no longer content to simply consume linear content in the way they did during the glory days of TV. Increasingly, people today want a sense of control. They want to be active in the process.
Without a captive audience, it is important for marketers to give people a reason to choose their brand not just for purchase, but also in deciding which brand they will interact with as well. This is because people no longer need ads to discover and feel connected to culture as they have so many paths for discovery and web3 and metaverse technologies will further expand their choice in terms of media, experience and cultural discovery. People today (especially youth) want is to create culture and web3 provides the medium through which they can create their own stories, navigate through virtual worlds, and even access token-gated experiences.
Given the power to create and guide stories and experiences themselves, consumers won’t want your brand story. Instead, they will want to know what your brand can offer to enhance the story they are creating themselves. If marketers want their brands to participate and feature in the story, they will need to stop thinking of people as a receptive audience, and instead, recognize them as the choiceful protagonist.
Adapting to this change will pay dividends in terms of brand recall and brand salience. TV may have proven that brand stories are a powerful tool, but as powerful as a story can be, people remember what they do even more than what you tell them. Shared experiences through web3 will prove a powerful tool for building mental availability.
As a result, it will be important for marketers to develop strategies built around participation, strategies that give people a reason to choose to include their brand in the story will offer a significant upside.
SALES: From purchase as the end to tokens as the start
Traditionally, when a consumer buys something from a brand, that would be viewed as the bottom of the funnel - the end of the transaction. The tokenization of assets changes this. In the web3 space, as people acquire brand tokens (either through purchase or by earning them by participating in experiences) they are opening the door to one-to-one connections and interactions with the brand.
This tokenized connection offers new potential for longevity – it offers marketers an entirely new tool to connect with consumers. Unlike traditional products, tokenization combines the asset and the communication medium. Unlike email, tokens can be used to access gated content, exclusive products, and unique IRL experiences. Unlike social media, token holders feel like owners of the community and not just passive recipients and viewers of content.
To capture the value created by this new tokenized potential, marketers will need to create wallet / token-aware experiences. These are experiences and services that reflect or are unlocked by past interactions with the brand and offer the potential to extend the brand relationship into new areas through interaction. Tokens even offer the potential to deliver value based on a person’s relationship with partner and 3rd party brands by connecting composable tokens.
Early examples of token-aware services and experiences include:
Token-gating – Exclusive access to products or content that is granted to token holders.
Airdrops – Sending new items directly to the wallets of token holders. These may offer value, or they may be designed simply for brand fans to further participate in more meaningful ways.
POAPs – With cookies set to disappear, POAPs (or similar technologies) will be the new guideposts to a person’s behaviors and interests. That said, they can be better than cookies ever were in that tokens can be given to people for both their digital and real-world actions – meaning that a much more complete understanding can be developed.
The true power of tokens as the starting point of a relationship will be their ability to combine communication value and business value into one unified structure.
COMMUNITY: From value extraction, to value delivery
Community in web2 is either managed by social media platforms, in which case the value of the community is principally in media access and targeting, or structured through CRM and loyalty programs, in which case the community structure is principally focused on data capture and extraction. In the future, web3 and decentralized identity will mean that brands don’t have to worry about data capture or media targeting in the same way. Community members who “connect their wallets” will be able to share a complete view of their past behavioral data right from the start. This will be possible because people will own and control the data themselves. It will not be owned by a 3rd party platform. (For an example of how this will work, have a look at Lens Protocol)
Making this even more compelling is the fact that the data set being shared through a wallet connection is likely to be much more extensive than the basic PII marketers typically collect today. This means that with just one “wallet connection”, a brand could get much more valuable and actionable insights about a person than what is typically possible over years of “engagement farming” in the way it is done today.
As such, the emphasis by the marketer must be on creating a perceivable value for connecting a wallet. What is the long-term value for the person who connects? How do we create enough value in “being part of the community” that community members become almost magnetic and attract more people to connect their wallets to the community?
Truth told, web3 communities might be smaller than web2. You can follow hundreds of brands in social media, but you can only meaningfully participate in a small handful. Entrusting community members with authority and giving them and their voice influence will be core to creating perceivable value.
The focus of the community will be the longevity of engagement and participation.
MEASUREMENT: From short-term optimization to long-term interaction
Metrics in web2 have been developed to understand the short-term influence and impact of engagement. In this way, the technology has enabled personalization, real-time optimization, efficiency, and performance improvement. However, the changes mentioned above relating to communication, sales, and community all suggest that web3 will focus on longevity rather than short-termism, so new long-term interaction-focused metrics will need to be created.
I personally don’t believe that the focus on performance will ever dissipate. ROI will need to be proven in this space for significant investment to come in. To be honest, I don’t know how these long-term focused metrics are going to take shape. Will analytics just feed into existing brand power studies? Will tokenized brand value become a tangible balance sheet asset (this idea feels like it could be the basis for a newsletter on its own)? Will new metrics appear that measure people’s propensity to long-term participation?
I am sure all this will happen and more.
This is a nascent space and there are many businesses that are already starting to build web3 measurement and analytics tools. I expect as these tools develop, we will see new thinking and new approaches to KPI measurement. Some of the brands building measurement tools for web3 include Third Society, Merlin, Plex Labs, Lagos, and many others
SUMMARY
In summary, I don’t ever believe that one thing replaces the other. The internet hasn’t replaced TV (even though it is not enjoying the same standing it once had) and web3 won’t replace web2. These are different tools, built at different times, for different jobs and so they do different things.
Web2 came about when TV was still a strong brand-building tool with a captive audience. Marketers didn’t need another brand-building tool, they needed ROI and so web2 delivered. A well-oiled machine designed to capture eyeballs, keep them on the platform, or make it easy to take action. Web2 gave marketers the performance they needed.
Today marketers have a lot of options when it comes to performance tools. But TV, their trusted partner in brand building, isn’t as strong as it once was. It no longer delivers marketers with the same captive audience it once had. Today’s marketers need new brand-building tools that are designed for the digital age and web3 is well-positioned to deliver. It will work differently from how TV worked before it, these are different times after all. Instead of focusing on passive audiences consuming content willingly, web3 will be built for active participants who lean in, interact and engage. This will require markets to think and act differently if they want to succeed.
The new marketing challenge will be time. It is a scarce resource for all of us and so people will be discriminating when they decide who they give their time to. After all, no one has time for an active relationship with every brand. Marketers will need to develop new brand-building strategies that leverage the potential offered by web3 communication, tokenized sales, loyalty fuelled communities, and blockchain measurement in order to give people reasons to choose to spend time, interact and participate with their brand.
Seen through the lenses of communication, sales, community, and measurement, I believe that web3 provides new tools to brand-builders as it unifies marketing and product. It unlocks opportunities not just to communicate but to build real trust through interaction and shared experiences. Most importantly, it offers the potential to build beyond today’s short-term attention economy and to create a long-term participation economy.
I am excited by this because I believe web3 will unlock amazing creation potential as it renews the emphasis on long-term brand-building. I look forward to seeing what you build.
As noted at the top of this article, this was the first in what will be a five-part series. The next four articles in the series will explore how web3 will impact Communication, Sales, Community, and Measurement.
Please share your thoughts, comments, and questions below. Your comments will help to shape the next articles.
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