Three mindset shifts for Web3

Newsletter #13 - August 21st, 2022

Hello and welcome back. It’s official. This is the first long-format issue of the rebranded newsletter. I want to thank all of you for subscribing, and I want to welcome all of the new subscribers who have signed up in the past few weeks. For those of you who are new, the BRAND N3XT newsletter has a three-part mission.

1. Educating people and brands about the potential value that Web3, especially where it has the potential to deliver real benefits to people, communities, and the world.

2. Highlighting use cases that are likely to drive scale and adoption.

3. Spotlight the innovators who are leading and building in the space.

And lastly, before getting into the content, if you are reading this and haven’t subscribed yet, please do so you can join our growing BRAND N3XT community. 🚀

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I’ve been working in the strategy consulting and marketing space for a long time, and one thing I quickly learned is that I love the rule of three.

• People can usually remember 3 key takeaways

• People appreciate being given 3 options

• People see a 3 bullet list as a sign of organization and confidence

Maybe this is why I was first drawn into Web3. LOL.

This isn’t really the case; what brought me into Web3 was recognition of the potential for tokenization to align incentives of diverse stakeholder groups. I saw Web3 as a transformative force with the power to move people from seeing themselves as passive investors to active participants who have both a voice at the table and a stake in the direction of a project.

When I got into this space, this was all still principally focused around DeFi projects and investments where participation could result in AirDrops or other value-based incentives, but the bigger promise and the potential for brands were clear from day one. After all, the type of active participation and vocal advocacy that these new businesses were benefiting from would be a holy grail for any brand loyalty program. And these brands were getting it all with limited, and often no real investment in marketing to speak of.

In short, I saw Web3 as being a strong force for equality, engagement, and empowerment. But one that still needed to be harnessed and shaped by its participants and builders. In particular, I recognized that as brands moved into the space and looked to leverage the technology, they would need to reimagine three things:

• How they build relationships (go-to-community)

• How they think about people (self-sovereign identity)

• How they empower people and add value (protagonist model)

Each of the above requires new ways of thinking, and of leveraging the tools and technologies connected to the Web3 ecosystem. But getting them right will offer the ability to deliver profound impact and value for businesses, customers, and the broader communities in which they operate.

MINDSET SHIFT 1 - Establishing valued relationships by adopting a Go-to-Community strategy that complements existing Go-to-Market approaches

Community and connection have long been recognized as the superpower of the internet. In Web1 this was enabled by our ability to send an email and communicate in an asynchronous way. In Web2 these abilities were augmented through social media which allowed people to publish their activities with greater frequency and to like or follow groups and brands as points of focus. In Web3, communities are being tokenized giving all participants the opportunity to collaborate within a community on near-level terms.

For businesses and brands, the value of taping into community has long been clear through its ability to drive advocacy and in turn influence consumer decision-making and sales. However, prior to Web3, despite recognizing the importance of community their ability to either build thriving communities or tap into existing communities has been constrained. There are some hero examples of brands who have committed to the community in the past and been very successful in doing so, but for the most part, the focus has been on building up a social following for media targeting.

Web3 makes the Community opportunity real for more brands today.

What’s changed is that the technology that underpins the web has been progressively moving towards real-time engagement, and towards models that offer people the type of voice and value they might enjoy when engaging in “real-life” communities. What this means is that people can feel more empowered as participants within a community and hence they can get more consistent value from it. In short, people’s motivation to participate in digital communities is increasing and active participation is where the greatest value and influence is had.

So how do brands get value from this? How do they benefit? Go-to-Community is the short answer.

We all know that the typical Go-To-Market strategy is a funnel wherein you develop a message and proposition, deliver that message to as many people within your target audience as possible with the expectation that only a limited subset of them will engage further, and then only a smaller subset will eventually buy. In theory, the more people that come through the top of the funnel, the more people you should see converting at the bottom. As such optimizing spend on reach so you can afford to connect with as many people as possible at the start is essential in order to maintain a positive ROI even if there are low conversion rates through each phase of the funnel.

AIDA Model of the Marketing Funnel

In many ways, Go-to-Community is the opposite. Instead of targeting a large volume of people and minimizing the per-person investment at the top, you start with a small number of people with the intention of investing to a level where each person recognizes the real value of participation and engagement within the community. The focus is on the value you create for people.

The thinking is that the greater the perceived value of participation and inclusion within the community, the more powerful the gravity that pulls people into the community. This in turn grows reach, engagement, and impact creating a virtuous circle.

Unlike the FUNNEL which starts with a large number of people and reduces over time, the ORBIT model starts with a small team, then grows to advocates, and then grows further as it reaches further out.

Looking at the two models side by side, you can see that they work in opposite ways: GTM working from the outside in, and GTC working from the inside out. As such it is important to note that Go-to-Community does not nullify the need for a Go-to-Market strategy but instead compliments it and makes it more effective.

As new technologies emerge, there is often a desire to talk about how one is replacing the other. How long have we been reading about the death of TV? But the truth is that it’s rare for one medium to truly replace the other. Instead what we typically see is that these new mediums create new contexts of use. So Web3 and token-based communities will not replace the contexts of use developed in Web1 and Web2, but rather adds a new context of use, and with that opens up new opportunities for both business and people.

So what do you need to do to succeed in launching your Go-to-Community strategy?

The first thing to know is that this is new and there is no playbook. There is no best practice. This is the n3xt practice. That said, there are some good fundamentals to start with:

• Build Hypotheses - For now, much of the ROI in this approach will be in the learning you get out of it. As such, having a clear view of what you want to measure, and where you believe you can make an impact is critical.

• Focus on the value you create, and measure it - This is about creating gravity that draws people from outside of the community in. To manage this, the value should not be a function of the investment you put into each person, but rather a function of what they can do as participants within the group.

• Investigate the potential to empower people with tokens - Digital communities existed long before Web3 and Tokenization. That said, tokens are a new tool and offer new incentives to engage, empower, activate and reward people. They can be tradable. They can represent past activities. They can evolve. They can serve as a digital data record of preference, behavior, and identity. And so much more. We are still early, so don’t be afraid to experiment.

• Create separate teams for GTM and GTC activities - Long-term success requires the removal of competing priorities, and while the overall objectives of both a GTM and a GTC strategy may be the same (grow the business / grow sales), the tactics to get there will at times be in opposition. As such, to protect the investment, it is advisable to have separate stakeholders managing each approach.

• Remember that Go-to-Community does not replace, but instead compliments Go-to-Market - This isn’t the case of what’s new replaces what came before it, but rather that complementary strategies can work together to make each other more effective. People always seem to assume that one strategy or channel will kill off the others, but remember that despite people talking about the death of TV for over a decade, TV remains a powerful communication channel. It is not either or, but both together.

There are some great examples of brands building successfully in this direction. Beyond the legacy examples of Nike Running Club, Sephora, etc, there are emerging places looking at new tokenized GTC activities.

Three brands succeeding with tokenized community strategies

• Gucci - Gucci has been pushing the Web3 strategy forward on many fronts. The above image is from their partnership with the NFT community 10ktf. As part of that partnership, they enabled the owners of blue chip NFTs from 10 different communities to re-mint their NFT but dressed in Gucci clothing. In this way, each was unique to the individual and the value and the exclusivity were instantly clear.

  Gucci has also launched a Discord server which you can access here.

• Nike - Following on from their purchase of RTFKT, Nike has been advancing a very community-centric strategy built around the release and airdrop of new NFTs. Their approach is successfully building anticipation and a sense of ownership around launches and drops while still keeping many elements secret in order to build excitement.

• StepN - As a native Web3 brand whose proposition is built on a Move-to-Earn promise, StepN has built a large following from consumers who are both active users of the product / NFT, as well as those users looking to join through by getting an access code. Their limited participation/invite strategy has its roots in both Web1 and Web2 mechanics, but has proven itself successful in activating, engaging, and growing a Web3 audience as well.

Many other brands are launching Discords as the first step towards Go-to-Community including brands like Lamborgini who recently launched a discord server and Puma who just launched their Discord community a few days ago. These are still both new enough that I don’t know much about how this will be used and what it gives to the community.

MINDSET SHIFT 2 - Recognise people as individuals by moving from Persona’s to Identity

Todd Kaplan, CMO of Pepsi, recently made a long statement on LinkedIn that I will paraphrase here by saying that the word “consumer” brings risk in that it generalises the way we look at people to a level that neglects them of their individuality. Marketers strive to connect with people on a human level, but achieving and understanding people in that way requires recognition not just of how they are similar and how we can cluster them together, but also of how they are different and what makes people unique as individuals.

You can and should read his full statement here as I can’t possibly to justice to it in such a short space.

Moving from generalization about people to specificity about individuals isn’t a new thing. It is one of the driving forces behind many of the personalization tools that we see today from the big AdTech and MarTech players. And, while this technology has been very successful in many regards it is still limited.

Specificity is hard

The real challenge for brands is that they don’t actually know very much about their customers beyond the basics. If we are honest, most people probably like it that way too as they don’t want to share very much information with brands. Why does a brand need to know about my family? Why should a brand care about my hobbies? How does my telling you more about myself make the product I buy better? Brands often ask for information without making it clear why it is relevant or how it will be used. This can in turn result in frustration and mistrust, or worse yet, in people bouncing out of a process or leaving the brand.

One tool that has been developed by marketers to help manage the challenge of specificity is the Persona. Personas aggregate data and generalize insights while also providing a sense of personality to their target “consumer”.

This image is deliberately simplified and does not include reference to the underlying technologies that enable media targeting

As seen in the diagram above, personas provide marketers with a series of archetype “consumers” who can easily be targeted with more relevant creative communications and through more targeted media based on a set of defined attributes such as communication channels of preference, behaviors, etc (personas offer a broader set of benefit to marketers than just this, but for purposes of simplicity lets focus here for now). In short, personas act as a map that marketers can use to push messaging.

But this is still a big challenge. While a brand can create a multitude of personas to reflect the perceived breadth of the client base, the reality is they are still generalizations of people that don’t reflect true identity, individual motivations, or personality. So they still don’t let you speak to an audience of 1.

What’s next and how Web3 might impact this

Crypto wallets, as indicators of identity, have the potential to change this. The tech isn’t entirely there yet, but the rationale is clear.

Today, a person’s identity data is held by many 3rd parties with each having only a limited view of who the person is. A person entrusts their bank with financial insights and data, they entrust social media brands with other sets of data, and so on and so on. But no one has the whole picture. As Crypto wallets develop, and as people bring this data on-chain, they will become the owners of their own data. This will mean their identity data is complete, up-to-date, and in one place. Most importantly though, it will make the individual the guardian and the distributor of their identity data.

While the change might sound subtle, the impact may in fact be profound as it offers the potential for communications not to be targeted at generalized profile-based personas, but at individuals based on a complete set of identity data (or whatever limited data sets they feel comfortable sharing).

The diagram below highlights one possibility for the way this could work where the individual is in control of the media and the communications that they see through digital channels. Unlike today where media are is based on broad-based facets and pushed to “consumers” whose profiles are a match (or in some cases more generally just based on demographics or just plain reach), the above diagram highlights a potential scenario where media isn’t pushed to “consumers” but pulled by individuals.

Image deliberately simplified to focus on the concept rather than the technology or the actual workflows that will sit behind this process.

In this scenario, their wallet (or another key with access to the full identity data in their wallet) would look at the universe of possible messages and select with whom they would share what types of data based on any number of parameters. Are there industries they are willing to see and others they are not, are they in the market for a specific product or service at that time, etc?

If you are saying to yourself that you thought this was possible today, well - yes and no. There is a saying in marketing that “half of my budget is wasted talking to the wrong people, I just don’t know which half”. Well in this instance it’s unlikely that half would be wasted because the individuals would be opting in to receive specific messages based on the data facets associated with the message as opposed to having messages pushed to them based on data facets about them as “consumers”. This should eliminate a lot of the waste associated with both incorrect audience targeting (wrong person and/or wrong time).

There is however one big challenge with the model that I have just described and that is privacy. We know that this is a primary concern for people, legislators, and for technology companies. At the same time, we also know that if an advantage or cost savings can be captured, someone is going to develop a product to do so. So what’s to prevent the progressive profiling of individuals as they interact with different messages and experiences over time?

Enter ZK-Proofs and ZK-SNARKS. A Zero-Knowledge (ZK) Proof enables one party to prove something to another party using cryptographic methods that don’t reveal any private and sensitive information. For example, if a person goes to a beer brand’s website, the brand is required to validate that the person visiting the site is of legal drinking age. Using ZK proofs, the person visiting could share the information to prove that they are of age without the need to reveal any personal data (birthdate or anything else). Key to the way this works is that the cryptographic proof shared between the two parties cannot contain the data used to create the proof. This means that if a person shares their birthday, their social security number, or their TAX ID number to the Zero-Knowledge Proof program, they can be sure that the other party will not be able to reverse engineer any sensitive information from the proof that is shared because the data is not in the proof.

ZK Proofs and SNARKS are complex in what they do and how they work. If you want more detail and to learn more about ZK Proofs, you can visit this site for additional detail.

In summary, putting people in charge of their own identity data will create the potential for brands to connect with people as individuals and not just as Personas - all while still respecting their privacy.

How this really takes shape and scales is still a bit of an unknown, but I am certain that as we gain the ability to digitally recognize and engage with people as individuals instead of personas we will unlock new creative opportunities for brands and marketers to build relationships and share value with people and the communities the brand serves. Below are a few examples of companies and technologies that are driving towards individually owned identity data. Their visions and approaches differ, but they are all influential and worth knowing about.

• PolygonID - Polygon ID is a blockchain-based ID system for decentralized and self-sovereign models. It uses Zero-knowledge (ZK) native protocols for ultimate user privacy. It is scalable with private on-chain verification for use with dApps and DeFi.

• Disco - Disco is building a data backpack that solves reputational challenges by using on-chain identifiers across different blockchains as well as web2 platforms. And they do this while still maintaining the privacy of users and ensuring their autonomy.

• Lens Protocol - Lens Protocol is building a Social Graph similar to other social networks, but this one is composable and decentralized. Anyone will be able to build apps that are compatible with the social graph meaning that people can just focus on the experience they create - not the number of users they need to join.

• BrightID - Is building the Web3 solution to help you prove that you are who you say you are - so every app and service you connect to believe you.

• Iden3 - Iden3 is building an identity protocol based on Self-Sovereign identity and built for privacy. As a standard, it can be used by any identity platform meaning that it is designed and built for interoperability. This is the protocol used by Polygon ID for example.

I haven’t done justice to any of the companies by trying to simplify what they are building down to what I can express in a sentence - or in truth to the Identity category as there are many more companies in that space. If you are interested in Digital Identity, I highly recommend that you visit these sites, but if you still want to read more about the different businesses building wallet-based and tokenized identity solutions, this blog post from dommy.eth provides a comprehensive view.

MINDSET SHIFT 3 - Empower people by recognizing them as the hero’s in their own journeys and moving from an Audience to a Protagonist mindset

We all know the customer journey isn’t linear, but modeling it precisely is a challenge that which people have been working on since the advent of marketing. We’ve seen an evolution from thinking of a linear funnel to a circular loyalty loop, and most recently, Google released research that highlights the chaos of the decision journey and culminates with a new model called The Messy Middle. Truth be told, none of the models are perfect, but all have validity and provide value to marketers.

1. The AIDA model was developed in 1898 by Elias St. Elmo Lewis and remains the foundation of the modern marketing funnel. 2. The Loyal Loop, Mckinsey 2008 3. The Messy Middle, Google 2020

While the three models look quite different, they do have one thing in common: they position the audience as a passive recipient of communications with limited ability to guide or direct the journey themselves. The reality is that most people are not passive in their decision at all, and as a reflection of that most journeys are self-directed.

We need to shift the marketing mindset from thinking of people as the audience for a show where the brand/product is the hero, to recognizing them as the protagonists in their own stories where the brands/products feature as the supporting character.

Gaming works under this premise as it puts a person in control of their own journey. This is potentially one of the drivers behind the growth of the category and is also likely one reason we are seeing increased marketing investment in the category - as it is their way of shifting to this mindset. But outside of gaming, our ability to connect with people in ways that put them in control has been limited by technology.

Metaverse and NFTs have the potential to change that.

NFTs won’t just be digital collectibles, they will become indicators of past actions, current behaviors, preferences, brand loyalties, etc. The team making POAPs (proof of attendance protocol) describes what they are building at POAP as “bookmarks for your life”. These bookmarks will form an index of memories like a photo album does today, but with additional utility. If permission is given by the owner, they will also be indicators that can be read by brands allowing them to curate and customize experiences for the individual, and for the moment.

So POAPs and NFTs, when seen as roadsigns to understand an individual, offer the potential to truly connect with the right person at just the right moment and to reward them for their engagement along the way.

As an aside, POAPs are free, so if you don’t yet have one yet, or if you’ve already started your collection but want one from BRAND N3XT, you just have to do the following:

1. Subscribe to the newsletter (if you haven’t already)

2. Comment on this article indicating that’ve read the whole thing and want a POAP

I will follow up with a personal email providing you with an individual link to get your BRAND N3XT POAP.

But please note, I will only be giving a total out 50 POAPs.

As an industry, we’ve all recognized the challenges with interruptive media for a long time. You just have to look at the 65 to 85% of people who skip YouTube ads to know that people don’t want things to get in the way of their goals. NFTs offer the potential to stop interrupting and instead reward people with elements from your brand as they progress in their journey. This potential could be further amplified when connected to an open and inter-operable metaverse. Let me share a few thoughts/examples:

• Imagine entertainment brands using the metaverse to create story worlds that fans could explore to learn more about their heroes. I am sure a lot of people would have fun going through Tony Stark’s office, reading his diary, looking over his schematics, etc

• Automotive brands might try to win me over and get me to “test drive” one of their cars, or maybe just keep me loyal by recognizing an NFT travel ticket and responding by offering me a rental/loan of one of their vehicles upon landing.

• A CPG brand might recognize me as a music super fan from the collection of concert POAPs that I have amassed. In turn, they could use their sponsorship spend to offer me backstage passes increasing the value that I see in being part of their community.

• A credit card brand could give me tokens as transaction receipts while creating a marketplace that allows me to trade the tokens they give me for tokens (loyalty points/airline points/dollar credits) from other brands based on a free-floating exchange rate.

• When I go to see my hometown sports team play a game, they would see the NFTs and POAPs I have collected from their partners and sponsors and choose to give me a jersey that’s emblazoned with the logos, but which for me is a fans trophy.

• My health insurance could partner with my favorite games so that my character recovers faster when I am observing a regular exercise routine.

Mindset shift, or mindset expansion?

• FROM go-to-market TO go-to-community

• FROM personas TO identity

• FROM audience TO protagonist

I know that I have positioned these as mindset shifts, but in truth, these legacy mindsets still serve us well. The world won’t change overnight, and people won’t stop using the channels that they have been using and relying on every day just because some new technology comes about. No - they will work together, supporting each other as people discover these new channels and increasingly put them to use in their daily lives. So while I might call them mindset shifts, the reality is that they are mindset expansions.

So don’t think that you need to replace the old, but do start making room for the new so you can experiment and succeed in the rapidly arriving and evolving world of web3.

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News, Articles, and other bits of inspiration

• Mercado Libre just launched a tokenized loyalty program in Brazil. At the core is the creation of a new cryptocurrency Mercado Coin. With so many people waiting to see what Starbucks announces next month in regard to their Web3 loyalty program, this definitely ups the game. You can read more about it here.

• Reddit also announced that they would be tokenizing their Karma points rewards by partnering with FTX.

• You and learn more about the thinking around Go-to-Community by reading this great article from A16Z.

• Or you can learn more about the Orbit Model that I mentioned earlier and how it relates to Go-to-Community.

• This is a great breakdown of what different Web3 Identity brands are building at the moment.

• I enjoyed this piece about CC0 and more specifically about Nouns.

• It’s always good to get multiple points of view - especially from people whose opinions differ from our own. Here is one POV worth listening to from James Whaley’s talk at the BIMA Beyond conference where he says that the Metaverse isn’t a real thing. It’s just gaming and any claim that it’s more is incorrect.

• Nike and RTFKT recently launched a hood that mixes digital and physical products. Here is a link to more detail about that.

• While on the subject of Nike, here is a great breakdown of their Web3 strategy from a great Web3 blogger/writer kahris.eth

• It’s always good to look at competitors to see how they differ, so here is a great piece about Adidas Web3. Also from kahris.eth

• Here is a link to a fantastic Twitter thread from Montana Wong about the upcoming ETH Merge.

  Montana Wong @Montana_Wong

  Ethereum is about to experience a once-in-a-lifetime phenomena called the "Triple Halvening" after the upcoming Merge. What this is, and how this will drastically affect every ETH holder 👇

• I will wrap up with a bit of promotion for my recently launched Podcast. If you have already listened, thank you. If not, here is a link where you can subscribe listen and subscribe. I have interviewed two great guests so far and have a few more episodes scheduled to drop soon.

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Nothing in this newsletter is intended as financial advice. This newsletter is for educational and entertainment purposes. It is not investment advice of any kind, and no commentary contained herein should be viewed as a recommendation to make any financial decisions related to assets of any kind.