Social tokens & the future of brand marketing?
While much is still written about The Attention Economy, some of us believe we are already moving into the next marketing paradigm: The Ownership Economy.
The Attention Economy assumes a competition for time and engagement, an outside-in approach to marketing where brands are competing to be the most creative interruption in consumers lives. And hence win the war for share of attention, share of voice, share of search in that moment. Brand ambassadors are hired guns, paid to promote based on their proven ability to command that precious attention. The Ownership Economy flips this model on its head to advocate for an inside-out relationship where customers, consumers, or better still fans, are part of your brand and driving your business.
But how is that possible?
Imagine being able to release the benefits of a membership club, a rewards programme and traditional financial equity ownership all in one package. Web3 social tokens, digital proof of ownership recorded on a public blockchain, make all these possible simultaneously.
Considering these three customer relationships one by one, and their limitations in the Attention Economy:
- Membership clubs formalise a sense of community through official membership and via exclusive branded merchandise, and maybe some perks like first looks at content or the occasional discount. But there is usually no commercial incentive nor participation in the financial success of that business.
- Rewards schemes are more commercial in nature, being structured around financial incentives in return for loyalty, but offer little fan community engagement. Again, there is no direct connection between the member and the financial success of the business.
- Equity ownership through publicly traded shares in the company is almost the complete opposite of these first two schemes. Participation in the financial success of the business is guaranteed through dividends and any capital appreciation, but there is usually no need to be engaged with the business at all – nor even to like the product the company is selling.
The benefit of social tokens is that they unite the fan engagement of membership clubs, with the loyalty incentives of rewards programmes and with the commercial participation of equity ownership.
And how do they achieve this?
Imagine a hypothetical example; the issuance of a social token by The Walt Disney Company: a Star Wars coin called $STARWARS. The tokens would be offered to the public at initial mint price for fans to buy. By issuing a large number of tokens, the price per token can be low, allowing any fan anywhere in the world to own some of the IP they love (and indeed newer brands with a less engaged fan can airdrop the token for free). The number of tokens initially available would be limited, with maybe 50% issued to the public at launch and 50% held back by Disney for management incentivisation and later marketing activations. The mechanic would be the same as a branded NFT drop like the recent Matrix NFTs or Discovery’s Shark Week NFT drops on Niftys. This initial coin offering could raise significant capital for the company without the need to dilute pre-existing equity, nor take on any new debt – an entirely incremental revenue stream.
And this token is available to anyone anywhere in the world, with no dramas about whether to list in on the London Stock Exchange or NASDAQ. Furthermore, these new tokens can now be publicly traded instantly and globally on any crypto exchange where it is listed, making ownership liquid in a way that a membership scheme is not. As interest in Star Wars grows (say with the announcement of a new movie or a new series on Disney+), so does demand for the token and hence the token price goes up. Token holders can now realise a financial return on investment from their initial purchase or HODL the coins because their support as a fan is more important to them.
It is important to state at this point that the financial regulation of this space is changing almost daily, with the possibility that tokens can be deemed as financial securities. Any business considering issuing a social token should of course seek legal advice.
Token ownership, instantly verifiable on the blockchain by simply connecting your Web3 wallet, would act as your membership club ID. By showing you are a token-holder, you could for example get early access to the sale of tickets for Star Wars Celebration, new movies or exclusive access to limited edition collectibles. Now the token is part of your Web3 identity. Simply by connecting your wallet, a zero-knowledge proof will validate that you are who you say you are without Disney (or any of their third-party suppliers) needing to hold any personal data on you.
“The real magic comes”, comments Toby Rowland, CEO of CRANQ.io, a low-code IDE for Web3, “when you combine the authentication and equity implied by ERC-721 tokens (like NFTs), with the value from a complementary flow of ERC-20 tokens (fungible tokens like $STEPN) that can be used as a form of payment. This is how many Web3 games work, giving fans the chance to buy an NFT that entitles them to issue fungible tokens that can be used in-game”.
But maybe most importantly, from a brand management perspective, the token holders – the fans – now have a financial as well as personal incentive to promote the brand. When they see an advert on social media for a new Star Wars movie, it is now in their personal financial interest to share that advert to help make the new movie as popular as possible. If the Star Wars movie is more popular, then the $STARWARS token will be in higher demand and hence the price goes up – making your personal holding more valuable (should you want to sell).
As such, social token ownership aligns fan engagement (membership club) with commercial incentive (rewards scheme) by rewarding fans for becoming brand ambassadors. As well as offering the potential commercial benefits (and risks) of traditional equity ownership.
This is not just a fanciful idea. This new asset class is already making culture investible through both fungible and non-fungible (NFT) social tokens:
- Music. Often a first mover in the digital space, the music industry is actively exploring tokenisation. Imagine finding that new band that no one else has yet heard of, supporting them (when they most need it) by investing in their token, then sharing in their success in the years to come as the value of your token holding increases. Companies like HiFi Labs are exploring new business models that disintermediates the record labels and streaming platforms by allowing direct crowdfunding from the fans to the artists. An attempt at a truly decentralized Web3 model.
- Sport. Socios allows fans to buy tokens from their favourite sports teams. The company has deals signed with a large number of top tier football clubs including AC Milan ($ACM), Manchester City ($CITY) and Barcelona ($BAR) as well as other sports. Fans of these teams can buy their team’s social token to participate in certain governance decisions and get access to special events and merchandise.
- Film. Independent film producers are now actively exploring funding mechanisms using the issuance of tokens. New companies like Mogul Productions ($STARS) and Moviecoin ($MOVIE) are issuing tokens or NFTs to raise financing for the production, with the investors getting access to limited edition collectibles and in some cases (securitised) stakes in the production itself.
- Crypto. Finally, blockchain native IP is of course using social tokens to build communities around new projects. The Otherside & $APE token from YugaLabs, the owner of Bored Apes NFT-based IP, is maybe the most high-profile recent example. But there are so many token-gated communities here, including for example $STEPNwho have built a social and gamified community of runners with entry gated through their Sneaker NFTs.
And it’s not just cultural or entertainment IP business that are employing the use of social tokens to engage and motivate their communities. UK crypto accountancy firm Myna have just announced their own ‘token-gated’ community. Participatory benefits will include discounted tax services, consultation opportunities, private Discord, whitelist opportunities, premium events, and private webinars. In the words of the founder of Myna’s owner, Nephos Group, Joe David:
“We are always looking to integrate ourselves within the crypto community even deeper to ensure we can support the needs of our clients. Naturally creating a professional services NFT to allow our clients and partners to collaborate was a fantastic way to start. We also wanted to try to begin to show some of the true values of what NFT’s can bring to communities in all different sectors.”
So why should we pay attention as businesses?
Those companies that are always looking further, beyond the obvious, are the ones that succeed and grow. In today’s complex and challenging environment, spotting the right growth opportunities is vital, and continually evolving to be able to embrace and operationalise them is imperative. Social tokens have direct and potentially revolutionary implications for businesses and their brands:
- As well as fusing fan engagement with commercial ownership, social tokens forge a stronger bond between the CMO and the CFO. Not only can the marketing team move from being a cost-centre to a profit centre (unlocking the value of fandom through any initial coin offering capital raise, if not airdropped for free), but the token price also measures brand equity and becomes a brand valuation KPI. Brand tracking now happens on Coinbase and FTX with the market defining a brand’s value at scale. Marketing and finance are now speaking the same language. And crucially, it could move brand value from an intangible to tangible asset on the balance sheet.
- A tokenized customer relationship also allows for endless innovative new communication and brand activation tactics. Remember the 50% of tokens Disney held back for themselves in our earlier example? These can now be drawn down and given away (airdropped) in small quantities to incentivise product trial, first weekend movie viewership, the sharing of social video etc. And how does community ownership affect your advertising and media budget? What is the role of advertising to fans, when you are speaking to them daily on Discord?
- Internal staff engagement is another fascinating opportunity. Does the issuance of the same social token to employees of the company create an additional value proposition and incentive to promote the business they work for? Traditional share options naturally play the same role, but many companies will not or cannot offer shares to all employees in all jurisdictions. To create long-term incentive plans, the token could even become an NFT where the smart contract does not allow sale for a period of time – and even longer-term, be an incentive for alumni to continue their support of the business even after they leave. Again, token ownership can be used to reward staff where share dilution might not be possible or financially attractive.
It’s a fascinating new space with so many opportunities. No one has all the answers yet. Businesses in many industries are experimenting with new approaches and new models. We firmly believe this will provide incredible new opportunities for imaginative brands to engage with their customers.