This is an article I previously published on the technology edition of The Paper.
Web3 empowers daily life and allows Web3 to enter ordinary people's homes. This article interviews Wang Chao, a crypto OG and an expert in Web3 empowerment consumption.
My Twitter: @curiousjoe5
If a brand puts itself at the center of its Web 3.0 strategy, rather than the community and the innovation that will come from it, it will rarely succeed.
In my opinion, Web 3.0 is a new open Internet where consumers can immerse themselves with their digital assets and digital identities and move seamlessly between the online and offline worlds. This will be a fundamental change in consumer behavior.
"The word 'company' in English comes from two words, come and panisse (a chickpea snack for sharing). That is to say, the original meaning of company is for everyone to come to a fixed place to trade and then share food together." Wang Chao said that now this word usually gives people a cold and stereotyped impression. But when Web 3.0 and brands are combined, we see a paradigm shift: "Brands need to step down from the stage to get closer to consumers. Consumers are not just consumers, but residents of various micro-communities in Web 3.0."
Wang Chao is an early participant in the Web 3.0 industry. He joined Web 3.0 from the traditional IT industry, served as COO of a Web 3.0 startup, and is now a Web 3.0 researcher and independent investor. Recently, he shared some insights with The Paper (www.thepaper.cn) on the topic of "Community, Consumption and Brand of Web 3.0".
Wang Chao believes that in the field of "Web 3.0+consumption", there are several major directions that are currently developing rapidly. The first is to use Web 3.0 technology to unlock some new scenarios for end consumers and give everyone new experiences; the second is to use new technologies and operating methods to gather the community, and then allow the community to truly participate in brand building and capture some potential value; the third direction is to revolve around digital identity.
In terms of the practice of "Web 3.0+brand", big brands such as Starbucks, Nike and the clothing brand "Crocodile" have already taken action, and most well-known international brands are also learning and brewing their own Web 3.0 promotion strategies.
The following is the transcript of the conversation between Curiousjoe, a special contributor to The Paper, and Wang Chao.
Web 3.0 is bound to happen
The Paper: Could you please introduce yourself first and talk about why you are engaged in research and investment related to Web 3.0?
Wang Chao: My understanding of Web 3.0 started from Bitcoin, then blockchain technology, and then to today's Web 3.0 and its application scenarios. I heard about Bitcoin around 2011, but I really started to pay attention to it in 2013. Several things happened that year. First, the Cyprus banking crisis at the beginning of the year caused a lot of chaos in Europe. At that time, Bitcoin's vision of improving traditional finance made it a safe-haven asset and made many people know it. Second, many commercial institutions began to try to provide Bitcoin payment services. Against this background, the price of Bitcoin also exceeded $1,000 and attracted more public attention. This made me start to think seriously about what Bitcoin is, why it was born, and what is its internal operating logic? After reading a lot of information, I have a basic understanding. Later, on October 31, 2015, the British magazine "The Economist" published an article on the cover titled "Trust Machine - How the Technology Behind Bitcoin Changes the World", proposing that "the meaning of blockchain, a technological innovation, extends far beyond the cryptocurrency itself." That article had a great influence in academia and the business community, and successfully ignited everyone's interest in blockchain.
Subsequently, a large number of people in the financial and technology sectors invested in this field in 2016, so many people later said that 2016 was the "first year of blockchain." Due to professional needs, I also invested resources to track this technology since 2016. Although I was not sure about the future of Bitcoin at that time, I began to have a very strong confidence in blockchain technology itself, and believed that this technology would definitely be applied to a very wide range of fields in the future. This confidence was very firm in 2017, and I was very excited after seeing the innovation in blockchain. So that year I made up my mind to leave my original industry and join this industry.
I started to do independent research and investment away from specific projects in 2020, and it has been more than two years now. This happens to be the two years when the Web 3.0-related technology stack and Web 3.0 as a new narrative have developed rapidly.
Of course, the Web 3.0 technology stack is still far from mature, and there are still many different arguments and thoughts about the future direction of Web 3.0 applications. Any new technology has this process. But I have seen breakthroughs in technology and infrastructure, and I have seen a large number of innovators conducting various explorations based on Web 3.0 technology. I have also seen these technological breakthroughs bring new possibilities to many industries and even the entire business community. During this period, our world has also changed a lot, resulting in a strong demand for Web 3.0 at the cultural and social levels.
So I think there will be a lot of related applications in the next two to three years, and some of these applications will really be able to penetrate the mass market and achieve a certain scale of mass adoption. I think this is a definite trend.
Web 3.0 and the Web 3.0 Community
The Paper: What aspects of real life can Web 3.0 empower?
Wang Chao: Web 3.0 solves the problem of data ownership. One of the most widely spread metaphors is that for users, Web 1.0 Internet is read-only, Web 2.0 Internet is read and write, and Web 3.0 is read, write and own.
In the world of Web 2.0, if you look at the user terms of the big platforms, you will find that all data, including your own account, belongs to the platform company. Even if the content on the platform is created by users, it is essentially owned by these centralized Internet companies. Web 3.0 attempts to solve the problem of data ownership. Relying on blockchain technology, individuals in Web 3.0 can truly own the content they create. Based on such data sovereignty, many scenarios have been derived, including scenarios for empowering consumption, which can be discussed in detail later. Of course, the meaning of Web 3.0 has long been extended very widely, so when we talk about Web 3.0, it is far from just discussing the concept of data ownership. More often, Web 3.0 will be related to a wider range of ownership, digital identity and community.
The Paper: What are the characteristics of the Web 3.0 community?
Wang Chao: Community is a very complex concept, and its meaning varies greatly in different contexts. For example, we have consumer communities that use the same product, interest communities like Douban groups, and people living in the same unit are of course a community.
I think the community in the context of Web 3.0 is very close to the original definition of community. The word community comes from Latin, and originally refers to close relationships and homogeneous groups of people. The community in the context of Web 3.0 is a group of like-minded people who have a common recognition of something, which can be a common hobby, a common subculture, a common brand or a common cause, and there is also a strong connection between members. Community members are not fans, users, or spectators. This is why Starbucks has hundreds of millions of consumers around the world, but Starbucks says that we have never had a community, and now we hope to gather the community through the new experience brought by Web 3.0 technology.
Building a user base requires more consideration of how to distribute it better and how to quickly scale up. Building a community is more about generating better interactions and more meaningful connections. Therefore, the correct way to build a community is basically not scalable. But when an active and highly participated community is established, it will form a network effect, spread widely, and many community-led innovations will emerge, which will eventually drive the flywheel of growth.
Web 3.0, Community, Consumption and Brands
The Paper: How does Web 3.0 empower consumption? How does the community help brands?
Wang Chao: First of all, I would like to look back from consumption and see the development of business. Early business was very close to people and the community. The word "company" in English comes from two words, come and panisse (a chickpea snack for sharing). In other words, the original meaning of a company was for everyone to come to a fixed place to trade and then share food together. Contrary to the cold and stereotyped impression that the word company brings to everyone now, the company was once full of warmth. Think about when we were young, the business we were most familiar with was the small shops at the corners of the streets and the hawkers walking through the streets and alleys. It was also very community-oriented and close to consumers.
Since the Industrial Revolution, because of the substantial increase in productivity, mankind has entered the era of mass production, and the focus has been on production efficiency. When production efficiency has increased and the number of products has increased dramatically, the previous method of walking through the streets and alleys can no longer solve the problem of sales. On the production side, workers are not regarded as people, but as a tool in the production process. On the sales side, extensive sales within the community cannot digest the increased productivity. Therefore, both the production and sales sides have undergone great changes at this time, and they are increasingly deviating from the concept of people-oriented. In this scenario, consumers have no rights because the entire channel is very primitive. If they buy products they donât like, they cannot be replaced, and they can only tell a few people around them about their dissatisfaction with the product.
With the development of communication technology, consumers have been empowered because they have the ability to influence others through communication. Especially in the Internet age, if consumers are not satisfied with the product, they can quickly spread their dissatisfaction. So a long time ago, most commercial companies did not have customer service departments, but since the 1960s and 1970s, people have paid more and more attention to customer service. With the advent of the Internet age after 2000, the level of customer service has reached a peak. For example, there is an e-commerce website called Zappos in the United States that sells shoes. Its customer service system is extremely good. When customers are not sure about the size, the merchant will send a pair of shoes according to the order size and the two sizes before and after the order size, for a total of three pairs of shoes. The customer keeps the most suitable pair and returns the other two pairs for free. This change is inseparable from the development of the entire era, that is, everyone pays more and more attention to the voice of consumers.
When customer service has developed to a relatively mature level, it faces the question of how to go further.
In the past, many companies have given the answer - community-led, that is, turning users from guests to hosts, such as the Google Developer Program. A large amount of work related to this developer program is done by community developers, and Google only provides support and operating frameworks. Both the developer community itself and Google have benefited greatly from it. There are many more examples like this.
However, this model also has a problem, which is the problem of value capture. In this model, the value created by the community is ultimately captured by the merchants, and the community has little say in the distribution of value. Of course, some community members may not participate in creation for material benefits, but may participate out of their love for the brand and identification with the culture. But such value feedback is not good enough. If there is a more reasonable way to give value to members who participate in creation, it will undoubtedly stimulate everyone's motivation and sense of identity, forming a better cycle.
When Web 3.0 and brands are combined, we see a paradigm shift. Building and maintaining communities in Web 3.0 will require brands to rethink everything they know about consumer relationships. Brands need to step down from the stage to get closer to consumers. Consumers are not just consumers, but residents of micro-communities in Web 3.0. Brands must consider how to interact with the community, how to cultivate the community, and how to provide value to the community. This is not easy, but it is all worth it. In the end, a community with a lot of connections, meaningful interactions, and a strong sense of identity with the brand will drive the development of the brand with unimaginable power.
There are many brands with native Web 3.0 concepts, and many traditional brands are also trying this. Each brand has its own culture and loyal followers. Community empowerment is very important in the operation of the brand. In the past, the traditional incentive model was generally to earn points for consumption and then exchange them for prizes. With Web 3.0 empowerment, there are more things that can be done.
A few months ago, I had a conversation with Keith Grossman, then president of Time magazine. You may feel a bit of a time traveler when you hear Time magazine, but Time magazine has already been conducting a lot of explorations related to Web 3.0, culture and brands. At that time, he said something that left a deep impression on me. He said, "From web 2.0 to Web 3.0, the role of brands will change. To some extent, brands will change from top-down to bottom-up. In the top-down model, brands are heroes, brands are verifiers, and brands are editors. In the bottom-up scenario, brands are enablers, brands are distributors, and brands are verifiers from different angles. When many brands start to consider their Web 3.0 strategy, they must consider what kind of community they want to collaborate with and how to further help the community. If a brand puts itself at the center of the Web 3.0 strategy instead of the community and the innovation generated from it, this Web 3.0 strategy will basically not succeed."
From this perspective, we have gone through a cycle from early commerce to the era of large-scale industrial production, and then to the present day. Because of new technologies, we have begun to pay more attention to the human factor and become more people-centered.
The Paper: Can you share some more specific practical cases?
Wang Chao: In terms of "Web 3.0+consumption", we can see several major directions developing rapidly. The first is to use Web 3.0 technology to unlock some new scenarios for end consumers and give everyone new experiences. The second is to use new technologies and operating methods to gather the community, and then enable the community to truly participate in brand building and capture some potential value. The third direction is centered around digital identity.
Starbucks' recent attempt is a good example of how Web 3.0 can unlock new scenarios and experiences. On September 12 last year, Starbucks announced the "Odyssey Project", a plan to transform the membership reward system using NFT (non-homogeneous token) technology. Currently, this plan is open to early trial users.
It is worth mentioning that Starbucks' membership loyalty system is one of the foundations of Starbucks' success. The Starbucks App is the second largest mobile payment app in the US market. According to the financial report, Starbucks had 27.4 million active members in the US market in the second quarter of 2022, contributing 53% of revenue. The membership loyalty system is a vital part of Starbucks and is also an object of emulation by global brands. Starbucks' introduction of Web 3.0 scenarios in this system is equivalent to upgrading one of its engines in flight. We can imagine that if Starbucks had not seen the huge opportunities and potential benefits here, it would not have made such a decision.
In the "Odyssey Plan", users will be given different "journeys". The so-called journey is actually a gamified task, which can be watching an introduction to the history of Starbucks, checking in at the original Starbucks store, or other customized tasks. When the user completes the task, he will be rewarded with a digital collection called "stamps". And getting stamps is just the beginning. Starbucks will develop unique reward scenarios based on various stamps, such as invitations to offline events, giving away limited edition coffee, or creating a new flavor of coffee together. At the same time, stamps will also be digital tickets for the future Starbucks community. Of course, as a collectible, the Starbucks App also supports the transfer of stamps to meet people's needs for collection and exchange.
Web 3.0 technology provides several key guarantees. One is digital ownership. In the traditional incentive model, reward points are reset regularly. The enterprise is the real owner of the user account and related rewards. In other words, the user does not really own the relevant ownership. Not to mention a reward point, even the game account, character, equipment and other digital assets that have a deeper interest and emotional connection with everyone, the user does not really own them. The suspension of Blizzard China has made all players realize this.
In contrast, Starbucks digital "stamps" are truly owned by consumers. When they are issued on the blockchain network, they truly belong to the user, and Starbucks cannot take them back. We know that the essence of user loyalty programs is to give rewards. What Starbucks gives is a programmable reward, a digital collection, and an asset that users truly own. Once people realize that they really own something, this thing has a higher value both emotionally and economically.
The second is interoperability. Due to the open nature of the blockchain network, the stamps issued by Starbucks are visible to everyone on the blockchain network. The Starbucks membership system is the world's largest coffee consumer data system. Other companies can directly create new scenarios based on Starbucks' customer reward system. In the words of the relevant person in charge of Starbucks, Starbucks' membership reward system will change from a company's reward system to an open membership reward system.
Starbucks' partner Target supermarket can add special preferential rewards for Starbucks stamp holders in its own reward system without communicating with Starbucks. In the Web 3.0 world, such scenarios become extremely easy to implement. There are similar sharing systems in some industries now. For example, Star Alliance can share airline mileage data and connect rewards, but this requires a lot of integration work. To connect the systems, very complex business agreements must be signed. Compared with traditional practices, with the help of the "building blocks" interoperability of the blockchain network, similar ecosystems can be easily built, which also means that a large number of innovative gameplays will be born because of such openness.
The third is community. Digital gating technology based on Web 3.0 has developed very maturely and is being used by the majority of communities to form a community with a greater sense of belonging. As we said above, Starbucks has never had a community. I am not just saying this, it was said by a business leader of Starbucks himself. Although Starbucks has hundreds of millions of consumers, apart from a small amount of interaction with the barista when buying coffee, there is not much interaction between consumers and the brand, and there is no interaction between consumers who also like Starbucks. Starbucks is known for its third space outside of home and office. It also hopes that through this opportunity, it can create a third space in the digital world and build a community that truly loves the brand and coffee culture.
A representative example of the direct community participation in brand building is the recent attempt of the clothing brand "Lacoste". "Lacoste" in France is a well-known clothing brand. A few months ago, it proposed a new plan to issue a set of digital collections, totaling thousands of pieces. The holders of the digital collections form a community called "Lacoste" DAO (decentralized autonomous organization). The goal of this community is to gather a group of people who, on the one hand, truly love the "Lacoste" brand and "Lacoste" culture, and on the other hand, have creative thinking, and ultimately form a good interaction between the community and the brand, so that the community can make suggestions for the development of "Lacoste". The most important thing they are trying to do now is to let the community participate in brand building. Because when a wider group of people are involved, there will inevitably be gains in many aspects. The reason is simple, no matter how many designers you have, they can never be more than the thousands of people in the community.
Introducing the community can produce faster creative iterations, bring better incentives and more consistent values ââto the community, and form better cultural representation due to the wide distribution of community members.
The community of "Crocodile" is called underwater3, spelled UNDW3. "Underwater" is because crocodiles like to hide in water, and "3" comes from Web 3.0. In the future, there will be a separate sub-series in the crocodile clothing system, which is the UNDW3 series. All the design ideas of this series will mainly come from community members. Of course, "Crocodile" will not completely abandon it, and there will be quality control, but at least the main creators of this series are no longer the designers of "Crocodile" company, but community members. "Crocodile" is just providing empowerment and distribution. The brand's past accumulation in this industry and various resources will become a strong backing for community creativity. Web 3.0 technology has realized the empowerment of communities and individuals through such a solution.
I think one of the most attractive aspects of Web 3.0 is that everyone is trying to unlock individual potential in various ways, giving ordinary people the opportunity to create new things around what they love.
Of course, the "Crocodile" model is not in place, that is, there is no real ownership. Although community members can gain a sense of participation and accomplishment in the creative process, they will not own shares in the "Crocodile" company because of these labors, nor will they receive dividends from sales. Crocodile is not unwilling, but cannot. On the one hand, because traditional commercial institutions have investors and shareholders, involving various complex matters such as ownership, taxation, and legal affairs, it is difficult to tell the existing equity parties that because I want the community to participate and contribute, I have to dilute your equity. On the other hand, dividends are a sensitive issue involving whether the plan is compliant in major regions around the world, and everyone dares not mess around. Therefore, the only things that these commercial entities can provide at present are experience and cultural incentives, as well as some non-equity rewards, to motivate the most loyal participants in the community. However, cultural incentives alone are not enough, and we still need to find a model that allows community members to share the value they create.
There are many teams working on how Web 3.0/community can be integrated with business in a compliant manner. I have recently communicated with a Web 3.0 team called Upside Coop, who have just collaborated with top international accounting firm KPMG and law firm Orrick to create an innovative framework that uses the cooperative system to allow brands to share brand ownership or the value created by community members with the community in a compliant manner.
Finally, let's talk about the combination of digital identity and consumption. As more of our interactions take place in social media, games, and the virtual world, digital life has become an important part of our lives, and it will take up an increasing proportion of our time. Therefore, we are becoming more and more willing to pay for items in the digital world. According to statistics, up to 60% of American millennials believe that how to present themselves online is more important than how to present themselves offline. This is the underlying recognition of the new generation of their digital identity. So we see that from the earliest clothes used for QQ images, to the skins of King of Glory, to the crazy purchase of virtual items in the Roblox game by American children, a global trend is taking shape.
Digital identity is the continuation of self-expression, and in the future, it will be our most important asset. To live a digital life with a digital identity, you must use digital objects. However, since digital objects are free from physical limitations, they can be easily and infinitely copied, and it is technically impossible to distinguish between copies and original objects. This feature is actually inconsistent with our normal cognition and use scenarios of objects in real life. Every object in reality is different, even if it is a mass-produced product, the one that belongs to me is different from the one sold in the store.
Web 3.0 technology has restored some of the characteristics that objects have lost in the digital world. If I buy a digital collectible issued on the Web 3.0 network, although the corresponding image can be copied countless times, everyone knows that only the copy in my hand is the original collectible. In many scenarios, only my copy will be truly recognized. I write an article and publish it on the Web 3.0 network. No matter how it is copied, people will always know that this is the digital original and was first published by me. This changes the underlying characteristics of digital consumer products, thereby enabling a large number of digital scenarios that were impossible in the past. These scenarios have actually gone far beyond the scope of consumption. Today, we will not expand on this. Let's take Nike as an example to briefly talk about the digital fashion products that I think will flourish.
Nike is one of the first brands to show interest in digital space and products. It registered trademarks for virtual sports shoes and clothing very early on, and sold a large number of digital products through traditional Internet platforms such as Roblox. As Nike entered the Web 3.0 field, it has successfully obtained nearly $200 million in related revenue in the past two years and established Nike Virtual Studio, focusing on Web 3.0 and metaverse-related businesses.
Nike's exploration in the field of Web 3.0 goes far beyond selling some virtual sports shoes. Nike is also experimenting with issuing physical digital twin versions of shoes based on Web 3.0 technology. A shoe can be used as a virtual fashion product on the Internet and will eventually be produced as a physical object for consumers to wear. In this process, consumers can also customize it to a certain extent.
Last November, Nike launched its latest Web 3.0 platform, a virtual sports shoe mall - Nike.swoosh.
Nike hopes that this mall will become the base camp for selling virtual sports shoes, clothing and accessories in the future, and transform this company-led mall into a community-led mall. Consumers will not only be able to buy, show off and trade virtual sports shoes here, but will also unlock special events and communicate directly with the designers of the purchased sports shoes. They can even design and create new sports shoes with other enthusiasts and share the sales profits. Just as many consumers expect, here, "purchasing virtual goods is not the end of the journey, but the beginning of the journey."
In my opinion, Web 3.0 is a new open Internet where consumers can immerse themselves with their digital assets and digital identities and move seamlessly between the online and offline worlds. This will be an underlying change in consumer behavior.
(Author Curiousjoe is a cross-border researcher of international politics and cryptocurrency.)
