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What does ‘crypto winter’ mean for brands’ web3 strategies?

June 7, 2022

By Samuel Huber, CEO and co-founder of Admix

A recent report from the Wall Street Journal claimed that NFT sales are down 92% since September 2021. The data used as the basis for the article, as it turned out, could be pretty straightforwardly disproved, bringing to mind the oft-misquoted Mark Twain line: “the report of my death was an exaggeration.”

The leading NFT marketplace OpenSea saw a trading volume of $480m on May 1 alone, while there are consistently more than 350,000 active wallets in the NFT market. And, while the value of leading cryptocurrencies is considerably lower than recent peaks, prompting headlines of a ‘crypto winter’, this largely reflects macroeconomic trends (with a couple of notable outliers).

That’s not to say the web3 space isn’t undergoing some pretty radical, but long-expected, shifts. One thing that was undoubtedly prevalent in mid-late 2021 was mainstream hype around finding the next big NFT project or plot of undervalued NFT virtual land. This hype raised the floor price of many NFT collections and caused the average price of land in The Sandbox to hit $15,000 in December 2021 - up from $100 12 months earlier. In 2022, with a critical mass of identikit NFT projects and static crypto prices, focus has shifted to interest in established ‘blue chip’ NFT projects with community and utility; as well as what can be achieved with or built on virtual land, rather than simply speculating on its price.

Beyond the headlines, what does all this mean for brands?

Early mover advantage

The first thing to say is that it’s still early days for blockchain and its associated technologies. Blue chip NFT projects such as Bored Apes and Doodles are testing grounds for technology that will be used in music licensing, event ticketing, digital identity, and the execution of legal documents such as wills and property deeds. Likewise, web3 metaverse platforms like Decentraland, The Sandbox and Somnium Space are in early development stages.

Does that mean brands that have already made forays into web3 such as adidas Originals, Nike, Atari, Samsung and Bud Lite, made their moves too early? Absolutely not. Companies that created a website in 1996 or a branded Facebook page in early 2007 marked themselves out as innovators and opened up new channels to their audiences, which soon followed them in droves. In a similar way, a brand like adidas Originals that has joined one of the best-known web3 communities, launched its own NFT collection, and purchased its own plot of digital land in Decentraland, has laid claim to continued success in the next generation of the internet.

So entering web3 right now is about being relevant in the next phase of the internet, and even multinational companies with huge brand equity aren’t prepared to be seen as standing still while their competitors innovate. Partnerships such as adidas Originals and Bored Apes are the ultimate hedge against future obsolescence.

Are we too late?

Just like the early days of the world wide web didn’t immediately make the Sears catalog obsolete, nor does the current web3 build phase mean the primacy of websites, apps and social media platforms is in imminent danger. It’s obvious that Spotify Island will reach a larger audience on Roblox today than it would have if it was built in Decentraland. However, a January 2022 JPMorgan report stated: "the astronomical risk of being left behind is worth the incremental investment needed to get started and explore this new digital landscape for yourself."

Even as someone who guides brands into the metaverse, I wouldn’t say the risk has reached stellar proportions, yet. But that statement does reflect an important point. Getting started in web3 is currently very affordable in comparison to the media spend brands are used to - but it won’t always be that way. Prices of virtual land and web3 eyeballs will become more expensive as adoption and competition increase. I predict that within two years, land prices will be such that many brands will be forced to rent space in the metaverse rather than own it, so the simple reality of being able to buy is as good a reason as any to jump in early.

So, no, brands that lack a web3 strategy aren’t too late to implement one, but they should absolutely be looking to pull the trigger, particularly as doing so will soon become far more expensive. In the near future, brands with no web3 presence will be seen as laggards and, eventually, dinosaurs.

Is there a middle ground?

With the likes of adidas, Gucci, PwC, and HSBC having bought land in the web3 metaverse, it’s fair to say that many of the early movers are large, multinational brands with whole departments looking at the metaverse. For those that aren’t ready to execute on a fully-fledged web3 strategy, is there a toe-dipping option available?

The obvious answer is to make the metaverse part of your media mix. Leading Out Of Home companies Ocean Outdoor and JGroup have already introduced web3 metaverse billboards that mirror the campaigns of their real-world counterparts. And in March 2022 the first Metaverse Fashion Week was held in Decentraland, with brands running campaigns on Admix billboards and offering their physical products for sale in a boulevard of metaverse stores using Boson Protocol technology. As above, these activations signal a future in which brands lease space for pop-ups and discrete branded activations within the most popular web3 spaces.

I’m tempted to end with a convenient metaphor about crypto winter leading to green shoots of recovery. However, it wouldn’t be an entirely accurate one. web3 is best characterized as being in a build phase where we’re still finding out what works and what doesn’t, meaning there will be many more radical shifts to come. For brands, this current phase is an opportunity to jump in while ownership is still widely affordable, and explore what the next generation of marketing and e-commerce could look like, safe in the knowledge that it isn’t business-critical. Yet.

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Cryptocurrency
web3