In recent years (past the initial buzz around NFTs in 2021), brands in Web3 have focused mainly on building Web3 loyalty programs — which are an incredibly effective way for brands to find more dynamic ways to engage and retain consumers.
But here’s the kicker: Web3 loyalty programs are about more than just loyalty — and they are just the tip of the iceberg in many ways.
The real magic in Web3 loyalty programs isn’t just the coveted act of retaining consumers, but as we like to say in Web3, what happens under the hood. This is where things get really interesting.
In other words, the next big trend in Web3 after loyalty may very well be a more efficient and engaging form of advertising.
At face level, these realizations may seem at odds with diehard Web3 principles like decentralization and self-sovereignty. But the fact of the matter is that most brands and consumers don’t seem to really want or care about this anyways.
What the brands and consumers of the future do want is direct, rewarding relationships without the reliance on shadowy Big Tech intermediaries. This revolutionary new paradigm between the old and the new — something I coined as Web2.5 — is what will get them to where they want to go.
The trail of cookies will never look the same.
How we got here
It’s been over two years since the $40 billion peak of the NFT market and almost a year since the collapse of FTX (among others) marked a new low in Web3 sentiment.
As often follows periods of crisis, the dust has now begun to settle. The last two years have taught us that NFTs are not a one-size-fits-all solution for collectors looking to make a quick ETH on an anthropomorphic PFP or brands looking to signal cultural relevance.
While blue-chip NFTs are still to be celebrated, I think we can all agree that the greatest future for NFTs is one beyond speculation and limited use cases. Instead, it’s a future that has the power to reimagine the historically fragmented relationship between products, consumers and brands in a way never seen before.
I’m talking about the power of Web3 loyalty. It’s a direction that will disrupt not only historical frameworks around brand loyalty, but the many underlying, often ineffective, technologies that power customer acquisition and retention — AdTech, CRM (customer relationship management), CDP (customer data platforms), analytics and our entire relationship with what will soon be obsolete practices around leveraging data.
The big players are already on the Web3 loyalty train
Brand loyalty programs date back over 200 years. And like many once innovative concepts, they lost their initial spark, turning into shallow programs intended to keep customers locked into buying products without offering them anything of real value beyond the product itself.
Fast forward and, thankfully, a lot of things have changed, with some of the world’s most forward-thinking brands such as Nike, Starbucks, Mercedes and Shiseido shifting their loyalty approach to focus on retaining the younger generation (whom studies show are half as likely to join a loyalty program compared to their generational predecessors).
These brands have become hip to the fact that the next generation of consumers want more from the giant brands they engage with — they want to own a piece they’re helping bake and get rewarded for their time in the kitchen.
As a result, Web3 loyalty programs and the tokenized rewards (aka NFTs) that connect brands to consumers have continued to grow as the preferred method for brands keen to leverage Web3 technology, and as a new way to grow — and retain — customers.
Reading between the lines of loyalty
Are loyalty programs really about loyalty?
Like most things in culture, commerce and technology, there’s always more to something than a single descriptor. And like nearly all things in 2023, what loyalty boils down to is data, specifically personal and behavioral data that brands have on their consumers.
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In other words, the more data brands have on you, the more likely they present you with compelling reasons to spend more. This is why brands spend so much money to gather, connect and own consumer data.
But, this data strategy is on its way out.
Relying on Big Tech platforms rather than owning the data outright is strategically dangerous, not to mention ineffective. Yesterday’s method of collecting, monitoring and analyzing data — specifically relying on cookies, will be phased out within a year. This means that brands are staring down the barrel of a gun without many obvious solutions.
Web3 to the rescue
As Michael Litman from the always ahead-of-the-curve digital marketing agency Media Monks once said: “NFTs are the new cookies.”
Here’s what that looks like:
Web3 wallets are key to connecting tokenized brand loyalty assets to the consumers who own them and must store them. However, traditional wallets and the complicated technology within them (seed phrases, private keys, etc.) can be detrimental to onboarding new users. A new trend in “invisible wallets” leverages blockchain technology while abstracting much of the complicated tech entirely in the background.
Conventional static NFTs are often rigid in their utility — what you see is often what you get. Dynamic NFTs, however, flip the script (and smart contract) to offer evolving assets that can change via various consumer actions, reward points and more.
Imagine having an airline loyalty card that changes based on how much you travel or where, like a living, breathing map of your favorite destinations. That’s personalization on a whole new level.
Alittle exclusivity goes a long way in retaining customers, especially when they feel like they truly earned the reward. Token-gating enables brands to grant people exclusive access to specific environments — an event, a community channel, a product sale — based on whether they own a particular token or not.
The future of advertising data will be tokenized
In the Web3-powered future of loyalty, brands will augment their CRM and CDP approach by integrating the dynamic Web3 infrastructure and data flows I’ve mentioned.
Ultimately, this means that brands gain an entirely new toolkit for gathering, connecting and owning consumer data in a new, future-proof way — which, at its core, is what will drive the future of advertising.
In this tokenized future, brands will continue to roll out Web3 memberships, tokenized rewards and on-chain loyalty programs to entice consumers to create wallets, mint tokens and engage in new ways.
But that’s not the endgame of what defines or powers loyalty programs.
Like Web3’s potential to disrupt countless consumer-facing industries, the path ahead will trickle down into many siloed, increasingly ineffective spaces, rebuilding what they are to reimagine what they can be.
NFTs are the new cookies — catch ‘em while you can.
Matthew is a brand strategist and Web3 product builder. He is the co-founder & COO of Mojito, the first company to spin out of Serotonin. Mojito is a Web3 platform for NFT commerce that powers Sotheby’s dedicated NFT marketplace, Sotheby’s Metaverse, where Matthew currently serves as Managing Director. Previous to his work at Serotonin, Matthew founded the blockchain-for-journalism startup Civil, which was acquired by ConsenSys, one of the most important companies in the Ethereum blockchain ecosystem. Before entering the world of decentralized technology, Matthew led Nine Lines, a prominent marketing agency where he worked with 40+ consumer startups over 6 years, and he co-created the digital marketing course for General Assembly.
