Why the Metaverse is Broken and How it Can be Fixed — Chapter 3

Here we are again, you are really a glutton for punishment. By now we should be exchanging Telegram IDs or wallet addresses as a Web3 version of reaching ‘third base’. Lucky you. I want to call this Chapter ‘ ’ but it might as well be ‘Command, Control and Conquer’ to all intents and purposes and you’ll understand why in the end. Composability, Community and Content Something interesting is happening and it will be a worrying trend for those , especially businesses and the end consumer. who can’t tell the difference The first trend — just caught that ByteDance potentially could be making moves against Spotify by creating a music service tied to TikTok — called TikTok Music according to patents filed. Penny Watson This is a great catch by Penny and if you can use the music within TikTok videos as part of the user agreement and licensing terms then this is a massive win for creators on both sides. The real winner will be to see whether their terms are more favorable to artists than Spotify, or the recent Warner/ SoundCloud agreement. If artists are compensated for every view on a video as well as streaming then given the size of their user base…this could be huge. The issue is that like all Chinese super-apps, you’re trapped in their ecosystem. Took me an age to get rid of Apple, ByteDance could be the Hotel California of social media. The second trend — Warner Bros making a deal with SoundCloud, a global licensing deal that makes them the first major label to adopt SoundCloud’s payout model, Fan-Powered Royalties (FPR). “Launched in 2021, FPR is a first-to-market payout model driven by fandom and built to power the fan economy.” Harmless enough. One more trend then — the latest by Ticketmaster which I wrote briefly about yesterday, where it seems that they will be offering NFT-based tickets for every major type of event listed on the platform, allowing artists to issue NFTs as tickets and also wrap up more rewards as part of the package. Noticed anything yet? Fine, we’ll do one more example for those at the back. Something which might have slipped by many not in the UK — has launched a nationwide rewards program. Pay attention because this is big. McDonald’s Customers will be able to use the points to get free menu items or convert them into cash to donate to charities such as Children in Need, FareShare and Ronald McDonald House. They will earn 100 points for every £1 they spend, with every penny equating to 1 point. I love the charitable approach to this. I was watching The Founder last night too before writing this part. The loyalty program looks very well thought out but there’s a potential hint of a bigger (burger) digital strategy at work that centers on web3 and metaverse. The chain has recently filed patent applications indicating that it is in the process of developing “virtual restaurants.” so why not order home delivery from within the metaverse? They’re also exploring NFTs that would allow digital items it creates for the metaverse to be unique, limited edition, or one-of-a-kind, indicating that it may be interested in creating collectibles or personalized promotional items. How do you get kids and families involved? suddenly the Happy Meal contains an NFT collectible instead of a plastic toy. That’s how you do it. Now imagine the full circle of combining loyalty, metaverse, and NFTs and this is becoming something very big in terms of mass traction and consumer interest without using any of the technobabble we’re obsessed with using. Are we there yet? Ok, last and final fucking example then! Hot on the heels of their May announcement Starbucks is now launching their NFT loyalty and rewards program next month and this is big. As of October 2021, the current loyalty program has nearly 25 million members and Starbucks Rewards. Today, customers load a staggering $10bn per year on the Card program — which represents 40–45% of the chain’s entire sales. The perks and program are habit-building, people keep coming back and reloading over and over. There are 32,000 Starbucks dotted around the world. These numbers are important because this is NFT adoption at scale. “We believe this new digital web3 enabled initiative will allow us to build on the current Starbucks Rewards engagement model with its powerful spend to earn stars approach while also introducing new methods of emotionally engaging customers, expanding our digital third place community, and offering a broader set of rewards, including one-of-a-kind experiences that you can’t get anywhere else, integrating our digital Starbucks Rewards ecosystem with Starbucks-branded digital collectables as both a reward and a community building element. “This will create an entirely new set of digital network effects that will attract new customers and be accretive to existing customers in our core retail stores” This is exactly the same type of strategy that McDonald’s will take, which has started rolling out its own rewards program and is pretty similar in nature to how Starbucks is structured. What’s more, is that there was a rumor that NFTs could be extended and structured toward employee benefits which in itself opens up huge possibilities for companies to adopt internally as well as externally. Who will care about an open metaverse when you can pop into a virtual Starbucks, order a flat white and get it delivered for real whilst earning an NFT? Again, it’s going to be Web2 companies that will pull their customers into mass adoption by their own network effects and seamless experiences — not Web3 startups trying to force people to use technology-driven products they don’t have a need for. And as a result, the real ideology of a decentralized and open future becomes more and more a myth. It gets a lot worse, especially in the examples of Starbucks and McDonald’s. As soon as you financially incentivize customers to take part in a reward scheme their behavior changes, and their motivations for being a customer change. Secondary market NFT values are really interesting but also boil down to the purpose of the NFT release in the first place. If this is tied to a loyalty or rewards scheme for example, like Starbucks or McDonald’s, then the secondary market might be absolutely huge for customers to trade collectibles or rewards but then alters the entire consumer behavioral attitude towards the brand and the reward scheme itself. You could end up destroying a large part of your loyal customer base who will only be in it for the new speculative gains and never touch your product again. There’s a lot more going on under the surface than just money and I doubt many are even thinking about it. This is not Web3. It looks like Web3 because there’s a certain amount of focus on the artist, creators, customers and fans but this is pseudo-Web3, it’s very much rooted in Web2 philosophies where the power broker and intermediary still exist. Web3 is supposed to remove them entirely, there’s supposed to be a direct 1:1 relationship between the fan, customer, and the artist. What we’re seeing is the adoption of the ideology behind Web3 and the metaverse by existing behemoths to move with the trends. The idea of disintermediation has been disrupted already. — but don’t think for a minute that this is anywhere near the end game it needs to be. Who’s in control here and who stands to benefit? For a start, once they see how much can be made from this there will never be a shift towards Web3 that relinquishes it back to the creators directly, and secondly, those VCs who are funding these moves stand to make a tidy profit for as long as they can maintain this status quo. It’s not a bad thing, it’s how you bring these ideas to life for mass adoption Oddly enough, they’re also the ones writing lots of books about it… The more things change, the more they stay the same. I had hoped that Matthew Ball covered this in his User and Business Behaviour part of his Primer Series but no, it was more focused on games than anything really meaningful and with broader application across consumers. And therein lies the reason why the metaverse will never be open — if you consider these companies to be dominant then you’re also suggesting that they will assert control over it. Which is precisely what they’re doing. And this type of thinking and acceptance normalizes it. I both love how progressive some of these examples are, and loathe that we will be distracted by them. But it’s enough to be aware and wary of them at the same time. It’s partly the reason why I write so prolifically, to keep up. Can you imagine McDonald’s decentralizing their franchise model entirely? Or that the rewards program becomes a Customer DAO and consumers can own a piece of the Golden Archies? LOL no neither can I. So by now, it should be becoming clear that the idea of Web3 and the Metaverse is pretty sound but the execution is fucking terrible and couched in the same old bullshit — mostly driven by those who will stand to profit from this mid-term course correction. Now all this preamble about loyalty and consumers kind of leads to a nice segway towards a word that gets thrown around more than a pair of knickers at a Tom Jones concert and that is . Community Degens and Discords Or if you want to break it down, “a group of people living in the same place [ ] or having a particular characteristic in common [ ]”. Definition — Community: a group of people living in the same place or having a particular characteristic in common. echo chamber being completely fucking gullible I don’t understand posts that claim community, collaboration and co-opetition didn’t exist before web3. They have nothing to do with technology and everything to do with strategy and people. They existed, they always have. It was never something exclusionary that waited for a new trend to appear. It’s not my fault if you didn’t look at your own market in the same way, just don’t pass it off as something that was only invented when blockchain or crypto and NFTs came along. Here’s a perfectly good example of how brands and marketers have completely lost the plot. We transitioned from Web1 marketing which was defined by email marketing, nascent SEO and direct deal advertising placements, to Web2, which focuses on social media and dynamic ads, that are data-driven and target-based. In a Web3 era, marketers will need to consider NFT, decentralisation, AI and tokens. Whereas in web2 a marketer needs to acquire, engage with, and retain customers, web3 marketers will have many stakeholders to keep in mind. The group of stakeholders includes users, developers, and their broader communities. As Web3 leverages the capabilities afforded by decentralisation, the transfer of control and decision-making from a centralized entity (like Facebook, Instagram, or Google) will be to a distributed network, where the data is owned by (no one) users holding their digital identities. What?? “In 1.0, your community is IRL and based on things like where you were born, where you went to school, what sports team you supported, etc. In 2.0, your community was a URL, where you joined interest-based online groups across Facebook, Reddit, Discord, etc. In 3.0, the community is all about ownership. Being part of a community means you’re providing funding to run the community and gaining transparency and voting power.” “Web3 products have no marketing team. Their community — incentivized by co-ownership through DAOs and other smart contracts serves the marketing function.” I can see a lot of CMOs looking at their marketing function thinking “why the fuck am I paying these people when I could just spin up this DAO thingy and let the community do it because they co-own this company now?” People are really writing this shit and actually believing it as they say it out loud. I mean, in that second quote they actually use Discord as an example of Web2, and yet here we are, all piled into Discord servers because it means we’re Web3 now. Yes, yes, your identity will be owned by no one…you have been paying attention to what Meta is doing with Instagram and NFTs haven’t you? It’s a bigger data heist than Cambridge Analytica in the making — by linking your wallet to your off-chain identity that Meta already owns on your they will be able to track and combine that on-chain wallet data you claim will keep you anonymous. You really fell for that one just so you could post your latest NFT purchase on your Instagram feed. Anyways, back to communities. Have you actually been on a Discord server recently? It’s the same five people posting in an online community supposedly packed with 2,300 others. Every time. And then there’s the thought leaders and experts telling you that Twitter is an absolute requirement to launch your NFT project, not understanding that you’re attracting the same speculators who jump onto the whitelist as fast as possible, pump that shit then dump at the top. Just look at the Nickolodeon Rugrat drop — it flatlined faster than a patient in Grey’s Anatomy and the community is nowhere to be seen. You go where the fans are, community means nothing if you don’t understand your fans or customers. People buying these drops are not fans, they’re speculators and so don’t care about the community. People keep using the same examples — build a community on Twitter or Discord blah blah, sorry but do you actually know your audience, or are you falling into the same trap by advertising to the same crowd of NFT flippers every-single-time on the same channels. I don’t see McDonald’s or Gucci wasting their time building a “community” on Twitter or Discord — why? because they know their customer base and where the real value is. Nickelodeon’s first and only mistake was using Recur and following a cookie-cutter drop model, it was doomed from thereon in. Because the community never existed. A community does not equal your customer. I defer back to my point right at the start about not understanding who your customer really is, and whether launching NFTs or Web3 strategies will attract outside attention with zero interest in your goods or services but who will completely alienate your loyal customers who get stung by their activities. There’s also another choice to consider too — do you allow outside influences into your cOmMuNiTy with token swapping attributes to whatever it is you’re designing, or do you put up a walled garden around your strategy and not allow your NFTs to be traded openly and on a secondary market? In effect, piss off your customers or piss off everyone else to protect your customers. Papa-Ooo-DAO-DAO I need to move away from the marketing bullshit about communities and onto something with more promise for fear of an aneurism. I really love the idea of DAOs ( ). A lot. In fact, I see parallels and promises of what DAOs could be aligned to what pirates strove to achieve themselves with Libertalia. Decentralised Autonomous Organisations Pirates of the 17th and 18th centuries are utterly fascinating. Pirates and other social bandits adopted social mechanisms which can be summarized as libertarian, democratic, federal, egalitarian, fraternal, and communal. Long before the American or French revolutions, pirates were living — more or less — according to the principles of freedom, liberty, and equality. Pirates, in effect, were pioneers in democracy. They developed a system of checks and balances, created a representative legislative body with certain reserved powers. Perhaps most importantly though, the Pirate Codes were revolutionary in their method of taking power away from any one man, and placing it in the hands of the majority. On the surface, pirates are just like the pioneers of Web3. I won’t reiterate it in full here but I wrote about this in a previous entry on . Why Web3 Is Like Piracy here Anyway, I’ve written about DAOs (Decentralised Autonomous Organisations) before but I want to toy with the idea of DACs — Decentralised Autonomous Communities. What’s the difference? I see DACs as the actual reason this Web3 construct should exist — in a way, the DAO acts as a holding or governance structure, and multiple subsidiaries, or communities, operate autonomously underneath with either common or separate mandates but each with their own sets of code, token strategies etc It’s the crazy idea of becoming a DAO of DAOs. It’s something that is echoed by a16z in one of their articles about “composable communities”. “We’re introducing the term composability to describe the way communities can be stacked together, like blocks, to create new layers of communities… community While community composability isn’t a panacea for all types of products, it can empower builders to create stickier communities by uniting subcommunities in passion spaces, as well as enable projects that benefit all stakeholders by allowing anyone in web3 to offer benefits and experiences to community members.” a16z also focuses more on the software than the human part further along in their text which is perfectly acceptable but not what I want to talk about here just now, I may tackle this in a later chapter ( ) I’ve been speaking to a lot of young people recently in Web3 — younger than 20yo — and there’s a growing sense of unrest and also hunger to do Web3 right. This might form the basis of that chapter so I’m sticking this in here to remind myself a16z It’s the same net-net and I don’t care which terminology wins out but the idea of layered or nested decentralized communities is a strong one. I’ve purposely cut out references about linking Web2.5 users to Web3 in their blurb because I’ve violently against this, and I’ve already explained why — it serves a16z’s purpose to prolong this middle ground rather than build Web3 in its truest form. . Cowards The problems with DAOs are becoming evident outside of the regulatory issues, like jurisdiction and tax. Voter apathy, voter fraud or manipulation, lack of real governance or direction, and the fact that “code is law” means there’s very little fluidity or leeway. This is extremely ironic given that the lack of hierarchy and rigidity is touted constantly as a benefit. But what if you had a set of autonomous communities, structured the same way but ultimately responsible to the main DAO itself? You could argue that this is already the case in some DAOs with huge reserves to dish out on projects voted upon, forming groups around each initiative. But they’re all bound by the same code — and therefore also prone to the same issues. By creating further decentralization and autonomy, or nesting, there may be some benefits and protections afforded, as well as clear goals and the means to execute. Having been in a few DAO Discords now there’s just an awful lot of hot air and no real sense of urgency to solve anything meaningful. DAOs can become pivotal as a force for digital transformation too. Over ten years ago I wrote a series of blogs that examined the restructuring of organizations toward less formal hierarchy and more akin to social structures. Agendas are normally set at the top — people in the boardroom with no idea of how life is on the shop floor. What if digital transformation programs became DAOs where funds were allocated depending on the voting of the people it is likely to affect — ie the working community? DAOs are also pivotal to rethinking just how employee performance should be measured. KPIs or OKRs can no longer be the defining factor in appraising someone in an organization — DAOs are driven by communities so reputation and influence matter more. I wrote how HR could use social structures to uncover where the real information networks and subject matter experts existed, so why can’t a DAO especially is reputation is king? What if DAOs could redefine how salaries are calculated to become more fair and equitable? What if DAOs could remove inequality or gender pay gaps? What if DAOs integrated more web3 components as part of compensation structures? NFTs as your career history, NFTs as a bonus, NFTs as an alternative to share options, NFTs as a loyalty scheme (well if it works for customers it can work for employees surely?) A DAO — in whatever legal structure it eventually takes — can potentially solve some fundamental problems that are purely human in nature before the blockchain technology is factored in. I said before to start with the customer experience and work backward to the technology — in this case, start with the org structure and work backward. The Real Impact Of The C Word In I spoke about the absolutely bonkers notion that decentralization could achieve a holy grail for society — universal basic income. Chapter One You tie Universal Basic Income (UBI) to the provision of distributed computing and storage necessary to handle the metaverse and enterprise in general. You don’t need to tie it to a token, capitalism pays for this… …Anyway, you make this as invisible as possible but with the provision from Govt that everyone will have one and earn from it. Heck, you could even make this a crypto-wallet or part of a decentralised identity system. And with decentralisation comes extra security too. Community DAOs become a thing, equitable ownership and voting rights over local authority spending tied to smart contracts and accessible on your node… Community DAOs become a thing, equitable ownership and voting rights over local authority spending tied to smart contracts and accessible on your node… To me, this is the real power of decentralization and community. It’s something that has a material impact at a societal level, where the technology works for the people and not the other way around. If you take all the ideas I’ve used above in relation to DAOs in organizations and translate this into real-world communities there is something here that should be explored beyond what Web3 and Metaverse contexts are under discussion across these various manifestos, rules and frameworks. And if there’s any one lesson to take away from how the web began it was that it grew and evolved with a real sense of community ownership — a global one. And that points to its future. In the end, this chapter was supposed to cover a number of topics but there was far too much to cover under community alone that I’ll have to return to Composability and Content for Chapter Four. If there’s one thing I’ll leave you with here it’s this — when someone talks about Community in Web3 or the Metaverse there’s an all the nines chance they’re talking a load of shite. In fact, I’ll wager not one of them really pays much attention to real community at all, they all treat community as a commodity. And that should give you some idea of how they treat their customers. Also Published Here