Starbucks ends NFT program—why Web3 loyalty programs face larger concerns

Starbucks is casting doubts in the Web3 marketing community after it announced last week that it would shutter its NFT-based loyalty program at the end of the month. The coffee giant was one of the most prominent consumer brands to use digital tokens as a reward mechanism, and its reversal is being viewed by some in the industry as a signal that such programs may not provide traditional marketers with value. Ever since launching Odyssey 15 months ago, Starbucks has been lauded by Web3 enthusiasts for developing an NFT-based loyalty program that makes sense. The thinking was that consumers would actually want to collect the tokens—which Starbucks calls “stamps”—because they would be rewarded with real utility in the form of coffee rewards. Why this didn’t work as intended is unclear. Starbucks did not provide an explanation for shuttering Odyssey, stating only on the program’s “frequently asked questions” page that it “must come to an end to prepare for what comes next as we continue to evolve the program.” “We’re looking forward to applying our learnings to the future of this program and are grateful to the Odyssey community for their participation in the beta experience,” a Starbucks spokesperson told Ad Age. The cancelation is the latest blow to the halcyon vision that Web3 technology could change how brands connect with consumers. A year ago, Disney exited the metaverse after deeming virtual reality a dead-end. And while NFT-based loyalty is still being tested by a few big brands such as Nike and Adidas, the approach has struggled to gain a foothold with mass audiences. Nike, whose “DotSwoosh” program has been one of the more successful efforts, conducted layoffs last month that impacted the Web3 division overseeing DotSwoosh, according to Vogue Business. The issues that could have hampered Starbucks’ Odyssey platform are numerous, and they reflect larger concerns with the Web3 loyalty space, said Martha Bennett, VP and principal analyst at Forrester. One potential problem was using technology that, instead of improving the rewards experience for users, only soured it, she said. As of six months ago, roughly 40% of consumers had still never heard of NFTs, and for those who had, the tokens ranked among their top choices for what they considered to be “cringe,” according to a study conducted by Morning Consult and Advertiser Perceptions. Also read: How Gen Z defines “cringe” and other words Odyssey had at least a surplus of 7,000 active members as of January, according to marketplace data published by Starbucks. And while the program’s total membership was likely larger—around 58,000 people, according to TechCrunch—the size of this audience may still not have been worth the pricey investment to build and maintain Odyssey, Bennett added. Starbucks has not provided information as to the costs behind Odyssey, but “these things aren’t cheap to run,” she said. A low ceiling for ROI is another issue that mass consumer brands have yet to resolve. Starbucks’ NFTs were never more than $100 at the time of launch, and most of its tokens were doled out for free as a reward for completing activities, called “journeys.” The revenue opportunities available between these two pathways equate to a small fraction of the billions it brings in every year through its traditional rewards program, which reaches over 30 million people. NFTs are still a luxury technology, Bennett said, which is why luxury fashion houses have so far found the most success with them. Brands such as Louis Vuitton and Gucci have dropped NFTs with prices in the tens of thousands of dollars, requiring far fewer buyers to make the efforts worth the costs. In comparison, one estimate puts Odyssey’s total revenue generation since launch at around $250,000, according to research conducted by Alex Baghdjian, co-founder and chief strategy officer at ad agency Funday. Two of Starbucks’ Web3 partners, Nifty Gateway and Polygon, have been mired in controversy since Odyssey launched; Nifty Gateway revoked publishing privileges from creators that had not reached a certain earnings threshold, per NFT Now, and Polygon reportedly paid DraftKings millions of dollars to support an undivulged preferential relationship, per CoinDesk. The scrappy, sometimes improper behavior of Web3 technology providers can clash with the expectations of big consumer brands, Bennett said, creating another avenue for trouble. “You have worlds colliding,” said Bennett. Starbucks declined to comment on its relationships with its tech partners. Nifty and Polygon did not return a request for comment on this issue. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here Loyalty fallout In canceling Odyssey, Starbucks has also seemingly abandoned the program’s thousands of members, who remain unclear about the future value of their assets and whether their efforts in demonstrating loyalty have been a waste of time. “The way this ended, all the points and utility we built up collecting Stamps feels for naught,” said Lily Snyder, a freelance emerging tech writer and member of Odyssey. Stamp NFTs will be ported over to Nifty Gateway’s main marketplace after Odyssey shuts down, Starbucks said, where they will still be buyable, tradeable and transferable. But the fate of the rewards associated with the tokens is unclear. Another frustration felt by members is the collapse of the community, Snyder said. Starbucks operated Odyssey through a Discord server, in which members could interact and keep each other updated on rewards and incoming drops—a common method of socialization in NFT circles. But Starbucks shut down the Discord server yesterday. While feeling spurned, Snyder hopes that brands will recognize the things that Odyssey got right, such as building a loyalty community, and feel motivated to try Web3 technology themselves. “It was a really cool thing Starbucks did with Odyssey, just a sucky ending,” she said.

Starbucks ends NFT program—why Web3 loyalty programs face larger concerns

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