Web3's branding problem and its future—how PepsiCo and others are approaching the space

The Web3 frenzy that once gripped the marketing landscape and spurred brands to feverishly release NFTs or create worlds in the metaverse has died down. But that isn’t to say brands have completely abandoned Web3. In reality, many brands have continued to invest in marketing opportunities tied to NFTs, the metaverse and other Web3 technologies—but many of these efforts are taking on different forms and are going by different names. At Ad Age’s Web3 Marketing Summit last week, executives from several brands leveraging Web3—including PepsiCo, Puma, iHeartMedia and Chipotle—joined Web3 tech pioneers to discuss the possibilities these emerging technologies can offer to brands. Here are five takeaways from the event, which itself took place in the metaverse. See all of Ad Age's Web3 Trailblazers here E-commerce and Web3 converge In 2022, U.S. consumers spent over $1 trillion on online shopping, making it the “largest year of digital commerce” thus far, according to Comscore. As brands strive to engage consumers’ increasingly-online shopping habits, e-commerce is interweaving with metaverse shopping experiences and digital-only items. For years, the online shopping experience has remained stagnant, typically revolving around a grid of product photos that consumers can scroll through. But to make online shopping more immersive, brands are launching virtual stores that echo the traditional experience of walking around a physical retail location. Also read: Inside brands' holiday virtual stores “What we are starting to see now are these virtual stores that transform online shopping into an experience that's really creative; that's contextual to the brand; that's contextual to the product category; and also, that's really unique to every brand,” said Neha Singh, founder and CEO of Obsess, an experiential e-commerce platform that has created virtual stores for brands such as Disney, Johnson & Johnson and Crocs. These virtual storefronts allow brands to differentiate themselves from the sameness of the typical e-commerce experience of scrolling through a simple list of product photos, she said. And consumers tend to spend more time exploring these virtual retail locations than they would on a typical brand website. American Girl, for instance, has seen 1000% longer shopping sessions through its virtual store than the brand’s other e-commerce platforms, Singh said. Younger consumers, especially, are increasingly interested in purchasing digital items to adorn their virtual avatars in the metaverse, said Stan Georgiev, head of strategic partnerships at Ready Player Me, a platform that creates avatars that can translate across different virtual experiences. For consumers like his 7-year-old daughter, “the virtual world is equally positioned—if not better positioned, as far as emotional attachment goes—as the physical world,” he said. And marketers are leaning into this blurring between the physical and digital worlds, with brands releasing virtual items that come with real-world perks, or physical items that give consumers access to a metaverse equivalent of that product, he said. Wrangler, for example, partnered with singer-songwriter Leon Bridges and NFT project Deadfellaz on a real-life clothing line that also involved metaverse wearables. And Tommy Hilfiger introduced four virtual items at Metaverse Fashion Week in March that consumers could also purchase physical versions of. “It's no longer just small experiments that brands are doing, but this is starting to become a new mode of shopping for a lot of customers—especially for a younger audience,” Singh said. AI’s potential to enhance Web3 marketing In recent months, artificial intelligence has overshadowed metaverse and NFT technologies. Brands such as Coca-Cola have already jumped headfirst into AI technologies, such as ChatGPT and DALL-E, to weave AI-generated art and text into their marketing strategies, as Pratik Thakar, the company’s global head of creative strategy and integrated content, said at the Web3 Marketing Summit. “AI is going to be more fundamental [than Web3 technologies],” he said. “The OpenAI platform is very practical. I can use it every day. [But] I’m not going to buy crypto everyday. Or, I’m not going to spend a few hours every day on Roblox or any particular metaverse platform.” But brands don’t necessarily need to choose between AI or Web3. In fact, generative AI could actually support and enhance many Web3 technologies. Going back to digital items in the metaverse, Georgiev and Ready Player Me are experimenting with the potential for consumers to prompt an item of clothing they’d want their avatar to wear—for example, a hoodie with stars and stripes. Also read: How AI and Web3 marketing will compete for ad dollars “We often tend to separate people's physical lives and digital lives as if they're two different things, because that's how we've come to think about our compartmentalizing goods [and] identity,” said Marc Mathieu, senior VP of Web3 and Emerging Tech Studio at Salesforce. “We tend to think if it's virtual … it's not meaningful and valuable …. [But] it's a matter of how we make it valuable, how we make it worthwhile. And I think it's a whole new game that's about to be further enhanced and game-changed by the power of generative AI.” Marketers shouldn’t pit Web3 and AI against each other or turn their backs on their existing Web3 investments in favor of the latest shiny tech. Michael Figge, chief creative officer at blockchain company Yuga Labs, which has created well-known NFT collections such as the Bored Ape Yacht Club, said he’s enthusiastic about AI’s potential to transform Web3. “I think everyone realizes that AI is going to plug in and improve many things in life [and] in all industries. I don’t think that’s mutually exclusive of the innovation that’s happening in Web3,” he said. “If anything, integrating use cases for AI into Web3 will help expedite innovation and the way in which it can magnify cultural attention around Web3. Web3’s branding problem The early phases of the Web3 surge revolved around a narrow community of largely white men—and that lack of diversity has persisted. Only 13% of Web3 startups include a female founder and only about 27% of the entire Web3 workforce is female, according to a study from Boston Consulting Group and People of Crypto Lab. Many people continue to view the Web3 space as something of a “boys’ club,” and that barrier to entry is only increased by the complicated vocabulary surrounding Web3 technologies. “If we’re ever going to grow out of this existing Web3 audience and get into general consumers, the first thing that has to go is all of the jargon and all of the confusion,” said Bianca Posterli, head of brand marketing at NFT brand Doodles. “The second that anyone sees ‘NFTs’ or ‘blockchain,’ they’re immediately turned off. And a lot of the really smart brands that are getting into the space right now are massively changing all of that terminology.” Simplifying the language around Web3 to make its technologies more accessible has been a core part of the Web3 marketing strategies of both Paramount and Reddit. Reddit, for example, launched an NFT collection last July involving its alien mascot, but intentionally avoided using the term “NFT,” instead calling them “collectible avatars.” Paramount, too, has avoided labeling its extensive line of digital collectibles as “NFTs” and instead emphasized their similarity to physical collectible items, such as trading cards, said Doug Rosen, senior VP of gaming and emerging media at Paramount. Introducing CryptoSnoos—a very Reddit take on NFTs by u/Veromonious in CryptoCurrency “When NFTs first hit the scene, they were perceived for the most part as an unattainable piece of artwork reserved for the wealthy tech enthusiasts,” said Kaitlin McGirl, global head of KarmaLab at Reddit. “And since the days of when Beeple went to auction at $69 million, I would say that the focus and perception [of NFTs] has shifted really from a more speculative investment vehicle to something that’s more utility-driven and attainable. And we're seeing brands really start to lean into that benefit and that value.” Ultimately, brands wanting to expand into Web3 spaces need to “humanize these technologies” rather than lingering on their underlying technical jargon, said Akbar Hamid, co-founder of People of Crypto Lab and founder and CEO of creative communications consultancy The 5th Column. “We try to keep reminding these Web2 brands that you have to bring it back to your consumer, and I think losing the jargon is a big part of that,” he said. “Frankly, the general consumer outside of this power niche that we’re in don’t care about the steps—they just want to know they are…having a cool experience in a cool environment.” NFT-based brand loyalty programs One of the “utility-driven” applications of NFTs that brands are increasingly adopting is tying these digital assets back to brand loyalty programs. In the past two years, brands such as Starbucks, Clinique and Nike have launched loyalty programs that link rewards, such as discounts, unique items or access to exclusive events, to NFTs held by consumers—and a growing number of brands are embracing this approach, said Catherine D. Henry, senior VP of Web3 and metaverse innovation strategy at Media.Monks. “We're finding that token-based loyalty programs are really, really in high demand right now—in fact, I'd say that they're probably the majority of our new remits for Web3 are all about creating a unique strategy for each company,” she said. “In the old days, the only levers that people would use would be to offer customers discounts or coupons. But this offers an entirely new and exciting way to create community, because brand relationships aren’t always about using money as a lever.” View this post on Instagram A post shared by Nike (@nike) These NFT loyalty programs are far more of a “two-way street” than traditional programs, said Salesforce’s Mathieu. Where brands have historically viewed customer loyalty as something to expect from consumers, brands can collect information about these consumers’ “needs” and “passions” from the information associated with their unique token, he said. “Suddenly you're able to serve them product extension [and] promotion, but also services [and] experiences that truly connect to who they are and what they expect not just from the brand, but from life,” he said. “And that, to me, is really changing the game in terms of how we think about loyalty.” Nike’s .Swoosh loyalty program, for example, extends customer loyalty into co-creating products, inviting consumers to help design virtual sneakers and other items and offering them exclusive access to Nike events. With these types of programs, most brands are seeking to create a “long-term reciprocal relationship” with consumers, said Henry. “There's still a space for digital collectibles, and I think that we can't think of it so much as a cash grab as we did last year,” she added. “A lot of people thought, ‘Well, this is a great way for me to drive quick profits to the company.’ But I think we've moved away from that understanding.” Ad Age Breakout Brand Leaders New award honors the people behind emerging brands Enter here Navigating brand safety in Web3 Several brands breaking into Web3 have built out robust legal teams and other precautions to protect their brands from potential Web3-related brand safety issues. Over the past six months, PepsiCo has developed a legal resource the company dubbed its “Web3 Center of Enablement” that helps guide the company’s Web3-centric campaigns, such as NFT collections or metaverse experiences, said Kate Brady, head of next gen D2C connections and innovation at PepsiCo. “This covers areas like reading regulatory guidelines, compliance tasks, IP security—and, really, brand safety is paramount,” she said. “Our Web3 COE is really challenging vendors in the space, as well, to come up with solutions that protect our brand’s IP and safety. And we won’t partner with businesses in the space who don't have those production guardrails in place.” The program unites the company’s legal teams across departments, which has helped streamline the approval process for PepsiCo’s Web3-based campaigns, Brady added. Approvals that once took months to get through legal hurdles now can take “a week or less,” she said. Wunderman Thompson, too, has implemented extensive legal guidelines to steer clients’ Web3 marketing campaigns, said Justin Peyton, chief transformation and strategy officer for APAC. “We're bringing the finance community, the legal community and the compliance teams all together much earlier in the process than we would with any traditional marketing activities,” he said. “The roadblocks that we can hit—and that I know many brands have hit—late in the process can really derail something. So, getting those teams on board and talking them through how you want to build this, what the ambitions are, typically helps us get to a yes or find a pathway through things.”

Web3's branding problem and its future—how PepsiCo and others are approaching the space

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