Community over liquidity
DAOs emphasize the community aspect of Web3, which makes them an attractive tool for brands looking to onboard their consumers into the space.
One way to do this is through what Watts calls “consensus commerce.” Unlike the model of community commerce that is popular on Web2 platforms like TikTok and Instagram, which is where consumers engage with branded content as a method of shopping, consensus commerce leverages the DAO structure to allow consumers to actually contribute to product creation. The members take part in important Web3 processes, such as voting with governance tokens and interacting with smart contracts, while brands get to observe their audiences expressing their wants and needs, almost like through a focus group.
The benefits of activating a DAO may even outweigh those of an NFT drop. In their current state, most NFT projects emulate stocks, and are thus focused on increasing liquidity. While brands have hitherto activated NFTs for brand-building purposes, the practical selling point for consumers is that the asset could later accrue value. NFTs’ focus on liquidity has also led to rampant fraud, making the space unpredictable for brands, especially those interested in establishing long-term presences in Web3.
DAOs, on the other hand, are more concerned with organizing around a common interest, and could therefore provide a safer process of onboarding and retaining consumers while avoiding the intense pressures that come with highly speculative assets, said Jason Keath, co-founder and CEO of social media consultancy Social Fresh.
“[A DAO] allows people to learn a little more slowly without as much FOMO (“fear of missing out”), it allows them a network of people to whom they can ask questions ... just basic support mechanisms that make it a better experience and a better kind of educational space,” he said.
To be sure, DAOs can also fall victim to scams, and hackers have previously targeted funds collected in groups’ treasuries. But if a brand’s goal is to encourage adoption of Web3 technologies in spite of these issues—and as better security is developed—DAOs could serve as useful tools.
“There's lots of great NFT collections out there with great Discord communities, but most of them are very focused on making money ... DAOs are more about building together,” said Keath.
While computerized tokens must be used in a DAO to cast votes and make decisions, the central objective of the group can just as easily live in the real world as in the digital. Members can choose to direct their funds toward creating real products, displaying real art or benefitting real social services.
Late last year, a series of DAOs aimed at procuring physical items received mainstream attention. ConstitutionDAO, for example, pooled together $47 million from thousands of contributors to buy an original copy of the U.S. Constitution (although it was ultimately outbid) and Spice DAO raised $3 million to buy an unreleased movie script for the novel “Dune.” These efforts are hardly more than crowdfunding experiments, but they illustrate how DAO tools can be leveraged for real-world use cases.
For marketers, this could be an important advantage given most consumers prefer metaverse activations that tie back to reality. And since metaverse worlds are not expected to be fully developed for another five to 10 years, having that in-real-life component may be essential for a brand looking to leverage Web3 any time soon.
“[IRL activations] are a really good and fun way to experiment between the things that we already know, that we're already used to, and slowly starting to bring in these new concepts in a kind of subtle way,” said Jessica Angel, community lead for Web3 investment firm Metaversal and head of its DAO project, MetaLetters.
MetaLetters DAO, which Metaversal launched earlier this year, is specifically focused on creating real-world opportunities for artists. The project hinges on an ongoing contest to rebrand the letters in the company’s name; artists submit designs for one of the letters (i.e. “M,” “E,” etc.), and when a winner is chosen, that artist is admitted to the DAO, the design is auctioned off as an NFT and 60% of the proceeds are given to the DAO treasury. How exactly these funds are spent will be decided upon by the members, but will generally go toward fostering relationships with institutions in the art world and opening exhibitions.