Month: July 2022

“Ultimately, the more money we bring them, the better it is for them, so they don’t have to invest in building something [in-house],” said Dulcedo CEO Karim Leduc, who declined to comment on the financial details behind the acquisition. “So our strategy was to go after that tier of tam that just doesn’t have the capacity to have full-time staff on business development — and then, as we develop expertise working with them, we could pitch to the bigger organizations.”

C4G was founded in August 2021 by Louis-Philippe Dalpé, a Montreal-based agent focused on the gaming and esports space. Prior to the acquisition, the company’s mission was to connect non-endemic brands with esports organizations, but not the expensive top-tier orgs that appear in Forbes’ annual valuations of the industry’s high flyers. Instead, C4G — and now, Dulcedo — has tied its fate to clients including Wave Esports, a localized Austrian team, and the Belgian org Sector One.

“We wanted to offer services not only to the tier ones of this world, which all agencies are fighting for the exclusivity of, but also giving that opportunity to tier threes and tier twos that really want to get their foot in the door on making more commercial deals happen,” Dalpé said.

The numbers seem to support Dalpé’s strategy.

“If you look at their fan engagement rate and such, they’re even bigger than these well-known orgs, it’s just that the competitive side is less prominent on their end — they’re more focused on content creation and the lifestyle approach,” he said.

Wave Esports’ social following is dwarfed by that of larger organizations such as Misfits Gaming. But Wave’s localized approach has boosted its social engagement percentages above the larger company, according to the data platform GEEIQ — 1.36 percent over 1.25 percent, specifically. The gap between the companies’ social engagement figures is less than 80,000, despite the massive gulf between their followings. Regionalization also allows teams like Wave to create unique opportunities for their brand partners to target local markets.

In spite of these potential advantages, Dalpé and his new colleagues believe that non-endemic brands have not yet fully realized the potential value of partnering with mid-sized esports orgs like Wave and Sector One, in part because these organizations lack the resources to reach out to brands themselves. 

“Tier one teams often have a director of sponsorships hired full-time to do this kind of work, so when we approach them, they sort of feel threatened, because they might lose their job if their CEO gives Dulcedo the mandate to develop sponsorships,” Leduc said. “So we decided to go after esports organizations that didn’t have enough money to higher full-time staff on the business development side, and could benefit from having a team like Dulcedo bridge that gap for them.”

The strategy of focusing on smaller or mid-sized esports organizations is not without its challenges. Business is booming right now, at least on the brand partnership front. But with a potential recession looming on the horizon, things won’t stay this way forever. If the partnerships dry up, there will be a culling of the weak, and smaller esports companies that lack the backing of institutional investors could be the first to go. Still, the leaders of smaller esports organizations are confident that they are built to last — a good sign for the companies working with them.

“In the video game industry, there are a lot of companies that get to a certain point and maybe don’t have the DNA to become a larger organization,” said Mark Elfenbein, CEO of the esports company X1 Esports and Entertainment, which recently acquired its own management firm, Tyrus Talent Services. “They fit well in our kind of ecosystem, and so we’re focusing on putting together an organization more like that.”

The most basic definition of interoperability is the way different systems are able to communicate and interact with each other to form a cohesive whole. Many of the digital ecosystems that form the bedrock of the modern internet are interoperable such as email, where users are able to send or receive messages from several applications rather than a single central feed.

In the context of the metaverse, interoperability enables a user to transfer their virtual identity and digital belongings from one platform to another. In a fully interoperable metaverse, a user would be able to purchase an in-game skin (a graphic that changes the appearance of a playable character or item) inside Fortnite, then use it inside another virtual world such as Minecraft or Decentraland.

“We don’t think there will be one metaverse; we think the world is going to be composed of multiple metaverses, and it’s important for us to succeed that the players or the creators understand that what they build inside The Sandbox can be reused in other worlds,” said Mathieu Nouzareth, CEO of The Sandbox. “If you make an avatar in The Sandbox, it can become your own identity, not only in The Sandbox, but also on other websites.”

The majority of today’s most prominent and highest value NFT collections, including prominent, high-value collections such as Bored Ape Yacht Club (BAYC) and CryptoPunks, hinge on the concept of interoperability in the metaverse to come without actually offering those capabilities yet. Although BAYC offers its NFT holders access to a private online space and in-person events, the primary use of the Bored Ape images themselves is as avatars or profile pictures on social platforms like Twitter. When the metaverse is fully realized, holders will naturally want to use their Apes — or other NFT avatars, like Meebits, or Cryptovoxels or Lazy Lions — as three-dimensional avatars within its major virtual platforms.

Although BAYC creator Yuga Labs has teased interoperability for the Bored Ape metaverse, many of the most prominent NFT companies at the moment treat their offerings as more of an asset class than a type of virtual item with utility across disparate platforms and systems. Sure, users can slap the profile pictures on their social accounts, but most of the value in holding an NFT comes simply from owning it, rather than using it as an avatar or virtual-world calling card.

That’s not to say that the users themselves aren’t clamoring for utility and interoperability. Many NFT holders have a background in gaming, and the ability to truly own and interoperate digital items one of the most obviously enticing applications of blockchain technology for gamers. Just as their users do, the blockchain experts behind these companies understand how important the role of interoperability will be to the metaverse — but few of them are actually working to make it a reality.

Cracking the puzzle of interoperability

There are many obstacles on the path to true interoperability. Perhaps the most obvious is the difficult task of designing virtual items to match the vastly different aesthetics of today’s leading metaverse platforms. An NFT designed for the blocky, LEGO-like worlds of Roblox might look out of place in a more realistic platform such as Second Life. What’s more, interoperable virtual items would have to be able to plug into the numerous game engines used by today’s popular games and metaverse platforms, including Unity and Unreal Engine, a challenge modern game developers are still struggling to overcome.

“I used to be at Activision Blizzard, and on the Call of Duty franchise, we had three different versions of the Call of Duty engine,” said John Linden, CEO of the game developer Mythical Games, which implements blockchain technology within its titles. “Honestly, it was hard enough for us to get one folder from one Call of Duty engine into another.”

With their fleshed-out virtual economies and a longstanding tradition of digital ownership of items, game developers have been toying with the concept of interoperability for years — another factor that backs up the gaming industry’s claim on the metaverse. But blockchain technology remains an efficient way to track the sales and private ownership of entirely virtual items, and many of the companies looking to implement interoperability in the metaverse are doing so by applying Web3 concepts to pre-existing gaming frameworks. 

Taking cues from the gaming industry

The company Pocketful of Quarters, for example, has invented a “universal token for games,” allowing players to exchange in-game currency inside a game for a crypto token at a fixed rate, then trade that token for in-game money inside another title, effectively creating interoperability between game currencies. At the moment, the service is mostly available in games built using PoQ’s homegrown system, but the company’s token, Quarters, can be purchased with marquee in-game currencies such as Fortnite’s V-Bucks — though users aren’t able to turn around and buy V-Bucks with Quarters quite yet. PoQ is already a verified partner with the game engine Unity, and plans to integrate its software development kit into all versions of Unreal Engine, Tello said.

At the moment, game developers are leading the interoperability charge, both within the traditional gaming industry and the nascent “play-to-earn” space, where players are able to exchange the currency and items they accrue in-game for real-life currency through blockchain-enabled games. 

The traditional publisher Little Orbit will soon allow users to mint NFTs within its popular cops-and-robbers game APB Reloaded, which boasts thousands of creators, who design skins, vehicles and other items for in-game use, among its 22-million-plus users. Players will then be able to sell their creations to other players inside the game, with plans to expand the entire system to other games.

For now, Little Orbit’s creation tool is relatively simple, allowing users to wrap their drawings around pre-made virtual items, including weapons, clothes and vehicles. Someday, the same concept could be applied to platforms with more robust in-game economies, such as Roblox. 

“Imagine you’ve got this sort of third-party game; the developers have added our platform to their game, and player one uses our UGC tool to create an NFT skin for a weapon,” said Little Orbit CEO Matthew Scott. “That skin can then be sold on the marketplace to player two. Player two is in a completely different game, and he’s able to take that symbol, and instead of applying it to a weapon, he can apply it to a car using the same sort of toolkit.”

There are also simple market forces working against the implementation of true interoperability across major titles. While interoperability of items and in-game money is an enticing prospect for the average gamer, it’s less of a boon for massive corporate game developers such as Epic, whose large captive audience already generates hundreds of millions of dollars in annual digital sales. “We don’t believe that AAA [developers from mid-sized or major video game publishers] ever want to share player pools; they don’t want to share monetization strategies,” Tello said. “Those are the trade secrets, right?”

The inevitability of interoperability

Some observers believe that major players such as Epic will have no choice but to opt into interoperability once it reaches critical mass. 

“In general, blockchains are only useful for things that need a global state of synchronization between everybody. When you need convergence on a single status of the system — for example, what are your Fortnite items, or your Roblox items, or your Roblox name — these are things that you want to convert into a single thing,” said Decentraland co-founder Esteban Ordano. “I think that’s a win-win for everybody — users win in the sense that their value is protected.”

Others think that interoperability is inevitable as the metaverse takes shape, whether or not today’s leading platforms get on board. They believe that embracing interoperability could determine which platform becomes the Internet Explorer of the early metaverse — and which will go the way of Netscape.

“For a couple years after the internet was born, financial brokers and advisors couldn’t even have email. Then, as social media came out, everybody kind of broke that mold and it was a shorter time frame to get there,” said David Lucatch, CEO of the blockchain tech company Liquid Avatar Technologies. “Now, what we’re seeing is, OK, the metaverse is here, NFTs are here — let’s just jump in head-first. And if there’s a rock on the bottom, we’ll figure it out later.”

For some publishers, that has meant turning event tickets into NFTs and gamifying events with opportunities to earn tokens throughout the venue as potential strategies. Whether they are successful is another story. The slow-going adoption of the blockchain by mass consumers — and even among Web3-native attendees of crypto conferences — means that audiences are not guaranteed to participate in these new innovations while at events.

Earlier this year, crypto publisher Blockworks set a goal to reach $20 million in revenue in 2022 by embracing blockchain technology in its business, in part by turning VIP tickets to its Permissionless conference last May into NFTs. CoinDesk, another crypto news site, integrated its proprietary participation token DESK into its Consensus conference in June to reward attendees for engaging with sessions, sponsors and other activities.

Now that the height of conference season has passed, here were some of their takeaways:

• Blockworks sold all of its 555 VIP NFT tickets at 1.1 Ethereum (or $3,300 at the time of the drop) with the most expensive one selling for 7.3 ETH, or $20,000, in the resale market, according to co-founder Jason Yanowitz. The company, however, only received 7.5% of that in royalties.
• Of the 20,500 attendees to CoinDesk’s Consensus, 20% participated in collecting and spending DESK this year, according to Sam Ewen, svp and head of CoinDesk Studios.

Exclusivity sells

Selling a VIP ticket for $3,300 requires a certain level of prestige and access that a general admission ticket (which is priced between $1,489 to $2,500) does not offer, but after those tickets sell out, there is very little that can be done to measure demand from the high-value super fans who are willing to spend at this level.

To change that, Blockworks turned its VIP ticket level into an NFT drop where owners of the NFTs gain access to the VIP exclusive events by showing it in their wallets. Not only could the company then see every time those tickets were resold or traded — and the price they sold for — but it also earned a 7.5% royalty from every resale transaction.

Blockworks created and sold 555 unique VIP NFTs called Permies, which were designed by a former Pixar animation artist to look like futuristic cartoon characters.

“If people didn’t like the idea of a VIP ticket, the price would have obviously fallen pretty substantially, or they wouldn’t have [sold] out,” said Jason Yanowitz, co-founder of Blockworks. Instead, the resale price for the most expensive NFT sold as a part of this drop, Permie #549, was 7.3 ETH (about $20,000 at the time) less than 48 hours after it was minted on April 7, according to OpenSea records.

Admittedly, only a small percentage of ticket sale revenue for Permissionless came from the royalties earned from secondary sales of the NFTs, Yanowitz said, but the initial earnings made from the NFTs would equal approximately $1.7 million based on the price of Ethereum at the time. In total, Permissionless earned over $10 million in revenue, he said, with a total of 7,000 people attending the three-day-long conference. Sponsorship revenues exceeded the company’s goals by 50% and ticket sales exceeded its goals by 25%, he added, but declined to say what the company’s goals were.

The NFT holders were also given the incentive to hold onto their Permies post-event, with additional perks and access offered to this newly-formed community, including a lifetime pass to future Permissionless conferences, free merchandise and a private Discord channel. 

Despite the Permie drop leading to an important core membership for Blockworks, Yanowitz said that his team is still trying to figure out what its NFT business will look like and does not intend to launch another set of Permies in the future to keep the collection exclusive.

Testing the play-to-earn model 

It might seem unnecessary to bribe event attendees to participate in a conference that they paid to attend, but for CoinDesk, encouraging people to sit in on panels and visit sponsor booths by awarding them its participation token DESK assisted the publisher and its advertisers in getting a better grasp on how over 20,500 people were spending their time over four days at the Austin, Texas-based event.

CoinDesk’s participation token does not have any monetary value backing it, meaning it cannot be spent outside of the confines of its closed economy, but for those who attended the Consensus conference, they had the opportunity to spend any earned DESK on food, drinks, merchandise, NFTs and even the chance to play Dallas Mavericks’ player Spencer Dinwiddie in a one-on-one basketball game or Russian chess grandmaster Garry Kasparov in a chess match. 

Of the more than 20,000 people who attended, only about 20%, or 4,000 people, participated in collecting DESK during the event, which Ewen said was on target for the first in-person execution of the tokens, but was likely a lower number than what it would have been if the security measures his team put in place weren’t as strict and if blockchain technology wasn’t still so fragmented in its early stages of development.

One of the security measures that created a higher barrier to entry for attendees included issuing soulbound NFTs, or non-transferable tokens, that acts as an identifier and opens up their wallet to be able to collect DESK. “In some respects, we probably sacrificed more adoption for the security protocols, but that’s primarily just a reality of being cautious when building in public spaces where you have tens of thousands of people,” said Ewen.

Because of these challenges, the likelihood that someone would throw in the towel versus trying to get DESK to work in their wallet was higher than anticipated.

“We were hoping that people would actually be more digital savvy than they were because they’re coming to Consensus and it turns out there’s still a ton of people who don’t exactly understand” how to access their crypto wallet or scan the QR codes using the Coinbase app to claim tokens, Ewen said.

There were over 500 opportunities for attendees to earn anywhere from 15 to 150 DESK tokens, with the average number of transactions per 4,000 participants netting out to be about 15 throughout the conference. More than $20,000 worth of merchandise was purchased using DESK and more than 2,000 drinks were purchased using the tokens during evening parties, Ewen said. In total, DESK accounted for 40-45% of all the on-the-ground purchases made in its store and at the night time events, he added.

Sponsors are still on board 

Audiences aren’t the only ones interested in the convergence of blockchain technology and the events industry. 

One of the products that Decrypt Studios, the commercial production house under crypto news publisher Decrypt, offers its clients is custom events, and according to CRO and publisher Alanna Roazzi-Laforet, it’s a standard practice to issue NFTs or tokens as tickets to those events. 

“You have to have an NFT to access specific parties or specific functions of Decrypt Studios and upcoming projects that we’re launching,” said Roazzi-Laforet. “That’s really becoming the norm.”

Despite the crypto bear market, events in the metaverse are still able to drive substantial revenue, particularly from Web3-curious advertisers, who are willing to pay top dollar to be seen in this space. One reason for this is that these events, as well as other NFT-based experiential activations, have the potential to collect first-party, privacy-compliant data from attendees who give access to their digital wallets to the brands and publishers hosting the events, according to Publicis Media’s head of innovation, Keith Soljacich.

Going consumer 

This integration of NFTs and tickets isn’t limited to crypto conferences, however. Earlier this month, I was emailed by Ticketmaster that I had the opportunity to claim a free NFT with my ticket to The Weeknd’s After Hours Til Dawn Tour, which I could claim by setting up a digital wallet through cryptocurrency exchange platform Binance. 

“There’s a future where all tickets are NFTs, and in some respects NFTs like that will eventually become super boring, and that will actually maybe be good for this space in a weird way. People won’t care as much about [the investment value of NFTs]. I think they’ll be more and more impressed by the access that it gives,” said David Cohn, senior director of the Alpha Group, the in-house tech and media incubator for Advance Local.

There have been a number of attempts so far to create media-focused decentralized autonomous organizations (DAOs). At the basic premise, DAOs are designed to give all organization stakeholders an equal say in decision-making and growth strategies — including subscribed readers. (Read WTF DAOs are here).

“[DAOs] can give journalists a platform to connect more directly with their audience and be supported directly for their work, [however] DAOs are nascent and experimental in nature,” said Kelsie Nabben, a researcher at RMIT University Blockchain Innovation Hub in Melbourne, Australia, who has written for decentralized publishing platform Mirror.XYZ. “Developing the rules of [organization], the relationship between the role of people and the role of code, and actually distributing power, is hard.”

If the early entrants are any indicator — the industry isn’t there yet.

The early players 

TruthDAO

Take TruthDAO — a non-partisan news publication founded in November 2021 that its founders hope will eventually be monetized with a DAO funding model.

The company plans to introduce “membership cards” in the form of NFTs later this year, which its audience will purchase to earn a stake in the DAO. It’s not clear how much they will cost but members will have benefits that mirror those offered to subscribers of other media outlets, including the ability to ask questions to reporters during live broadcasts on the Fireside platform and over Discord, exclusive content and discounts on merchandise. In addition, a hotline will be available to members to submit news tips and suggest sources. The cards will also allow holders to vote in certain business decisions within the DAO.

The cards will come in three different tiers, giving each level an increasing number of voting shares (one vote for the citizen level, five votes for the ambassador level and 100 votes for founders).

Membership cards will be advertised when they launch to the company’s 40,000 cross-platform followers, said co-founder Leslie Cauley, who claimed that though TruthDAO doesn’t generate revenue, the company is financially stable, but did not say where the money is coming from.

Web3-native companies and enthusiasts are typically advertising-averse, sharing a belief that the modern digital advertising model doesn’t reward consumers for sharing their personal data. But Cauley, who is a former journalist at traditional publications like USA Today and the Wall Street Journal, is not opposed to eventually integrating advertising into TruthDAO’s monetization strategy, such as on content distributed on ad-supported social platforms.

PubDAO

Another DAO-based publication, PubDAO, launched in October 2021, as an off-shoot of Web3-focused publication Decrypt. It started as a decentralized newswire for other publications to access blockchain-related news, but that didn’t pick up any steam, nor did it serve a purpose for the intended members, causing Reza Jafrey, community lead and head of PubDAO, to pivot away from that focus.

The initial monetization model for PubDAO was going to be selling its members governance tokens — the typical business model for DAOs — but “the bear market came and really ruined any hopes and dreams of launching a governance token anytime soon.”

With both original plans scrapped, the organization pivoted into a network to connect vetted freelancers, who have expertise in the blockchain, with companies looking to purchase Web3-related sponsored content. Those companies purchase “private pods” and Jafrey assigns one or more freelance writers to work with the client on the specific project they purchased as a part of that pod.

A portion of the money earned from the sales of private pods is used to fund the public pods, which are non-paid pods used to build projects and create public domain content aimed at improving the Web3 space. Jafery, whose job consists of “figuring out what decentralized media means and then trying to turn that into products,” did not say what those revenue figures were or how much a private pod is, but the individual price point for sponsored content posts from private pods ranges from $300 to $1,000 per piece.

There are 80 writers who have joined the network and three companies in the blockchain industry have signed on to pay for private pods, though Jafery did not provide specific names.

Mirror

Mirror is one of the more established decentralized media organizations founded in 2020 and serves as a publishing platform for writers. It’s been called the Medium of Web3 and its users can create a publication on the blockchain, start a crowdfund, turn articles into NFTs, collect tips and split proceeds among contributors. MirrorDAO is a part of the platform and has a vague mission of “creating great stories together,” according to its website, but all of its members hold a $WRITE token that’s awarded to top writers on Mirror by other members of the DAO. Mirror’s founder Denis Nazarov did not respond to a request for comment for this story. 

Integrating DAO 

Giving up the decision-making autonomy of a traditional business model in exchange for a member-supported revenue stream comes with expected challenges, from how to accommodate voting time without delaying business development to creating rifts between members who disagree on decisions.

While decentralization is the end goal, PubDAO will be run by a centralized power at its start. The process of decentralization has to happen slowly and will rely on a small group of leaders to figure out how governance looks for the organization, according to Alanna Roazzi-Laforet, publisher and CRO of Decrypt.

For media companies in particular, giving any portion of editorial control to non-journalists calls into question whether journalistic ethics will be upheld.

It doesn’t have to be all or nothing. Crypto publication CoinDesk is not a DAO, nor does it have an adjacent DAO group, but as it builds out its participation token DESK, which rewards readers for engaging with the media company, there are aspects of a DAO model that start to bleed into the picture — namely, giving DESK holders voting rights over content and event programming.

For example, at the publication’s Consensus conference next year, Ewen said his team might reserve five on-stage sessions that DESK holders can program by voting on the topic or speaker. But there are limitations to how much say readers should get in what is traditionally an editorial responsibility. 

“I don’t think there’s any reason that [CoinDesk] necessarily would become a DAO,” said Sam Ewen, svp and head of CoinDesk Studios. “We still are trying to run a business and [DAOs are] a bit of a different business model. But DAO structures can help us get more connected and [to a] deeper level with our readers. I love the idea of giving them more agency over what and how we’re creating for them.”

There are numerous brokers of virtual land, but a group of prominent digital real estate companies has emerged — Decentraland, The Sandbox, Somnium Space and Cryptovoxels — which Web3 observers have dubbed “the Big Four.”

Until now, virtual real estate has largely been treated as a financial asset, but recent trends in the crypto market indicate that this use case might not be sufficient: As crypto markets continue to crash, the average price of virtual land NFTs in both The Sandbox and Decentraland has dropped by thousands of dollars in recent months. To stop the bleed, both metaverse executives and virtual land investors are becoming increasingly aware of the need to add tangible utility to their digital property, either through gamification, community-building or a combination of the two.

Each prominent virtual land platform operates a digital world consisting of a set number of land parcels — for example, Decentraland has 90,000, The Sandbox has a total of 166,464 — with each parcel acting as a non-fungible token (NFT) that can be bought and sold on the open market. At the time of this article’s writing, the floor price for a parcel of Decentraland land is 2.1 ETH, or approximately $3,400; in The Sandbox, it’s 1.88 ETH, or $3,000. Parcels range in price depending on their size and location.

Although The Sandbox makes some money by selling land — total land sales on the platform exceeded $211 million by December 2021 — this is not its primary planned revenue stream. The company plans to generate the bulk of its revenue by taking a cut — currently 5% — from every transaction that takes place inside its virtual world.

These platforms also use other blockchain technology, such as bespoke cryptocurrencies and unique NFT avatars. The virtual real estate market is not limited to the blockchain, however. There are Web2-based virtual real estate companies, such as Atlas Earth, which sells virtual land within a game environment but has thus far eschewed any integration of blockchain tech.

These platforms face hurdles from all directions, including in their longevity, particularly as the market for virtual land is seemingly cooling down.

“Just like in Web2, when Myspace became obsolete, we don’t even know if the Big Four players are going to exist, or if there’s going to be another metaverse that’s developed even a few years from now,” said Lisa Wang, the founder of Bad Bitch Empire, an investment collective for women in Web3, and the former head of brand and communications at Republic, a company investing in virtual real estate, who does not own virtual real estate in the “Big Four.” “So if you spend a lot of money buying land in one of the metaverses, and then it’s just obsolete, that’s a huge risk.”

The pitch for virtual real estate can seem a bit nonsensical — at least when considered through the lens of physical real estate. In the physical world, real estate is a finite resource; although the aforementioned platforms do have a limited number of available plots, this is liable to change on some platforms. Decentraland, for example, allows users to vote to expand their world and create new plots. “Until there is true innovation and inclusion in these spaces, I do not see how it’s actually going to create any sort of positive impact or ROI,” Wang said.

Gamifying virtual spaces

Some metaverse platforms are taking cues from the gaming industry to convince users to stay, making buying and selling virtual land feel less like a traditional real estate transaction and more like playing Monopoly or Pokémon Go.

For Web2 virtual real estate platforms such as Atlas Earth, creating this gamified impetus to engage is far more important than financing the platform via blockchain tech. “What is our incentive to be on blockchain?” questioned Atlas Earth CEO Sami Khan, who doesn’t feel threatened by the recent interest in blockchain-based virtual land. “Nobody could give us a straight answer. What we know is that blockchain will bring about immutable contracts, taking things away from our game and to other games. But that ecosystem doesn’t exist yet.”

Gamification of virtual land is seen as a midpoint between the Web2 internet and a fully realized metaverse in which virtual land has inherent value for the same reasons as land in the physical world. 

“At the end of the day, what creates value is the economic activity you can build on top of the land,” said Mathieu Nouzareth, CEO of The Sandbox. “Imagine Manhattan 200 years ago; by itself, the land wasn’t very valuable, but by being able to create this critical mass of businesses, artists and ambitious people, little by little, people started to create economic value.” 

Building value through community

Not all Web3-native metaverse platforms are as bullish about the gamification of their virtual land: “With Decentraland, you shouldn’t see it so much as a game, as much as a platform that has an ethos that’s driven by the community,” said Adam De Cata, head of partnerships at Decentraland.

Decentraland is somewhat unique, though, as it’s a non-profit and the bulk of its funds came from selling off all of its land parcels four years ago, and De Cata described the organization’s current role as a “glorified guidance counselor.” To the founders of Decentraland, the monetary value of their virtual land doesn’t matter — as long as people are willing to hang out in it.

Instead of gamifying Decentraland’s virtual property, De Cata said, the company has invested in offering limited-time events, such as a virtual Sotheby’s auction or Metaverse Fashion Week. “As a collective, events drive audience,” he said.

Early bird gets the worm

For now, the companies that have benefited most from the rise of virtual real estate are those that got in early. Sam Huber, CEO of the company LandVault, which includes virtual real estate investments among its metaverse businesses, has watched prices for parcels in Somnium Space rise from $50 — the price at which he purchased land in 2017 — to about $25,000 now, he said.

Huber didn’t purchase his virtual land just to see it increase in value. His company is a builder of metaverse experiences, with real estate holdings across all of the major platforms. LandVault works with brands to help them design bespoke spaces inside metaverse platforms, with the bulk of its work taking place inside Decentraland and The Sandbox. “We do really calculated investments, where we basically buy land in order to deliver a specific project,” Huber said.

In many ways, companies like Huber’s represent an ideal future for virtual real estate platforms, one in which engagement is driven by user-generated content, such as LandVault’s independently built experiences, rather than gamified quests or community events created by the platforms themselves. This is what makes them into genuine virtual worlds, rather than particularly decentralized multiplayer games. The gamification of virtual land and introduction of community-building events is simply meant to get the ball rolling; eventually, metaverse builders intend for their virtual worlds to economically stand on their own, much like cities in the physical world.

“We’re not in the business of selling land,” Nouzareth said. “We’re in the business of selling land to create economic activity and to incentivize landowners to build something interesting for users.”

And business is booming — at least it is if that study from media management firm Ebiquity, programmatic consultancy Jounce Media and brand suitability business DeepSee is to be believed. 

“This isn’t surprising to hear but it continues to be disappointing because it highlights the continued lack of transparency in the media supply chain,” said Joshua Lowcock, chief digital and global brand safety officer at UM, told Digiday. “I’ve had clients read the [MFA] report and then reach out to me to see whether they have the right controls in place to limit their exposure.”

The aforementioned study found that $115 million accounts for around 7.8% of the $1.47 billion that 42 clients of Ebiquity spent on programmatic display and video ads across 5,490 unique MFA domains. That’s money that could’ve gone to quality publishers. In the U.S., Ebiquity’s clients spent roughly one in every 10 dollars (9.8%) on average on clickbait. Perhaps more worryingly, though, this seems to be a problem that’s getting worse, not better. In Q1 2020, MFA inventory was 10% of the bidstream. Now it’s 20%, per Jounce Media, which has been following the flow of media dollars to these sites since 2020.

Cue the obligatory reactions of shock and denial that are becoming par for the course whenever reports like this are published. Undercutting it all, though, is a pang of resignation. Or to put it more bluntly, ad execs are adopting an if-you-can’t-beat them, join-them strategy.

Ad tech vendors that once steered clear of selling MFA inventory are now folding them into their own marketplaces. For example, native advertising ad tech vendor AdYouLike launched a new integration with Exorigos, a MFA publisher, in April. Even premium publishers seem just as cynical about the issue these days. Group Nine has outsourced monetization to MFA specialists to satisfy the ad arbitrage demand opportunity.

Of course, these companies would rather be rewarded for producing quality content that attracts readers. But doing so doesn’t always guarantee top-line growth in a market wired to reward cheap reach. MFA partnerships can help plug that gap. Not that the MFA sites themselves need partnerships necessarily. They seem to be doing fine on their own, especially as they get better at running ad arbitrage businesses at scale.

“The arbitrage math scales really well for MFAs,” said Chris Kane, founder of Jounce Media. “There’s enough demand for cheap, high viewable traffic that MFA publishers can scale these businesses profitably.”

It doesn’t have to be this way. No. The industry isn’t going to stop heading toward the farthest corners of the web in search of cheap reach (there’s more chance of finding a beachfront in Arizona). There are, however, other more palatable alternatives.

• There could be a set of industry standards to distinguish more clearly between what is and isn’t invalid traffic. Standards would make it more difficult for ad tech vendors to avoid weeding out this traffic. 
• Publishers could use what influence they do have to push other ad tech vendors into phasing out MFA sites. They’re not going to fire any ad tech vendors for selling these impressions. But they could decide not to give those vendors anything special on their sites to sell until they do drop MFA sites. No vendor wants to be just another commodity open auction demand partner.
• Like publishers, buyers could take a stand. A big demand-side platform, for example, could decide not to buy impressions from these sites.

Maybe, it’s bits of all these alternatives that coalesce into some meaningful progress on shady inventory, rather than one of them. As the industry seems to wake up to the huge opportunity cost of wasted ad investments, priorities are shifting and there are early signs of real progress, said Ruben Schreurs, group chief product officer at Ebiquity.

He expanded on the point: “It’s not just about the dollars lost, but these trillions of zero-effectiveness bid requests and impressions emit terribly large amounts of CO2 equivalents. And it’s not just one group that can achieve change on its own. Brands, agencies, publishers, and (legit) ad tech companies should rally behind a united stance on acceptable practices and hold each other accountable.”

For publisher execs, it’s a tricky situation. The fact that MFA sites are winning more media dollars is an indictment of the pathetic state of the market given the likelihood of those ads having any positive effect on any metric that actually matters is next to zero. That said, publishers don’t want this to be another sob story.

“Publishers must become better at communicating their strengths and must be more vocal in their day-to-day cooperation with brands and agencies and, if competition rules allows, publishers could be better at delivering standards — thereby making it easier for the buy-side to access publisher inventory,” said  Thomas Lue Lytzen, director of sales and ad tech at one of Denmark’s biggest news publishers Ekstra Bladet. “That being said, we feel that supply-side platforms should start realizing that you actually get more quality on sites that do proper journalism. It’s well documented that people trust news outlets more than long-tail sites.”

It’s not much, but it’s a start — just like it is on the buy side. 

The Trade Desk is a case point. The ad tech vendor, which helps advertisers bid on programmatic inventory, blocks open auction spend against MFA inventory. It’s not a complete ban. Buyers can still buy this inventory if they set up one-to-one private marketplaces with MFA publishers. It’s been this way for the last year or so. A spokeswoman from The Trade Desk confirmed the stance but declined to share any more detail.

“The solution to this issue is having major advertisers and agencies make a conscious effort to target quality news publications,” said Chris Hajecki, director of the curated portfolio of trusted local news websites Ads for News. “There has to be a deliberate intention here to avoid money going to MFA sites and other places that intentionally take money away from quality publishers irrespective of their size.”

Keeping them happy means providing added tangible value to their NFT purchases of hundreds or thousands of dollars, such as access to exclusive events, subscriptions to premium content and message boards. But keeping those super fans content could come at a cost to those businesses’ bottom lines.

Blockworks, Playboy and Time are a few media companies that have started to form “communities” out of the people who have purchased their NFTs, while crypto publisher CoinDesk is using participation tokens to reward its most active readers to form a pseudo-membership from that cohort.

Having a group of regularly engaged and active blockchain fans automatically fills the funnel with potential NFT buyers for future drops. But rewarding NFT holders for their one-time purchase can have inadvertent effects on other revenue streams, including ticket sales, subscriptions and product licensing.

Communities form themselves 

Blockworks — an online crypto news publication — created a core group of super fans during its Permissionless conference this past May in which 555 VIP ticket holders stayed in touch after the event wrapped, said co-founder Jason Yanowitz.

Yanowitz’s team turned those VIP tickets into a limited collection of 555 NFT avatars called Permies, priced at a starting point of 1.1 ETH (or $3,300 at the time), to add value to its ticket revenue through ticket resale royalties.

What it ended up helping to do was identify the fans of the brand who were willing to pay over $1,000 more than the price of a general admission ticket to gain access to more parties and exclusive events at the conference as well as a lifetime pass to Permissionless as long as they own the NFT.

“A very strong community has formed around the Permies and they basically became our earliest product testers,” said Yanowitz. 

The NFT holders, affectionately known as Permies themselves, also gained access to a private Discord channel, where many crypto executives and significant investors tend to workshop ideas before taking them public. Beyond that, Permies were given access to Blockworks Research, which typically costs users $2,500 per year and filters various stats and information about cryptocurrencies in the market into one platform. 

“Permies are the most aggressive users of the research product and they give us a lot of feedback. It’s honestly just like having a very core user group, which is nice,” said Yanowitz.

Whether this feedback is worth the nearly $1.4 million being left on the table every year from what those 555 NFT holders would have otherwise paid for the access to Blockworks Research is up in the air. Blockworks earned $1.8 million from the initial sales of the Permies and 7.5% in royalties from every subsequent sale in the secondary market. But the resales of Permies that took place in the past week (four sales, according to OpenSea) range in sale price from 0.6 ETH to 1.59 ETH.

Blockworks does not have plans to release any additional NFTs in the Permies collection going forward, according to Yanowitz, which would keep this membership exclusive and likely keep the price point of Permies on the higher side.

Connecting the virtual with the physical 

Playboy has always championed exclusivity and VIP culture with its infamous Playboy Mansion, it is opening up those doors with Web3 by giving its fans the chance to purchase access in the form of “Rabbitar” NFTs.

The company launched nearly 12,000 animated rabbit NFTs in the collection last October, the most expensive of which sold for 10 ETH (about $42,000 at the time), according to OpenSea records. In total, 2,600 ETH worth of transactions have taken place in initial and secondary sales of Rabbitar NFTs per OpenSea, equivalent to $4 million today, and there are currently 5,200 owners of Rabbitars. In 2021, Playboy earned a total of $12 million in NFT revenue, about $10.7 million of that coming from the Rabbitars collection, according to the company.

With the purchase of a Rabbitar, holders are able to attend free, exclusive events both in-person and in the metaverse, such as the ones that took place adjacent to Art Basel in Miami Beach, Fla. last December. As a result, it negated potential ticket revenue that could normally be earned from these events.

While Playboy wants to get its audience to collect NFTs in the same way fans collect bunny merchandise and its magazines, Ben Kohn, CEO of Playboy Enterprises, said creating a community from these collectors is a core part of the company’s Web3 strategy as well. It’s not just about collection of the digital asset, but also about “what else do you get?”

This month, Playboy also announced its collaboration with The Sandbox, a metaverse platform that sells virtual real estate, to build a “MetaMansion.” Rabbitar owners will be able to visit the virtual mansion (which features pixelated women in the iconic bunny costumes) and play games, interact with other NFT holders and attend events.

Time has similarly entered into The Sandbox metaverse with its virtual TIME Square, which gives its NFT holders access to discussions, events and screenings within the metaverse space. NFT holders also have the perk of a free subscription to Time, which go for $4 per month or $39 a year.

The publisher has been one of the more bullish media companies in the NFT space, earning $10 million in profit alone from the sales of NFTs in its TIMEPieces collections. 

The approximately 4,000 NFT holders it has are not the only members of the community it’s built around TIMEPieces. At large, TIMEPieces has more than 50,000 members across Twitter and in its Discord channel, the latter of which acts as a platform for virtual events and gives members the ability to engage with Time’s reporters and editors, as a benefit of being a part of the group. 

Using tokens as incentives for membership  

CoinDesk is still working to create a community of its most engaged audience members but plans to do so by taking the participation reward system it built for its event businesses and applying it to the rest of its editorial portfolio.

In June, CoinDesk tested DESK at its marquee conference Consensus, which took place over four days in Austin, Texas. The token was built to reward the 20,000 in-person attendees for sitting in on panels, talking to sponsors and interacting with other various activities. After completing one of the 500-plus activities, those attendees could scan a QR code and have DESK tokens deposited in their crypto wallets, which they were then able to spend within the confines of the event on food, drinks, merchandise and other activities.

Now, the team that built the token economy in-house — the CoinDesk Studios team, headed by svp Sam Ewen — wants to replicate that model across the publication’s portfolio of products to get its readership of 1.5 million monthly unique visitors (an average from May 2021 to May 2022 per Comscore) collecting and spending DESK as well.

Readers will be rewarded with DESK after reading articles, listening to podcasts, watching videos and more, according to Ewen, who is still working out the ultimate model that’s expected to go live later this year. DESK holders will get access to exclusive events, receive discounted or a free ticket to Consensus in 2023 and also be able to purchase NFTs in CoinDesk’s marketplace with the token, among other things. 

“It’s not cheap to build this stuff and frankly, you learn a tremendous amount about the complexity by building the tokenomics itself. But we are trying to build a rewards-based ecosystem that we can actually run across the entirety of CoinDesk,” said Ewen, making the investment to build the technology hopefully worth it in the long run. He declined to disclose how much has been spent on building the project to date but did say it took approximately eight months to build it. 

At Consensus, 20% of attendees, about 4,000 people, participated in collecting and spending DESK. If that rate of adoption translated to CoinDesk’s online readership, about 300,000 people would be expected to participate in using the token across the publisher’s online presence as well.

“We are looking less at whether we are revenue positive [or] break-even on DESK alone, and more on, are we creating more utility, more value [and] more connection with our readers in ways where they feel like they’re actually a part of the CoinDesk family,” Ewen said.

Anthony’s game has so far been acquiring companies that are independent and owned by non-white executives, including the non-profit striving to make changes in their community.M.A.D.E BKLYN, The film studio that makes independent and commercial films Goodlook, the luxury lifestyle and influential magazine Uptown Magazine, and the content and communications hub MyCoop. Aside from creating content, it will also provide the mechanics for advertisers to establish advertising on these channels and develop an online presence.

Multicultural-owned media companies, like multicultural ad agencies, both suffer from a significant lack of investment. While that’s something brands have publicly stated they are working to commit more ad dollars to with pledges made over the last two years to do more and do better it’s still a problem that needs long-term commitment. This is also despite multiple agencies, such as GroupM and Havas, creating programs in the last two years to attract ad dollars to non-white-owned media companies.

The plan is for Hero Media to help better monetize content with revenue-sharing mechanisms, ads and subscription services across its portfolio of brands.

Hero Media also produces social content for advertisers to reach Gen Z, millennials and multicultural audiences. Aside from the acquired media properties, Hero Media also works with a curated group of more than 300 BIPOC influencers and works to connect them with brands.

It likely helps that he’s already working with advertisers through his agency, Hero Collective. The agency and the media company function as separate companies with the same founder — much like Vayner Media and Vayner Talent, per Anthony.

Since its 2015 founding, Hero Collective has grown to nearly 100 employees and over 60 clients, such as Mattel, American Express, and BGK. And Anthony has already worked to convince brands like Shell, Twitter, Jordan Brand, and Hewlett-Packard to increase their investment in diverse-owned media properties.

“What was clear is that I needed to be very entrepreneurial, industrious, and I needed to figure out how to own my audience, how to utilize my understanding of culture to develop intellectual property and invest in IP that was going to give me another bite at the apple,” said Anthony, as he wanted to break down the barriers facing minorities running big agencies. “Or at least a better chance of providing value that helped separate me from the competition.”

Through his passionate advocacy for multiculturalism as the new mainstream, Anthony aims to disrupt an industry that has historically been polarized into silos by showing multiculturalism can have a significant impact on business. Anthony has not only built a reputation for himself as a hard worker, but also as a subject matter expert in American youth, consumer lifestyle trends, and multiculturalism.

“Over the years, I have had the pleasure of working alongside some of the most brilliant minds in business and culture, amongst them Quincy Jones, and consider Joseph Anthony worthy of being mentioned in the same sentence as those creative visionaries,” said John Frazier, head of curation at Hero Collective.

Fraizer continued: “Joe’s approach, thinking, process and the resulting creative output are individually and collectively unreplicable, as they are informed by the unique combination of his astute observations, vast and varied experiences, trial and error and a willingness to immerse himself in a universe of disciplines, with unrelenting focus until the task has been mastered.”

It can be difficult to build a media company and get brands to commit ad dollars, especially when it comes to diverse-owned media properties and new businesses. “All new media companies face the same challenge of delivering a consistent audience and targeted demographics,” said Adam Dornbusch, founder and CEO of UGC platform EnTribe. “They are competing to pull ad dollars from existing more entrenched media companies and more robust media conglomerates. Fortunately, many advertisers are now allocating a sizable piece of their ad spend to diversity and inclusion initiatives. This does open the door to more diverse media companies.”

But by far the greatest source of Anthony’s pride comes from his unwavering commitment to his family and the community around him. A devout husband and father of two, a fan of the New York Knicks, and an avid traveler, Anthony plays an active role in his Brooklyn community, where he has lived for 25 years.

Aside from his activism, Anthony is also known for his willingness to speak out against racial and social injustices, as well as for his willingness to afford economic empowerment to the underprivileged.

“When you work at a place like Hero Collective and with Joe at its lead, you are acutely aware that you are in a transformative creative space,” said Sara Hashim, EVP creative and client services at Hero Collective, later adding, “His mission, purpose and passion for the space attracts the kinds of people who are unafraid to take on the challenges of our time, are undaunted by the obstacles that may come before us and are unrelenting in their drive to change the world.”