In January 2021, members of an investment subreddit started buying shares in a struggling retailer called Gamestop. The results delivered an uncomfortable lesson to the financial markets about the incredible power of collective action and how quickly it can make the unthinkable a reality.
By the time the year was up, numerous decentralized autonomous organizations (DAOs) emerged in the hopes of achieving everything from winning an auction of the U.S. Constitution, to buying an NBA franchise, to reviving the nostalgia icon that is video rental brand Blockbuster.
This marks a huge turnaround for the idea of the DAO given earlier misfires, such as The DAO being widely hailed as the future of the corporation and attracting millions of dollars in investment in 2016, only to implode a year later. By contrast, Constitution DAO only fell a couple of million short of its aims, Krause House is still raising funds and the Blockbuster takeover is gaining momentum.
Questions – and distrust – remain around exactly how DAOs will be managed, governed and funded long-term. But their popularity signifies a potential major cultural shift, coinciding with Web3 becoming mainstream and the explosive take-up of NFTs, especially among younger generations.
Proponents of the DAO system tout it as the future of community, exclusivity and ownership, and even suggest it has the potential to dethrone the almighty corporation.
Corporations organized the Industrial age— Aaron Wright (@awrigh01) September 12, 2021
DAOs will organize the Internet Age
Others, famously including Twitter founder Jack Dorsey, remain more cynical - not just about DAOs, but about the entire web3 ideology of decentralization.
You don’t own “web3.”— jack⚡️ (@jack) December 21, 2021
The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label.
Know what you’re getting into…
What isn’t up for debate, however, is that brands are facing interesting questions about how to act in this new world of collective ownership.
In 2022, consumers do not just have purchase sway and platforms to air their opinions. They are now financially empowered to create change, reanimate and even potentially take over corporations, driven by reasons as varied as financial gain, to passionate brand fandom to a sense of justice. This is a radical scenario for brands.
One strategy could be to embrace the more optimistic side of DAOs – those which are set up with altruistic goals. Look at Endaoment, for example, which aims to put charity giving in the hands of the people and has already attracted over $2 million in funding. Or Diatom, focused on restoring ocean health; EarthFund, which supports planet-saving projects; HerStory, funding Black women and non-binary artists; and the Komorebi Collective, funding women and non-binary crypto founders.
Then there are organizations like Uniswap, a community-governed system for a growing network of apps, which also funds grants for people building finance apps and tools using its protocols. In 2021, Uniswap gave Harvard Law’s Blockchain and Fintech Initiative $20 million to help fund a group lobbying for good crypto industry regulation (though half of this was sold a month later, causing some consternation in the community).
On a day-to-day level, the rise of DAOs warrants a fresh look at the role the consumer plays in marketing. Consumers have already gone from being the target of a broadcast to communities that brands engage with. Now, they will become the reason brands exist. It’s a further subversion of the traditional value exchange and a nail in the coffin of the brand-first approach to marketing.
This shift forces a convergence in media approaches. We often still talk in terms of owned, earned and paid social, but the decentralization of the internet forces these categories to converge. This will be challenging for large brands that still manage these areas in silos. Traditionally structured brands should consider organizational change quickly, as challengers emerge in sectors as varied as fashion and publishing.
For brands, Web3 opportunities do not equate to immediate invitations to just dive in. The space is there to be explored and be contributed to in meaningful ways. Be prepared for the audience to have control. And, now more than ever, the individual isn’t someone to preach at; they’re there to lead and shape the future of this space.
Benjamin Arnold is CEO at We Are Social U.S.