The concepts behind Web3 could radically alter our digital lives, but it is difficult to parse through the vague promises and fractal ideas behind the alluring technologies that coalesce to form Web3.
Scouring for information about Web3 will require any aspiring learner to discern through an ambiguous sea of ideas. You can discover opportunities of actual merit drifting beneath the surface. But for each hidden gem, there is a trove of clumsy schemes spouted by rapacious entrepreneurs seeking to capitalize on the moment.
If you seek information from your peers, you may find that Web3 will draw polarizing viewpoints. I receive two different reactions whenever I try to discuss Web3 with friends or colleagues.
- Rapt attention and curiosity
- Vehement aversion and bitterness
Or they are completely disinterested and want the nerd to stop talking.
Anything that causes such divisiveness in opinion is worth exploring further, but the charged beliefs causing the division make it burdensome to find grounded viewpoints. I hope that this article can offer you a practical analysis of how Web3 could impact digital media and advertising so you can spread equanimity to discussions on the subject.
Will Web3 make an impact on digital media and advertising? The question is certainly open for debate. Some believe that Web3 is overhyped, and they may be correct. But I want this article to help you form an opinion.
I will detail some foundational concepts of Web3 and describe how companies could apply them to media and advertising use-cases. We will also explore how users may interact with digital media and advertising on a Web3-powered Internet.
As Scott Galloway says, making predictions is a shitty business. If you are right about a bold prediction, then the events leading to that prediction make them seem less extraordinary, and if you are wrong about a prediction, you look dumb in retrospect. But maybe that is what makes predictions so fun?
Bill Gates failed to recognize the profound and immediate commercial impact the nascent Internet would create before correcting course. Google Glass gave Larry Page chills as he thought about the future application of augmented reality before the product flopped with consumers.
These events teach us that even the brightest and most successful people can end up on the wrong side of technology predictions. Both legendary technologists ended up or will end up correct in their predictions. Bill Gates probably knew about the potential of the Internet but did not expect such rapid uptake of the technology. Larry Page was most likely a decade too early to augmented reality.
Suppose you have a strongly formed negative opinion of Web3. In that case, I recommend that you keep an open mind because the world will not punish you for being overly excited about novel technologies. Technological development is an iterative process, and the primitive state of Web3 will eventually serve as a foundation for the future. We will either build on top of that foundation or learn from our mistakes.
I am certainly not Bill Gates or Larry Page, but I can provide you with information to help you decide how you view Web3 technology. But first, I need to include the obligatory What is Web3 section.
Even if you believe that you have a firm grasp of Web3, I would still encourage you to read this section. If you ask ten people what Web3 is, you may receive ten different answers. Understanding how I view Web3 can give you a firm foundation to follow the concepts discussed later in the article.
What is Web3?
I do not believe there is a one-size-fits-all definition of Web3 at this current point in time. But we can describe the concept by expounding on the trends that characterize Web3. The problem with defining the term Web3 is that it represents several disparate yet interconnected topics on the fringes of mainstream technology.
Recurring themes used to describe Web3 are decentralization, identity, and ownership. The term is a natural progression from other notable shifts in Internet technology — from Web 1.0 to Web 2.0 and now to Web3.
Web 1.0 was the initial iteration of the Web. This era consisted of static pages that hosted information accessible from anywhere through this revolutionary new invention of the Internet.
Platforms and user-generated content ushered in the Web 2.0 epoch. Rather than consuming static information, users could now interact with each other and publish content through social media, blogging platforms, YouTube, forums, and other platforms. Users still relied on centralized services and companies to help them publish and interact, but Web 2.0 put users in a more personal relationship with the Internet.
Even though Web 2.0 users could now easily publish and interact with content, centralized platforms like Facebook, Twitter, and YouTube accumulated the monetary benefits of that content. These companies built technology and media empires perched high atop a mountain of user-generated content.
Users create the content, platforms put ads next to the content, users continue to use the platform for free, and platforms earn advertising revenue. Aside from the minority of professional content creators who share advertising revenue with platforms like YouTube and TikTok, this is the deal we have all come to accept. Most users do not realize any rewards from using a platform, and no users have a say in how companies run and manage their business.
Web3 could fundamentally alter the ownership and governance paradigms established with Web 2.0. Platforms will no longer run a network but act as an app interacting with a decentralized network. One of the promises of Web3 is that users can now own digital items without the need for any centralized platform.
The world received its first taste of Web3 with Bitcoin in 2009. Bitcoin offered a way to exchange value between two parties without an intermediary. Bitcoin presented a future where two parties do not require a bank to transfer value between each other through the groundbreaking introduction of the blockchain. Users control a wallet (software that allows users to access the network) to store value and prove their identity.
What if you could also program rules into an exchange between two parties? Ethereum introduced the concept of smart contracts on a blockchain that gives anybody the ability to execute a set of rules based on code without relying on a third-party or company to run that code.
I want to attempt to explain Web3 without delving into the vast intricacies of how Bitcoin, Ethereum, or blockchains work. I only need you to understand three key points to follow the ideas discussed in this article.
- Bitcoin, Ethereum, or similar blockchain-based networks allow two parties to exchange value or agree to a set of rules without an intermediary.
- Once the parties agree to a transaction, there is no turning back, and that agreement is publicly known to everybody.
- You can prove your identity and store value using a wallet.
Decentralized ownership and exchanging value without intermediaries are crucial principles of Web3. Bitcoin and Ethereum figured out how to allow users to store and exchange value without a central entity like a government, bank, or technology platform. Without Bitcoin and Ethereum following in its wake, Web3 may not exist as a concept.
Web3 users can interact with decentralized ecosystems that shift ownership and control of value and assets from centralized companies to the users interacting with them. In this article, we will explore several concepts of Web3 that will illustrate how this will happen and how it can impact digital advertising and media.
I want to provide you with real-world implementations and connections I have identified between Web3 and digital media that could spark your imagination. This section will include ventures that already exist and ideas that may not exist in any form.
Digital advertising companies have grappled with the thorny problem of establishing identity recently more than ever. Publishers, advertisers, and ad technology providers are scrambling to adapt to a world without proven mechanisms to verify user identity, like third-party cookies and mobile device identifiers.
Publishers with a substantially large user footprint stand to gain by leveraging email addresses from their logged-in users as a persistent value to establish identity. Publishers can determine the identity of logged-in users within the confines of their website, app, or publisher network. Publishers can even assign publisher-provided identifiers (PPIDs) to activate data while obfuscating identity.
Universal identity solutions like Unified ID 2.0 look to extend the usefulness of an email address as an identifier beyond the scope of a single publisher. Even though UID 2.0 obscures email addresses, the solution enables tracking outside where a user initially logged in (which may not be apparent to users). UID 2.0 can also lead to data leakage, allowing others to capitalize on valuable publisher first-party data.
On Web3, user identity is tied to a public address associated with a piece of software called a wallet.
Wallets & Dapps
Ethereum is overwhelmingly the most widespread ecosystem powering Web3 applications today. To interact with decentralized Ethereum apps or dapps, users must connect their Ethereum wallets. Users can leverage Ethereum browser extension wallets or mobile wallets, like MetaMask, to interact with dapps.
If you want to edit your profile on OpenSea, the most popular NFT marketplace, you do not log in with an email and password — you connect your wallet.
Whenever you use an Ethereum wallet to send cryptocurrency or connect to a dapp, you need to prove you are the wallet owner by signing a transaction. You can only sign a transaction if you control your private key. When using the MetaMask browser extension, the extension saves your private key, and you only need to click sign to prove your identity when connecting to a dapp.
Only the holder of a private key that matches the public key of a wallet can sign a transaction. Private keys offer increased utility over centralized login databases because I can prove who I am to any application integrated with the Ethereum network.
However, if you lose your private key, you lose your identity and any value stored in your wallet, be it cryptocurrency or NFTs. Users can restore private keys using recovery phrases. Recovery phrases are usually 12 random words that wallet software can convert into a hard-to-remember long alphanumeric private key.
If I know my Ethereum wallet private key, I can be me on any device or application built on Ethereum forever. Even if I have never interacted with a particular wallet provider before, I can plug in my private key and pick up where I left off, and instantly access all funds and digital goods associated with my wallet.
This concept of identity portability is both a technological marvel and a notable point of Web3 user experience friction. Private keys are even more valuable than passwords and create a significant risk. Users must safeguard their private keys at all costs. With passwords, attackers need to know the application they belong to and the paired usernames. Attackers only need a private key and nothing else to steal all funds and value associated with a wallet.
Managing private keys requires a massive amount of custodial responsibility. Despite the utopian technological promises of Web3, most wallet software recommends writing your recovery phrase on a piece of paper. Many cryptocurrency investors rely on centralized services like Coinbase to hold their crypto funds on their behalf instead of grappling with the immense custodial responsibility of managing a wallet.
If users lose their private key, they lose access to their wallets forever. There is no restitution on Web3, unlike centralized services that offer forgot your password tools. I believe this custodial responsibility is the single biggest showstopper preventing mainstream acceptance of Web3. The promise of being your own bank is tempting until you realize the associated responsibility it requires.
Sign in with Ethereum
Some users have accepted the inherent risks of managing their own decentralized identity, as evidenced by the absolute explosion in the popularity of Ethereum and associated applications like decentralized finance (DeFi) and NFTs. Fortune could favor the early adopters as laggards wait around for somebody to solve the custodial problems of Web3.
Even though dapps like OpenSea allow users to connect their wallets, the concept of signing in with Ethereum is fragmented and different from dapp to dapp. Initiatives like Sign-in with Ethereum look to standardize the experience.
The team behind Sign-in with Ethereum has even mentioned enriching user sessions with personal data. The Decentralized Identity Foundation created a working group to establish secure data storage that could allow wallet holders to provide access to personal data.
The Web3 vision of the future is that you can maintain your own identity and prove who you are by signing with your private key. Signing in with a wallet could allow you to persist your identity across all websites and apps. Future applications could access provisioned data, but only with express permission.
We could live in a world where usernames and passwords fade into echoes of a more primitive technological past. But only if someone solves the custodian problem and users become more comfortable managing their own identity.
Economics & Tokenomics
Much like NFTs exploded in 2021, ICOs made tech headlines in 2017. ICOs or initial coin offerings offered anybody with a half-baked idea that contained the word "decentralized" to raise capital outside standard rules and regulations.
The blueprint for an ICO was for a company to create an idea that allowed users to do something but required a specific cryptocurrency or coin to do it. The company running the ICO would release a tranche of coins for purchase to raise capital quickly. Investors could value the coins based on the future utility they could provide.
An ICO gave companies immediate access to capital without dealing with pesky venture capitalists, angel investors, rules, or regulations. Scammers naturally flocked to the concept before facing a smackdown from the SEC.
But not all ICOs ended poorly. The team behind the Brave browser raised $35 million in under 30 seconds after their ICO in 2017. Brave promised the utility of their Basic Attention Token (BAT) would allow token holders to obtain services on their platform:
The token will be used, for example, in acquiring ad slots to be filled with privately matched, anonymously confirmed ads.
The Brave team (maybe correctly) thinks ads suck and do not respect user privacy. So their browser blocks ads and offers their own more privacy-conscious advertisements. Additionally, Brave compensates users in BAT for viewing ads.
Users can also configure the Brave browser to distribute a set amount of BAT to publishers based on time spent on their websites — with more BAT going to more frequently visited websites.
The utility of the tokens contributes directly to the tokenomics behind BAT. Tokenomics is a loosely used Web3 term to describe the math behind a token and how the token works along with incentives that culminate into the monetary value of that token.
Suppose one believes that Brave will rise in popularity, leading to more users acquiring BAT and more advertisers requiring BAT to purchase Brave advertising slots. In that case, you could reasonably believe that the value of BAT will increase.
The main challenge with BAT is that the token is only applicable within the confines of its ecosystem, the Brave browser. Permission is a company that wants to reward users for viewing digital ads and take things a step further by offering rewards for sharing personal data that advertisers can use for targeting.
From the Permission whitepaper:
Permission has developed a Web3 advertising system and unit of exchange that allows the value of an individuals’ time and data to be properly priced and permissioned within a transparent market system.
Permission believes users will choose to willingly provide interest and demographic data, along with personal data from Facebook, Instagram, LinkedIn, and Google, to advertisers in exchange for their platform token ASK. Much like BAT, investors will intrinsically link the value of ASK to their belief in the Permission concept and platform.
Unlike Brave, Permission wants users to earn ASK on any browser. The company has developed a Google Chrome browser extension to make this happen:
The browser extension, currently available via the Google Chrome Web Store, customizes the browser experience by enabling Permission users to earn ASK for viewing advertisements while they traverse and engage with the web as they normally do.
Advertisers can then use declared (zero-party?) data to serve personalized ads tailored to the user in real-time. Advertisers already pay third-party data providers for user data, so it stands to reason that compensating users directly for even more accurate data is a win for all parties involved.
Both Brave and Permission introduce intriguing models that create self-contained systems of economics. The platforms use their respective tokens as the unit of account between users, publishers, advertisers, and investors.
Rewarding early adopters is a mainstay theme of Web3. Ordinary people can now reap the same benefits that accredited investors have had for ages. But instead of owning shares of a company, Web3 users can invest in the token that makes a system function. If the platform succeeds, the token is in more demand, and thus price rises. But this also exposes users to immense financial risks associated with early-stage companies.
But the rewards are just as great. If you believe Permission or Brave could take off, their respective tokens will rise in value relative to your currency of choice (like US dollars). Advertisers or Agencies could gain an immense monetary advantage by storing away BAT or ASK if they believe those platforms will succeed and eventually need to purchase ads using the tokens.
The rise of Web 2.0 brought with it a slew of new platforms where users could easily publish digital content to share with the world. These platforms relied on centralized entities to provide the tools to post content and the infrastructure to host it.
Platforms offered a way for users to share content for free but monetized that content for themselves through advertising. Platforms can also remove and moderate content as they see fit, often without reason or explanation.
Users are at the mercy of platforms but accept that reality due to the strong network effects and discoverability that platforms can provide. Some may not appreciate large tech companies' outsized role in society, where deplatforming on Twitter or YouTube can effectively erase their voice from mainstream culture.
Web3 dapps can help users publish content without the need for any centralized authority to host that content.
Mirror is a decentralized application that empowers users to publish written content to the decentralized file hosting protocol Arweave. Users connect their Ethereum wallet to create a Mirror profile and publish content free from centralized control.
Mirror itself is a centralized entity that could theoretically block access to illegal or harmful content, but its tools publish to decentralized infrastructure. So another dapp could view the same content even if Mirror or another dapp blocks it.
The original author will forever control the content, and apps can selectively choose to allow or not allow access to that content.
Twitter is also dabbling with a similar concept applied to social media called Bluesky. The idea behind Bluesky is to create an underlying decentralized protocol where users could publish social media content. Then social media applications could choose which information to surface from the Bluesky protocol.
Content existing on a decentralized protocol would alleviate the platform of the responsibility of being the sole arbiter of free speech. Platforms could freely moderate as they please by erasing content from their application but not the underlying protocol.
If you disagree with a platform's moderation policy, you can move to a new application. Users can choose to use applications based on that application's feature set and moderation policy.
Platforms could then choose to offer ad-supported or subscription model services. Advertisements would appear alongside content that users genuinely control.
Governance and DAOs
What if users could control their self-published content and the platforms that display that same content?
A DAO or decentralized autonomous organization is a fascinating concept of Web3 that can wholly democratize an organization's governance. Developers can create a DAO for various applications, but they typically launch them to raise money for a cause or to distribute the administration of a dapp.
DAOs can follow the ICO model to raise capital by issuing tokens. DAOs have raised funds to start a city and even purchase a copy of the constitution at auction. Existing Web3 dapps, like the decentralized cryptocurrency exchange Uniswap, have also converted to DAO-like models by issuing governance tokens.
Some DAO tokens could offer utility on their respective platforms, but most importantly, they give the holder a right to vote in the DAO's governance. Token holders can create and vote on proposals that govern how the DAO or app should run and function. The more tokens you hold, the more voting power you wield.
For example, Uniswap and Helium, a decentralized wireless network, allow users to vote on proposals to choose which features to develop or rules to adopt on how the ecosystem works.
Many doubt the effectiveness of DAOs since they still have to interact with a centralized world even though their governance is decentralized.
The ConstitutionDAO still had to collect the funds, verify it with Sotheby's and have humans bid in the auction. Then if they won (they didn't), there would be questions about how the document would be stored and other boring real-world necessities.
Regardless, it is an admirable democratic pursuit to create a model to govern an entity directly by the people. But this does not make Web3 free from centralized control. Jack Dorsey pointed this out in a tweet:
Venture capitalists or corporate investors can buy up most tokens governing a platform, dapp, or protocol and wield great control. These entities will have only their financial glory in mind and may not care about a utopian vision of democratic governance.
To take a counter view, users may choose to avoid platforms with entities holding too high a concentration of power. Users could find substantial benefits on platforms governed by those who use them.
Imagine if a social media dapp running on Bluesky ran autonomously. The organization would only pursue objectives approved by its users. Unlike Twitter or Meta, its main goals would not have to align with creating profit or threading a needle through the Overton window.
What if media organizations switched to a DAO model? Readers could vote on the stories they want journalists to pursue or even reap some of the advertising and subscription revenue profit. If they disagree with the publication's agenda, they could vote to adjust it. Decrypt, a Web3-focused media company, has started looking into the idea.
Like Web3, DAOs introduce an exciting host of possibilities and a litany of tough questions. Centralized companies may seem slow and bureaucratic, but giving power to a few people (board of directors) or a single individual (CEO) may prove much more efficient than wrangling thousands or even millions of votes from DAO token holders.
The most effective DAOs may blend traditional operational concepts with the transparent governance structures that Web3 can provide.
Are NFTs & the Metaverse part of Web3?
Did you think you would get through this article without talking about NFTs and the Metaverse?
Luckily for you, I have written a separate article that can give you my full thoughts on how NFTs and the Metaverse impact advertising. Check out that link if you want to learn more about both topics. Although, I still want to touch on how Web3 intersects with NFTs and the Metaverse.
NFTs and the Metaverse burst into the public consciousness in 2021, and it is not uncommon to hear these terms mentioned in the same breath as Web3. Both concepts draw a similar collective ire as Web3 due to their nebulous nature and dubious short-term utility.
Web3 infrastructure provides the foundation for NFTs to exist, while Web3 concepts could facilitate more grandiose visions of the Metaverse.
Ethereum and other decentralized protocols provide the infrastructure necessary for NFTs to exist. NFTs allow users to own and exchange digital goods without centralized authority by using their Ethereum wallets.
The digital goods that NFTs represent typically exist independent of the blockchain. The blockchain only serves to prove that you own a particular item. For example, an NFT JPG image does not usually live on the blockchain, but the blockchain can point to the image location.
NFTs are the first clear-cut use case that Ethereum or other decentralized smart contract blockchains provide. Even if you think owning a JPG is the dumbest thing you've heard of in your life, it can at least serve as the perfect example of decentralized ownership.
Users use their wallets to prove they own a digital good (like a JPG or a video game character/item). While flexing on Twitter with a JPG may seem like a ridiculous application of the technology, I believe the concept of proving digital ownership could bust the door wide open for multiple media use cases.
Businesses may find that exchanging digital goods directly with a client could help them forge a more direct relationship and help save them revenue that a middle man would usually scrape off the top.
- Sports, concerts, and events could issue NFTs as tickets erasing unnecessary fees from ticketing services while simultaneously providing a digital collectible ticket stub (physical ticket stubs resell on eBay all the time)
- Blog posts like those on Mirror can be minted as NFTs that users can buy and collect to show support, creating a new monetization method for creators.
- Digital artists can create reuseable NFT patterns or art that users could apply to video game cosmetics — any video game publisher could choose to support integration.
I am just riffing here on possibilities, but the main benefit NFTs offer is that they offer a path to decentralized ownership, creating an avenue for any application to add support to interact with them. Application developers do not have to enter into a business relationship with another company to support an NFT. They only need to interact with the blockchain they exist on and receive permission from the NFT owner.
If you sign into a service using your wallet that holds NFTs, marketers could use that information to tailor experiences and advertisements to suit you better.
There could be a time in the future when I sign into a publisher's website with my wallet. That publisher could immediately know that I've gone to see Dead and Company every year I've lived in Colorado. They could also know I saw Tom Brady win his second super bowl with the Tampa Bay Buccaneers in 2023 (wishful thinking).
Owning digital art has broken through as the first understandable use case for NFTs. You might not think that it makes sense, but you can at least understand it. I personally do not believe that paint splatters on a canvas are worth $58.4 million, but I can comprehend why someone paid that much for an original Pollock.
At least with NFT art, you can transfer ownership to anybody on the planet without the risk and cost of shipping. You can also transparently understand its entire purchase history by auditing the blockchain it exists on.
The one advantage of physical art is that you can hang it up to display, but some companies create NFT displays that can show multiple art pieces or animated art. Unlike physical art that requires experts to verify authenticity, NFT displays can instantly authenticate your ownership.
Or maybe you will want to bring your digital art or other NFT items with you wherever you go in the Metaverse.
Interoperability stands as a critical principle for a fully realized Metaverse. The concept of interoperability means that users could flow seamlessly from one experience to another while bringing their identity and digital goods.
Much like Web3, the Metaverse could mean different things to different people. If you were to believe Meta (Facebook), the Metaverse is a three-dimensional world accessed via virtual reality where you can play games and hang out with friends. Others believe a fully realized Metaverse goes way beyond this scope.
Matthew Ball, a Metaverse thought leader, believes interoperability is a core attribute of the Metaverse. He believes that the Metaverse will:
Offer unprecedented interoperability of data, digital items/assets, content, and so on across each of these experiences – your Counter-Strike gun skin, for example, could also be used to decorate a gun in Fortnite, or be gifted to a friend on/through Facebook. Similarly, a car designed for Rocket League (or even for Porsche's website) could be brought over to work in Roblox.
Web3 could create an interoperable foundation for the Metaverse. Using an Ethereum or other decentralized wallet could allow users to tie their identity in the Metaverse to their private keys. Logging in with an Ethereum wallet could also enable users to bring along all their associated NFTs. Holding a virtual concert NFT ticket in your wallet could allow you to waltz into the next Ariana Grande or Travis Scott virtual concert.
Establishing identity using a wallet could allow a user to seamlessly move between Metaverse experiences without logging into separate centralized platforms. You would remain you wherever you went in the Metaverse.
Forming a persistent and interoperable identity method could allow companies to use your identity to personalize your experience, but of course, only with your permission.
Maybe you only let specific platforms know your age to verify that you can access mature experiences or your location to connect with other users who speak the same language. You would control the personal data that platforms can access in your secure private storage.
Web3, a work in progress
I did not expect this to be the longest article I have ever written, but here we are. The crazy part is that I have barely scratched the surface of Web3.
I hope this article, at the very least, gave you a starting point to think about how Web3 could impact digital media and advertising. The truth is that many of the ideas discussed may never materialize. Developers will need to solve many custodian and user experience issues before Web3 has a chance at gaining mainstream acceptance.
Many Web3 zealots will jump at any chance to sing the praises of a decentralized utopian future. But after reading this article, can you blame them for being a little excited? What if, without a centralized entity or intermediary, you could:
- Establish your identity anywhere in the digital or physical world
- Exchange funds or personal data with any person or business
- Verify ownership of any item (your house, car, plane ticket, concert ticket, etc.)
Although maybe intermediaries and centralized authorities offer a valuable service? They can protect our best interests and provide restitution when we need them. If you forget a password, need to dispute a banking charge, or lose your driver's license, centralized entities are there to help.
Web3 offers some seemingly outlandish prospects, but there was a time when sharing your credit card to purchase something on the Internet was an absurd and irresponsible thing to do. But now, Amazon packages are almost a daily fixture on most of our doorsteps.
Dismissing a future you cannot picture may save you a little time, but staying open-minded when exploring the fringes of technology could create opportunities you may have never imagined were possible.
Photo by Shubham Dhage on Unsplash