While the metaverse, NFTs, and immersive experiences have been top of mind for brands recently, DAOs (short for decentralized autonomous organizations) have been largely flying under the radar and might be the biggest opportunity for brands looking to build their web3 strategy.
First off, what is a DAO?
DAOs are online communities governed by their members and do not have centralized leadership. All governance is done as part of a group or collective. This differs from traditional companies or organizations managed by boards and executives. In other words, a DAO is a group of like-minded people that share a passion for a cause or common interest (think fashion, music, art, sustainable causes, or even coffee).
What sets DAOs apart from other online communities, like Facebook groups or a subreddit, is they have a shared bank account, in some cases a really big one. To give you a sense of how big a DAO can get, Bitdao, which is currently one of the world’s biggest DAOs, has a treasury of $2.2 billion, which it invests into a growing ecosystem of web3 builders and decentralized finance projects.
How are DAOs created?
Typically when a DAO is founded there’s an initial pot of money invested by the community’s founders or, in some cases, VCs. As more people join the DAO by purchasing its tokens (a cryptocurrency specific to the DAO), those token holders get voting rights on how the cash is used or distributed. DAOs are made possible thanks to smart contracts, where ownership rights, funding, and governance live on the blockchain. The rules are coded in smart contracts and cannot be changed unless voted on by the DAO’s members.
Why should you care?
DAOs are being hyped as the future of everything from politics to healthcare to corporate governance. And they are not a flash in the pan. According to this report the number of new DAO governance proposals increased 8x in the past year, and there are more than 6,000 DAOs in existence today as opposed to a mere 700 a year ago.
While time will tell if DAOs disrupt the world in the way many web3 enthusiasts believe, there is already evidence that these new member-owned communities will have a major impact on how brands of the future are created, how they will demonstrate their purpose and values, and ultimately how they will build loyal communities of passionate brand fans.
Exploring the use cases for brands and DAOs
There are numerous ways that DAOs may disrupt brand building in the future which we’ll continue to explore in our blog series. Here’s a look at three top use cases and examples of how DAOs are coming to life today.
- DAOs offer a new business model for brands to be funded, incubated, and launched.
- DAOs extend the value of NFTs, creating communities and bridging online and offline experiences.
- DAOs are reinventing the relationship and value exchange between brands and creators.
DAOs offer a new business model for brands to be funded, incubated, and launched
This past year saw the very first consumer packaged goods (CPG) DAO created, called gmgn. gmgn was created by the marketing agency Funday and additional founding members to disrupt the CPG market with a new business model for the people.
What exactly does that mean? Gmgn offers a compelling proposition to its members: “Imagine if CPG brands like Nestlé or Unilever started as Decentralized Autonomous Organizations (DAO), and you were invited to be a stakeholder from the start. We want to do it better together and this is your invitation. Help us fulfill the ambitious vision of 100 community-built CPG brands.”
If successful, gmgn will create and launch 100 new CPG brands across categories owned by its members who share in its success. If you are a legacy brand, applying this model and giving so much power to customers may sound scary.
Still, it will be paramount to winning over Gen Z as an overwhelming majority have expressed wanting more influence over how brands make their decisions and would be interested in using company-issued crypto tokens to vote on decisions. At the end of the day, it’s about giving customers a voice which leads to stronger communities and products.
DAOs extend the value of NFTs, creating communities and bridging online and offline experiences
We’ve seen countless stories of brands creating NFTs and selling them for hundreds, if not millions, of dollars. These great early experiments showed how NFTs can create new revenue streams, but they only scratch the surface of the long-term value that can be created. When NFTs are combined with DAOs, that’s where the magic happens.
- Maison Hennessy, maker of the iconic cognac, recently partnered with Friends With Benefits DAO to drop an NFT collection. These new NFTs will give members access to the exclusive Café 11, a new Web3 community from the brand.
- Café 11 will give fans a host of benefits, both virtually and IRL. Hennessy tapped FWB DAO to serve the role of a “creative agency,” and members of FWB will also have access to Cafe 11, bringing together both communities in a shared experience.
- Laurent Boillot, President and CEO of Hennessy, stated, “Like Hennessy, FWB has a deep-rooted passion for art and culture. And, like Hennessy, FWB brings together a vibrant community of diverse, inspiring creatives from every horizon: Hennessy and FWB are shaping a world of possibilities both digitally and IRL.”
DAOs are reinventing the relationship between brands and creators
Creators and influencers have long been the subject of unfair business practices and have been forced to rely on big social platforms to distribute content and support their businesses. Web3 is giving a much-needed makeover to the economics of how creators get paid -- creating stronger and more direct relationships between creators and their fans, as well as brands and their agencies.
L’Oreal is a great example of a brand investing in creator partnerships and making major strides into web3, by backing blockchain and NFTs to create an early competitive advantage in the beauty space. To date, one of their most ambitious endeavors was the creation of the ‘the world's first DAO focused on fostering the development of the 3D artist community’.
Created by L’Oréal’s NYX Professional Makeup, the DAO is called GORJS and will serve as a launchpad for 3D creators and help increase aptitude in digital make-up, which will help advance L’Oreal’s presence in the metaverse. L'Oreal is also using GORJS to lead the cultural conversation on brand values like diversity, inclusivity, and accessibility.
Why does a DAO make so much sense for NYX? Asmita Dubey, L’Oreal’s Chief Digital & Marketing Officer, explains, “The DNA of the brand is about makeup artistry, it's about entertainment, it's about community – and the brand has been pioneering 'social beauty' from the start of Instagram. So what the brand wants to do is empower 3D creators that are coming up. So the brand will become the first ever decentralized record label for creators in web3.”
DAOs, it's just the beginning, but the possibilities appear endless.
Often considered the future of human organization and community, DAOs are the force field brands need to attract consumers once again. With new DAOs popping up weekly, it can be challenging to keep track of them all and understand how to get involved. Launching your own DAO, partnering with an existing one, and creating a hybrid DAO model are all new ways that brands are getting involved.
Contact Pilot 44 to understand what model is right for your brand and how DAOs can become part of your move into the exciting world of web3.