Newsletter: Brands in Web3 & Web3 in Brands #17

Welcome to Edition #17 of “Brands in Web3 & Web3 in Brands“, your regular dose of the latest news from the blockchain, crypto, and Web3 space, curated to provide unique marketing and brand strategy insights with a pinch of spice. 

‍

This time we are looking at two fashion brands and a telco that are adopting Web3 in very different ways. Adidas enters the move-to-earn space, but is it fully aware of what it’s getting into? German fashion company HUGO builds on its 2022 rebrand with a new F1 metaverse activation campaign. And Vodafone looks to the future by embedding blockchain wallets into SIM cards.  

‍

Adidas joins the move to earn craze with Stepn partnership

Last month, Adidas announced that it is partnering with the “move-to-earn” app Stepn on a new virtual sneaker collection. Currently, these NFT sneakers are trading for prices ranging from $4,482 for the cheapest pair up to $19,951 for rarer options. So what is “move-to-earn” and why is Adidas getting involved?

The idea is quite simple. Users download the Stepn app and purchase a pair of NFT sneakers with the native GMT token to get started. Afterwards, users can take their mobile phone for a walk or run with the Stepn app activated and earn GMT rewards. The payout earned each day for real-world activity is heavily influenced by the attributes of the NFT sneaker, such as “efficiency”, “luck”, “comfort” and “resilience”. 

Overall, Stepn combines gamified mechanics similar to a computer game with some of the activity stats of a fitness app. This has proven to be an intriguing and addictive prospect for users, who have flocked to the app in numbers, with over one million downloads on Google Play alone. 

‍

Some early adopters like Don Crypto told of unlikely sounding payouts, telling Vice that he was pocketing $60 a day for a 10-minute walk after spending $1,000 to secure his Stepn NFT. If you think that sounds a bit too good to be financially sustainable, you are not the only one, and since April 2022 the price of the GMT token has declined from a high of $3.83 to around $0.24 today. Predictably, this has resulted in lower rewards: The South African YouTuber @SLGuides documented in December how he made about $0.63 per day for a 20-minute walk after an outlay of $95 for a comparatively cheap pair of NFT sneakers.

Stepn has been criticised as exhibiting some characteristics of Ponzi economics, whereby payouts to existing players are largely covered by the fees paid by new entrants. This has even become a running joke among the app’s devotees, with one user posting that it was a “beautiful day for a ponzi run #STEPN”. 

It should be noted that Stepn has pushed back against the Ponzi accusations. In a long blog post on the issue, the company argues that move-to-earn games need to constantly monitor and tweak tokenomic incentives and gameplay to ensure that both new and long-term players feel they are receiving value from the game and keep playing for longer without cashing out. 

For a company with an established footprint in Web3 like Adidas, it might seem like a no-brainer to partner with one of the most successful fitness apps in the space. Furthermore, it is in line with its strategy of partnering with successful crypto-native projects with an established user base like Bored Ape Yacht Club. But while ostensibly a Web3 fitness app, Stepn is really a hybrid construct that draws more of its inspiration from the addictive, play-to-earn mechanics of games like Axie Infinity than the health, metrics and competition of Web2 fitness apps like Fitbit or Strava. 

Whereas a standard NFT collectible is a one-time purchase that can be held or traded, it does not entail the same level of gamified incentives to keep spending more as an app like Stepn. Speaking to Vice, Don Crypto said that after finding the game “very addictive” he spent $14,000 to boost his earnings. This is not a phenomenon that is exclusive to Web3 gaming obviously. For better or worse, microtransactions have become a central plank of the gaming industry globally. But while Web2 games like EA Sports FC (formerly FIFA) involve similar “loot box” mechanics to encourage microtransactions, the costs tend to be considerably lower overall. The possibility that some users could incur significant financial losses poses a reputational risk for Adidas and we have seen the backlash and recriminations in the sports arena from the collapse of Web2 games like Football Index. Only time will tell whether Stepn has managed to nail the tokenomics so that it can keep attracting users while remaining financially viable. 

‍

In Stepn’s launch video for the partnership, it proudly proclaims that this is a “step into the future”, but for Adidas, it could be a step into the unknown.   

‍

HUGO cements rebrand with RB F1 metaverse partnership  

Having recently analyzed the flood of Web3 sponsorships in sports, and the fashion industry’s continuing experimentation with NFTs and digital collectibles, I was interested to come across a story that combines elements of both. German fashion brand HUGO has partnered with RB F1 Team to release a cross-branded range of clothing and a virtual “garage” in Roblox, the US-based centralized metaverse platform. Visitors to HUGO GARAGE are able to see a virtual version of the new F1 car, which features HUGO branding. There are also options to customize its style and colors, complete an obstacle course, access digital wearables, and even take part in a race on a HUGO branded track in Formula Apex Racing, a popular simulator on Roblox. The campaign was accompanied by the razzmatazz you would expect from the fashion industry, with various GenZ gaming and fashion influencers invited to see the car in person at a Miami launch party and race against each other in a simulator.

‍

While many people probably still think of Hugo Boss as a singular entity, in January 2022 the decision was taken to split it into two separate brands: HUGO and BOSS. Aimed at a slightly older millennial demographic, BOSS is the core brand which focuses on business and smart casual attire. HUGO, on the other hand, aims to be a younger, more trendy brand focussing on the more unconventional, casual styles of Gen Z. Initial financial results following the rebrand have been positive, with operating profit (EBIT) increasing 47% in 2022 and a further 22% in 2023.

‍

Unlike Adidas, it seems that the core aim of this partnership is to expand the visibility of the HUGO brand to a Gen Z audience of casual gamers, rather than trying to earn revenue by selling digital collectibles to NFT enthusiasts. This makes quite a lot of sense. When trying to appeal to a price conscious demographic who are known for their skepticism, giving people free experiences stuff is always likely to go down better than $19,000 virtual sneakers. In the end, however, it comes down to whether these brands primarily regard such initiatives as a revenue earner that taps into the wallets of NFT enthusiasts, or a marketing tool to engage a wider audience. BOSS is betting on the latter approach.

From SIM cards to smart factories: Vodafone’s vision for blockchain

With a lot of news about court cases and controversy in the Web3 space in recent weeks, it was good to see how a practical use case for blockchain is progressing. In an interview with Yahoo Finance, the CEO of PairPoint David Palmer (a company owned by Vodafone), explained the role he sees blockchain playing in future logistics and supply chain operations. PairPoint has found a way to equip mobile SIM cards with digital wallets capable of securely generating private keys to sign transactions.

Palmer envisages a future where devices like vehicles, infrastructure and equipment can autonomously communicate and transact with each other. In the medium term, this might mean self-driving cars automatically traveling to a smart charger to pay to charge its battery. On a longer time horizon, items from various vendors could pay to process themselves at a smart factory, with the owner able to remotely track their progress along the way. As one of Europe’s largest mobile phone operators, it is encouraging to see that Vodafone continues to see a future for blockchain technology that goes well beyond the realm of finance.