Web3 x DTC (Part 1): A framework for thinking about the changes to come.
This next iteration of the internet is going to change the way DTC eCommerce owners, operators, and marketers grow their brands.
The web is an unfinished, constantly evolving project and its history thus far can be categorized into three main phases:
In the first phase, content creators were few and most users were passive consumers of content. Web1 was static and centered around read-only.
Phase two brought us “Web as Platform” where software applications could be built on the web rather than on desktop, allowing masses of users to participate on social media, e-commerce, and knowledge platforms.
Mobile perpetuated this “always-on” content creation and consumption making Web2 much more social and collaborative than Web1, but that came at a cost.
The early Internet was created around the idea of free information so customers were often not willing to pay for online content with a recurring subscription fee, and micropayments were still not feasible. Therefore Web2 platforms were built around business models that relied upon the participation of its users to 1. Create fresh content, which grows existing user engagement and draws new users to the platform, and 2. Share their personal data, which is then monetized through targeted advertising. In short, users in the current landscape are paying for services from the central Web2 platforms with the value of their time and the ownership of their private data.
Web2 platforms have introduced many beneficial services and created considerable social and economic value over the years. However, wealth was mostly accumulated by the companies offering the services, and less by the general public contributing content and value to those services.¹
Enter: Web3
Rather than evolving around the centralized databases of the dominant platforms in Web2, this next step of the internet will be characterized by the decentralized storage, management, and transference of data. Blockchain technology is what makes Web3 possible and the key innovation of decentralized networks built on a blockchain is the creation of platforms that no single entity controls, yet everyone can trust. Blockchain removes the need for third parties and intermediaries by creating a “trustless” network whereby information and value can be transferred directly from one individual to another.
In sum, Web 3.0 will bring us a fairer internet by enabling the individual to be a sovereign. True sovereignty implies owning and being able to control who profits from one’s time and information. Web 3.0’s decentralized blockchain protocol will enable individuals to connect to an internet where they can own and be properly compensated for their time and data, eclipsing an exploitative and unjust web, where giant, centralized repositories are the only ones that own and profit from it.²
But has blockchain actually done anything for us yet?
The phase transition from Web2 to Web3 will take time, but it is already well underway as we see centralized web apps being replaced with their decentralized (“dapps”) counterparts.
Ultimately, I believe Web3 will allow DTC eCommerce to fully realize its original vision of removing the middleman:
eCommerce can systematically democratize key functions of our lives by removing the gatekeepers. Much like railroads provided access and commerce, new technologies can simplify the purchase of a car, remove bias from the purchase of a home, or provide peace of mind without dialing a number to make an appointment with your physician.³
Web3 will flip the current DTC growth model on its head as internet control shifts to the user and value realization shifts from the platform to the individual. The creator becomes the acquisition channel. Attention shifts to micro-communities. Users are directly compensated for their time and data. Scarce digital goods accompany the sale of physical goods. Customers have ownership in the brands they buy from. And the brand becomes more focused on satisfying their customer’s needs through the delivery of a great product.
The possibility of starting a DTC eCommerce business emerged from the second epoch of the internet. This Web3 x DTC series will aim to uncover current applications and predict future applications in the Web3 x DTC space so that we don’t miss the opportunities that the third epoch will present.
Follow along as I explore this next iteration of the internet, and share your observations along the way: What are some applications that you predict? What are applications you have seen already executed in this space?
