Lufthansa's Integration of NFTs and Google's Stance on Web3

Speaker 1: 0:05

Welcome to Marketing Meets Web 3, a podcast that helps marketers navigate the news trends, opportunities and insights surrounding Web 3. Today's conversation is for information purposes only and does not constitute legal or investment advice. Hello.

Speaker 2: 0:22

Nick, how are you? What is up? Alberto, I'm good. How are you?

Speaker 3: 0:28

It's good to be back to the news.

Speaker 2: 0:31

It's good to be back recording the news. The news haven't stopped. We've been taking a detour for a project that has taken us a long time, I'd say this loyalty series, talking about how Web 3 improves on the loyalty work programs that some of the companies are using. Well, it's been quite an exercise. I'm sure that people will like it. But today we're discussing the news and I wanted to ask you what are you thinking about? Traveling to Germany?

Speaker 3: 1:07

I don't have any immediate plans. Why do you ask?

Speaker 2: 1:11

Well, because if you decided to travel to Germany, the most available probably option would be to travel with Luftfanser, which is the airline from this country, and this Luftfanser airline is starting to do something with NFTs. It's starting to use NFTs from NFTs that live in the Polygon network as part of the reward program. Sorry, I'm just rushing here because I'm a bit excited about this piece of news, because I think it was just a month ago that we were talking about traveling on NFTs and you were saying well, probably airlines are not in a rush of getting into this because they love their programs as they are, but here we have Luftfanser, which is German, so they are like super innovators and they're getting into it.

Speaker 3: 2:05

So your first comments would be Well, first of all, I'm glad to be wrong about my prediction. You know I was pretty excited to see this as well. I think you know seeing a traditional industry like Airlines start to experiment with Web3 technology is pretty exciting. So let me break this program down a little bit and we'll talk about what it means for travelers, how it adds value, and then you know why using the Web3 technology underneath is important and interesting. So this is a project that came out of Lutanza's Innovation Hub.

Speaker 3: 2:44

So as a multinational corporation, you can imagine that they have an internal unit that's dedicated to digital innovation, and many large companies have these sort of internal incubators. I've, in my own career, have spent a little bit of time in one of those, and you know the whole point is for industries that are used to moving slower generally, because they have to right. They might have millions or hundreds of millions of customers, they might have regulatory requirements, they have privacy concerns, they have rollouts that need to happen across the globe. So in that kind of business environment it's really difficult to move quickly. You can't move like a startup, you can't make careless mistakes and you really do need to be considerate and thoughtful about your approach. And so these innovation groups inside these larger corporations are generally tasked with looking at the up and coming technologies out there, looking at the opportunities on the horizon and asking the question how can we, as a business, make sure that we understand this technology so that, if and when it is adopted, we're not left behind and that we actually have a strategy that makes sense and that works with our business? And you know we're not caught on our back foot trying to catch up. You know we've seen that over and over again with technology people who didn't think that e-commerce was going anywhere and then eventually had to catch up. You know, kind of the Amazon versus Walmart thing. You know Walmart's definitely caught up and they have a great digital strategy, great e-commerce program. But it's this idea that you can't get too far in the past, right, you don't want to be left behind, and so these innovation groups, they're designed to help these companies move forward in a thoughtful way. And so the innovation hub inside of Lutonza launched a program, and here's how it works.

Speaker 3: 4:31

So airline passengers who are on their flights they can scan their boarding pass using this app that they download very familiar experience, and this was a. It's branded under uptrip and so they scan their pass and then they collect these trading cards. And these trading cards are just, you know, fun artwork about the destinations they're going to, and really they've sort of gamified this whole experience. And so users basically collect these different cards based on their destinations and once they collect certain combinations of cards, they can redeem rewards against those cards. And so two things happen.

Speaker 3: 5:07

When they redeem Number one, they get the reward, which is obviously the value for the user, and these could be things like, you know, first class upgrades, they could be red carpet, club stays, they could be, you know, just ways to enhance the travel experience, very experiential type rewards.

Speaker 3: 5:23

And then, once they redeem that reward, they can also choose, at their option, to hold on to that trading card as an NFT, as a digital collectible, and so they own that thing and it becomes part of their travel experience, their travel portfolio. You know, I think that people you know we use social media this way in a little bit, or a little bit this way as well, where you know we post things, we post our trips, we post our travels, and that becomes sort of our memory book of the places that we've been, and so it's an interesting way to connect not only the reward redemption but also this experience of owning the travel experience, so that ownership piece, and giving that back to customers in a way that they can hold on to and make meaning for themselves. So that's a little bit how the program works Curious. What are your thoughts?

Speaker 2: 6:09

Well, I have plenty. Well, I have three. We can discuss them three, but just beginning with the fact that these NFTs, even though they are created and I love that part created using the app from Blue Thansa. And then we have the Polygon Network, which means that if tomorrow, some other airline I don't know the Spanish one, for instance goes out and creates their own program for creating NFTs, then well, they would use Polygon, of course. Then they would be very easily compatible.

Speaker 2: 6:36

They could be using a different chain, which is also compatible with discussed bridges in the past, but well, if they used the same blockchain, it would be very easy to connect them, even though they have been created with two different apps, which I think makes it very interesting, because we are now talking about loyalty reward programs from airlines that are completely different and foreign. I mean, they're both as foreign as the countries themselves. Right, if I have a loyalty program with Blue Thansa, it's very unlikely that it's going to overlap in any way with a loyalty program that I have with my Spanish airline. So I think that that's cool, that they will be able to connect. But the part that I love the most, to be honest, is the part of the user being able to create their own NFT with that. I think that's a. I mean, we've discussed gamification before, but this is probably the most interesting part of gamification or the most interesting way of gamifying the experience for the user.

Speaker 3: 7:36

Yeah, you know, going into or touching into something that you just said with regard to these different airlines. So if we just play this out a little bit and, you know, assume that this will not be the last experiment by an innovation group who wants to start getting experience with this technology we can imagine that we'll have clusters of customers that have collected these badges, these collectibles, these markers of their experiences and their engagement with different brands. And, you know, I just I have to ask myself you know, what does that look like five years from now, when we have people with these wallets and they've been collecting these different experiences and now marketers are able to take a look into that data? Because, remember, this is all connected to a public blockchain and so we're not talking about, you know, personally identifiable information. So it's not like we're putting names and emails and phone numbers or you know anything that would be a risk to personal privacy. We're not putting that on the blockchain.

Speaker 3: 8:34

But what we are putting on the blockchain are these markers of engagement and so that a customer can say, yeah, I have, you know, five of these travel cards. I've flown a million miles, you know whatever that marker is, and that becomes very valuable as a way to identify and segment customers, not only by the brand that issues that collectible, but by other brands who want to engage with that customer. And so I think that this leads us down a path where we have brands that are entering these sort of alliance loyalty situations, and you know, this already happens today. It's just that it takes a lot more coordination and a lot more technology integration to get those alliances off the ground where, in the future, it may be as simple as asking the customer to connect their wallet and then, based on their personal history and engagement with brands, a company will be able to offer them benefits, specials, you know, and welcome them into their own loyalty program or their own customer experience.

Speaker 2: 9:31

Yeah, I love that part and well, we need to move on.

Speaker 2: 9:34

But before, before we move on to the next piece of news, which is also about innovation, but in a different way, I want to.

Speaker 2: 9:41

I want to highlight one comment here from from the, from one executive from this innovation hub, specifically some Christian Baymark, and and he said that in the announcement about this piece of news that the Web three is in its earliest stages, as users are curious but still hesitate to dive in.

Speaker 2: 10:02

And I think we've we've seen, we've seen the hesitation plenty of times. That's, that's, I think, the most common feeling, I guess, when people come across a Web three. But I love that they are acknowledging it and I'm thinking OK, even if this Web three arena still creates or still incites this hesitation, we're going to create something that's going to be very easy for people to use and that also builds some trust in the users, so they feel like, oh OK, we can, we can do this Kind of works and gives me these other advantages. So I mean, the only way to go to overcome the hesitation is doing things like this. So I have to say that I think it's a very it's a very bold move here, but a very, very interesting move. And what hats? Hats off against to the loop.

Speaker 3: 10:56

Yeah, you know, I know you want to move on to the next story, but before we do that, I do want to touch on something there. So this idea that users are hesitant to dive in very true. You know, I was just at the permissionless conference in Austin, texas, and lots of people talking about the adoption curve and what do we need to do to get more people into Web three and this was one of the biggest themes that was talked about is this idea that you know we have to meet people where they are. We can't we can't just throw technology in their face and expect that they're going to get excited about it. You know, nobody gets excited about technology for technology's sake.

Speaker 3: 11:30

It's connected to some sort of value or benefit in my life, and so the idea that you know people are hesitant, I think we need to embrace that, and the answer to that, in my view, is we need to make sure that the experiences fast, fluid, easy, feels just as familiar as anything that you're using today and is optional for the user. Right? The fact that Lufthansa is saying you don't have to create NFTs from these passes, but if you want to, that's a, that's a really nice way to engage people, meet them where they are and then help them kind of leap into this when they're ready, if they're ready. So, yeah, I agree with you hats off to this, this initiative. I hope that we see many more of these.

Speaker 2: 12:10

Yeah, no, very, very, very cool, and yes, you need to meet them where they are. Where they are if they are flying, you meet them in the flight, and that's it. So, so, talking a bit about innovation. So we're talking about this innovation, have from, from Lufthansa, and the next, the next piece of news is about a company that has been innovating for a long time. We need to talk, then, of Google.

Speaker 2: 12:34

Google has a history with NFTs, with this innovation that has been sometimes used in games that have been offered through the Google platform, android, and Google has not been very happy with the with ads being being being used in to promote these, these games that then offer NFTs and that then go on to other rewards that may be outside of the game. Then, if it's itself, I think it's been concerned with the fact that some of these games are actually becoming, or using some kind of gambling behind behind the scenes. Anyway, the story, the history of Google with, with blockchain, with blockchain based non fungible token games, has been, has been hard, or has been a bit of a of an up and down, and, specifically in 2018, the company Google turned against the blockchain industry alongside other titans. I think this happened also with Facebook. I think it was when Facebook did this initially. It was when, I think, facebook banned the ads of crypto in in the platform.

Speaker 2: 13:48

Anything that had crypto in it got banned, I think in 2018, after the ICO craze. Well, so then they banned this in 2018, and then in 2021, they retreated this ban, admitting again ads from exchanges and wallets, but now they are softening their stance on NFT gaming ads in particular. So it's a bit of a change coming from Google, which I guess initially had this knee-jerk reaction of okay, I don't like what's going on here, or I don't understand what's going on here and I'm a bit concerned that some things are not cool and that I may be allowing them, so I will just stop everything, and then they are slowly opening their hands to more things happening under Google. But yes, I want to hear your opinion on this.

Speaker 3: 14:42

Yeah, so this has been a hot button issue in the crypto, the blockchain, the Web 3 space for some time now, and I want to start off by saying that I think that the original decision to ban a lot of this advertising was probably the right decision. In the beginning of any sort of emerging technology, you always have speculators. You have, unfortunately, scammers or bad actors, and there are lots of people in this space that are definitely trying to, or have tried to, take advantage of systems to just take people for a buck. But what's changed over the past five years, as this industry has matured, is that there's a lot more nuance now to this whole idea of crypto and blockchain and Web 3. And I think that the people who are making these decisions are starting to realize that we can't just put this all under one umbrella.

Speaker 3: 15:36

This is an enabling technology that has as many uses as the internet itself, and so how would we approach this if we just said, well, there are bad people on the internet and therefore we shouldn't advertise anything that has anything to do with the internet? That would just be. It wouldn't make any sense, right? And so it's good to see that we are moving forward. We're adding nuance to how we characterize the different use cases for NFTs and gaming in particular. I think the use case is so clear that when you're enabling players to own their in-game items, when you're allowing them to take those between games, that's not a financial instrument, that's part of the gameplay, that's the player's reputation. That's already happening in web two games, where people are paying real money to purchase these things but then they can't take them anywhere else. So it's good to see that big tech is kind of opening the aperture and saying there's actually legitimate use case here for this and therefore we should allow some sort of advertising.

Speaker 3: 16:40

I think nothing good comes from hiding in the darkness when it comes to highlighting the benefits of this technology, and so the fact that we have a place now where we can legitimately advertise for this use case, and a very specific use case, I think it's positive because for the public it creates more awareness, it creates more definition and I think it ultimately helps consumers be more comfortable with this technology and really start to understand what it's good for, what it's bad for, and an outcome of that is I really do think it'll help consumers actually start to spot bad actors sooner, because they'll say if they're seeing advertisement for legitimate use cases and a bad actor comes along and tries to run an ad for a scam or something like that. I think it's gonna be a lot more apparent to the average consumer that that looks a little shady. Maybe I shouldn't interact with that. So I think this is a positive development.

Speaker 2: 17:36

Yeah, I think what excites me more about this is that it levels the playground a bit.

Speaker 2: 17:42

So far, it's been said that NFTs don't make out of sense for games and that people are not really interested in owning their own weapons or owning their own items from the game in an NFT form that allows them to then take them somewhere else. But it may be so, there may be some truth in here, but I think it's also true that the playground wasn't leveled. There was the possibility of a lot of games that weren't using NFTs to advertise and to compete advertising with others, and then there were the games with NFTs that weren't able to advertise themselves. So, of course, the ones that were able to advertise themselves to the users were probably more successful than the ones that weren't. Still, I think, yeah, we're gonna see what happens now if this allowance goes forward and some of these games start competing using the same rules, and let's see then if users are really interested in owning their own items in the game.

Speaker 2: 18:50

And it's important, I think, to also well specify that what Google is allowing for in here is what you were talking about the possibility of owning these items that you need in the game, like, for instance, you will be able to advertise games that allow purchase in-game items like virtual apparel or weaponry or armor with better stats, so the usual things that you need to improve in a game and it's not allowing games that allow you to stake your NFT to earn rewards or some other games that promote gambling.

Speaker 2: 19:28

As I said earlier, this was one of the main concerns with Google because, as we know, the fact that the blockchain allows you to interact in many different ways, allows for these things, allows you to have an NFT, which may be a weapon very, very interesting, like a sword or something, and then you can stake it somewhere and earn some rewards that may have some monetary value outside of the platform and that could be then converted to crypto dollars or something, and this is where the game stops being a game and starts being something else. But yeah, so Google is drawing the line in there and we'll see what happens, but I think it's a good development. And I wonder, because you were saying just before, when I was talking about NFTs, advertising sorry, games that advertise and games that don't so do you think this is gonna have an impact in the competition between these two?

Speaker 2: 20:27

You know it's hard to say.

Speaker 3: 20:29

I think you know to your point, web three gaming is still pretty early and I think the jury is out in terms of whether or not this is actually a benefit that you could, the consumers wants to see.

Speaker 3: 20:41

You know, I think there's very strong opinions on both sides. I think I've heard cases for adoption and I've heard cases for this entire sector of the industry going to zero, as they say. So, you know, I don't have a strong opinion, other than I think we have to create space for innovation and I'm glad to see that we're putting rules around things. You know, this is the kind of definition that the entire industry has been really screaming for across the board, whether it's crypto or blockchain technology in general or NFTs. We need clarity, we need rules, we need to understand what is acceptable, what is not acceptable from a regulatory perspective, so that we can move forward and really start to prove out these ideas at scale. You know, because gaming is it's a massive industry. We're talking about billions of players around the world, and what's going to tell us whether or not this is a win is getting this into more hands and really just letting the people decide.

Speaker 2: 21:37

We'll be right back after the award from our sponsor.

Speaker 1: 21:41

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Speaker 2: 22:11

The revolution of Web3 and NFTs is still something that we will see, or maybe we will not see, or maybe we will see in a different way.

Speaker 2: 22:21

I'm talking about revolutions.

Speaker 2: 22:23

One person in particular has a very strong opinion on how this is gonna play, and it's interesting to touch on this because he's a.

Speaker 2: 22:32

This is a person that wrote an opinion article on Web3 wallets and this is very specific to how marketing will function in the future, and he's talking about how Web3 is going to bring a revolution to how marketing works, and I found this article to be very interesting. We're gonna be talking about some of these, some of these angles and ideas here, but just what the author basically states here is that marketing as we know it is going to go through a few changes and we will see what the impact of them, of these changes, is. But in the meantime, it's going to be interesting to see what Web3 can offer to the marketing industry, because the way marketing works until now is going to change, in his opinion, and Web3 brings something completely new to the table that may benefit marketers. So maybe to cover this opinion piece, nick, do you want to talk a bit about the situation in marketing? As Nick Kumar, who is the author, sees it.

Speaker 3: 23:47

Yeah, so I think, as you mentioned, he points out four areas that are implicated by this idea of a cookie-less internet. Starting from the top, here, it's very clear to all marketers that there's this huge increase in customer acquisition costs. Anybody in the digital space has seen digital ad prices go up and up and up and up. It's a consequence of many more advertisers entering the space and also just hitting market saturation with a lot of the keyword spaces that people are playing in. Those customer acquisition costs are sky-high right now. I don't see a world where that goes backwards. I think that those costs are going to continue to increase. It's getting more and more expensive to bring in new customers.

Speaker 3: 24:39

Google, specifically in Chrome, is also phasing out third-party cookies by 2024. This is something that's been on the table for a while with Google, with the Chrome team in particular. It's going to have a real impact for marketers. A quick side trip on this one Third-party cookies. A first-party cookie is given to you by the website you visit. A second-party cookie could be a technology vendor, like a Google Analytics that's collecting data on the user on behalf of the site that they're visiting. The third-party cookie is behind the scenes. This is where it gets more shady for consumers, because this is a cookie that's collecting data behind the scenes about consumer behavior and then is used to basically feed advertising platforms with information about user behavior. For a marketer, that creates options in terms of targeting and finding people in the wild. For a user, it's questionable, because we're not always aware of how that data is collected, when it's collected, where it's actually sold and made use of. Google actually has acknowledged this in their roadmap for Chrome, and they're removing third-party cookie support, which is going to make it harder for marketers to target people based on their click behavior. It's going to be harder to personalize messaging for those users as well, since we won't know what people are doing behind those clicks. That's a big change.

Speaker 3: 26:05

The third thing he talks about is this increasing public consciousness about online privacy. This is one that I think, even if you talk to older generations, who maybe are not as internet savvy or haven't had the internet in their life for as long, everybody is becoming aware of this digital shadow that follows us around, based on what we do. We've all had the experience of searching for something and then we're just retargeted ad nauseam with ads for products like that. It's kind of unnerving sometimes the correlation between something that we do even on between devices. You'll look at something on one device and suddenly you're getting ads in a social stream on another device.

Speaker 3: 26:51

For the consumer, I think that's really it's a little bit frightening. How do these devices, how do these companies collect this data and how are they tracking me around my everyday life? That's uncomfortable for a lot of people. Then, finally, he touches on this idea that global regulators are starting to catch up with the digital domain. It moves quickly, but I think regulators, at least within the purview of this idea of digital privacy, are starting to really bring strong frameworks and laws around what we can't and can't do as digital marketers. Things like GDPR, things like CCPA, various privacy frameworks all over the world, are starting to account for this safety of the consumer. I think with that, what does he get into in terms of the cookie-less internet and what kind of opportunity that presents?

Speaker 2: 27:43

Yeah, well, I have to make a very, very, very bad joke before we move on, because I didn't know. I mean, I always heard that Google.

Speaker 3: 27:51

I'll be back Go ahead.

Speaker 2: 27:54

I didn't know Google was so powerful that they could ban cookies altogether. That was the joke. But before we move on to something better than a bad joke, okay, we are going to talk a bit about how Web3 can help in here and how Web3 can allow marketers to continue, let's say, nurturing this relationship with their users. But instead of doing it as Kumar does in his piece, I think we could maybe connect this to the first piece that we covered today and talk about Lufthansa app and the usage of NFTs, so how something like this Lufthansa program could overcome some of the obstacles that marketers are going to be facing in the future as these things evolve. That's a good one. Yeah, go for it.

Speaker 3: 28:56

I like the challenge. So the cool thing about Web3 from a data perspective and we've had a few guests on the show, we've had a few conversations about this but wallets and, in particular, nfts, provide the opportunity for the consumer to opt in in a new way, so similar to the way that a consumer opts in with an email address and they agree to be in a relationship with a brand. Consumers do that when they connect their wallet and so when they connect their wallet, they're basically opening up their treasure chest of assets, the things that they own digital collectibles, nfts and they're saying hey, brand, I would like to have a relationship with you. What can you do for me and as a brand, as marketers, we can then look at that wallet data and we can start to understand things about the consumer. So we can see things like in the case of Lufthansa how many of these flights have you taken? How many travel upgrades have you had in the past? Again, not PII, but markers of engagement, which indicate behavioral metrics or behavioral outcomes, and so we can start to use this wallet data as a way to segment users. We can assign them some sort of customer persona. When they come in the door, we can understand. Are they a frequent shopper? Are they a high value shopper? What do we wanna do with that to make them feel special?

Speaker 3: 30:22

I think the other cool thing about this is that they're inherently private. So a wallet because it is owned by the user, a wallet can be disconnected from a property at any time, and so as long as marketers are doing the right thing here and they're not taking that data in and storing it about the user, which obviously puts their organization at risk from a digital privacy perspective, this is an opportunity for marketers to think about digital privacy in a new way, as sort of an on again, off again, on again situation, where a consumer can come along and say, yep, I like what you're offering. Here's my data, let's have a relationship and then at some point, if they're done with that relationship or if the value proposition has changed for them, they can unplug for that right. We've all had that experience. Brands come and go in our lives and sometimes you've just you've moved past a brand, or sometimes your life situation has changed. We see this a lot when people quote, unquote grow up and have families, right, you have new brands in your life. At that point. Old brands go, new brands come, and so those are interesting moments for us as consumers when we should be able to decide what we want our privacy to look like. And with a wallet we can do that. We can unplug that wallet and go to the next brand and start a new relationship.

Speaker 3: 31:35

So I think wallets from that perspective, they put us in control. They're also very dimensional. So earlier we talked about this sort of multi-brand alliance. If Lufthansa and other airlines have these programs where the consumer has these different badges in their wallet that indicate their travel behavior, you can imagine how that plays out if we start piling on other industries. You know, about a year and a half, two years ago, I wrote an article for Cointelegraph about this very subject of a future where we have this whole treasure chest of all of our interests, all of our activities that are represented in our wallets, and so it becomes this very multi-dimensional data set that we can allow access to and we can give marketers the opportunity to understand us better as customers so that we can get the best value and the service that we deserve. So I think from that perspective they're really useful tools from a perspective of understanding customers, which ultimately, if we're talking about the entire customer experience I think leads us to a world where digital wallets can really foster longer-term and deeper customer relationships.

Speaker 2: 32:44

And hopefully take you to Germany more often than not. Well, thank you. Thank you, nick. That was a nice answer to a curveball that I just decided to throw at you. And well, if you liked what you heard, there's a loyalty series, podcast series for episodes with experts from the industry talking about how Web3 impacts loyalty reward programs. So it's available on YouTube. Do check out the link in the description if you want to access that series, and I hope you enjoyed this one and, nick, always a pleasure to be with you.

Speaker 3: 33:31

Certainly talk to you soon.

Speaker 1: 33:35

Thanks for listening to Marketing Needs Web3.