Web3: ¿Bubble or The Future of Innovation? A Penguin Answers

Speaker 1: 0:00

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.

Speaker 2: 0:23

Hello Nick, how are you doing?

Speaker 3: 0:26

Hi Alberto, I'm great. How are you?

Speaker 2: 0:28

I'm doing fine. I am looking forward to Christmas already. I know it's a bit far away, but I just found the perfect present for myself. Tell me what's on your wishlist. It is, of course, a Padji toy. A Padji toy, which is one plushie version of the Padji Penguins NFTs that have made their way to the Walmart stores, which means that I will be asking you to purchase one for me, because they don't sell them here in Spain. So, yeah, padji Penguins have arrived to 2000 Walmart in the USA. This Padji toys, of course, belong to the line of Padji Penguins NFTs that were all the craze a couple of years ago probably, and that have been evolving all the way from NFTs to being toys on the shelves of a big retailer like Walmart. So, yeah, that's my present. What do you think?

Speaker 3: 1:32

Well done. You'll definitely get a Padji for Christmas. Before we dive into the details of these toys, though, I think it's worth digging into a little bit of the history with Padji Penguins for listeners that might not be familiar. So, padji Penguins, it's an NFT collection, right, and it launched, I want to say, two years ago. They launched close to the top of the hype cycle for NFTs.

Speaker 3: 1:57

What originally happened, though, is that the project was nearly abandoned. The community was in disarray. There were people who held Padji Penguins NFTs, and the original creator just kind of gave up on them. Along came a person named Lukanets Lukanets comes from kind of a web and an e-commerce background marketer and decided to buy the rights to the Padji Penguins NFT collection. So he came along, he bought it, and I don't remember the details of the sale. I think he got a pretty good deal. It was somewhere around $800,000 or $1 million.

Speaker 3: 2:31

He purchased the rights to the NFT collection, and he revitalized the community, and what's happened since then is that they started by creating a line of toys that were originally sold on Amazon and I think those have done pretty well, relatively speaking, for an Amazon item and now he's brokered this deal with Walmart's 2,000 locations across the USA to actually sell Padji toys in retail locations. So that's a pretty interesting turnaround story. There is some controversy out there around Lukanets. We're not going to get into that today, but it is interesting to see that an NFT collection has gone from almost dead to now owning the intellectual property for Pleshi toys that are showing up in retail locations all over the United States. So, with that said, tell us a little bit more about how it's going to work. What are these toys and do they do anything special?

Speaker 2: 3:27

Well, I don't know if they do something special, as if, like you know, if they were moving or they make noises, I don't know about that, but they do come with a QR code that unlocks digital traits which can be redeemed in a digital social experience that, of course, padji Penguins has created.

Speaker 2: 3:47

I have to tell you that I've tried this thing and, well, it's not like we are here endorsing anything, but I have to say I was quite surprised by the digital world that they've created, in which you can, of course which you can, of course, access through the, through the, through the QR codes and the and the traits that are associated to the Pleshi toys that you can purchase at these Walmart stores.

Speaker 2: 4:16

So, basically, they created this, this world, which, as I said, it's very interesting. You basically land in there and you can already play as if it was a game. And, yeah, the point with this, with the stories, is that they allow you to obtain special things that will be able to be used in this game thanks to the fact that you purchased the toys, so that makes them interesting. I want to hear your take here, because I know that you've been on this world longer than me and you know that this may be something that has already been tested. However, I see some differences that maybe we want to highlight between this project and whatever has been done before.

Speaker 3: 4:59

Yeah, absolutely. I think there are a couple of things to dig into with this story One. You know I'll start by saying what's not interesting about this story. What's not interesting to me is the idea of a physical item that has some sort of digital capability or unlock some sort of digital functionality. We've had that for quite a while.

Speaker 3: 5:19

There have been lots of toys that you know you can take into a game world, you know, either just by, you know, connecting that thing or setting it on a sensor of some sort. There have been experiments like this and I think, you know, while that's a little bit more interactive and it helps bridge sort of a physical and digital experience within the isolation of a single game or experience, that's not really interesting because it's, you know, it's a walled garden, you can't really leave that experience, you can't show that experience off, and so the idea of physical to digital itself in this context, I think, is mildly interesting at best. Where it gets interesting to me is the fact that these digital items are actually A NFTs and that they connect to other communities, and so I believe that traits are going to be unlockable. So each QR code unlocks these traits that can be redeemed in some sort of experience and you can collect and connect with friends, and those traits are actually coming from other NFT collections. And so things like Meebits or things like Degas, those are both NFT collections, nft communities and those are going to feed into this pudgy experience. And so what's really cool about that, you know, what I think the real headline here is, is that using this physical, physical to digital bridge of a toy scan and the digital experience is great, it opens the door but then connecting to these other communities I think that's where we start to get back to the really interesting parts of Web 3, where we're talking about interoperability, we're talking about composability between experiences, and you can now start to think about taking those digital traits or that digital experience that's originating from a physical item, and taking that to different experiences online, different virtual experiences, which is really, you know, I think, the superpower of Web 3.

Speaker 3: 7:17

It unlocks that sort of interoperability and sort of overlap between all of these different worlds. So that's my take.

Speaker 2: 7:24

Well, I agree that the physical to digital, or the fact that you're purchasing something physical and this is giving you access to something special in the digital realm, is only mildly, mildly interesting. But I have to say that the fact that Pudgy Penguins comes from a digital experience first, I think it gives it an advantage over other projects that are doing the reverse story, so going from physical to digital, because, as I said, the way they created this digital experience is already, it feels, very natural, right. It's not like when you come across a toy like, for instance, I don't know, the human toys we were talking about Mattel a couple of podcasts ago. So imagine one of these toys that were physical initially, like human, and then they make their way to digital. I don't know when this happens, usually the experience leaves much to be desired, but this wasn't the case with my experience with this Pudgy Penguins. So, yes, I agree that this is not something very special, that has been done before and we've covered some of these examples before, but the fact that they come from digital and they made their way to physical, I think, gives them an advantage when people use the physical to get back to the digital and, yes, of course, the part where this digital experience can then connect to other digital experiences coming from other NFTs and from other native projects that were also launched in the digital realm.

Speaker 2: 9:07

Yes, well, that's, that's a completely different game. We never had the chance of him and playing with Barbie, for instance, and that's our interact in a list, and I think this is something that is gonna happen. The crossover thing is gonna be massive In this, in this experience, because of the fact that, yes, this is very easy to connect these projects once, once they all leave in In, well, in the blockchain or in the digital realm First. So, yeah, that's a. That's just one detail I wanted to add, because, I don't know, I'm just very excited about the experience. I loved it. I think it's maybe because it's the first time I play a game in years. Just just jumping around with the penguin was fun.

Speaker 3: 9:52

Well, before we leave this story, I think one more thing I'll touch on is just the fact that we're we're talking about 2000 Walnards, that's a significant number of retail locations, and which means that you know, provided that the pudgies get a good position in the store and they have good visibility, that's, that's strong awareness. And so you know, if even just a percentage of those people who see these things in the store and say, oh, that's cute, I'm gonna buy one for my kid, or mom, dad can have one of those, they go on to engage in the digital side of this and start learning about, you know, what's behind that toy. That feels like a win for web 3. That feels like a win for NFTs. So it'll be interesting to see how this plays out over the holiday season, would be right back after a word from our sponsor.

Speaker 1: 10:38

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Speaker 2: 11:13

Yeah, it's a pity that. It's a pity that NFTs are dead, or maybe they are not we. We need to, we to get to the next story. And the next story is about, well, a couple of takes that have recently been published in a couple of In a couple of places. So one was a sentence and pronounced by the head of Instagram during a summit, specifically the creator innovation summit, and the other one is an opinion Editorial from tech central, or sorry, published On a tech central that had the title NFT craze is dead.

Speaker 2: 11:56

So we have these two takes from two different Venues, let's say, and they both speak of opposite things, at least a List on the face of. On the face of it, they are completely opposite, but we will see whether this is true or not as we get into this story. But, yes, let's start maybe with with the head of Instagram Saying that, and I quote, I'm still bullish on NFTs. Close quote. So he said that in this summit and he was having this conversation with Marquis Brown Lee, who I know because I've watched a couple of YouTube videos from him, and Adam well, adam Mosher is the head of Instagram and in that conversation, mosher, is it that sentence about being bullish on NFTs.

Speaker 2: 12:43

He was then asked well, if you were, if you are bullish on NFTs, why did Instagram in March 2023? Announced that they will be removing their NFT supporting features? And to this question, adam replied, and I quote Because I didn't see as a meaningful, I didn't see it as a meaningful revenue driver for all creators, and ended pulling back because they were tightening their belt Everywhere and was too high risk. Close quote. So we have the, the head of Instagram, saying these words, and then we have this article published at Tech Central arguing that NFTs, nft craze is dead and, specifically, that the bubble has burst. What, what is your first take on these two opinions, from these two avenues?

Speaker 3: 13:38

Well, let's. I'll start with. The NFT craze is dead and the bubble has burst. I mean, if you do a Google search for Bitcoin instead, bitcoin has died hundreds of times since it was started, and the last time I looked, it's still not dead. The same could probably be said for most emerging technologies. You always have a group of people dissenters will call them who are Negative on the technology for one reason or another, and they will find every possible reason an opportunity to declare the technology dead Because it hasn't reached some sort of arbitrary threshold in their mind about what adoption means or what scale means. The reality, though, is that scale and adoption happen in waves.

Speaker 3: 14:22

There's never really been a technology that just went from zero to a thousand overnight. You know, even when it seems like it does, it's typically Just what we're seeing above the surface. You know, if you think about something like chat GPT, there was years and years of development that went into the technology behind Chat GPT, behind this sort of AI. That seems like magic now, and there were many times when these tools started to emerge to show these sort of you know, ai interactions, and people just weren't ready for it yet. The technology wasn't fully baked and people weren't in a place where they could imagine how that would be useful to their lives. And it's the same situation with NFTs, with web 3, with blocked with any emerging technology. Which leads me to Adam's comment, which is that you know he a he didn't see it as a meaningful revenue driver for all creators, and I think the for all creators part is really important.

Speaker 3: 15:16

You know, if Instagram is trying to democratize creativity through something like NFTs, I hope, and it's encouraging to hear that they're thinking about the entirety of their user base. So if you're a creator, this should be accessible. It should be able to move the needle for you. They haven't seen that yet and I think that's a fair take. So that seems like a fair reason to pull back.

Speaker 3: 15:36

Also, you know the reality of business and where we are even outside of. You know the crypto cycle and the NFT. You know negative sentiment that's come down after the NFT craze, which is just that Businesses are in a tough spot right now and businesses are trying to figure out what the future looks like the world and is in a very uncertain place, and so it makes sense that people are trying to hedge their bets and being careful about where they spread their risk around. So I'm encouraged by the, by the comments. I think that it's good to hear from somebody At the top of a company that, honestly, you know Instagram versus Web 3. That's kind of a that's kind of an ongoing debate. Right, it's centralization versus decentralization, and yet we have the head of a centralized platform saying that he's bullish on a technology that enables decentralization. That I'm enthusiastic about that.

Speaker 2: 16:28

Yeah, I want to focus on the bubble part for a second, because they just said that, well, this, these technologies, they usually go through these phases and in I want to go. I want to go a lot, a Lot farther in the past because, well, we've had a lot of bubbles in our history and they, they, well, they are bubbly, basically, and they go a lot, a lot, they increase a lot and then they burst and they, they cause some pain and they Inside people to say, okay, this is dead. Well, we're not gonna see this anymore. But the fact that there was a bubble in the first place, it only indicates that there was some value in there underneath, and the fact that this was valuable was what created the bubble. And We've seen bubbles in railroads. We've seen bubbles in the internet. We've seen bubbles in all kinds of assets and trends that for a while were very hot and then they cool down a bit, but then they continued to be, to be with us. So bubbles are, I Think, an intrinsic thing that we live with, and it's good that we do, because otherwise we wouldn't be moving forward.

Speaker 2: 17:40

Also, well, getting into natural gas and things like this, they all came with their own, with their own bubbles and oil, of course. So, so yeah, all of these things are important and it's good that we have these, these bubbles, and I think I started by saying that these two opinions were opposites. But I don't think they are right, because, well, it's, it's completely natural that the, the bubble burst and that they there are people like Adam in this case, and us, that continue to be bullish on NFTs, because they, too, can totally live together. It's one thing that the initial bubble burst and it's another thing that this is good, going to disappear. So it's not going to disappear, it's going to continue to be and it's continued to. It's gonna continue to be Employed and used in different ways for from from different companies.

Speaker 2: 18:33

I mean the in the in the item, in the news item before we're talking about this NFTs making their way to, to the selves of Walmart. So they will continue to be around. They will be around, of course, in different ways. It will not be the same as it was two years ago. It will probably be something different, still with NFTs, still with Web3 on the back, but it will be something a bit different. But, yeah, I think both can happen at the same time the bubble burst, but the NFTs will continue to be with us and, yeah, we will see where they take us, maybe to the metaverse, but before we get there, anything else you want to add to these two opinions?

Speaker 3: 19:20

No, I agree with your take. This is natural cyclical behavior that we see not only in technology but in finance and macroeconomic conditions. So, yes, this is two ends of the pendulum and the pendulum moves back and forth, and I think you're right. When this comes, when we see the next wave of adoption with NFTs, it's not going to look like the first wave. So the people out there who are waiting for a PFP craze to come back probably not going to happen the same way. But if you think about NFTs a little bit more broadly and you think about them as a new digital substrate that we can start to interact with on this shared data layer, then adoption looks different in round two. So, yeah, excited to see where this goes, of course, but agree with your take on that.

Speaker 2: 20:03

OK, let's see then what happens, and we will be waiting, maybe in the metaverse, which is our next story. So we've been talking about companies creating their own digital experiences. We actually started this news today talking about one project that already had their own digital experience. Now we need to talk about a different project. This one started being very physical. It's none other than Macy's, and it's creating its own metaverse with a new digital fashion platform. So we cannot say that Macy's is new to this. It's not new to Web3 and NFTs. They've been somewhat involved for the past few months and years, but it looks like they are finally taking more well, let's say more interesting or more loaded steps into this with the creation of this fashion platform. I think I can pronounce it correctly M-style lab, and yeah, this is going to be basically a digital platform, something like a metaverse, specifically for Macy's. But since I don't know much about Macy's, do you want to continue with this one, nick?

Speaker 3: 21:25

I will do my best. So, yeah, I guess, starting with some history on Macy's involvement in Web3, for the past couple of years they've been actively involved in Web3 through digital experiences around the Macy's Thanksgiving Day Parade. So they originally started by creating some NFTs. I believe they use the suite platform creating some NFTs or digital collectibles of their Macy's Thanksgiving Day Parade floats, and so I don't remember the supply on that collection maybe 10 or 20,000. But it sold out pretty quickly. People came in and they bought those things and I was actually at NFT NYC listening to the case study and the playback of what happened and it was interesting because they had a lot of participation from a wide demographic and I think it's because the Macy's Thanksgiving Day Parade is such a well-known event in the United States. It's televised, it's something that you'll sit down with multiple generations of the family and watch together, so it's almost like a Super Bowl event in that regard, and so I think a lot of people just have sort of sentimental attachment to the event and saw the digital items as like hey, that looks cool. The suite platform is also very web-to friendly in terms of the user experience and so very little overhead for the user to deal with. They did that again the following year, so I think they started in 21. They did 22. And each year they've been continuing to sort of expand the experience. They're tying in things like community involvement. So both the past two years proceeds were donated to different charities and they're continuing to involve the community aspect as well. They have an active Discord where people can come and talk about the collectibles, web 3, et cetera. So, similar to Starbucks, they're really leaning into the Web 3 native behavior that we've seen power a lot of these NFT communities.

Speaker 3: 23:17

So let's talk about M-Style Lab. So we're now at a place where Macy's has found their footing, let's say, in Web 3. They're starting to establish some more strategy and they're creating this experience called M-Style. It's really, I think, to highlight a Macy's brand, a new brand called On 34th. On 34th is a fashion collection and I think it's kind of a nod to classic items, and so as part of the M-Style experience, people will be able to go in and they'll be able to create their own digital fabric, and that digital fabric then is sort of their representation of them in the M-Style experience.

Speaker 3: 23:56

They've also partnered with Ready Player Me, which is an avatar platform, which means that in the future, I'm guessing that we can expect to see an intersection where you'll be able to take your digital fabric from M-Style Lab that you've created and apply that to your avatar so that you can start to represent your preferences in this digital experience.

Speaker 3: 24:17

And I think that plays to a trend that we've been talking about on the show for a while, which is NFTs have the superpower of allowing us to be able to express ourselves in digital environments across those experiences. So, ready Player Me, they're integrated with hundreds of different digital experiences, and so being able to dress your avatar in the clothes that you create in M-Style and then walk around your digital universe, that's a unique way that we can start to express our personalities and our ideas and preferences in a digital environment, and then that really, honestly, doesn't exist today, and so that's where I see this headed. I think it's an interesting new approach that Macy's is taking, and I applaud their team for continuing to innovate and push the envelope, especially for a brand like Macy's, which is typically not associated with a lot of innovation.

Speaker 2: 25:08

Yeah, I have to say that it's probably thanks to Paddy Penguin, to be honest, because one of the things that they were saying in this announcement is that what they wanted to they wanted to find new ways to connect with consumers and to basically find them where they are. And if one thing has been shown by something another project like Paddependence is that people like the digital experience and they don't feel foreign when playing with these things in the digital realm, and this is, I think, well, in their words, this is one of their objectives to create something that is natively digital. So, as you said, they can create these styles and these clothing in the digital world first, and then we will see what happens, right, but the point is that, yes, thanks to other projects that have created the or have shown that this is possible and potentially demanded, then we see projects such as Macy's which, as you said, well, it's probably at the end of the spectrum of something like Paddependence doing basically the same thing, and this again comes back to what I was saying before about being digital first or being physical first, and I would like to see what ends up happening with this metaverse from Macy's, because they're going to have to learn how to create this experience in a way that is relatable and is interesting for the audiences, something that other digital native projects. I mean, they were born doing this right, so I think it comes more natural to them and we will see how a lot of these companies adapt, but it's interesting to see how they are adapting and playing with this.

Speaker 2: 27:05

However, one thing that maybe highlight from this experience from Macy's is that it's not as digital well, it is digital, but it's not as super digital, let's say, as the one proposed by Paddependence, in the sense that the digital assets that live in these metaverse, they are, well, digital assets. Basically, they are not NFTs, they are not able to be owned by the players or, let's say, the users, whereas in the case of Paddependence, yes, these items are NFTs. So this it's like a middle ground right from Macy's, and I wonder what you think about companies like Macy's doing this strategy of getting into this but maybe not getting in all the way.

Speaker 3: 27:57

Well, before I weigh in on the middle ground approach, I just have to rewind. So you said super digital. I think I'm going to start using that term now. Super digital for things that are true NFTs. I love that.

Speaker 3: 28:09

Yeah, so this is a trend that we're seeing play out across Web 3. This idea that you start with a Web 2 experience but you create a Web 3 path for adoption, and so let me dig into that a little bit. So, with M-style, when somebody creates an account, they're actually spinning up a custodial wallet address, meaning that Macy's has access to that wallet. They kind of hold control of that wallet. For now, they're spinning up that wallet address in the background for every user. Now, the digital item, the digital fabric that you create in M-style, it's not an NFT, as you said, it's just a digital item, which means it's you know bits sitting in their database somewhere. However, they've now created a Web 3 locker. We'll call it. It's that digital. It's that that web three address that sits in the background. It's tied to a blockchain Address and at some point in the future, if we get to the point where somebody says you know what, I'd really like to own that digital item, I'd really like to have that for my collection on the blockchain and own that, regardless of whether or not I'm interacting with Macy's. They have that option. The Macy's team has that option to create that functionality where a user could own that item and push that into their web three wallet.

Speaker 3: 29:30

And this is a pattern that we're seeing play out with a lot of different web three Apps and teams and agencies that are working on web three. Strategy is start with what people know. Which is web two? Right, we know how to log in with email. We know how to use a mobile phone to log in. That's not hard. We understand that.

Speaker 3: 29:47

So let's not create friction in the beginning, but let's create a door into web three on the back side so that down the road, as the web three strategy evolves, we have a place to get people into that experience without them even really knowing anything about it. And so I, inside of our team, I call this the web three mullet. You know it's it's web two in the front, it's web three in the back. But for the, from the user's perspective, they don't do anything differently. They just interact with the experience and if and when the experience calls for some sort of web three functionality. You have that capability kind of sitting in the background. So I think it's a smart approach. I think it's an approach that we're going to see lots and lots and lots of companies take as they start to tip toe into web three.

Speaker 2: 30:33

I will do a take away from this episode and then I would like to hear yours, and then we can wrap it up. I'd like to highlight a couple of things First, that you owe me a budget toy. Second, that, yes, we're going to be. I think we're going to be seeing the proliferation of these experiences and I think after that, the next wave is going to be the connection between these digital experiences. So we've covered with with budget toys and their digital world and the fact that they already announced that you will be able to play with other NFTs in there, and then we see Macy's doing their thing, and then we see what we've seen.

Speaker 2: 31:15

And we've covered here a few other metaverses. I remember the one with with cereals. That was kind of fun as well. So I see a world where all of this is as connected as as well as connected as the Internet in the sense that, well, you access the Internet, the different ways that you can access the Internet, the different venues in the Internet through a, through a Google Chrome or something like that, but more connected in the sense that you will be able to jump from one to the other and probably connect between them, whereas you cannot do this. You cannot have one tab opened on top of the other, so to speak. You will be able to do something like this with with NFTs, so so I think that's that's my take that it looks like everybody, everybody is at the moment doing their own thing, but this own thing has the potential unlike in the case of work to do in the future be be connected and the opportunities there. Well, we will be seeing what happens, but the opportunities are massive, yeah.

Speaker 3: 32:15

You know I totally agree with that.

Speaker 3: 32:16

It might take away from these stories.

Speaker 3: 32:18

You know the red thread for me through all of this is that NFTs, web 3 it's alive and well and I think you know the writing is on the wall at this point.

Speaker 3: 32:29

We're starting to see more and more brands get positioned to take advantage of Web 3 down the road and incorporate Web 3 in their strategy. And so, whether that's you know, getting behind a Web 3 project with your retail locations, which is a pretty big commit, or you know figuring out a way to serve your entire user base with NFTs or with Web 3 so that it makes sense for a larger audience, or creating sort of a Web 3 ready experience so that your users can jump into that if and when it makes sense, all of these brands are making moves to start positioning for the next wave of what's coming with the Internet, and I think this is going to continue to play out over the next year or two as brands find their lane, find a way to incorporate Web 3 natively into their value stack and then start unrolling the execution of that strategy in ways where, as consumers, I think we're going to be surprised and delighted when some of these things come to fruition and, like you're saying, when these experiences start to talk to each other and we have these interoperable moments, I think it's going to be a brand new world for the Internet.

Speaker 3: 33:30

I'm excited for it, yeah.

Speaker 2: 33:32

It's going to be like when you're watching a movie about Spider-Man and then you see Batman and you're like, oh, this is Batman on this movie as well, except for everything, yeah, that's going to be fun. Well, thank you, nick, and I'll see you next time.

Speaker 3: 33:49

Have a good one.