KYC, Meet KYP – Navigating Digital Marketing in the Web3 Era

by jAIme (Jaime and some AI)

The pivotal shift from the blogs and storefronts of Web1 to the attention and surveillance economy of Web2 was built on the back of cookies. Cookies allow brands to hyper-target you, tailoring messages with uncanny precision. For almost two decades, consumers have became the product, as their clicks became predictive metadata, a commodity more valuable than oil, and sold to the highest bidder, which is usually a marketer, but could also be a government or really anyone who can pay.

You've probably heard the news that this is the year cookies die.

But as we shift from Web2 to Web3, the question shouldn't be about what's replacing cookies, but rather, can we replace the surveillance economy?

We are in the early days of turning 2D into 3D, and clickable UX into conversational UX. So what can we turn cookies into?

The answer lies in determining if the next era of the web is consumer or platform owned.

KYC's Reign

Marketers will be quick to point out that KYC or "Know Your Customer," is more commonly used to refer to regulations that require that companies know that the right people are exposed to the right content and so that data theft among consumers is minimized. But when you hear the phrase "we are the product," that comes from KYC too. That phrase means is that our cookies of demographic and behavior data build a predictive preference list and tie it not to our names but to our unique IP. So marketers technically don't know who we are but they know our IP address more intimately than we know ourselves. KYC knowledge is so powerful, it allows marketers to buy media today for who we are going to be tomorrow instead of who we even are today. That's efficiency for marketers playing by the rules, but because that data is open to highest bidder, it also means surveillance and behavioral modification for those playing by looser rules.

KYC in Web3

So how will KYC work in Web3? As much as Meta has been trying to design 3D worlds and AI-charactered KYC marketplaces, Web3's early audiences have shown their preferences for a different kind of platform-owned 3D world. The kind lead by Roblox and Epic Games ' Fortnite. In these immersive worlds, the money isn't coming advertisers paying for data, it's back to actual consumers paying for upgraded experiences, digital products to enhance those experiences, and, in the case of Roblox, the ability to make and sell those experiences to other players, forming a co-creation economy. Where brands come into play here is in how they partner with the platforms to offer their own experiences and products alongside Fortnight's and Roblox's. There is no doubt that the advertising for these experiences and products is growing, but as an extender of this new economy, not the centerpiece of what drives it.

However, as stated before, these are closed systems, walled gardens where there is no true ownership for consumers, with no rights transfers, and no interoperability of what is purchased outside of these spaces. Here, you don't own things, you lease them, with the platform having every right to take it back, limit it's use and not allow it to work on any other platform. In these worlds, KYC will remain king, because behavior data is still centered around consumer profiles. As long as consumers are not given the opportunity to actually own their purchases, KYC will be used to gamify behaviors towards more purchases. In this world, platforms continue to be the middlemen between brands and consumers, holding the power of their reality (and the data inside it) to broker with brands. If consumer ownership is to truly happen, and with it, a direct connection between brands and consumers just like in real life, we need blockchain technology in the form of Non-Fungible Tokens or NFTs.

Platform vs Consumer-Owned Digital Economies

The reason platforms can even try to call what they sell, "ownable" is because of world persistence. Whenever you leave a digital world, it continues on without you being there. Your objects are waiting for you, even going on about their business (evolving, aging, being used by others) until you return, just like object permanence in real life. And this perception is what tricks consumers into thinking they actually own their digital products. But if the platform disappears, or just decides you can't have what you made anymore, they can take it away, and as for rights to do what you want with these objects, consumers never have that. True ownership lies in consumer possession, object permanence that isn't reliant on the platform that birthed it along with rights transfer or at least rights management. Just as walled-garden platforms are known as centralized platforms, blockchains are decentralized platforms. And across these decentralized platforms, tokenized products (NFT's) can be owned, authenticated, transferred, and evolved.

Unlike the Bored Apes or other early NFTs, where value was based on the owner community and future utility, the potential of NFTs extends to any digital product—from cryptokicks and other digital twins of physical products, to avatars, their skins and accessories, to even moments like proof of attendance or stories through recorded media. These digital assets, defined not by the pixels on a screen but by their blockchain receipts, introduce a new layer of value for this new economy: provenance.

KYP's Currency: Provenance

Provenance, or the history of an object, is a narrative thread that weaves through the lifecycle of a digital asset, enriching it with context, added utility, important moments and, importantly, the authenticity of that history. For marketers, understanding the provenance of digital products opens new avenues for engagement, allowing for targeted marketing strategies that resonate on a more personal and meaningful level. This is where Know Your Product, or KYP, is born.

Companies like Blocksee and Chainalysis are pioneering the analysis of provenance on blockchain, mining insights not just on the products but indirectly on the customers themselves through their interactions with these digital assets, creating the first iteration of KYP data.

KYP can provide deep insights into the provenance, popularity, and utility of digital products, enabling marketers to not just craft better campaigns as they have under Web2, but actually design better products and experiences, the things their customers are actually buying. Where KYC focused on future consumer behavior based on past click-thru behavior, KYP emphasizes the importance of understanding the digital products themselves— through their provenance.

From Market Development to Product-Market Development

Web2 is about market development, empowering messaging that resonates to encourage conversion. But Web3 allows for product-market development, using market-driven insights to go beyond improving the messaging to actually improving the product. This intersection of product and market development signifies a broader shift towards a more transparent, equitable, and customer-empowered digital marketplace because it strengthens the ties directly between makers and consumers just as it weakens the ties with the platforms standing in between them.

The KYP Economy

Along with true consumer ownership through on-chain transfer, comes the ability to also transfer rights management. This doesn't mean a consumer can automatically do anything they want with whatever NFT buy, but it frees creators to add smart contract-based co-creation guidelines so that consumers can act as prosumers (producer-consumers) adding value that's recorded in the product's provenance.

If you buy a soccer ball and get it signed by Lionel Messi, it's worth more. If you evolve a Pokemon character, it's worth more. If you set up a social profile and add followers to it, it's worth more. If you create a Fortnite character and add skins and guns to it, it's worth more. These specific instances are universally applicable to all digital products, setting up a supply chain of products with an assemblyline that never ends, where ever product is part of a value-add chain, where ever consumer is capable of producer: buying, building, and selling on. And in this economy, KYP is not only the determiner of that value, but the metadata window to new market dynamics.

This is not an advertising-based economy, but a co-creation economy, and one that aligns with consumer control, creates new opportunities for brand engagement, and provides a path forward for platforms too, where they no longer have to be fiefdoms filled with user-workers, but can be hosts and stewards of culture, providing experiences and products worth paying for because of the value they can add to consumers' products' provenances.

Privacy, Ownership, and the New Digital Marketplace

As digital products carry increasingly detailed histories of ownership and interaction, ensuring the privacy and security of this information becomes paramount. However, the transparency of data is what gives digital products their value. Just as influencers keep their private lives private, but their performative lives as public as possible, the objects consumers want to add value to gain from being on public, transparent, authenticatable chains.

Real-World Applications and the Future of Marketing

As we look towards the future, the applications of KYP in marketing strategies are vast and varied. From luxury brands tokenizing their products to create exclusive digital experiences, to musicians building ever-broadening chains of collaboration and shared royalties, the potential for KYP to redefine engagement is immense. Moreover, the rise of virtual brand ambassadors and AI-driven marketing campaigns can further innovation and engagement, allowing KYC to compliment KYP.

A consumer-owned, co-created, interoperable, and open Web3 economy will be driven by KYP product-market development to advance consumer-preference iteration instead of consumer-manipulated efficiency.

Challenges and Opportunities Ahead

Despite its potential, the transition to a KYP-focused marketing strategy is not without its challenges. The technological and conceptual leap from KYC to KYP requires a fundamental rethinking of marketing strategies, consumer engagement, and data analytics. Additionally, the regulatory landscape surrounding digital products and NFTs remains in flux, with significant implications for privacy, copyright, and ownership rights, which also requires infrastructure product development to aid in safe, equitable, co-creation. Some companies like Mintangible that work on flash licensing, or MRKD.art that work on product authenticity and user experience are providing key building blocks, while other companies like Parallel Worlds, Inc. are starting to build entire, open worlds for interoperable co-creation economies to begin to take hold.

TL;DR Embracing the KYP Paradigm

As we stand at the cusp of a new digital economy, the transition from KYC to KYP represents more than just a shift in strategy. It embodies a broader movement towards a more decentralized, transparent, and customer-empowered digital world. By embracing KYP, marketers can partner with Web3 product and world builders to not just make market development better, but product development as well. We are so close to a future where digital products and their provenance are not just understood but providing a more equitable economy that frees us from the invisible hand of the attention algorithm.