Jeff Kauffman: DAOs Will Own Big Brands

The founder of the JUMP community token, a speaker at Consensus 2022, on how Web 3 will change branding and empower communities to buy brands themselves.

AccessTimeIconApr 5, 2022 at 5:07 p.m. UTC
Updated Apr 8, 2022 at 6:55 p.m. UTC
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Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.

Jeff Kauffman loved to skydive. He was obsessed. He wanted to connect with other skydiving junkies so he turned to the power of the internet. He used a hot new website to create a hub for this community: MySpace.

This was back in 2005. Facebook was still only on college campuses. At the time the group was almost comically small; the MySpace page was just “Skydive Dallas,” intended only for local skydivers. “It’s the most niche thing you could possibly do,” says Kauffman with a laugh.

This article is part of Road to Consensus, a series highlighting speakers and the big ideas they will discuss at Consensus 2022, CoinDesk's festival of the year June 9-12 in Austin, Texas. Learn more.

But that’s how long he has been creating online communities. Eventually he launched a skydiving group on Facebook, he expanded beyond Dallas and soon he scaled it to the world’s largest such group. Then he built communities with brands. Over the next 15 years, Kauffman focused on Web 1 and then Web 2 brand building, where his clients ranged from GameStop to Dr. Pepper to Chick-fil-A. He enjoyed it. He loved it.

And then the game changed.

“Unfortunately, the way Facebook and Twitter evolved, they didn’t really nurture online communities the way we had hoped for,” says Kauffman. The new rules of the road: Communities were out, paid advertising was in. You could no longer truly engage with your customer; you just paid to serve an ad. In early 2020 he took a hard look at himself and thought, “I can’t run another carousel ad on Instagram.” He didn’t know what was next, but he knew he was done with the Web 2 grind.

Almost on a lark, Kauffman went to the website of Andreessen Horowitz (the powerhouse venture capital firm), and he followed the links to every investment the firm has ever made. For weeks he studied these investments. He ruled out verticals like biotech and space (he wasn’t exactly an expert) but he focused on media, culture and entertainment. “I was just like, ‘What’s the future? What’s coming?’,” he said. In the course of this research, he stumbled upon a term he had never heard before: “social token.”

Hmmmm. That seemed interesting. Thanks to his social media background, Kauffman’s a whiz at scraping Twitter and using “listening tools” to better understand a topic. So he went to work. “Within three days I understood the entire landscape of who's talking about social tokens,” says Kauffman. “I started building word clouds around who's associated with who, who's using the term the most, who's followed the most.”

Kauffman began publishing daily insights on social tokens and the native Web 3 space. People began to read and get it. He started tagging influential people in the space including Jess Sloss, the founder of Seed Club (a social token accelerator). He whipped up research reports and analyses of these new companies.

He had a sense that Web 3 would be the future of brands, and he wanted to learn by doing. So he created JUMP, as in “Jump into Web 3,” a Discord-based network of branding ad execs – from mainstream companies – who are curious about Web 3. Jump is essentially a bootcamp for Web 3 branding.

Kauffman keeps the member data private, but says that “at least 200 of the top Fortune 500 companies” have brand managers who have joined Jump. “Take any big brand that you can think of, and they have multiple people inside the [Jump] community.” (And Jump is now on the radar of Morning Brew, the business publication, which noted that Jump has “two pretty clear use cases: as a platform for networking and as a safe space to ask questions.”)

So where, exactly, are we all jumping? Kauffman’s not entirely sure. But he shares predictions on how Web 3 will change branding (including rewards programs “on steroids”), is bullish on a resurgence of community building and boldly predicts that within the next five years one of these communities will “purchase a Fortune 1000 brand.”

This interview has been condensed and lightly edited for clarity.

CoinDesk - Unknown

You’ve called the early days of Web 2 a “golden era,” where brands were really able to build communities. What do you mean by that exactly?

For a soap brand, for example, you could actually build an online community and get product feedback in real time. One of the brands I worked on was “Boudreaux's Butt Paste.”

[Important note to reader: Get your mind out of the gutter. This is a diaper rash cream, for babies.]

So for first-time parents, you have no idea what you're doing. You're trying to figure it out. You're using this product and the parenting communities were just thriving. For a product like Boudreaux's Butt Paste, we could bring the community together and create this space.

And then, in real time, we could have parents saying, "What's happening here?" And we could start to help them. Even if it wasn’t selling the product, we could provide some sort of support. We had a real-time conversation of trying to solve problems. It creates a better bond. And everybody gets served better when the community is at the center. Customers get a better product, and the brands get loyal customers.

Everyone knows that the average consumer has soured on Facebook. But you say that brands have, too. What’s the reason?

The ad dollars just got more and more expensive, to the point where the ROI got stripped out of it. It became a race to the bottom. And, over time, [Facebook] imposed handcuffs around, "All right, if you want to engage and talk to your customers or your potential customers online, you have to pay for it. And oh, by the way, if you're successful, all of those learnings are going to be shared with everybody else. And that’s going to continue to drive costs up." It just became incredibly limiting.

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The best strategy is actually not to sell NFTs. It's to give them away for free
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What led to the creation of Jump?

In 2020, when I was going through my discovery process, I created a trends deck. And I presented these concepts [in one-on-one Zoom meetings] before anybody in agencies was talking about [non-fungible tokens] or social tokens or [decentralized autonomous organizations]. You can go look at Google search trends from back then; it’s tiny. I was presenting these concepts. And everybody within the agency and brand network said the exact same thing. They're like, “Holy crap, that's cool. It solves so many problems. I don't understand anything that you just said. I never heard of it, but it's cool. And I don't know where to get started."

I heard those things over and over. And I realized, "Oh, the best place to get started is to build a community for marketing and advertising professionals." Because you can present decks all day long. But until you experience it, and you're in it, it's so hard to know how to build and how to create. You have to experience it first.

Right, learning by doing.

The best way I felt I could teach the entire industry was to create something like this. That’s how I could scale these ideas and move the industry forward. What I just wanted to say was, "Let's create this community to help you jump into Web 3."

Then they can take those learnings inside of all their agencies and brands, and start to execute. So, that's the reason Jump exists.

What are some ways that branding will change as a result of Web 3?

The low-hanging fruit is that brands can create communities in Web 3, using NFTs and social tokens. And then they can create experiences around that community.

If you have a group of people that hold the same token, what can they do? They can move anywhere, both physically [in real life] and online URL. So what a really savvy brand can do is say, “Okay, cool, here's my community, here's my customer base." The best strategy is actually not to sell NFTs. It's to give them away for free. Give them away, and put them in the hands of your best customers.

Now you’ve basically created a handshake and a relationship. And you say, "I don't need you to have a username and password. I don't need to store any of that stuff. I don't need to have some sort of ID check at a concert.” This is already happening. Your NFTs can go in your Apple wallet. You can just show up IRL, but also URL, and you can just enter any experience that the brand has created.

How about loyalty rewards programs?

Loyalty programs are definitely massive. In the old world, while they did create loyalty it was sort of this loyalty where you felt like, “Man, all my points are stuck there. And I want to use them, but it's because I'm locked in.”

Right, because there’s nothing else you can do with them.

Right. Whereas now [with Web 3], as long as the brand is building in the open environment, the loyalty programs are on steroids. Why? Because now you are an owner in the loyalty program. You own your place in it because you own the tokens.

What’s an example of a traditional brand doing smart things with Web 3?

Take Time magazine. Now Time is able to connect the readers to the creators – the writers and photographers – that they love. They can do that by selling NFTs. In partnership with those creators, Time can split the royalties. Then the people who hold those NFTs can access a community of others who are passionate about the creators, or the photos, or the print journalism.

What does that do for Time exactly?

So now, without being ad supported, Time has this way to say, “Hey, readers, you love these creators. We’re going to build the infrastructure of bringing you all together. We have a business model and a revenue stream because of the primary NFT sale and the royalties. We can share that with the creators themselves. Oh, and now you, as a reader, actually own what you purchase. So you can trade it. And if you happen to be on to something early, before other people, before that demand comes in, you have ownership and upside in this network. And oh, if you add more to the experience as a reader or as a subscriber, and that experience increases in value, if you want, you can sell out of that network and exit, and actually realize a profit."

Now let’s go even bigger. Give us a bold, “out there” prediction about what’s going to happen with Web 3 and branding in the future.

So, the absolute craziest thing that's going to happen within five years is a community is going to form without a brand involved, and this community is going to purchase a Fortune 1000 brand.

Okay, that’s bold! Please elaborate.

It’s going to be hard for the big brands to really execute in a way that’s native to Web 3. When anything gets big and is old, it doesn't move as fast. There are lots of moving parts.

Whereas Web 3 is unlocking new capital and new resources that haven’t been unlocked before. Web 3 does not need Coca-Cola's ad dollars. And because online communities can form so quickly, and they can support themselves through this economic engine of royalties and primary sales of NFTs, they actually can generate a lot of capital. Yuga Labs is a really good example.

I was just about to say that. The Bored Apes guys are already big enough to buy any number of companies.

Exactly. And one of these communities is going to unlock such enormous value that these brands are basically going to say, "You know what? This community and this DAO just offered us a lot of money to buy our company. If our fiduciary duty is to do right by our shareholders, and there's actually a legal entity to sell this into, I think we need to sell it.”

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I think we could see an alcohol brand get purchased by a community.
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What’s a concrete example of a brand where this might make sense?

I think we could see an alcohol brand get purchased by a community. Like a whiskey community just comes in and says, "You know what? We're going to activate this whiskey brand everywhere. We have the resources, and we're actually going to buy an alcohol brand."

When we spoke a few months ago, you floated the idea of an eco-focused Web 3 community deciding to partner with Patagonia, given the brand’s environmental ethos. Could you see an eco-DAO buying Patagonia?

Actually, Patagonia is a really interesting example. The founder owned 100% of it. And then his plan is to essentially say, "Now it's an employee-owned company, there [are] no outside shareholders." And that's great. It really keeps the culture intact, and everybody's there for the mission and the values. But that next level is actual community and customer ownership, not just employee ownership.

Interesting.

If we just scan the history of time, we went from a king who owned everything, then to this invention of a country that granted ownership and said, "You know what? You can own your land, and we're actually going to protect it.”

Then it evolved to families. And then to corporations. So you went from kings to families to corporations. And with corporations, at first just the leaders of the company owned it, not the employees. Then with the Silicon Valley era, the employees could own part of it.

Now we’re entering an era where the actual end-customer very much owns a stake.

That’s wild. Love it. Thanks for the time and have fun at Consensus.

This story is part of Road to Consensus. Register for Consensus 2022 here, the must-attend crypto, blockchain and Web 3 festival of the year.


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Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.

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Jeff Wilser is the author of 7 books including Alexander Hamilton's Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.

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