If you want your media business to go ad-free, social coins might be the way to go!
It seems like just about anyone is creating some kind of cryptocurrency these days. In April this year, news broke that Meta founder Mark Zuckerberg was planning on creating his own centralized-social token (dubbed “Zuck Bucks” by Meta’s employees) to reduce the company’s dependence on advertisers. This currency would operate like tokens inside a video game, meaning that you could use them to buy items on Meta’s platform. The company also opened up about its plans to launch creator coins to monetize its user base.
While Meta’s token is not officially rolled out yet, hundreds of social tokens exist already, some popular players include $FWB, $BANK, $WHALE. As per Forefront, the market cap of big social tokens exceeded US$303 million in 2021, a 500% growth from 2020. To understand the growing endorsement of social tokens, let’s make sense of what these tokens are, their utility and whether creating your own social coins is the way to go.
What are social tokens?
Social tokens (also called creator tokens or community tokens) are virtual currency tokens created by a company or creator (usually under their name) to build a community of followers or customers and engage with them. Community members can either earn them for meeting certain requirements or buy them from the creator in lieu of receiving special perks. For instance, the podcast Tech First has its own cryptocurrency called the $SMRT coin. Those who buy the $SMRT coin, get a chance to directly interact with the podcast’s creator John Koetsier.
The key idea behind social tokens is community participation and that over time, the value of community participation will increase at an exponential rate. They give the community a chance to vote on the content the creator puts out, building trust and engagement between creators and the community members.
Another long-term goal of these tokens is to replace subscription or advertising-based models for accessing content. At the moment, many social media platforms, like YouTube and TikTok, only pay creators a part of the revenue that the platform makes through their content. By having a social token of your own, it eliminates the middle man and increases the creator’s income.
Two main types of social tokens
Broadly speaking, these tokens can be understood under two categories—creator tokens and community tokens:
Tokens by the individual creator—the creator coin
This concept isn’t anything new. In fact, musical legend David Bowie had released asset-backed securities called Bowie Bonds as far back as 1997. Those who bought these bonds earned an interest of 7.9% for a period of ten years on the royalty earned for the streaming of David Bowie’s music.
With social tokens, the same concept has been shifted to the blockchain. An example of this kind of token is Tech First podcast’s $SMRT coin, which gives holders access to a special Slack channel where they can directly interact with the podcast host. These tokens can also be exchanged for certain services. For instance, Grammy-winning music producer !llmind created his social token $BLAP, which people can send to !llmind in exchange for a custom beat, a video shoutout, online training courses or a collab session on Zoom with him.
Tokens by companies—community tokens
Social tokens don’t necessarily have to be created by individual creators, they can also be made by companies. For instance, crypto news platform CoinDesk created its own social token DESK launched earlier this year as a part of its event Consensus Festival 2022. The company was rewarding attendees at the festival for their engagement through DESK tokens. The attendees could then use these tokens to buy items at the event. CoinDesk says that its goal, in the long run, is to use these tokens as a feedback mechanism to directly engage with its readers.
A sub-category here is participation tokens wherein a user earns by participating in the development of a project. An example of participation tokens could be the Friends With Benefits (FWB) Token. FWB is a cryptocurrency-backed social club and a decentralized autonomous organization (DAO) that brings together artists, creators, thinkers and Web3 enthusiasts. Members buy FWB tokens to become a part of the community and then pay to access content. Realizing it’s hard to keep up with the massive amount of content posted on their Discord server, some members create a summarized version of those content which other members can pay to unlock. Here, FWB tokens act as a reward for their contribution to the growth of the community.
Social tokens vs non-fungible tokens (NFTs)
It is also important to note here that social tokens are not the same as NFTs. Even though NFTs also offer a new tokenized form of ownership, it is different from social tokens. NFTs are related to the ownership of digital creations whereas social tokens are more like a currency used to monetize services or experiences.
Now, you may argue that certain NFTs might also entitle the holder to certain services, for instance, a Flyfish Club NFT entitles you entry into Gary Vaynerchuk’s members-only private restaurant Flyfish Club. The difference is that while NFTs, as the name suggests are non-fungible, social tokens are fungible and can be exchanged for each other. Moreover, NFTs get their value from the special benefits or uniqueness they offer. However, the value of a social token is directly related to the creator, so buying a social token is almost like directly investing in the creator.
Benefits of social token
Social tokens can quite literally serve any function that their creator intended for them. As we discussed in the previous examples, they can be exchanged for special services and used to have a more active role in a community. While you might dismiss this by saying it’s the same as other forms of monetization, like Bowie Bonds or Patreon (a platform where creators and platforms can get paid for their services), what makes social tokens uniquely valuable is the fact that they are on the blockchain.
With social tokens, buyers can be sure that they are making a genuine purchase from the creators; for the creators, the tokens can help them establish a reliable, trustworthy brand. For media businesses, a shift away from advertising reliance will bring a new sense of autonomy. They would now be able to create content based on what matters to them and their audience as opposed to what is advertiser-friendly.
Should you create your own social tokens?
Nonetheless, just because social tokens can offer the abovementioned benefits doesn’t mean you should immediately dive headfirst into creating your own. Social tokens, much like any other kind of cryptocurrency, require a lot of work to maintain. Besides, if you promise something to your audience in exchange for the tokens, faltering on its delivery could ruin you. The pressures of constantly creating deliverables can be too much for an individual creator and adversely affect their mental health.
Moreover, the autonomy achieved from being ad-free can quickly become its own kind of censorship because community approval and disapproval is the only deciding factor in whether a company or creator can sustain itself. Make sure you consider both the pros and cons before you decide to create social coins for your business.
Also read:
- The Rise of the Creator Economy
- YouTube vs TikTok: Which Platform Pays Its Creators Better?
- The Metaverse Tax: Who Really Pays to Keep the Metaverse Up and Running?
- What Is NFT Renting?
- NFTs and How to Mint Them
Header image courtesy of Freepik
