As we approach SuperBowl LIV tomorrow (Go Chiefs!), I thought it was a good time to look back to one year ago today - Saturday Feb 2nd, 2019, a seminal moment in video gaming. Marshmello, a world-famous DJ, performed a live concert at Pleasant Park in Fortnite, and 10.7 million people showed up to watch it at the same time. A week later, there was evidence of longer term impact as Fortnite reported its best non-event concurrent viewership at 7.6 million.

As I pointed out a year ago, the following day, SuperBowl ratings bombed and the linear audience was reported at below 100 million for the first time in a decade. The silver lining was streaming — the Head of NBC Sports proudly called out the best Super Bowl streaming that we had ever seen, up 75% over 2018. CBS said it drove their streaming product All Access sign-ups by 85%, unique viewers were up more than 46%, and time spent was up more than 76%. Still, the grand total concurrent viewers was only 2.2 million versus 10.7 million people watching the Fortnite concert just one day earlier. Considering the average SuperBowl ad sells for ~$5 million, this got my attention.

The original title of this paper, Gaming as the new Social (Capital) Network, reflected an increasingly popular view, which I share — gaming worlds will naturally evolve as a new backdrop for living and collaborating, allowing them to capture at least some of the social networking market share from companies like Facebook and Instagram.

This implies a move away from the one-way drumbeat of the newsfeeds we’re familiar with today, and toward a bidirectional digital presence that mirrors in-person social interaction. The idea of fishing for likes to quantify one’s value as an influencer will soon be viewed as a quaint anachronism. The paper also examines behavior change around personal identity and status since the 1980s.

Since the Marshmello moment, Fortnite is still showing us the way

The Marshmello skin was available for $15 during the show. On October 30, 2019, an entire Fortnite account was listed for $346 on eBay because it included the Marshmello skin. Of course, the publisher Epic didn’t get a single dollar of that secondary sale. The opportunity for game developers to unlock in-game digital economies is massive because buying in-game items to express oneself does not require a change in consumer behavior. Legitimizing in-game secondary transactions and allowing for revenue splits between platforms and players is a powerful concept that is surely here to stay.

On December 12th, the in-game area Risky Reels premiered Star Wars: The Rise of Skywalker, including Geoff Keeley from The Game Awards and Director JJ Abrams. As the event ended with the Millenium Falcon taking off, a communal trunk opened, allowing players to grab lightsabers that they could then keep in their inventories. There was a live quiz asking players for their favorite color lightsaber, and purple won by a landslide. Will we see similar outsized pricing on purple lightsabers selling on eBay?

Source: eBay

Social Media Influencers — a Failed Experiment?

As time spent online continues to grow at the expense of analog gatherings, brands have a harder time finding us. There is a pot of profitability at the end of this rainbow as Google and Facebook have shown, but it has become more difficult for brands because modern audiences are wary of ‘in your face’ advertising. Plus, the focus on privacy protection by the current zeitgeist has left customers more suspicious of companies who make a lot of money by extracting information about us, sometimes without our consent, only to repackage and sell it.

For example, before YouTuber PewDiePie broke away from Google, many press reports, and even the entertainer himself, characterized his prisoner-like status to Google’s ad dollars. Marshmello’s experience, however, isn’t tethered to one of the big centralized tech companies in the same way, and the variety of his performance options limits any one company’s power over him.

Separately, social media influencers have fallen out of favor — their “identities” are increasingly inauthentic because they have been created using one direction “push” tactics, requiring a quickening treadmill of content, more and more influenced by the brands who pay them. Also, it has become increasingly common knowledge that there are ways to buy ‘vanity metrics’ — followers and likes. Instagram introduced last year a pilot to remove such metrics, which might have upset some celebrities. For brands, it is good news as it signals that metrics which require a deeper level of engagement, such as the number of comments and shares, will drive their spending.

Perhaps the next evolution of online identities and digital advertising will go even deeper to revolve around creative content collaboration and actual economic value exchange across marketplaces.

Instead of leaning back and allowing influencers and celebrities to define how we measure up in this world, modern consumers have all the necessary tools to become an active participant in creating their own identities. This might be accomplished through an interactive demonstration of our talents and skills, or by spending time with our chosen “tribe” exchanging and building upon ideas.

This new two-way context for social networking will provide a more authentic outlet for creativity because it will be collaborative, giving ideas and artistic expression more organic growth and real value. A confluence of more time spent online, more potential for collaborative building, and the ability to buy and sell assets peer to peer across marketplaces with fewer intermediaries will result in new online economies.

An example of a company that lives and breathes the next generation of collaboration and creativity is HitRecord, a new kind of production company. Founder Joseph Gordon-Levitt’s Twitter bio says it all — I direct HitRecord. It’s an internet thing for being creative. But its not just about getting attention. It’s about making things with other people. The company currently has a gathering of ~800,000 collaborators that they have grown organically since 2004.

Gordon-Levitt explains the difference between getting attention and paying attention and the idea that new technology, namely social media, has allowed more and more people to have this powerful feeling of getting attention.

“There’s an unintended consequence for anyone on the planet with an urge to be creative. I think that our creativity is becoming more and more a means to an end. And that end is to get attention. The more I go after that feeling of getting attention, the unhappier I am. The more I go after that powerful feeling of paying attention the happier I am.”

Similarly, gaming requires two-way behavior, which by definition requires a deeper level of engagement and perhaps surprisingly, is more authentic. Even though the woman on the left looks (obviously) more authentic, interacting with and challenging the person behind the avatar on the right could result in far more opportunities for engagement than a static photo in a scrolling social media feed slapped with a never ending list of filters and enhancements.

Source: Top Shop, Fortnite

Creators and Consumers Getting Closer to the Cash Register

Creators. As mentioned in prior (more technical) posts, digital asset technologies hold the power to break up the gatekeepers and distribute their value hold across a larger number of content creators. Furthermore, using ‘smart contracts’, we can now embed code into the digital assets and improve upon offline systems of barter and trade. In many forms of art today, the creator benefits the first time their product is sold. Now, digital asset technologies can support a built-in royalty stream, allowing creators to be paid a small cut with each change of ownership. This is an exciting world full of a lot more creativity and entrepreneurship because incentives are aligned to reward creators for their contributions.

Consumers. Billions are spent on advertising to push people toward a cash register. With the exception of necessities, advertisers are typically selling identity of one form or another. While it is easy to understand the identity impact of carrying a Louis Vuitton bag, it is not as easy to be aware of how the social media wave of the last 15+ years has impacted our individual identities. This is partly due to obvious debacles such as Cambridge Analytica, in which false information changed our view of reality and likely influenced our elections. It is also due to more subtle trickery, based on the fact that we are seeing ‘real’ people and backdrops, which might not be real at all.

Imagine a new and improved online world in which we can purchase items, like a physical Louis Vuitton bag, which are provably scarce, like Bitcoin or tokenized Ethereum assets are today. This scarcity confers true ownership and ultimately identity and status to the holder. Like in the real world, the future online world will allow us to create identity through engaging in two-way behavior with others and through purchasing things like cars, houses and clothing to show who we are. In other words, our online identity and self worth will be built in a way that is more akin to our offline identities.

Behavioral Change around Identity Through the Generations Hint: Mobility and Income Inequality

The 1980s and 1990s

The suburban environment was booming. Having grown up in a suburb of Kansas City, I experienced first hand the Boomerish ways in which social capital was built, many of which continue to exist today.

If one can imagine a bank account that has the ability to take social capital deposits, such deposits would occur through our experience of interacting with others and the display of our physical things and talents.

One’s house and the clothes one wears to work or school are the most obvious symbols of identity. The car pulling out of the driveway was almost the perfect mechanism because as a relatively big purchase, it gave people the ability to take something almost as important as the home we live in and allowed us to move it around to “take deposits” from more people than just those who lived in our neighborhood.

And how did people increase their exposure beyond driving distance? Dinner parties! Inside the house, one finds a plethora of social capital-yielding items:-

the china on the table

the furniture

the wallpaper

even the dog — in New England, a chocolate lab was the best choice.

Other places we would find ATMs for social capital — work, vacation destinations, churches, synagogues, and other places of worship. These religious places of worship were a natural extension of our social circles, where people built community and a social backdrop for new relationships.

Our world was full of analog assets which defined our status. Since there was a finite number of people in our circles and a finite geography which we occupied on a daily basis, we could optimize our figurative social capital accounts by choosing what assets to accumulate and who to show them off to.

All of this seems out of date today!

The 2000s

The Millennial generation happened to start graduating from college in exactly the same year that Facebook started, 2003. It wasn’t so obvious at the time, but this generation would struggle with finding appropriate employment, end up in more debt and earn less income than the two prior generations. In turn, the launch of the iPhone four years later set off a mobile technology boom that gave rise to new narratives on social capital, the most common one being that millennials “cared more about experiences than things.”

And because one could now take pictures of these experiences and distribute them widely and instantly, the photos created status. Instagram arrived on the scene three years later in 2010 and I would argue that social media was in the right place at the right time to enable identity and status to shift online. Taking selfies in Machu Pichu could provide the same jolt to our identity as previous generation’s china and furniture. Millennials could be heard saying that they didn’t want their parents’ big house with all the stuff in it, but would instead prefer to travel.

Truly digital natives, they had a serious advantage over everyone else in the room — an ability to use technology to work more efficiently, save more money and ultimately lead a lighter life, even with the heavy mound of debt.

As the millennial generation progressed through the credit crisis, folks felt generally more prone to entrepreneurship because, well, why not? Fortune 500 companies, Wall Street, and the government had shown their weaknesses, while new networks like LinkedIn and Instagram had begun glamourizing the entrepreneurial spirit.

Importantly, while the status symbols looked completely different, the innate desire to express oneself and to garner social capital was unchanged from previous generations.

The concurrent rise of social networks and mobile technology presented us with a flywheel for social capital, as ownership took a backseat to appearances and constant connection turned smartphones into literal status ATMs.

Every positive post or stream that brought in more people set up a positive feedback loop. Buying a pair of Yeezees could boost your social status if they could be posted online. Renting, not owning, enabled more displays. Status growth is quantifiable so one immediately knows what works.

Until this point, relationships were limited by the touted “Dunbar’s Number” which concluded that it was only possible to maintain 150 close friends or acquaintances. Now, social networks allowed one to completely bypass that restriction. The difference between friends and followers is that your number of followers is not limited by brain chemistry — it’s a one-way street for attention. You aren’t required to reciprocate anything to social media “friends.” So while small scale analog assets are limited to the people in your circle and by the item’s physical space constraints, in the digital world, the number of viewers in your “circle” is effectively infinite.

Enter the downsized chocolate lab — the French bulldog.

Enter environmentally and socially conscious ‘low footprint’ living — tiny houses.

Enter an unlimited closet in the cloud with a new outfit coming every single day if needed.

The ephemeral nature of social media and the infinite newsfeed has led to a demand for high velocity, highly liquid forms of social capital, a phenomenon that has been incorrectly labeled by many as a generational shift away from consumption. Why own clothes when you can trade and rent entire wardrobes; why purchase a status symbol you can only share once when a trip can provide content for multiple posts?

Still, while the number of friends in our “circle” was effectively infinite, status still depended on the physical world, or at least digital representations of the physical world. What if we didn’t even need to go to Machu Pichu to get that shot hanging off the mountain? Or keep an account at Rent the Runway to make sure we have an ever changing wardrobe for the Gram?

The Future

Source: Riot Games

The future will allow for real interaction and collaboration among friends and colleagues, and it will allow for self expression of our identities. We may be creating artistic “products” like songs, paintings or books or creating our look without the physical limitations of stuff. We don’t need to go to H&M or Topshop anymore. Even better than renting physical items from Rent the Runway, we’ll be able to buy digital assets online, and instead of returning them to the store, we might trade with a friend or sell them for more items. Keeping a fresh look on a hub in Fortnite is simply the equivalent to keeping up your house in the suburbs.

Digital assets, either created or bought, are the new fuel that enable identity creation and status gains — How does this work?

The consensus value of any one digital asset will be determined by the network, with each creator as a node.

Decorative digital assets go further than clothing does in real life because our avatars have no intrinsic value outside of the personas we create with skins and accomplishments.

Blockchain protocols provide proven methods by which digital assets and achievements can be tracked across platforms

Provable scarcity will rid all doubt surrounding an individual’s ownership status by combating counterfeits and authenticating their trading and creation histories

In Conclusion

Facebook and Instagram as social media platforms have limitations — they are digital representations of physical lives so there is a limit to the value that they can offer. They require individuals to “push” the framework for identity to the world, which becomes less and less authentic the more that they themselves are influenced by brands.

Social networks predicated on collaboration require two way behavior. This, by definition, results in much richer engagement, or ‘time spent’, than scrolling a social media feed. A video game is one example of a two way venue which removes the physical representation of what you actually look like, but ironically creates more authenticity because communication and creation are collaborative.

Finally, digital assets, supported by blockchain technology, will bring both creators and consumers closer to the cash register. The ability to buy and sell assets using distributed, consensus driven, peer to peer tech, will result in new online economies. The assets in these economies will have true ownership and thus, will be exchanged in a legitimate way with fewer intermediaries for real value — there is nothing more ‘authentic’ than that!