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By Ben Zimmerman, president of SmartMedia Technologies.
Many consider Web3 the next chapter of the internet. Web3 represents a seismic shift from centralized systems to decentralized systems online. Its goal is to provide individuals control over their personal data. Dubbed the third generation of the internet, Web 3.0 is predated by versions 1.0 and 2.0 of the 1990s and early 2000s, respectively. So to frame where we’re at—and where we’re heading—let’s understand how we got here.
Understanding Web 1.0 And 2.0
Web 1.0, also called the “Static Web,” refers to the early days of the internet when it was primarily used to access information and resources. For users, this meant “surfing” websites generally consisting of read-only text and images. Web 1.0 had limited interactivity and all but lacked dynamic content. Yahoo GeoCities hosted a massive network of private sites starting in the early 1990s until its demise in 2019. These one-dimensional web pages may look archaic now, but they helped lay the foundation for what was to come.
If Web 1.0 laid the groundwork for the internet, Web 2.0 marked its integration into our daily lives. As the second generation of the internet, Web2 is characterized by social networking, user-generated content and cloud computing. Also called the “Social Web,” Web 2.0 was initially driven by interactivity and collaboration. For many of us, Web 2.0 creates the social fabric of the internet as we know it today. Users can call a ride on Uber, order lunch on Doordash and like a video on Instagram, all within the same minute.
Many, however, believe the internet should be more than social media, which leads us to Web3. But instead of a true heir apparent, Web3 looks to uproot some shortcomings of Web 2.0. As Web 2.0 has become increasingly commoditized, a few large companies control much of the power. In 2021, Google was projected to capture 28.6% of the global digital advertising market, with Facebook at 23.8% and Amazon at 11.6%, according to eMarketer. That’s more than 60% of U.S. ad spending. Instead of centralization, Web3 promises a more open and democratic future.
The Rise Of Commercial Web3 Technology
Web3 technology is rooted in decentralized technologies like blockchain and peer-to-peer networks, which distribute data across a network of nodes rather than storing them in a central location. The technology has already started to create new opportunities for individuals and businesses by way of decentralized digital assets. A torchbearer for Web3 technology, non-fungible tokens (NFTs), saw a meteoric rise in early 2021. As the price of cryptocurrency surged and decentralized finance (DeFi) projects became more mainstream, there was a spike in interest in digital collectibles, virtual real estate and other forms of NFT-based assets.
At their core, NFTs represent a new type of digital ownership. These digital assets are stored on a blockchain—a decentralized, distributed ledger that provides a secure, transparent way to store and transfer assets. When created and stored safely, NFTs can put power back in the hands of the people.
While NFTs have gained traction, there’s no standardized approach to creating, selling or managing them. There have been instances where NFTs were created without the consent or knowledge of the original creators, underscoring the confusion and complexities of Web3 copyright law. A 2022 Verge article highlights examples of NFT copyright violations. As the article asks, what does ownership of something on the blockchain look like when it’s just a bit of code that can be copied?
While stringent regulation in the traditional sense may be antithetical to the ethos of blockchain, there are measures users can take. For instance, use reputable platforms to ensure tokens are created properly and securely and digital assets are owned by the creator or properly licensed. Creators and consumers can also take measures to protect their NFT codes with open-source licenses, encryption or copyright registration.
Web 2.0 relied on user data for advertising and monetization, but Web3 does still have commercial potential. Advertising on Web3 requires an understanding of decentralized technologies but also offers businesses a new way to reach audiences. This could help increase data privacy and reduce many of the advertising fees and dominance associated with traditional, centralized advertising platforms. In their place, blockchain technology and decentralized apps may help create a more transparent, secure online environment for consumers and businesses. Here are a few of the potential outcomes.
• More targeted advertising: Decentralized technology could help businesses target specific audiences more accurately. For example, blockchain-based advertising platforms can deploy smart contracts to ensure ads are displayed to users who meet certain criteria (e.g., age, interests, location or purchasing history).
• Increased trust: Instead of relying on centralized servers and companies to store and access user data, decentralized platforms can leverage blockchain technology to store data more securely, giving users more control over their data—and a stronger sense of trust.
• Better ROI: Decentralized technology may enable better ad targeting by leveraging user data to get a true read on ad placements, clicks and other metrics. It also eliminates specific intermediaries found in the traditional ad world, reducing transaction fees and lowering ad costs in the process.
It’s not just businesses’ bottom lines that may benefit from Web3. As we witnessed with the NFT world a few years back, advertisers are already using the technology to push boundaries. For example, Taco Bell sold taco-themed NFTs on a blockchain-based platform. Gucci rolled out an NFT series called Gucci Grail, which offered fans an opportunity to receive a unique NFT from Gucci’s creative director Alessandro Michele. Bugatti entered the Web3 game by merging the physical and digital worlds with a “phygital” marketplace offering consumers the option to purchase NFTs to access a virtual showroom.
Web3 technology, including blockchain, has the potential to create a more open, democratized advertising ecosystem. By reducing the dependency issues advertisers have on big tech, businesses and consumers alike could have greater control over their data and identity. As this new environment continues to grow, it’s reasonable to expect cutting-edge campaigns and technology along the way.