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Thought for the week 💭
DAOs and Collaborative Content
NFTs have demonstrated that Ethereum can be used to unlock a significant amount of untapped value within the content creation market. While the current hype may be overshadowed by flagrant speculation - I believe that the long-term value of NFTs is clear. Through better incentivisation and economic distributions, NFTs will significantly benefit innovation in the digital content market.
I believe that DAOs - Decentralised Autonomous Organisations - are equally interesting in this regard.
Through improved incentivisation and novel organisational structures, DAOs will enable a new age of collaborative content creation. This will combine the democratic access of the UGC/Web2 era with the large-scale content collaborations of traditional mass media.
What are DAOs?
DAOs are organisations or companies that are operated by code instead of people. Specifically, DAO’s use an interconnected web of smart contracts (usually on the Ethereum blockchain) to automate all the essential and non-essential tasks of the organisation. These smart contracts are essentially pre-determined, permanent rules. As such, DAO’s have the ability to function autonomously, without the need for a central authority.
“Imagine a vending machine that not only takes money from you and gives you a snack in return but also uses that money to automatically re-order the goods. This machine also orders cleaning services and pays its rent all by itself. Moreover, as you put money into that machine, you and its other users have a say in what snacks it will order and how often should it be cleaned. It has no managers, all of those processes were pre-written into code.”
- Coin Telegraph
While traditional organisations work based on a hierarchical structure, DAOs rely instead on self-governance and collective decision-making. They use economic mechanisms (based on rewarding investors and collaborators with tokens) to align the interests of the organisation with the interests of its members.
Once a DAO is operational, all decisions are made by reaching a consensus amongst the community. Everyone who bought a stake or contributed meaningfully to a DAO can make proposals regarding its future by voting. In order to perform any action, the majority needs to agree on doing so. The percentage required to reach that majority can vary depending on a DAO and is specified within its code.
As such, relative to traditional organisational structures, DAOs are more (i) transparent; (ii) economically distributive and (iii) collaborative/democratic.
The first attempt of a DAO (aptly named “The DAO”) in 2016 was a chronic failure. A technical vulnerability led to $60m of Ethereum being (temporarily) stolen. While this was a big hit to the concept of DAOs, it did not kill the vision. A number of successful DAOs operate today - like MakerDAO, Moloch DAO, Aragon, Colony and the concept of DAOs has gained increasing attention over the past 12 months.
How do DAOs relate to media?
There are countless ways in which DAOs might be used in the future. The most commonly cited examples relate to finance (DeFi) where the use cases are more obvious (the original DAO was intended to replace the venture capital model). This is where the majority of the DAO focus has been to date.
However, I believe that DAOs could have a significant impact on the media sector too. Since DAOs are permissionless, anyone can become a core contributor to a DAO. Meanwhile, DAO’s enable collective ownership and decision making. They also reward contributions to the ecosystem. Because of these characteristics, DAOs are ideal structures for incentivising collaboration. When applied to media/content creation sector, I believe this will produce a number of innovative outcomes.
To see how it is helpful to examine the various ‘eras’ of media.
1. Mass media
First came ‘mass media’ - newspapers, magazines, radio and television. In mass media - a handful of centralised organisations control content creation. A select few managers within these organisations make the majority of governance decisions. The content is generally collaborative - consisting of several stakeholders working together to produce the content (e.g. actors, set designers, composers). However, to become a ‘contributor’ to the content one must be ‘selected’ (employed) by the managers. Contributors are compensated directly for their work. However, compensation structures can be opaque, highly variable and potentially misaligned with the drivers of the organisation’s success. It is rare for the majority of contributors to receive meaningful benefits from the upside of the content that they were part of creating.
Content decisions → centralised
Content creation → collaborative
Governance decisions → centralised
Financial upside → [shareholders]
2. Web 2.0
The web democratised content distribution - ushering in the era of UGC. The early years of the web were based on open protocols that were decentralised and controlled by the internet community at large. However, platforms like Facebook and YouTube built software and services that rapidly outpaced the capabilities of these open protocols. Their dominance grew, and these ‘walled gardens’ quickly monopolised the content landscape. Unlike mass media, anyone was free to create and publish content on these platforms. However, like mass media, the governance decisions of these platforms is highly centralised. Crucial decisions such as how content is ranked and filtered are made behind closed doors by a handful of executives - with little choice or transparency given to users.
The best performing content creators are rewarded - either by receiving a revenue share of the advertising dollars that they generate for the platform or via third-party sponsorships. However, the vast majority of creators receive no compensation for their contributions.
Interestingly, the majority of content on these platforms is created by individuals (as opposed to collaboratively). The economic structures of these platforms are such that they reward individual creation - as opposed to collaboration.
Content decisions → de-centralised
Content creation → individual
Governance decisions → centralised
Financial beneficiaries → [shareholders, top creators]
3. Web3 / Ownership economy
DAOs + NFTs will be a key part of the next era for media creation and distribution.
Imagine if the monetary upside of YouTube’s platform was shared more democratically based on a users’ contribution to the platform? In this way, even the least popular creators would earn a financial reward for participating in the ecosystem in some way. Additionally, other stakeholders would also benefit - through moderating content, for example. Smart contracts could be used to reward currently non-existent activities such as screenwriting or editing. The rewards would be enforced by immutable smart contracts that would ensure the successful cooperation of total strangers. In such a way, this would enable many stakeholders to collaborate on the content they create.
Similarly, imagine a UGC/sandbox game or virtual world DAO (e.g. Minecraft) which has a pre-determined set of rules for how to reward users for their additions to the world. This would incentivise users to contribute meaningfully to these ecosystems - with the knowledge that they will be adequately rewarded and that the platforms will not renege on their promises in the future.
"If the "real world" economy is run by centralized authorities who can change and adapt monetary policy on a whim outside public opinion or scrutiny, current video game economies are a microcosm of this behavior." - Garrison Breckenridge
DAOs can be used within games and virtual worlds to facilitate all sorts of other collective interactions… for example, p2p lending of virtual goods.
In this model:
Content decisions → de-centralised
Content creation → individual + collaborative
Governance decisions → de-centralised
Financial beneficiaries → [all stakeholders]
I’m excited by the inevitable experimentation in DAOs that we are likely to see over the coming years (/months!)
DAOs have their shortcomings and collective decision making is certainly not applicable to all organisational use cases. However, by restructuring existing business models and incentive structures, DAOs are likely to cultivate innovative new content types.
Thinking further ahead, DAOs will be essential to the successful operation of a Metaverse (a topic for another day, perhaps).
Will we see the same explosion of interest in DAOs as NFTs?
News from this week 🗞
The online social platform Rec Room has raised $100 million in new funding, at a valuation of $1.25 billion. At its founding in 2016, Rec Room was intended for virtual reality platforms, but it has since expanded to iOS, PlayStation 4, Xbox One, with an Android app due later this year. At present, less than half of its users are in VR. A report in The Wall Street Journal noted a "six-fold" year-on-year revenue increase in 2020, with monthly active users reaching one million people. With its combination of socialising, user-generated content, and gameplay, Rec Room has key similarities to Roblox, which went public earlier this month. Link
Discord is going through a sales process now that could result in a purchase of the communications and chat platform for much more than $10 billion. According to GamesBeat, the potential buyer is Microsoft. The deal, if it comes together, would represent a big jump from the $7 billion valuation that Discord was assigned by investors when it last raised funding in the amount of $140 million just three months ago. Link
Epic Games is finalising the terms of a $1 billion round of funding that could value it at $28 billion, according to Sky News. Just seven months ago, Epic closed a round of capital from investors, including Sony and Baillie Gifford, at a valuation of $17.3 billion. Link
A team of industry veterans has united to create HiDef, a new game studio in San Diego, California, with $9 million in funding to build a metaverse game. The company is making a “genre-defining game” for the metaverse. The goal is to make interactive experiences that transcend traditional gaming boundaries and demographics. The founders include CEO Anthony Castoro, Jace Hall, ex-NBA player Rick Fox, and social impact expert David Washington. Link
Podsights (SG Portfolio) - atool that helps brands and agencies measure and scale their podcast advertising, has raised $4 million in seed funding. Link
Augmented Reality pioneer Blippar – which has had a tortuous history after early investors pulled out and the company had to scramble for new backers – has now closed a $5 million funding round, after 18 months of re-positioning as a B2B company in the AR space. Its two routes to market are, firstly, via its Blippbuilder SAAS platform, which enables agencies, brands and AR content creators to create communications and campaigns. It also does bespoke work with an in-house team “Studio B”. Link
Short video stories platform Firework has raised $55 million in Series A funding. Firework’s business model revolves around creating and publishing short video content in the form of ‘stories’ on brand websites to increase their engagement with users. The company aims to further use short video content for brand storytelling and engagement over text and static imagery. The video content is made by the brands themselves, by content creators and users of the Firework platform. Link
OpenReel, which developed the Remote Video Creation platform, has announced that it has received $19 million in Series A funding. The OpenReel “remote camera” software is designed to allow a remote director to control a webcam or mobile device and film in up to 4K quality. The software allows as many as four people to record and four people viewing a shoot in real time. Footage is stored locally and automatically uploaded after the shoot. Link
Facebook is building an Instagram for kids under the age of 13. Link
Dataminr has closed on $475 million in new funding. Dataminr ingests information from a mix of 100,000 public data sources, and then based on that provides customers real-time insights into ongoing events and new developments. Dataminr has confirmed that this Series F values the company at $4.1 billion as it gears up for an IPO in 2023. Link
NFT marketplace OpenSea raises $23 million from a16z. OpenSea has been one of a handful of NFT marketplaces to explode in popularity in recent weeks as collectors wade into the trading of non-fungible tokens on the blockchain. While new startups have been popping up everyday, platforms that launched in crypto’s earlier times are receiving rampant attention from investors who see this wave of excitement for cryptocurrencies and tokens as much different than the ones that preceded it. Link
Contents has raised $6m. The tech marketing company uses AI to analyse data and creates native level multilingual content attractive to users and search engines.The platform has also implemented tools for trend discovery for publishers and e-commerce companies. Link
Public App, a location-based social network that connects individuals to people in their vicinity, has raised $41 million in a new round, just six months after securing $35 million. The new social network has amassed over 50 million users already, and he aims to expand it outside the country eventually. Link
Interesting data from this week 📈
Streaming service subscriber comparison
Source: Visual Capitalist