Why Some Brands Are Considering Social Tokens to Monetize Engagement

A token of a brand’s appreciation can take many forms. But very few T-shirts, battery chargers, beer cozies and other swag festooned with company logos hold out the promise of being traded for services. A branded mug can't entice someone to hold a spot in a chat room or be traded to gain access to custom experiences like an industry discussion. Unless they're the kind of rare artifact that appears on Antiques Roadshow, these items can't be liquidated for others to reinvest them. Swag is not technologically advanced. But social tokens offer a credible promise to all those things—to varying degrees. And by tapping into the increased acceptance and understanding of virtual currencies, brands can take advantage of social tokens in ways that uniquely heighten awareness, engagement and affinity. Rally, a tech company that bills itself as the “social token platform” for personalized cryptocurrencies, is premised on the idea of allowing individuals and entities to mint, issue, sell and trade virtual coins in their names. These branded cryptocoins even have a “collectibles” component akin to merchandise purchased by fans. Minting loyalty Although these are actual cryptocurrencies and there is a financial trading aspect to it, most users consider that secondary to accruing loyalty, said Mahesh Vellanki, Rally’s co-founder and head of growth. “Rally is as a powerful toolset for creators, but also brands,” said Vellanki, who was previously a principal at venture capital firm Redpoint Ventures. By having its own crytpocurrency, a startup or growing entity can move away from thinking about monetization that relies on direct cash payments via PayPal or Cash App. Instead, a supporter can donate to a creator by purchasing and trading social tokens. “A Rally creator of social tokens can circulate a supply of virtual coins and develop an economy around themselves and what they’re doing,” Vellanki said. “There are multiple ways for them to monetize their brand and share value with their community as they’re building it. It's just a different way to think about community building. And it’s a different and better way to monetize a brand or individual’s value to their followers and community.” Rally, which launched in 2017, is currently able to power the adoption of cryptocurrency across more than 50 million “coin creators” globally. At the vanguard of Rally’s “tokenized economy” are creators such as Clubhouse star Bomani X, Twitch streamer Alliestrasza, global esports organization Gen.G Esports and Grammy winner Portugal the Man, which views it as an update of the old rockstar fan club, Lowering the barriers to audience development and rewards represented an instant appeal to David Berkowitz, founder of marketing tech consultancy Serial Marketer. In February, he began issuing his own CMO Coins through Rally’s platform to promote the value of his work and insights among marketing professionals. Brands' virtual value Cryptocurrency and blockchain have become increasingly understood in the mainstream over the past few years. Even the seemingly abstruse concept of non-fungible tokens (NFTs) is capturing greater attention in everything from the art market to celebrity culture. Cryptocurrency’s value as a promotional and financial vehicle has intrigued Berkowitz since Dogecoin was introduced in 2013 as something of a joke (it has something to do with merging the leading cryptocurrency, Bitcoin, with a dog meme). Berkowitz has been advocating for the use of blockchain’s digital ledger to pay and reward consumers for content they’ve created and interacted with as far back as 2017. Rally’s social tokens appear to be a more direct and practical path for that use case now. Berkowitz was encouraged to explore the company’s branded coins by tech analyst Jeremiah Owyang. He told Berkowitz that social coins used as loyalty rewards might be a good way to accrue business referrals and increase his own following. “Producing CMO Coins was a way to tap into Rally’s ‘creator community’ and drive referrals to Serial Marketer and my community,” Berkowitz said. An example of a Rally portfolio. As of March 1, Berkowitz’s CMO Coins were valued at $0.52 with 122 supporters, 128 transactions from 87,900 total coins and $13,000 in total support volume. But those numbers are largely meaningless from a monetary standpoint, at least for now. The true value is tied directly to the novel and tangible marketing within a community that has already accepted the value of the token's creator and the access those cryptocoins provide. Audience exclusivity To Peter Shankman, entrepreneur and founder of online public relations service Help a Reporter Out (HARO), the main premise of Rally’s social tokens is the ability to create an “air of exclusivity within my audience.” For instance, Shankman maintains an email list of roughly 60,000 names. When he was running HARO, he would often net daily email open rates of 94%. These days, his email open rates are in the neighborhood of 30%—decent, but nowhere near what he used to have. His Rally-based Shank coins could be a good incentive to spur more engagement via email, where he discusses topics that range from customer experience to ADHD. “The value proposition to my audience is the level of access they can get through Shank coins,” Shankman said. “In this case, about 300 people requested and got my social tokens. Now, Shank coin holders can use that to receive a one-to-one or one-to-many invite to a discussion about the topics I cover. It can be whatever I want it to be.” The applications are fairly universal. If Shankman were a musician, he could see giving private concerts streamed only for coin holders. Brands before bucks For Shankman, Berkowitz and other early minters, the initial goals are brand building, not wealth building. In the social economy that Rally’s creator coins tap into, social tokens represent a new form of distributing elite perks. As a member of United Airlines' invitation-only Global Services mileage benefits program, Shankman gets upgrades on booking and other services unavailable to most other passengers. If United distributed social tokens, Shankman’s benefits might rise to an otherwise unattainable rewards level. “What if United had social tokens that were added to my account based on how much I fly?” Shankman posited. “Those coins could be spent on anything from helicopter rides to the airport to meet-and-greet with the pilots to a private spot in the United Club lounge. It’s an extra way to reward your most valuable customers.” Buy and hold strategy Options for brand building and rewarding loyalty haven’t evolved greatly during the rise of social media. Likes, shares and retweets provide engagement but are episodic and fleeting. They don’t tend to lock devotees’ engagement in for the long term. Shankman’s advice is: “Don't get into social tokens because you think you're going to make a killing on the side. It's really just about this extra level of connection with your community.” In any case, the ability for most creators to monetize their coins right away is naturally limited, because at the outset, there is little to no value backing the coins. The token supply—and the collateral backing the coins—only increases when purchases are made by fans. The number of tokens that can be minted is technically unlimited, Vellanki noted. But it naturally plateaus due to the parameters of the “token bonding curve,” which is meant to guard against unchecked speculation. In addition, Rally has implemented other safeguards and trading restrictions designed to avoid typical market manipulations. “That's why we always say that Creator Coins are currencies built for real usage, not financial securities,” Vellanki said. “When we approached the crypto space a couple years ago, we were against a lot of what was happening in the space: the initial coin offerings (ICOs), the scams, the frauds. The speculative nature was something we set out to avoid.” Rally isn’t a stock market, Vellanki hastened to add. There’s no open order book to make bids. All the coins are backed by Rally tokens (or, more specifically, “$RLY tokens,” as Rally is the project and $RLY is the name of the ERC-20 Ethereum cryptocurrency token standard). The algorithm effectively dictates only the price and goes up or down based on supply and demand. And while the supply is not set, Rally is no place for day trading, he said. “There are network level restrictions in place so a creator and users can only sell or transfer a certain amount of coins on a given day,” Vellanki said. “This is not meant to cater to a speculative crowd. The rewards on Rally are meant for the long term.”