Multicoin Capital: From UGC to UGP, Web3 Consumer Brands and Co-Creation

Author: ALEKSIJA VUJICIC

Compiled by: Shenchao TechFlow

Many argue that co-creation will ultimately lead to the democratization of the creator class, redefine fan culture, and turn fans into creators. However, this discussion overlooks the impact of co-creation on brands, which may be greater than the impact on the co-creators themselves.

In the past, brands created products, more generally, created culture, and promoted it through centralized, top-down media. Social media has disrupted the media of communication, naturally disrupting the dissemination of culture, which in turn sparked the first wave of large-scale co-creation between brands and their communities.

Just as consumers could first showcase products on social media to demonstrate their engagement with specific cultures, they could also shape that culture by sharing feedback, ideas, and suggestions, thereby shaping the brands that create them. Thus, brands influenced consumers, and consumers in turn influenced brands, initiating a cycle of co-creation.

However, despite the value consumers contribute to the co-creation process, they receive no economic value in return; brands reap 100% of the economic benefits. In short, successful Web2 brands are built on communities and consume the entire cake.

Successful Web3 consumer brands will build alongside their communities, formalize the co-creation process, and in turn reward their communities—growing together and sharing the cake.

How Brand Culture is (Co)Created

Starbucks is clearly more than just a brand. It is a "lifestyle of ultimate leisure," a semi-public facility, and a "third place" in society. Simply put, Starbucks is a culture. But once, it was just… coffee.

In defining "how brands are born," Marc de Swaan Aron argues that the 20th century brought standardization of quality products to consumers, "requiring companies to find new ways to differentiate themselves from competitors"—thus, modern marketing was born. Marketers shifted focus from the functional value of products to differentiating themselves from competitors by creating emotional connections with consumers. Brands then began to associate with subcultures and projected these onto their consumers—in other words: brand culture is created from the top down.

"In the CPSE model, companies brand products. They point to subcultures to justify the existence of products and use data marketing to categorize people into demographics similar to the starting pack. Subcultures become consumer goods subcultures, composed of products. In the new cultural economy, culture is product. It consists of practices, thoughts, and discourses. Products are auxiliary, supportive, but not primary." - Toby Shorin, Life After Lifestyle

As religious beliefs in the Western world decline, consumers begin to seek meaning, identity, and belonging elsewhere—such as from influencers or, more importantly, from brands. For brands, merely associating with a subculture is no longer enough; brands realize they need to become culture itself. Meanwhile, as the internet drives production and distribution costs toward zero, the only scarce resource becomes consumer attention, making community-centric marketing more valuable than ever.

These trends have profound implications for brands. Communities are becoming increasingly important, and brands cannot create culture without consumers, making brand culture a result of co-creation.

"People co-create their identities with brands, just as they do with religions, communities, and other systems of meaning. This constructivist view is incompatible with popular forms of postmodern critique, but it also opens up new critical opportunities. In this era we live in, brands not only reflect our values but also act upon them. Trust in companies is no longer based on visual signals of authenticity but can only be based on proof of work." - Toby Shorin, Life After Lifestyle

Culture has always been disseminated through content. When information is broadcast through top-down media (such as radio, television, newspapers, etc.), culture is also disseminated in a top-down manner. The advent of social media has changed this situation. On platforms like Instagram and TikTok, content creation has become democratized and decentralized—so has culture. Therefore, when brands recognize the need to co-create culture with their communities, they turn to social media and UGC to achieve this.

Brands do not simply encourage consumers to post photos wearing their branded apparel; they solicit immediate feedback, ideas, requests, and more from their communities. Accordingly, communities begin to shift from co-creating content to co-creating products.

Glossier has also defined the direct-to-consumer (DTC) era with this approach, as feedback from their Slack community prompted them to use pumps instead of jars, package mineral sunscreen, and more. Since then, community co-creation has become standard practice in modern marketing manuals, applied by brands across various industries (such as Samsung, Supergoop, Chipotle, IKEA, LEGO, Unilever, etc.)—in fact, there is already a book dedicated to this topic.

However, an important question remains: What do the inventors of Hazelnut Macchiato get after submitting their ideas to Starbucks?

Towards User-Generated Products (UGP)

Co-creation has a belonging issue, and Web3 addresses this problem.

Borrowing an idea from Marty Bell, founder of Vacation and Poolsuite, future brands will resemble "open companies," building products that the community wants together with the community. He said:

"For years, I thought the right thing to do with the brands and businesses I built was to stay out of the way, work quietly, and then launch a finished product, saying, 'Here’s our new product…' What I hope NFTs will do from now on is involve people in this creative process and build with us.

So, I think all of this should be public, not closed-door. We might have 20 ideas about what we want to do next. We’re equally excited about all of them, but it doesn’t matter to us. What matters most is what excites our community the most."

Web3 promotes co-creation through two mechanisms (thus realizing the future of "open companies"): facilitating more effective human coordination and improving the issue of belonging.

Human Coordination: In any heterogeneous organization (most of Web3), communities face the challenge of how to make collective decisions. This is especially true in co-creation, which in turn requires significant and precise human coordination. Tokens are a useful coordination tool that allows brands to prove membership, validate credentials, authorize permissions, enable voting mechanisms, and more.

Belonging: As we have discussed for most of this article, brands have been co-creating with their consumers—the issue lies in the lack of social and financial recognition for these contributors. However, quoting Sari Azout in her article on Attribution +:

"The true power of Web3 technology lies in reshaping how value is created, shared, and distributed on the internet, making the distribution of value as easy as sending and receiving emails. This is a foundational technological unlock that enables creators on the internet to capture more of the value they create."

Tokens allow brands not only to attribute social recognition through tracking origins and the points of creative inception but also to transfer financial value to those who own these ideas.

We see entrepreneurs, developers, and brand builders leveraging new collaborative strategies to build a new class of brands that increase engagement, sales, loyalty, and retention, aligning their value with that of the community. Co-creation can be divided into three categories: individual creation, group creation, and community creation.

Individual Creation: In the future, brands will release blank canvas digital products (variable NFTs) as "templates," designed for consumers to remix according to their own tastes. Imagine a white Porsche car or Air Jordan shoes that consumers can design entirely according to their unique vision.

Each consumer will own a uniquely designed digital item and have the opportunity to create a 1:1 physical replica. Additionally, the community may vote on a collection of ideas to select a design, which will then be offered to the mass market.

Good examples include the Nike x RTFKT "Your Force One" project, where holders of CloneX can design their own Air Force 1s, with the chance to see them produced in reality. Similarly, the latest Porsche NFT allows holders to design their dream Porsche, with the community voting on their favorite projects, ultimately seeing that car speeding down the highway.

Group Creation: A group can consist of any number of people, ideally between 5-50, with the common goal of producing a product or a limited number of products. This may remind one of Yancey Strickler's concept of MetaLabel, which he defines as "a group of people pursuing a common goal using a shared identity, focusing on public releases to showcase their worldview." In this case, the queue collaborates with the brand to pursue product development.

The digital fashion co-creation platform Effekt recently launched their first group creation project, paving the way for the field. 20 global community members gathered in a Discord chat to help co-create the brand's first in-house fashion item. Over the course of weeks, the queue collaboratively curated mood boards and inspirations, proposed design suggestions, and facilitated the design process through voting, written and image proposals, and other feedback systems.

While the queue provided all suggestions and feedback, the final product was produced by Effekt, allowing them to engage the community while still retaining some control over the outcome. The digitally co-created fashion items will be sold as limited edition NFTs, with proceeds distributed to Effekt and the co-creators.

Shifting from real-world examples to hypothetical ones, we can imagine a brand like Rebecca Minkoff recruiting a small group of about 20 consumers to co-create a capsule collection. Members might be selected based on their past credentials—whether by owning Access NFTs, purchase history, winning design competitions, etc.

Once selected, members can gather in a small chat room to provide design suggestions, give fabric feedback, and vote on outcomes, perhaps mediated through a governance tool like JokeDAO. Access NFTs might embed smart contracts that allow for revenue sharing from the sales of the series, or each team member could receive the entire collection through a digital marketplace like DressX. The collaborative surface area here is vast.

Community Creation: Further possibilities include a brand entirely sourced from a tokenized community, where these communities come together to decide what products they want to see, much like CPG Club or Poolsuite. While the decentralization of ideas has its advantages, we believe that execution still requires some degree of centralization, led by capable teams to turn ideas into reality. With built-in mass distribution and engaged consumers in the game, this could be the magical formula for launching the next wave of successful consumer brands.

Conclusion

As the number of co-created products continues to grow, we expect builders to leverage blockchain-based— in the form of fungible and non-fungible tokens— to establish social and financial alignment with their communities.

On-chain co-creation will give rise to better products, stronger communities, and the beautiful flywheel of capitalist consumption. To incentivize this behavior, brands must first recognize and reward it—Web3 achieves this through membership, provenance, reputation, revenue sharing, and more.