Web3 a hot topic at SXSW despite bear market and declining interest in NFTs

Web3 was a major theme at SXSW 2023, yet previous hype around NFTs and building during a bear market may be contributing factors to Web3 adoption.

Giant rabbits wearing trendy outfits situated alongside cartoon characters with rainbows flowing out of their mouths lined the streets of South by Southwest (SXSW) last year. This is because two nonfungible token (NFT) projects — Doodles and Fluf World — dominated SXSW 2022. 

Yet these projects were nowhere to be found at SXSW 2023, demonstrating the lack of interest in NFTs this year. This shouldn’t come as a surprise, though. With crypto prices down, coupled with declining NFT prices and trading volumes, very few projects seem to be focused on digital collectibles. Instead, SXSW 2023 was overrun by major brands and consultancy firms boasting the promise of Web3.

Brands discuss Web3 strategies at SXSW 2023

Avery Akkineni, president of Vayner3 — a Web3 consultancy firm founded by Gary Vaynerchuck — told Cointelegraph that Web3 is moving beyond its novelty moment and into a strategic implementation, which is why the technology has become a hot topic for business leaders at SXSW this year. She said:

“Web3 technology can potentially disrupt many industries, from finance to healthcare to social media, by enabling more secure, transparent and efficient systems. This increased interest in Web3 is crucial because it signals a shift toward the next era of the internet, which is more immersive, personalized and ownable for users.”

Akkineni added that she believes every brand should be taking the time to understand Web3 and strategize toward it. “Brands will leverage Web3 in various ways, from creating community-owned channels to implementing blockchain-based supply chain management systems,” she said.

In order to put this in perspective, Vayner3 and the cryptocurrency exchange Coinbase hosted a brunch during SXSW that included a panel discussion entitled “Web3 and the future of customer engagement: How brands can stay ahead of the curve.”

Rachel Weiss, vice president of L’Oreal Bold Ventures — the strategic venture fund of L’Oreal — stated during the panel that Web3 is enabling the beauty industry to allow for “ownership of beauty.” She said:

“What does Web3 mean for the new creator economy around beauty? What are the new expressions that will be built around beauty using this new technology? And what does it look like to be a fan of a brand? These are all things that I think Web3 will empower. And it will put what we built on Web2 on steroids with a new way to participate for the next generation of beauty consumers.”

It’s important to point out that Bold Ventures recently announced an investment in Digital Village, a United States-based startup that helps brands create digital identities and assets in virtual worlds. In addition, NYX Professional Makeup, a subsidiary of L’Oreal, integrated into The Sandbox last year to feature voxelized makeup looks on avatars, adding to the concept of consumer ownership.

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Yet while Weiss expressed excitement about Web3’s potential to transform the beauty industry, David Lee, head of Samsung Next, pointed out during the discussion that Samsung’s portfolio companies and partners are still waiting for a “ChatGPT moment” to overtake Web3. He said:

“I think ChatGPT was an interface that people just understood, but that was after years and years of foundational research, marketing and experiments. I think the same thing is happening right now. We are seeing a lot of experiments, particularly among brands, to engage in Web3. But I don’t think we have found that ChatGPT moment yet.”

However, this clearly hasn’t stopped companies from engaging in Web3 activities. For example, Coinbase had a large presence at SXSW, with a heavy focus on its recently launched wallet-as-a-service, or WaaS, product.

Leonard Law, product lead for WaaS at Coinbase, told Cointelegraph that WaaS was aimed to solve one of the key pain points for adoption: wallets. Law noted that WaaS was important to showcase during SXSW due to the large Web3 presence. “WaaS at SXSW was about connecting the right technology with the right brands and helping these brands build strong, direct relationships with their customers,” he said.

Law elaborated that WaaS makes the Web3 wallet onboarding process simple for end-users, as a username and password are the only elements required to gain access to Coinbase’s Web3 wallet. “Simple onboarding will reduce the barrier for users getting on-chain, which will open up Web3 experiences to the masses.” 

A number of official SXSW 2023 panels also focused on Web3 initiatives. For example, there was a featured session entitled “Building an Open Metaverse” that included a conversation with Timmu Tõke, CEO and co-founder of Ready Player Me — an avatar platform focused on interoperability.

Following the panel, Tõke told Cointelegraph that the metaverse is an important part of Web3 since so many people are spending time in virtual worlds. He explained that brands are interested in establishing a presence in the metaverse. “We have seen people make billions of dollars a year selling virtual assets in games, or in the metaverse. Web3 plays an important role because it enables a set of technologies that will allow consumers to finally own their virtual assets,” he said.

NFT presence was small but focused

Tõke said that NFTs will likely play an important role for Web3 platforms in order to allow consumers to own digital assets. He shared that brands have become cautious about launching NFTs due to current market conditions: “They don’t want to attach their brands to something perceived to be declining in value or popularity. We saw this mindset when the market crashed, where many brands told us they like the concept of the metaverse but don’t want to involve NFTs.”

Although this may be, Nicole Behnam, founder of marketing agency Beyond Media, told Cointelegraph that while not many people were talking about NFTs at SXSW this year, communities were still congregating because of the previous NFT hype cycle:

“Existing NFT communities and collections still put on events, activations and panels for their holders. We’ve been talking about utility for quite some time, and we’re finally starting to see which teams are following through.”

Natasha Hoskins, co-founder of the social decentralized autonomous organization (DAO) Boys Club, told Cointelegraph that the DAO is interested in how Web3 technology can be applied to experiences in real life. She explained that Boys Club launched a physical and digital NFT drop with the Boys Club Zine, the group’s magazine.

“The conversation around NFTs has matured from PFPs [profile pictures] to one around practical, functional utility. It’s less flashy, so, therefore, less visible in a noisy environment, but this shift is an important one for NFTs to become a credible integration into everyday apps,” Hoskins said. 

Excitement for Web3 despite market conditions

All things considered, it’s notable that Web3 had such a large presence at SXSW this year, given current market conditions combined with the Silicon Valley Bank collapse that took place on March 10 — the first day of SXSW 2023.

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Tara Fung, co-founder and CEO of Web3 development firm Co:Create, told Cointelegraph that the mood at SXSW during the first two days was dampened:

“Personally, I found it hard to be present and engaged when we were grappling with questions of where a significant portion of our operating capital was and whether we’d ever get it back.”

However, Fung noted that on March 12, word got out that Silicon Valley Bank depositors would be protected, which changed the SXSW environment. “We started to see more of that euphoria and buzz that SXSW is known for,” Fung said.

Regarding the crypto bear market, Law explained that developers view bear markets as a great opportunity to build: “This is what’s continuing to drive a lot of excitement in the space.”