From Newspaper Ads to Airdrops
Advertising's Evolution from Pre-Web to Web3
In 1876, John Wanamaker opened a department store called Grand Depot in Philadelphia. Last week, I got $350 sent to my crypto wallet for free.
I promise there is a connection. We just have to go through 200 years of advertising history to find the pattern. Stick with me. As always, I will keep it brief.
Pre-Web: 1800s-1990s
Wanamaker, owner of Grand Depot, used his profits from one day to buy ads in the next day’s newspaper. After achieving commercial success, Wanamaker was appointed Postmaster General of the United States in 1889.
At the time, farmers had to go into distant towns to get their mail — this might mean a half-day trip to send a letter. Wanamaker pushed the U.S. Postal Service to deliver to rural farms, thus opening the market for consumer goods to the 70% of Americans who lived hours from a big-city department store1.
Soon, shopping catalogs popped up like Montgomery Ward, Bloomingdales, and Sears. Of course, this meant newspapers full of ads could get to the countryside too. Once radio and TV were invented, then ads appeared there as well.
Web1: 1990s-2000s
When the internet was first created by the US government, it was illegal to buy stuff on there. The government thought that criminals would take advantage of the internet and use it for shit like spam and porn.
The government was obviously correct. But, the floodgates were opened to the rest of the world anyways. I think we all can agree the net positives of the internet have been much greater than the net negatives.
During the web1 era, advertising was banner ads, pop-up ads, and spam. Throughout the 90s and 2000s, buying goods online quickly became much more normal thanks to sites like eBay, Amazon, and all the dot-com era e-commerce sites.
Web2: 2000s-2010s
Facebook, Google, YouTube, Twitter, Instagram, Snapchat. None of these companies would stay in business without revenue from advertising.
This type of advertising is called paid acquisition — as brands pay platforms2 to hopefully acquire their users as their customers.
Let’s say you’re creating a Facebook ad for your online art shop. You add a line of code (called a Pixel) from Facebook into your store’s source code, and then when people click the Facebook ad and buy art from your store, Facebook tracks it.
This is called attribution as you’re attributing the sale to Facebook. And in the words of former ad-tech founder Antonio García Martínez, “attribution rules the world.”
Attribution made Zuckerberg a billionaire and is also why Facebook’s stock tanked after Apple’s new anti-tracking policy3 made it harder to serve customers relevant ads.
There’s a few solid reasons everyone hates on paid acquisition.
Many people think it’s creepy when ads tracks your search history. Personally, I prefer tailored ads to tampon ads, but the woke mafia came together and said they don’t want tailored ads because they can’t stop themselves from buying shit.
Paid acquisition created the attention economy where eyeball time = money. Platforms make their apps as addicting as possible so they can get paid more.
Also, from a brand perspective, it’s hard to tell if paid acquisition actually works.
I used to write ad copy for my family’s kitchen remodeling business. Someone will see the business’s ad on Facebook and then Google search the company. If the customer calls via the Google page, then the team will mark this customer as +1 from Google.
“This is part of what underwrites Google’s trillion-dollar market cap: the ability to claim that everyone who bought something via a Google search bought that thing because of Google,” writes García Martínez.
“Reality is of course much more complicated—people often use Google navigationally to lazily find some website—and Google is essentially stealing credit (and everybody in ad tech knows this).”
If I was Facebook, I’d probably be pissed af at Google. Then again, Facebook probably wouldn’t exist without the ability to Google search coding problems.
Anyways, paid acquisition is where most of online advertising is today. It’s a slightly less spammy version of web1 pop-up ads. Everyone hates web2 ads, but there might be a brighter future.
Web3: 2010s→∞
In web3, there’s this cool thing called airdrops where companies send your wallet tokens ($$$) if they think you’d use their company’s product.
Last week, I received an airdrop of $350 (.18 ETH) from a Layer-2 Ethereum protocol called Optimism just because I participated in a DAO a few months ago.
Because the blockchain is public, a company can target anyone’s wallets in the world who has used a certain protocol or collected NFTs of a certain type.
For example, a new NFT marketplace called LooksRare collected every address of OpenSea’s most valuable users and airdropped them tokens for their marketplace.
Yes, this is fucking savage, but only slightly more savage than if LooksRare paid Twitter $3,000/mo. to advertise to users who follow @OpenSea or #NFT.
Web3 takes out the middleman. Airdrops are web3’s paid acquisition.
It’s paid acquisition, except they’re paying you, not a social media platform. Since they knew I was involved with a DAO — which takes a level of commitment to web3 — they knew I might be interested in their product.
If I need to use Layer-2 for any reason, you bet I’m loyal to Optimism. They gave me free money! That’s 1 billion times better than a pop-up ad or YouTube ad.
There is one huge limitation to airdrops though.
Airdrops can’t get people involved who have never used a crypto wallet. They’re only useful for targeting already-active web3 users. This means you can’t use airdrops to recruit new people to a web3 product — except you sorta can.
Airdrops are insane publicity. In the crypto world where hacks and scams run rampant, it’s great for publicity to hear 100,000 people just got free money.
If I’m on a web3 marketing team and we’re trying to get initial users, I’m voting for an airdrop to web3-users over some Instagram ads. Once the company grows, then sure, go for the viral Super Bowl commercial or whatever.
Takeaways:
A few weeks ago, I asked on Twitter, why is Google so afraid of web3? I figured it out — in the long run, web3 has the potential to decimate their advertising revenue.
If you’re a vc-funded web3 founder now, why would you advertise on Google when you could directly reach everyone’s wallets? As more people are onboarded to crypto, the potential audience will keep growing.
In the 1800s, you needed the newspaper to reach customers. In the 1900s, it was TV and radio. In the 2000s, it was the internet. Now, it’s just a crypto wallet.
Over the last couple months, I’ve been reading about the history of capitalism and the internet in hopes of finding patterns that explain how the internet economy works.
If you’re looking to learn about these topics, I recommend three books in particular:
Americana: A 400-Year History of American Capitalism by Bhu Srinivasan
Money: The True Story of a Made-Up Thing by Jacob Goldstein
The Sovereign Individual by James Dale Davidson
Let me know if you get a chance to check them out.
Bhu Srinivasan, Americana: A 400-Year History of American Capitalism
I’d include influencer marketing here as a company is trying to acquire an influencer’s audience as customers. Influencers are platforms.
Funnily enough, I was making $2,000/mo. in college running Facebook ads for small businesses when Apple released their new anti-tracking policy. I immediately cancelled my contracts with clients, signed up for Lambda School, and learned to code.