Going Hamm

What Mad Men's historic run can teach us about Web3

“Did you see Yuga Labs raised at a $4 billion valuation.”

“Yeah, I can’t believe it was so low.”

“Are you out of your mind? 10 thousand pictures of apes and they think they’re Google. Intellectual property has the shelf life of a banana.”

“Ok boomer, the last Spiderman did ~$1.8 billion in the box office, and it’s the 9th Spiderman movie in 20 years.”

The Mad-Men-Effect

If NFTs have showed us anything, it’s that small but passionate fan bases can propel culture forward.

The NFT-market as a whole exemplifies this: 16% of all NFT owners own 80% of Ethereum NFTs. In other words, the bigger collectors own A LOT of NFTs. The passionate minority is responsible for the majority of the growth in the total NFT market value. 

For the non-crypto-folk, it’s all very reminiscent of AMC’s “hit” show Mad-Men. By traditional viewership metrics, it wasn’t such a “hit”. In 2010, the show had roughly 1.9M viewers weekly, while shows like NCIS were drawing 11.8M viewers weekly, nearly 6 times the viewership of Mad Men. However, based on the circles you found yourself in, you may have thought watching Mad Men was as routine as teeth brushing for American households. Everyone who watched Mad Men wanted to tell everyone they watch Mad Men… yes, Mad Men was the NFT of 2010.

In fact, the show was almost canceled after just 1 season. Low viewership + high production cost = recipe for cancellation (the old cancellation, not the new form of “I Tweeted @ fat people in 2012” cancellation).

Question: How could AMC justify financing Mad Men Season 2 when their finances were squeezed tighter than a Suzanne Somers ThighMaster?

Answer: advertising sales (yes, ironic based on the subject of the show).

Mad Men’s viewership was by far the wealthiest audience of any TV show by percentage of viewership, with almost 50% of its viewers making at least $100K / year. Now, the Jaguar Cars, Morgan Stanleys, and the NetJets of the world could finally convert on their commercials. The ROI on these commercials was large, as it was a particularly high-conversion audience. These wealthy viewers couldn’t be reached elsewhere, or at least not in high concentration. The “high life” advertisers generally have to compete with the Fords and Budweisers of the world, where the ROI of the non-high-life brands is much higher based on the number of dollars their ads can convert.  

The result of this small but passionate audience that commanded high-life advertising sales? AMC’s Mad Men went on to win 16 Primetime Emmy Awards from 116 nominations after 7 seasons.

By Emmy standards, Mad Men was an incredible success story. AMC found a way to produce high quality content with relatively low viewership. These examples are currently few and far between, but as the new saying goes, Bitcoin solves this.

The next Mad Men can come from anywhere

One of the big promises of Web3 is ownership. Chris Dixon lays it out simply here:

Spelling that out:

Web1: You can consume other people’s stuff. 

Web2: You can make stuff, but the FAANGs of the world own it, so you have to sell ads / tangential products such as merchandise in order to monetize the eyeballs from your content. 

Web3: You can make stuff, own it, and sell it. 

Sometimes, I believe the “ownership” principle is overblown. If I sell my series to Netflix (pour one out) and they pay me for it, I probably did pretty well financially, and I owned my IP before I sold it to them. Web2, sure, but money be green!

I believe the biggest difference in Web3 from Web2 is that the barrier to entry to creating and monetizing great IP is significantly lower, allowing the best concepts to surface more efficiently. It allows anyone to get to the point of monetization quickly to then build out the idea further, even if the idea only appeals to a small niche audience (more on this later). 

Remember Quibi? Me neither. For the same reason TikTok is more efficient than Quibi, Web3 content creation can become more efficient than Web2 content creation (yes, I know TikTok is Web2, but stay with me, the example holds true). Let’s break this down:

Quibi’s vision was that us humans like to watch bite sized content on the move, and that because we are on the move, we prefer to view it on mobile. Quibi was right about our desire to aimlessly consume mobile-first content in every gap of the day. No boredom allowed. 

What Quibi got wrong was crucial. They underestimated the power of the people. Give a man Quibi, he’ll eat for a day, AKA the free trial. Give a man TikTok, you’ll feed him for life. You’ll feed him for life because every person is their own mini content studio with TikTok’s creation tool. Betting on a few writers and actors, even with a proven track record, couldn’t compete with people all over the world with the right tools and an algorithm that helps surface enjoyable content. 

Netflix is currently going through a similar realization. They deployed a spray-and-pray approach with respect to content generation. Build it and they will come, they said, and it doesn’t matter what “it” is. Apparently, that’s not always the case. My belief is Netflix will be forced to go back to the ad model by introducing a tiered pricing structure to allow ads to be sold on some of their titles.

What has been made clear is that people want more of what they are passionate about, and less of what they don’t care about. Yes, it’s simple, but I think it’s emblematic of a larger shift in the zeitgeist, where we search for depth in content rather than breadth of content. Publications like The Athletic are a great example: why subscribe to the Wall Street Journal if you only care about sports?

Whether that’s good for society, to have less renaissance men/women, is another question for another day.    

Web3 lowers the barrier to entry by widening the financing pool for creators via non-dilutive equity

In Web2, to get paid for your IP, you have to hope that either:

A) Advertisers like the audience you draw (relevant for TikTok and YouTube too)

OR

B) A platform wants to acquire the rights to it.

The problem with both options is that you have to build a large enough (or in Mad Men’s case, rich enough) audience to attract advertisers or platforms to green-light the content. Especially for content that requires a large investment upfront to create (e.g., Mad Men), the barrier to creation is high if you aren’t a pedigreed creator. Which important decision maker will believe in you first?

Web3 allows anyone, not just studio execs and ad buyers, who believe in you first, to finance your creation, even if what you want to create isn’t aimed at drawing a large audience. Said another way, Web3 widens the pool of potential supporters of someone’s vision.

Taking it a step further, it’s no longer random execs who are the decision makers being tasked with GUESSING what people will like. The new decision makers in Web3 are the people who enjoy the content themselves who KNOW what they like, and they can now vote with their dollars.

Mad Men proved you don’t have to make the most popular content to build something great, but they had the advantage of appealing to viewers that advertisers needed to reach.

In Web3, a creator can obtain investment to produce content from anyone who wants to buy IP that the creator puts on-chain. In other words, by harnessing blockchain, creators can sell their IP without diluting equity in the underlying entity. For the non-crypto-speak version, this means that creators can sell NFTs of their IP that doesn’t cost them equity from their entity, whereas selling to Netflix would be dilutive (which isn’t necessarily bad).

How to turn a Web2 business into a Web3 business - getting off the “ad drip”

Taking a real world example of how you could take a successful Web2 business and make it Web3, let’s look at what Friday Beers built with their Instagram account. To be clear, some businesses will certainly be more profitable as Web2 businesses. The eyeballs generated from the most coveted IP leads to advertising dollars that are far too large to compete with for a Web3 model due to scale.

For those who are unfamiliar, Friday Beers is an Instagram account which gained popularity by developing familiar character themes (e.g., a “fringe guy” in a friend group that always searches for invites to group hangouts, but isn’t always included). Friday Beers built a brand which aims to encapsulate the ethos of “being an American social male in your 20s” by posting culturally relevant videoclip mashups weekly which tap into this ethos.  There are story lines in these clips, keeping followers engaged with character development, like they would a TV show, and allowing the themes created from the account to permeate social circles.

As I mentioned, the Friday Beers business is currently “Web2”, meaning they can read and write these stories on Instagram, and they can earn money by selling ads through the account and merchandise which leverages the popularity of the brand.

If Friday Beers wanted to change their monetization method and own and sell their IP as opposed to utilizing Instagram to sell ads, they can sell their ethos to the community in the form of NFTs. If the community believes in what Friday Beers can create, they should buy whatever the company is willing to sell them, as the NFTs will accrue value as the project becomes more popular while the amount of NFTs stays the same. Friday Beers can deliver more value and perks (gated content, merch, governance) as time progresses and continue to monetize from secondary sales.

While the NFTs aren’t shares in a company with dividends, they represent own-able and trade-able likeness of a brand, and there is a capped amount of “shares of likeness.” In a world where people want more of what they like and less of what they don’t, it would allow Friday Beers to capture more consumer surplus from each super-fan who’s willing to pay more to Friday Beers than they currently do (I explain this concept in detail in my previous newsletter). The only current way fans can “pay” is to pay attention to ads and buy merchandise.

After converting to a Web3 model, if a traditional streamer wants to buy Friday Beers’ IP, Friday Beers would then benefit from the monetization mechanics of Web3 and Web2. They would get paid on selling their likeness in the form of NFTs, and for creating new IP that’s build on top of their original likeness. Yes, money definitely be green.

Those who believed in Friday Beers when they released NFT collections will reap the benefits of newfound audiences that boost virality. It would also boost Friday Beer’s negotiating power with Web2 platforms, as they have an audience in hand, proof of concept, funds from the NFT raise, and ideas for exclusive content to deliver to their NFT purchasers. 

Web3 + Web2: Read —> write —> own —> write.

Talk to us!

If you are looking for an expert* opinion on your Web3 strategy, or want to talk generally about the market, please reach out.

Website: enpassantdigital.com

Email: bryce@enpassantdigital.com

*Anyone who claims to be an expert is a charlatan. They are generally snake-oil salesmen who probably also told you to buy OneCoin. From the last 5 years of our experience, we’ve realized that there are no experts in the space, as it changes by the second.

About the author: Bryce Baker is the co-founder of En Passant Digital, which designs and leads Web3 strategy for businesses.

Our other co-founder, John Tabatabai, has led investments for Crypto VCs and consulted for projects across the NFT space. He orchestrated one of the largest grossing NFT projects, kickstarting the first NFT bull run in early ’21, creating over $200M of value. John is designing one of the most influential Metaverse Community projects ($243M valuation at time of writing) which launches shortly.