Fairness alternatives to selling below market clearing prices (or community sentiment, or fun)
When a seller has a limited supply of an item in high (or uncertain and possibly high) demand, they frequently set a price far below what "the market will bear." As a result, the item sells out quickly, with lucky buyers being those who tried to buy first. This has happened in the Ethereum ecosystem, particularly with NFT sales and token sales/ICOs. But this phenomenon is much older; concerts and restaurants frequently make similar choices, resulting in fast sell-outs or long lines.
Why do sellers do this? Economists have long wondered. A seller should sell at the market-clearing price if the amount buyers are willing to buy exactly equals the amount the seller has to sell. If the seller is unsure of the market-clearing price, they should sell at auction and let the market decide. So, if you want to sell something below market value, don't do it. It will hurt your sales and it will hurt your customers. The competitions created by non-price-based allocation mechanisms can sometimes have negative externalities that harm third parties, as we will see.
However, the prevalence of below-market-clearing pricing suggests that sellers do it for good reason. And indeed, as decades of research into this topic has shown, there often are. So, is it possible to achieve the same goals with less unfairness, inefficiency, and harm?
Selling at below market-clearing prices has large inefficiencies and negative externalities
An item that is sold at market value or at an auction allows someone who really wants it to pay the high price or bid high in the auction. So, if a seller sells an item below market value, some people will get it and others won't. But the mechanism deciding who gets the item isn't random, and it's not always well correlated with participant desire. It's not always about being the fastest at clicking buttons. Sometimes it means waking up at 2 a.m. (but 11 p.m. or even 2 p.m. elsewhere). Sometimes it's just a "auction by other means" that's more chaotic, less efficient, and has far more negative externalities.
There are many examples of this in the Ethereum ecosystem. Let's start with the 2017 ICO craze. For example, an ICO project would set the price of the token and a hard maximum for how many tokens they are willing to sell, and the sale would start automatically at some point in time. The sale ends when the cap is reached.
So what? In practice, these sales often ended in 30 seconds or less. Everyone would start sending transactions in as soon as (or just before) the sale started, offering higher and higher fees to encourage miners to include their transaction first. Instead of the token seller receiving revenue, miners receive it, and the sale prices out all other applications on-chain.
The most expensive transaction in the BAT sale set a fee of 580,000 gwei, paying a fee of $6,600 to get included in the sale.
Many ICOs after that tried various strategies to avoid these gas price auctions; one ICO notably had a smart contract that checked the transaction's gasprice and rejected it if it exceeded 50 gwei. But that didn't solve the issue. Buyers hoping to game the system sent many transactions hoping one would get through. An auction by another name, clogging the chain even more.
ICOs have recently lost popularity, but NFTs and NFT sales have risen in popularity. But the NFT space didn't learn from 2017; they do fixed-quantity sales just like ICOs (eg. see the mint function on lines 97-108 of this contract here). So what?
That's not the worst; some NFT sales have caused gas price spikes of up to 2000 gwei.
High gas prices from users fighting to get in first by sending higher and higher transaction fees. An auction renamed, pricing out all other applications on-chain for 15 minutes.
So why do sellers sometimes sell below market price?
Selling below market value is nothing new, and many articles, papers, and podcasts have written (and sometimes bitterly complained) about the unwillingness to use auctions or set prices to market-clearing levels.
Many of the arguments are the same for both blockchain (NFTs and ICOs) and non-blockchain examples (popular restaurants and concerts). Fairness and the desire not to exclude the poor, lose fans or create tension by being perceived as greedy are major concerns. The 1986 paper by Kahneman, Knetsch, and Thaler explains how fairness and greed can influence these decisions. I recall that the desire to avoid perceptions of greed was also a major factor in discouraging the use of auction-like mechanisms in 2017.
Aside from fairness concerns, there is the argument that selling out and long lines create a sense of popularity and prestige, making the product more appealing to others. Long lines should have the same effect as high prices in a rational actor model, but this is not the case in reality. This applies to ICOs and NFTs as well as restaurants. Aside from increasing marketing value, some people find the game of grabbing a limited set of opportunities first before everyone else is quite entertaining.
But there are some blockchain-specific factors. One argument for selling ICO tokens below market value (and one that persuaded the OmiseGo team to adopt their capped sale strategy) is community dynamics. The first rule of community sentiment management is to encourage price increases. People are happy if they are "in the green." If the price drops below what the community members paid, they are unhappy and start calling you a scammer, possibly causing a social media cascade where everyone calls you a scammer.
This effect can only be avoided by pricing low enough that post-launch market prices will almost certainly be higher. But how do you do this without creating a rush for the gates that leads to an auction?
Interesting solutions
It's 2021. We have a blockchain. The blockchain is home to a powerful decentralized finance ecosystem, as well as a rapidly expanding set of non-financial tools. The blockchain also allows us to reset social norms. Where decades of economists yelling about "efficiency" failed, blockchains may be able to legitimize new uses of mechanism design. If we could use our more advanced tools to create an approach that more directly solves the problems, with fewer side effects, wouldn't that be better than fiddling with a coarse-grained one-dimensional strategy space of selling at market price versus below market price?
Begin with the goals. We'll try to cover ICOs, NFTs, and conference tickets (really a type of NFT) all at the same time.
1. Fairness: don't completely exclude low-income people from participation; give them a chance. The goal of token sales is to avoid high initial wealth concentration and have a larger and more diverse initial token holder community.
2. Don’t create races: Avoid situations where many people rush to do the same thing and only a few get in (this is the type of situation that leads to the horrible auctions-by-another-name that we saw above).
3. Don't require precise market knowledge: the mechanism should work even if the seller has no idea how much demand exists.
4. Fun: The process of participating in the sale should be fun and game-like, but not frustrating.
5. Give buyers positive expected returns: in the case of a token (or an NFT), buyers should expect price increases rather than decreases. This requires selling below market value.
Let's start with (1). From Ethereum's perspective, there is a simple solution. Use a tool designed for the job: proof of personhood protocols! Here's one quick idea:
Mechanism 1 Each participant (verified by ID) can buy up to ‘’X’’ tokens at price P, with the option to buy more at an auction.
With the per-person mechanism, buyers can get positive expected returns for the portion sold through the per-person mechanism, and the auction part does not require sellers to understand demand levels. Is it race-free? The number of participants buying through the per-person pool appears to be high. But what if the per-person pool isn't big enough to accommodate everyone?
Make the per-person allocation amount dynamic.
Mechanism 2 Each participant can deposit up to X tokens into a smart contract to declare interest. Last but not least, each buyer receives min(X, N / buyers) tokens, where N is the total sold through the per-person pool (some other amount can also be sold by auction). The buyer gets their deposit back if it exceeds the amount needed to buy their allocation.
No longer is there a race condition based on the number of buyers per person. No matter how high the demand, it's always better to join sooner rather than later.
Here's another idea if you like clever game mechanics with fancy quadratic formulas.
Mechanism 3 Each participant can buy X units at a price P X 2 up to a maximum of C tokens per buyer. C starts low and gradually increases until enough units are sold.
The quantity allocated to each buyer is theoretically optimal, though post-sale transfers will degrade this optimality over time. Mechanisms 2 and 3 appear to meet all of the above objectives. They're not perfect, but they're good starting points.
One more issue. For fixed and limited supply NFTs, the equilibrium purchased quantity per participant may be fractional (in mechanism 2, number of buyers > N, and in mechanism 3, setting C = 1 may already lead to over-subscription). With fractional sales, you can offer lottery tickets: if there are N items available, you have a chance of N/number of buyers of getting the item, otherwise you get a refund. For a conference, groups could bundle their lottery tickets to guarantee a win or a loss. The certainty of getting the item can be auctioned.
The bottom tier of "sponsorships" can be used to sell conference tickets at market rate. You may end up with a sponsor board full of people's faces, but is that okay? After all, John Lilic was on EthCC's sponsor board!
Simply put, if you want to be reliably fair to people, you need an input that explicitly measures people. Authentication protocols do this (and if desired can be combined with zero knowledge proofs to ensure privacy). So we should combine the efficiency of market and auction-based pricing with the equality of proof of personhood mechanics.
Answers to possible questions
Q: Won't people who don't care about your project buy the item and immediately resell it?
A: Not at first. Meta-games take time to appear in practice. If they do, making them untradeable for a while may help mitigate the damage. Using your face to claim that your previous account was hacked and that your identity, including everything in it, should be moved to another account works because proof-of-personhood identities are untradeable.
Q: What if I want to make my item available to a specific community?
A: Instead of ID, use proof of participation tokens linked to community events. Another option, also serving egalitarian and gamification purposes, is to encrypt items within publicly available puzzle solutions.
Q: How do we know they'll accept? Strange new mechanisms have previously been resisted.
A: Having economists write screeds about how they "should" accept a new mechanism that they find strange is difficult (or even "equity"). However, abrupt changes in context effectively reset people's expectations. So the blockchain space is the best place to try this. You could wait for the "metaverse", but it's possible that the best version will run on Ethereum anyway, so start now.
More on Web3 & Crypto
William Brucee
3 years ago
This person is probably Satoshi Nakamoto.
Who founded bitcoin is the biggest mystery in technology today, not how it works.
On October 31, 2008, Satoshi Nakamoto posted a whitepaper to a cryptography email list. Still confused by the mastermind who changed monetary history.
Journalists and bloggers have tried in vain to uncover bitcoin's creator. Some candidates self-nominated. We're still looking for the mystery's perpetrator because none of them have provided proof.
One person. I'm confident he invented bitcoin. Let's assess Satoshi Nakamoto before I reveal my pick. Or what he wants us to know.
Satoshi's P2P Foundation biography says he was born in 1975. He doesn't sound or look Japanese. First, he wrote the whitepaper and subsequent articles in flawless English. His sleeping habits are unusual for a Japanese person.
Stefan Thomas, a Bitcoin Forum member, displayed Satoshi's posting timestamps. Satoshi Nakamoto didn't publish between 2 and 8 p.m., Japanese time. Satoshi's identity may not be real.
Why would he disguise himself?
There is a legitimate explanation for this
Phil Zimmermann created PGP to give dissidents an open channel of communication, like Pretty Good Privacy. US government seized this technology after realizing its potential. Police investigate PGP and Zimmermann.
This technology let only two people speak privately. Bitcoin technology makes it possible to send money for free without a bank or other intermediary, removing it from government control.
How much do we know about the person who invented bitcoin?
Here's what we know about Satoshi Nakamoto now that I've covered my doubts about his personality.
Satoshi Nakamoto first appeared with a whitepaper on metzdowd.com. On Halloween 2008, he presented a nine-page paper on a new peer-to-peer electronic monetary system.
Using the nickname satoshi, he created the bitcointalk forum. He kept developing bitcoin and created bitcoin.org. Satoshi mined the genesis block on January 3, 2009.
Satoshi Nakamoto worked with programmers in 2010 to change bitcoin's protocol. He engaged with the bitcoin community. Then he gave Gavin Andresen the keys and codes and transferred community domains. By 2010, he'd abandoned the project.
The bitcoin creator posted his goodbye on April 23, 2011. Mike Hearn asked Satoshi if he planned to rejoin the group.
“I’ve moved on to other things. It’s in good hands with Gavin and everyone.”
Nakamoto Satoshi
The man who broke the banking system vanished. Why?
Satoshi's wallets held 1,000,000 BTC. In December 2017, when the price peaked, he had over US$19 billion. Nakamoto had the 44th-highest net worth then. He's never cashed a bitcoin.
This data suggests something happened to bitcoin's creator. I think Hal Finney is Satoshi Nakamoto .
Hal Finney had ALS and died in 2014. I suppose he created the future of money, then he died, leaving us with only rumors about his identity.
Hal Finney, who was he?
Hal Finney graduated from Caltech in 1979. Student peers voted him the smartest. He took a doctoral-level gravitational field theory course as a freshman. Finney's intelligence meets the first requirement for becoming Satoshi Nakamoto.
Students remember Finney holding an Ayn Rand book. If he'd read this, he may have developed libertarian views.
His beliefs led him to a small group of freethinking programmers. In the 1990s, he joined Cypherpunks. This action promoted the use of strong cryptography and privacy-enhancing technologies for social and political change. Finney helped them achieve a crypto-anarchist perspective as self-proclaimed privacy defenders.
Zimmermann knew Finney well.
Hal replied to a Cypherpunk message about Phil Zimmermann and PGP. He contacted Phil and became PGP Corporation's first member, retiring in 2011. Satoshi Nakamoto quit bitcoin in 2011.
Finney improved the new PGP protocol, but he had to do so secretly. He knew about Phil's PGP issues. I understand why he wanted to hide his identity while creating bitcoin.
Why did he pretend to be from Japan?
His envisioned persona was spot-on. He resided near scientist Dorian Prentice Satoshi Nakamoto. Finney could've assumed Nakamoto's identity to hide his. Temple City has 36,000 people, so what are the chances they both lived there? A cryptographic genius with the same name as Bitcoin's creator: coincidence?
Things went differently, I think.
I think Hal Finney sent himself Satoshis messages. I know it's odd. If you want to conceal your involvement, do as follows. He faked messages and transferred the first bitcoins to himself to test the transaction mechanism, so he never returned their money.
Hal Finney created the first reusable proof-of-work system. The bitcoin protocol. In the 1990s, Finney was intrigued by digital money. He invented CRypto cASH in 1993.
Legacy
Hal Finney's contributions should not be forgotten. Even if I'm wrong and he's not Satoshi Nakamoto, we shouldn't forget his bitcoin contribution. He helped us achieve a better future.
rekt
3 years ago
LCX is the latest CEX to have suffered a private key exploit.
The attack began around 10:30 PM +UTC on January 8th.
Peckshield spotted it first, then an official announcement came shortly after.
We’ve said it before; if established companies holding millions of dollars of users’ funds can’t manage their own hot wallet security, what purpose do they serve?
The Unique Selling Proposition (USP) of centralised finance grows smaller by the day.
The official incident report states that 7.94M USD were stolen in total, and that deposits and withdrawals to the platform have been paused.
LCX hot wallet: 0x4631018f63d5e31680fb53c11c9e1b11f1503e6f
Hacker’s wallet: 0x165402279f2c081c54b00f0e08812f3fd4560a05
Stolen funds:
- 162.68 ETH (502,671 USD)
- 3,437,783.23 USDC (3,437,783 USD)
- 761,236.94 EURe (864,840 USD)
- 101,249.71 SAND Token (485,995 USD)
- 1,847.65 LINK (48,557 USD)
- 17,251,192.30 LCX Token (2,466,558 USD)
- 669.00 QNT (115,609 USD)
- 4,819.74 ENJ (10,890 USD)
- 4.76 MKR (9,885 USD)
**~$1M worth of $LCX remains in the address, along with 611k EURe which has been frozen by Monerium.
The rest, a total of 1891 ETH (~$6M) was sent to Tornado Cash.**
Why can’t they keep private keys private?
Is it really that difficult for a traditional corporate structure to maintain good practice?
CeFi hacks leave us with little to say - we can only go on what the team chooses to tell us.
Next time, they can write this article themselves.
See below for a template.
Olga Kharif
3 years ago
A month after freezing customer withdrawals, Celsius files for bankruptcy.
Alex Mashinsky, CEO of Celsius, speaks at Web Summit 2021 in Lisbon.
Celsius Network filed for Chapter 11 bankruptcy a month after freezing customer withdrawals, joining other crypto casualties.
Celsius took the step to stabilize its business and restructure for all stakeholders. The filing was done in the Southern District of New York.
The company, which amassed more than $20 billion by offering 18% interest on cryptocurrency deposits, paused withdrawals and other functions in mid-June, citing "extreme market conditions."
As the Fed raises interest rates aggressively, it hurts risk sentiment and squeezes funding costs. Voyager Digital Ltd. filed for Chapter 11 bankruptcy this month, and Three Arrows Capital has called in liquidators.
Celsius called the pause "difficult but necessary." Without the halt, "the acceleration of withdrawals would have allowed certain customers to be paid in full while leaving others to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities," it said.
Celsius declined to comment. CEO Alex Mashinsky said the move will strengthen the company's future.
The company wants to keep operating. It's not requesting permission to allow customer withdrawals right now; Chapter 11 will handle customer claims. The filing estimates assets and liabilities between $1 billion and $10 billion.
Celsius is advised by Kirkland & Ellis, Centerview Partners, and Alvarez & Marsal.
Yield-promises
Celsius promised 18% returns on crypto loans. It lent those coins to institutional investors and participated in decentralized-finance apps.
When TerraUSD (UST) and Luna collapsed in May, Celsius pulled its funds from Terra's Anchor Protocol, which offered 20% returns on UST deposits. Recently, another large holding, staked ETH, or stETH, which is tied to Ether, became illiquid and discounted to Ether.
The lender is one of many crypto companies hurt by risky bets in the bear market. Also, Babel halted withdrawals. Voyager Digital filed for bankruptcy, and crypto hedge fund Three Arrows Capital filed for Chapter 15 bankruptcy.
According to blockchain data and tracker Zapper, Celsius repaid all of its debt in Aave, Compound, and MakerDAO last month.
Celsius charged Symbolic Capital Partners Ltd. 2,000 Ether as collateral for a cash loan on June 13. According to company filings, Symbolic was charged 2,545.25 Ether on June 11.
In July 6 filings, it said it reshuffled its board, appointing two new members and firing others.
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Simon Ash
2 years ago
The Three Most Effective Questions for Ongoing Development
The Traffic Light Approach to Reviewing Personal, Team and Project Development
What needs improvement? If you want to improve, you need to practice your sport, musical instrument, habit, or work project. You need to assess your progress.
Continuous improvement is the foundation of focused practice and a growth mentality. Not just individually. High-performing teams pursue improvement. Right? Why is it hard?
As a leadership coach, senior manager, and high-level athlete, I've found three key questions that may unlock high performance in individuals and teams.
Problems with Reviews
Reviewing and improving performance is crucial, however I hate seeing review sessions in my diary. I rarely respond to questionnaire pop-ups or emails. Why?
Time constrains. Requests to fill out questionnaires often state they will take 10–15 minutes, but I can think of a million other things to do with that time. Next, review overload. Businesses can easily request comments online. No matter what you buy, someone will ask for your opinion. This bombardment might make feedback seem bad, which is bad.
The problem is that we might feel that way about important things like personal growth and work performance. Managers and team leaders face a greater challenge.
When to Conduct a Review
We must be wise about reviewing things that matter to us. Timing and duration matter. Reviewing the experience as quickly as possible preserves information and sentiments. Time must be brief. The review's importance and size will determine its length. We might only take a few seconds to review our morning coffee, but we might require more time for that six-month work project.
These post-event reviews should be supplemented by periodic reflection. Journaling can help with daily reflections, but I also like to undertake personal reviews every six months on vacation or at a retreat.
As an employee or line manager, you don't want to wait a year for a performance assessment. Little and frequently is best, with a more formal and in-depth assessment (typically with a written report) in 6 and 12 months.
The Easiest Method to Conduct a Review Session
I follow Einstein's review process:
“Make things as simple as possible but no simpler.”
Thus, it should be brief but deliver the necessary feedback. Quality critique is hard to receive if the process is overly complicated or long.
I have led or participated in many review processes, from strategic overhauls of big organizations to personal goal coaching. Three key questions guide the process at either end:
What ought to stop being done?
What should we do going forward?
What should we do first?
Following the Rule of 3, I compare it to traffic lights. Red, amber, and green lights:
Red What ought should we stop?
Amber What ought to we keep up?
Green Where should we begin?
This approach is easy to understand and self-explanatory, however below are some examples under each area.
Red What ought should we stop?
As a team or individually, we must stop doing things to improve.
Sometimes they're bad. If we want to lose weight, we should avoid sweets. If a team culture is bad, we may need to stop unpleasant behavior like gossiping instead of having difficult conversations.
Not all things we should stop are wrong. Time matters. Since it is finite, we sometimes have to stop nice things to focus on the most important. Good to Great author Jim Collins famously said:
“Don’t let the good be the enemy of the great.”
Prioritizing requires this idea. Thus, decide what to stop to prioritize.
Amber What ought to we keep up?
Should we continue with the amber light? It helps us decide what to keep doing during review. Many items fall into this category, so focus on those that make the most progress.
Which activities have the most impact? Which behaviors create the best culture? Success-building habits?
Use these questions to find positive momentum. These are the fly-wheel motions, according to Jim Collins. The Compound Effect author Darren Hardy says:
“Consistency is the key to achieving and maintaining momentum.”
What can you do consistently to reach your goal?
Green Where should we begin?
Finally, green lights indicate new beginnings. Red/amber difficulties may be involved. Stopping a red issue may give you more time to do something helpful (in the amber).
This green space inspires creativity. Kolbs learning cycle requires active exploration to progress. Thus, it's crucial to think of new approaches, try them out, and fail if required.
This notion underpins lean start-build, up's measure, learn approach and agile's trying, testing, and reviewing. Try new things until you find what works. Thomas Edison, the lighting legend, exclaimed:
“There is a way to do it better — find it!”
Failure is acceptable, but if you want to fail forward, look back on what you've done.
John Maxwell concurred with Edison:
“Fail early, fail often, but always fail forward”
A good review procedure lets us accomplish that. To avoid failure, we must act, experiment, and reflect.
Use the traffic light system to prioritize queries. Ask:
Red What needs to stop?
Amber What should continue to occur?
Green What might be initiated?
Take a moment to reflect on your day. Check your priorities with these three questions. Even if merely to confirm your direction, it's a terrific exercise!
Jenn Leach
3 years ago
How Much I Got Paid by YouTube for a 68 Million Views Video
My nameless, faceless channel case study
The Numbers
I anonymize this YouTube channel.
It's in a trendy, crowded niche. Sharing it publicly will likely enhance competition.
I'll still share my dashboard numbers:
A year ago, the video was released.
What I earned
I'll stop stalling. Here's a screenshot of my YouTube statistics page displaying Adsense profits.
YouTube Adsense made me ZERO dollars.
OMG!
How is this possible?
YouTube Adsense can't monetize my niche. This is typical in faceless niches like TikTok's rain videos. If they were started a while ago, I'm sure certain rain accounts are monetized, but not today.
I actually started a soothing sounds faceless YouTube channel. This was another account of mine.
I looped Pexels films for hours. No background music, just wind, rain, etc.
People could watch these videos to relax or get ready for bed. They're ideal for background noise and relaxation.
They're long-lasting, too. It's easy to make a lot from YouTube Adsense if you insert ads.
Anyway, I tried to monetize it and couldn’t. This was about a year ago. That’s why I doubt new accounts in this genre would be able to get approved for ads.
Back to my faceless channel with 68 million views.
I received nothing from YouTube Adsense, but I made money elsewhere.
Getting paid by the gods of affiliate marketing
Place links in the video and other videos on the channel to get money. Visitors that buy through your affiliate link earn you a commission.
This video earned many clicks on my affiliate links.
I linked to a couple of Amazon products, a YouTube creator tool, my kofi link, and my subscribe link.
Sponsorships
Brands pay you to include ads in your videos.
This video led to many sponsorships.
I've done dozens of sponsorship campaigns that paid $40 to $50 for an end screen to $450 for a preroll ad.
Last word
Overall, I made less than $3,000.
If I had time, I'd be more proactive with sponsorships. You can pitch brand sponsorships. This actually works.
I'd do that if I could rewind time.
I still can, but I think the reaction rate would be higher closer to the viral video's premiere date.
Dung Claire Tran
3 years ago
Is the future of brand marketing with virtual influencers?
Digital influences that mimic humans are rising.
Lil Miquela has 3M Instagram followers, 3.6M TikTok followers, and 30K Twitter followers. She's been on the covers of Prada, Dior, and Calvin Klein magazines. Miquela released Not Mine in 2017 and launched Hard Feelings at Lollapazoolas this year. This isn't surprising, given the rise of influencer marketing.
This may be unexpected. Miquela's fake. Brud, a Los Angeles startup, produced her in 2016.
Lil Miquela is one of many rising virtual influencers in the new era of social media marketing. She acts like a real person and performs the same tasks as sports stars and models.
The emergence of online influencers
Before 2018, computer-generated characters were rare. Since the virtual human industry boomed, they've appeared in marketing efforts worldwide.
In 2020, the WHO partnered up with Atlanta-based virtual influencer Knox Frost (@knoxfrost) to gather contributions for the COVID-19 Solidarity Response Fund.
Lu do Magalu (@magazineluiza) has been the virtual spokeswoman for Magalu since 2009, using social media to promote reviews, product recommendations, unboxing videos, and brand updates. Magalu's 10-year profit was $552M.
In 2020, PUMA partnered with Southeast Asia's first virtual model, Maya (@mayaaa.gram). She joined Singaporean actor Tosh Zhang in the PUMA campaign. Local virtual influencer Ava Lee-Graham (@avagram.ai) partnered with retail firm BHG to promote their in-house labels.
In Japan, Imma (@imma.gram) is the face of Nike, PUMA, Dior, Salvatore Ferragamo SpA, and Valentino. Imma's bubblegum pink bob and ultra-fine fashion landed her on the cover of Grazia magazine.
Lotte Home Shopping created Lucy (@here.me.lucy) in September 2020. She made her TV debut as a Christmas show host in 2021. Since then, she has 100K Instagram followers and 13K TikTok followers.
Liu Yiexi gained 3 million fans in five days on Douyin, China's TikTok, in 2021. Her two-minute video went viral overnight. She's posted 6 videos and has 830 million Douyin followers.
China's virtual human industry was worth $487 million in 2020, up 70% year over year, and is expected to reach $875.9 million in 2021.
Investors worldwide are interested. Immas creator Aww Inc. raised $1 million from Coral Capital in September 2020, according to Bloomberg. Superplastic Inc., the Vermont-based startup behind influencers Janky and Guggimon, raised $16 million by 2020. Craft Ventures, SV Angels, and Scooter Braun invested. Crunchbase shows the company has raised $47 million.
The industries they represent, including Augmented and Virtual reality, were worth $14.84 billion in 2020 and are projected to reach $454.73 billion by 2030, a CAGR of 40.7%, according to PR Newswire.
Advantages for brands
Forbes suggests brands embrace computer-generated influencers. Examples:
Unlimited creative opportunities: Because brands can personalize everything—from a person's look and activities to the style of their content—virtual influencers may be suited to a brand's needs and personalities.
100% brand control: Brand managers now have more influence over virtual influencers, so they no longer have to give up and rely on content creators to include brands into their storytelling and style. Virtual influencers can constantly produce social media content to promote a brand's identity and ideals because they are completely scandal-free.
Long-term cost savings: Because virtual influencers are made of pixels, they may be reused endlessly and never lose their beauty. Additionally, they can move anywhere around the world and even into space to fit a brand notion. They are also always available. Additionally, the expense of creating their content will not rise in step with their expanding fan base.
Introduction to the metaverse: Statista reports that 75% of American consumers between the ages of 18 and 25 follow at least one virtual influencer. As a result, marketers that support virtual celebrities may now interact with younger audiences that are more tech-savvy and accustomed to the digital world. Virtual influencers can be included into any digital space, including the metaverse, as they are entirely computer-generated 3D personas. Virtual influencers can provide brands with a smooth transition into this new digital universe to increase brand trust and develop emotional ties, in addition to the young generations' rapid adoption of the metaverse.
Better engagement than in-person influencers: A Hype Auditor study found that online influencers have roughly three times the engagement of their conventional counterparts. Virtual influencers should be used to boost brand engagement even though the data might not accurately reflect the entire sector.
Concerns about influencers created by computers
Virtual influencers could encourage excessive beauty standards in South Korea, which has a $10.7 billion plastic surgery industry.
A classic Korean beauty has a small face, huge eyes, and pale, immaculate skin. Virtual influencers like Lucy have these traits. According to Lee Eun-hee, a professor at Inha University's Department of Consumer Science, this could make national beauty standards more unrealistic, increasing demand for plastic surgery or cosmetic items.
Other parts of the world raise issues regarding selling items to consumers who don't recognize the models aren't human and the potential of cultural appropriation when generating influencers of other ethnicities, called digital blackface by some.
Meta, Facebook and Instagram's parent corporation, acknowledges this risk.
“Like any disruptive technology, synthetic media has the potential for both good and harm. Issues of representation, cultural appropriation and expressive liberty are already a growing concern,” the company stated in a blog post. “To help brands navigate the ethical quandaries of this emerging medium and avoid potential hazards, (Meta) is working with partners to develop an ethical framework to guide the use of (virtual influencers).”
Despite theoretical controversies, the industry will likely survive. Companies think virtual influencers are the next frontier in the digital world, which includes the metaverse, virtual reality, and digital currency.
In conclusion
Virtual influencers may garner millions of followers online and help marketers reach youthful audiences. According to a YouGov survey, the real impact of computer-generated influencers is yet unknown because people prefer genuine connections. Virtual characters can supplement brand marketing methods. When brands are metaverse-ready, the author predicts virtual influencer endorsement will continue to expand.