Starbucks NFT & the Future of NFTs

Starbucks made headlines this week with its controversial announcement of an upcoming web3 and NFT program, Starbucks Odyssey.

Early feedback on the announcement was incredibly negative, shining a light on how much disdain the general public still has for NFTs, which was capped off by the tech publication Gizmodo publishing an article titled “Starbucks Explains How Its Dumbass NFT Program Works."

We’re so early. 

But negative feedback aside, upon initial review this program appears very well thought out. The project lead, Adam Brotman (architect of the Starbucks app and mobile pay system) clearly understands some of the issues present in the current state of web3 and NFTs and is addressing them in this launch.

At a high level, Odyssey is a next-gen loyalty program, building on Starbucks’ existing and groundbreaking program. It allows its users (customers) to earn and purchase digital collectibles, which can be exchanged for traditional perks (free coffee) or new ones (experiences).

The mechanics of how this program will work shed light on what the future of NFTs very well may look like – and early NFT collectors probably won’t like some of the implications. 

The primary areas of impact will be technology, cost, and terminology:

• Technology: seamless and under the hood
• Cost: next to zero (and not in crypto)
• Terminology: forget about “NFTs”

Let’s explore each in more detail.

Technology: Seamless and Under The Hood

One of the primary hurdles to mainstream adoption for NFTs in 2022 is the underlying technology. The number of steps and effort required to buy crypto, set up a MetaMask wallet, fund that wallet via blockchain transfer(s), and purchase an NFT are simply too big of a barrier for mainstream users. In fact, it has been a popular sentiment that NFTs won’t reach mainstream until the end-user has no idea that they’re even interacting on the blockchain.

Starbucks is hitting this issue head-on by leveraging its existing web app and loyalty program. All of the activities, gamification, and digital collection involved in this new program will be done within the app. 

Users will log in to the app with their loyalty program credentials, and from there, they will go on “journeys” (i.e. playing games or challenges) with the goal of winning digital collectibles (NFTs). These NFTs will provide perks beyond traditional Starbucks rewards, unlocking experiences, and other benefits. Additionally, there will be limited-edition NFTs available for sale, providing higher-end experiences, such as trips to a Starbucks coffee farm in Costa Rica.

Starbucks' CMO Brady Brewer added insight to the decision to leverage the existing app for this program.

“It happens to be built on blockchain and web3 technologies, but the customer — to be honest — may very well not even know that what they’re doing is interacting with blockchain technology. It’s just the enabler.”

Bingo. This was a brilliant decision by the Starbucks team to remove tech as any form of barrier, and it will likely lead to the onboarding of millions of users into this program (Starbucks' loyalty program had 27.4M users as of August 2022). And this will likely be copied by most big brands looking for adoption at this scale.

In quick summary: 

• Current state problem: too many technical hurdles with blockchain, crypto, and NFT transactions for mainstream adoption
• Starbucks solution: leverage existing, widely accepted tech (mobile app) with the blockchain/NFT component behind the scenes
• Impacts to current NFT users: millions of new users onboarded into NFTs and web3 (though these users will be no closer to interacting with or buying existing NFTs / our bags)

Now on to the money aspect of this program.

Cost: Next to Zero (And Not Priced in Crypto)

There will be nearly no cost to participate in the Starbucks Odyssey ecosystem. Users will go on “journeys” by playing games, buying goods at stores, or through other interactions in the app. There will be no cost barrier to entry. And this means there won’t be any six-figure mammal cartoon profile pictures (PFPs) being traded.

One early implication of big brand NFT adoption was a price increase. The most famous case was when Nike announces its acquisition of the RTFKT team, and their native PFP project Clone X rocketed from a 3 ETH (~$5,000) floor to 7 ETH (~$11,000) price overnight, eventually reaching highs around 20 ETH.

We have quickly learned that this was the exception case, and not the rule. Going forward brand adoption will not directly pump anyone’s bags.

Another reason the “number won’t go up” is that Starbucks is seemingly bypassing crypto entirely. Those who do wish to purchase the digital collectibles (versus earning them), will have the option of paying with credit or debit cards. Crypto wallets will not be required - another major barrier removed.

We have already seen the difference in transaction scale for NFT projects and blockchains that accept credit card payments. A case in point is NBA Top Shot, one of the foundational sports digital collectibles projects from Dapper Labs, which has done more than 21.7M transactions to date, largely by enabling purchasing via debit and credit cards (data from cryptoslam.io). For perspective, the entire Ethereum network has only processed 14.4M NFT transactions.

This was another really smart decision from the team with respect to ease of adoption, as the whole digital collectible journey will not require any new forms of payment interaction.

But again, this is mixed news for current NFT users:

• Current state problem: the high cost of NFTs as a barrier to entry, priced in crypto (another barrier)
• Starbucks solution: the cost will be mostly zero and traditional payment methods will be accepted
• Impacts to current NFT users: millions of new users are now comfortable using, buying, and selling NFTs (though with no additional buy incentive of crypto and/or rotation paths to existing NFTs)

Perhaps the biggest impact on the existing landscape coming out of this Starbucks program will be in its naming convention – say goodbye to “NFTs."

Terminology: Forget About “NFTs”

The digital collectibles that Odyssey users will win from going on “journeys” will be called “journey stamps.” There will likely be no mention of non-fungible tokens anywhere in the program, making Starbucks the first major brand to launch an NFT project without using the term “NFT."

Rebranding the term "NFT" has been a topic of discussion in recent months, and this decision by Starbucks to essentially remove the term from its program cements the need for a new term.

The acronym “NFTs” is not fun to say, is not well understood, and generally just leads to puzzled looks from people hearing it for the first time. Then the explainer has to define the term fungible, describe the difference between fungible and non-fungible assets, and then tie it back to NFTs – it’s a whole process and it’s tiring.

Mainstream adoption will require phrasing that is catchier and easier to understand for newcomers. Period.

While “journey stamps” likely won’t catch on, perhaps the term “digital collectibles” will become more mainstream in the fallout of this program. Certainly, that phrase is much easier to explain and understand.

Again, the Starbucks team is making a wise decision here by steering away from this already antiquated terminology. Kudos to their team, and hopefully they kickstart an overall re-branding within the NFT community.

And while this re-branding is likely a major win for all of web3 and the NFT community at large, it does have some downside for anyone who is clinging to that native term.

• Current state problem: the term "NFT" is clunky, misunderstood, and has general negative sentiment
• Starbucks solution: don't use the term "NFT" at all, instead, use homegrown "journey stamps" and "digital collectibles"
• Impacts to current NFT users: potential next step in re-branding of NFTs as digital collectibles 

Conclusion

In quick summary, Starbucks Odyssey is likely the first web3, NFT program with the potential to onboard the masses. The leading coffee chain will be able to do so by making the user experience seamless, keeping the underlying tech behind the scenes, costs minimal, and allowing classic payment options with simple phrasing.

The scaled adoption of web3 and NFTs is definitely a win for those early to NFTs, but this project certainly won’t pump our bags or necessarily drive more cryptocurrency adoption, and it very well may put the nail in the coffin for the term “NFTs." 

There are other impacts to unpack from this program, including the environmental focus (they are using the Polygon blockchain, (which is Proof-of-Stake and orders of magnitude more eco-friendly than some other major chains) and the gamification aspect (gaming may be one of the single biggest use cases for the blockchain in the near future).

Expect those two trends to continue as well as more brands, politicians, and businesses venture into this space.

Overall, even with the downside laid out above (somewhat tongue-in-cheek), this is a major step forward for adoption, and congratulations to the Starbucks team on a well-thought-out program.

Now, it’s time for execution.