Dear SGV friends, thanks for attenting our Farcon event.

During the event - hosted alongside Paradigm, Privy, Embed and Builders Garden - we unveiled the concept of “Ad coins”, and did a whole spiel on MOATs in web3 social. 

Here’s a copy of it, getting the alpha straight to your inbox.

Also, 1 lucky minter of this article on will get an airdrop of my favorite memecoins in around 24 hours.

Please unsubscribe if you don’t want to receive further notifications.

We’ve been active investors in the space for the past 2 years, and interested in the past 3. Here I will attach the slides of the presentation, alongside some commentary.

Ads are the revenue powerhouse for social apps. They come in a lot of different form factors. The initial Facebook ads in 2000 where static, and cost ~$40/day! I really like the way Pinterest frame Ads in a more positive way, and has avoided a lot of drama that Meta has had.

I’m a big fan of the book 7 powers by Hamilton Helmer, and I try to re-read some chapters every once in a while to get clarity on the competitive advantages businesses can have. His framework nails them down into 7, hence the name.

For web2 social, I’ve found 3 to apply the most, and they enhance one of the most powerful business models ever: Digital Ads. It has a variety of factors that adapt to the media being consumed and user type: banners, search results, videos, boosted content, sponsored content, etc.

Enter web3 social. There’s a couple of key points. First, the cornered resource which before was your social graph and engagement signals, is now partially permissionless, any client can access the data to build on top, even though some signals will still be cornered by clients (screen time, views, etc), a lot of other signals are now at a protocol level (follows, likes, etc), essentially tearing down a web2 moat.

The second one is network economies, which now are transactional and token based. This means that tokens will be front and center orchestrating a more efficient economy, which I’m calling Ad tokens (more on that soon).

This opens up space for the third, counter positioning, apps will be able to position themselves on digital based new media formats (more on that soon), and shared economies powered by tokens.

A novel concept I introduced is digital asset based media format. Digital asset based media is novel, miniapps as well. These are both fungible and nonfungible assets that live on a blockchain, and are earned, traded, staked, bought, burned, etc.

On the spectrum of non-speculative and speculative, digital asset based media is able to sit at the speculative part of the spectrum for different media types. In its most speculative form there’s memecoins, and also “content-coins”, where the value of a post is purely speculative and not linked to any cashflow. The most common use case is trading memecoins tied to a particular image, but it could apply to any media type.

On the left side, normal media is tied to normal behavior, likes, comments, etc, which can also be onchain.

There’s a goldilocks zone, where speculation can actually be productive. There’s collecting, also called minting, where users can prove their involvement and support for a specific piece of media and their creator, and it has proven to work with specific sets of creators.

There’s also app tokens, or miniapp tokens, where economic activity that flows through them is tied to the token to some extent. There’s creator tokens, where the economic activity of a specific creator is tied back to the token. These come in infinite twists and flavours.

Finally, there's adcoins?

If we rewind to digital ads, it's essentially attention being priced based on engagement metrics. On one side of the market, creators are driving the user engagement, and on the other, brands pay for it based on specific conversion metrics, mostly views, clicks, or buys. 

The problem now is: web3 has a broken marketplace. It has neglected to involve brand advertising, and the needs of them as essential stakeholders.

Enter, ADCOINS. The idea is simple. Web3 apps should offer ad placement in their apps to brands on specific pieces of content, and the ad revenue generated should be shared with content coin holders.

Another way to expand the model is through brand engagement, where brands need a specific amount of content coin ownership to advertise on a piece of content.

This essentially means that if a normal viewer feels like a piece of content is going to go viral, they can bet on that, buy some of its coins, and get rewarded via the ad revenue that that content coin gets. 

This market can start as simple as web3 apps adding a small “sponsored by” banner on posts for brands advertising on the post, or showing pairing the sponsored content right before/after the post is shown. This can happen at a protocol level, or at an app level.

In time, I would expect it to be more complex, with multiple types of media ads, different marketplaces, and different tokenomics for each. Just as web2.

The final slide touches on how web3 app builders are able to max their distribution by leveraging permissionless miniapp channels and protocols. From left to right, I rank those with the highest leverage.

The Ad coin mechanism applies to a lot of cases, and it’s not a sole winner type of thing. We’ll have it for different media types and regions.

• {{App1}} is an APAC app that {{Music}} creators use to enhance their earnings onchain via ad coins

• {{App2}} is an US app that {{Podcast}} creators use to enhance their earnings onchain via ad coins

• {{App3}} is an US app that {{Long form video}} creators use to enhance their earnings onchain via ad coins

• {{App4}} is an India app that {{Meme}} creators use to enhance their earnings onchain via ad coins

• {{App4}} is a global that {{Art}} creators use to enhance their earnings onchain via ad coins

• Etc

This is still a nascent idea, and we love to chat with folks interested. DMs open.