Polygon Labs paid $4 million to host Starbucks Odyssey, the NFT-powered loyalty program that made headlines as a crypto biz-dev coup.
The deal was a trademark of a “huge and flashy” enterprise growth technique that Polygon has since deserted, individuals acquainted with the matter mentioned.
Corporations often pay their tech distributors for companies rendered. For Starbucks’ soon-to-be-defunct foray into crypto on the Polygon community, it was the opposite method round.
Polygon Labs paid $4 million to the espresso big in 2022 as a part of their deal to construct and host a blockchain-based loyalty program, Starbucks Odyssey, on the Polygon community, in keeping with two individuals acquainted with the matter. The payout ended a aggressive hunt by proponents of not less than three blockchain ecosystems who wished to accomplice with Starbucks, a 3rd individual mentioned.
The beforehand unreported determine provides context to the origins of certainly one of crypto’s flashiest crossovers into American shopper tradition (and subsequent flops). Final week, Starbucks pulled the plug on Odyssey, its 18-month experiment in utilizing collectible non-fungible tokens because the anchor of a loyalty program.
The determine speaks to the price of doing enterprise growth in crypto. In 2022 Polygon Labs pursued headline-grabbing partnerships with the likes of Nike and Starbucks, the sort of firms that may elevate Polygon’s title recognition. If huge manufacturers had been utilizing Polygon as their launchpad for crypto, then maybe their large buyer bases would observe swimsuit.
They didn’t.
“All these huge flashy offers are a remnant of the previous and the earlier management’s technique,” mentioned an individual acquainted with Polygon Labs’ present considering. The corporate, the primary developer of the Polygon blockchain, is now extra centered on constructing revolutionary tech than inking partnerships, the individual mentioned.
Origins of Odyssey
The cope with Polygon doubtless wasn’t solely a cash play. Starbucks seems to have been genuinely fascinated by discovering a Web3 accomplice that will host Odyssey. Its search was being led by Forum3, a advertising consulting store whose co-CEO Adam Brotman was as soon as Starbucks’ chief digital officer.
Brotman had conversations with representatives from Polygon in addition to Solana in early 2022, two individuals aware of the discussions mentioned. Samson Mow, a longtime bitcoin booster, advised CoinDesk he lobbied Starbucks to decide on Liquid Community, a bitcoin layer-2.
Forum3 selected Polygon for its tech, one former Polygon worker mentioned. However the deal additionally got here with the grant in addition to intensive technical and advertising help to assist Forum3 arrange the Starbucks loyalty program, that individual mentioned.
The Voyage Begins
Starbucks Odyssey sought to reimagine the espresso firm’s in style loyalty program with a crypto tint, in keeping with a case research revealed by Forum3 in January. Members would get “stamps” (collectible NFTs) for finishing duties. They may use these stamps to qualify for rewards like invites to coffee-themed experiences or unique branded swag.
The loyalty program promised to be a moneymaker for Starbucks. It offered these stamps for as a lot as $100 apiece. It doubtless revamped 1 / 4 of one million {dollars} by taxing secondary gross sales of the stamps, in keeping with on-chain knowledge.
However Odyssey additionally had upside for its members, the stamp patrons. They may resell the stamps to others by way of a digital storefront arrange by Starbucks and Nifty Gateway, an NFT market.
Forum3’s case research hailed the “measurable financial worth” Odyssey might create for Starbucks and its followers. The primary monetized Odyssey NFT sequence (the Siren Assortment) offered out in 18 minutes and rapidly traded at a 4x premium, in keeping with Forum3.
As occurs with many NFTs, Odyssey discovered a collector group that believed in its worth potential and wager huge. One such collector was Dan Elitzer, co-founder of the enterprise capital agency Nascent.
“We have not invested an enormous quantity in comparison with what we sometimes do,” Elitzer mentioned in a January interview. Even so, Nascent believed that Odyssey NFTs might have long-term worth if Starbucks Odyssey endured as the primary huge NFT loyalty program, he mentioned.
Even earlier than Starbucks mentioned it might shutter Odyssey, its NFTs worth proposition was beneath stress. The final Siren NFT to promote earlier than Starbucks’ March 15 announcement was priced at $215. On Tuesday potential patrons had been providing a most of $86 per Siren NFT, whereas sellers wished a minimum of $165.
Representatives for Forum3, which as soon as billed itself as a Web3 firm however has since pivoted to AI, in keeping with its web site, didn’t reply to a request for remark.
The Odyssey Ends
Starbucks Odyssey succeeded in fostering a distinct segment following throughout its 18-month run as an invite-only “beta” program. Together with a vibrant Discord server, it impressed a cult following whose proponents traded the NFTs, boosted this system on social media and even created a “Suggestions” web site to assist individuals strategize their points-earning.
That group was in a way of shock final week when Starbucks abruptly introduced the Odyssey was ending. Members traded messages of grief, anger, unhappiness and wistful reminiscences in its personal Discord server, in keeping with screenshots of messages reviewed by CoinDesk.
“It’s undoubtedly a little bit upsetting as somebody who has put a while and $$ in however general I perceive the pivots of huge enterprise and I’m pleased that Starbucks examined the idea,” Bryan Kayne, a crypto advisor and Odyssey member, mentioned in a Telegram message to CoinDesk.
In an e-mail to CoinDesk, a consultant for Starbucks mentioned: “We’re wanting ahead to making use of our learnings to the way forward for this program.” She wouldn’t element what that future holds, nor whether or not it should proceed working in Web3.
“We worth our relationship with Polygon and the contributions it has made to Starbucks Odyssey,” the consultant mentioned. She wouldn’t talk about the financials of its enterprise partnership with Polygon.
Previous Polygon, New Polygon
The Starbucks deal was an exemplar of the high-flying, big-name-forward dealmaking type Polygon pursued beneath the management of Ryan Wyatt. The previous on-line gaming govt was Polygon Labs’ president from early 2022 till mid-2023, when, in keeping with two individuals acquainted with Polygon, he was ousted.
“If you happen to have a look at Polygon Labs now, during the last 9 months they’ve shifted their focus to turn out to be a tech powerhouse centered on ZK tech and offers which have extra of a right away impression on-chain somewhat than advertising worth,” one supply mentioned.
The swap additionally displays the challenges of constructing crossover Web3 merchandise for a non-crypto viewers, paid deal or no. A number of customers and proponents of Odyssey advised CoinDesk the characteristic was constructed to accommodate those that did not have a crypto pockets or an understanding of blockchains – in different phrases, most human beings (and by extension most Starbucks prospects).
A former Polygon worker who labored on the Starbucks deal mentioned it was no shock Odyssey is shutting down.
“Chasing Web2 is a idiot’s errand, for my part,” the individual mentioned, referring to established tech giants. “The crypto native narrative is sufficiently big if you happen to play it proper.”
Wyatt, who declined to remark by a spokesperson at his present employer, Optimism Limitless, highlighted his emphasis on the advertising worth of dealmaking in recorded talks he gave after leaving Polygon.
“We had been in a very good place the place individuals had been on the lookout for constructive tales and so a whole lot of the efforts had been amplified,” Wyatt mentioned in an interview with crypto investing agency Variant in September 2023, months after leaving Polygon. Partnerships with “family model names” helped Polygon “set up credibility,” he mentioned.
It was widespread for Polygon to pair grants with their partnerships, a former worker mentioned, calling the observe commonplace throughout crypto. Wyatt mentioned the identical in an look on CoinDesk TV in December 2022.
“All of the protocols are doing paid offers,” he mentioned on the time.