As we enter 2022, we are closing in on a brand new iteration of the web that could lead to new forms of eCommerce.
The volume of search for 'Web3' drastically increased in the second half of 2021. The term had been in talk for years; we are now closer than ever as blockchain and cryptocurrencies become more widely embraced. As a result, the e-commerce sector will undergo crucial changes, potentially leading to new forms and environments.
The first version of the internet, Web1, consisted primarily of links and homepages that allowed little to no interactions for users. Web2 took users' experience to a new height. Users can not only read and write but can also publish their content for others to consume. Social media's emergence further increased users' content sharing. Web2 provides an abundance of services, many even for free, but breaches in personal data amplified the public's concern over their online traces. For example, Tech giants can use personal data to create custom advertisements for various users. To make matters worse, 56% of Americans don't know what steps to take if they are affected by a data breach.
While Web2 can be understood as read-write, Web3 will be read-write-own. The third iteration of the internet allows users to govern their data and protocol through Decentralized Applications (dApps), built on P2P networks like Ethereum. Web3 solves the trust issue we have over the current phase of the internet via continuously verifying the identity and intent of users. The new form of the internet will significantly impact the eCommerce sector. The following article explores the different aspects in which Web3 can influence commerce.
A nail in the coffin for SEO?
Search engines are unlikely to become obsolete since there is yet to be a replacement. And SEO (search engine optimization) will accompany search engines into Web3. According to research, approximately 81% of consumers discover new products and services through search engines. Therefore, SEO has been a very fruitful method to market a business. Online stores use SEO to generate foot traffic. By ranking higher in the research results, an eCommerce business is more likely to attract shoppers. That is why these stores tend to use graphic and comprehensive product descriptions. Since 95% of people won't get past the first page of their Google search, online businesses compete for a spot on the first page by carefully choosing the keywords they embed in their websites.
It is uncertain how the further evolved internet will impact SEO and eCommerce. But Web3 will cause a shift in what search engines will look like, which in turn will change how SEO works. Andrew Kiguel, Co-Founder and CEO of Token.com, suggests that "Perhaps SEO will lead people to a metaverse shopping experience instead of a website." With the rising interest in the metaverse and its related technologies, eCommerce is in a position to go through revolutionary changes. Search ranking will be expected to be determined and optimized by a collective database, including users' past searches, instead of having one platform handling all the work. This will result in less exposure for online businesses that rely heavily on search marketers. However, users may see less sponsored content and experience enhanced accuracy in their search results. While users and customers will have a better online experience, eCommerce businesses may go through hitches in promoting their products. The shift in power from business owners to consumers will be the main theme of Web3 for the eCommerce sector.
Upgraded online transactions
Running on dApps and blockchain, Web3 secures users' data and online transactions more than ever before. In June 2021, data of 700 million LinkedIn users were put on sale online. The seller showed a one million LinkedIn users' sample to confirm that he has private information on users' names, physical addresses, inferred salaries, emails, and phone numbers. The data were obtained on LinkedIn API and various other websites. Despite the data not being strictly 'stolen,' the astonishing collection of personal information makes one ponder the safety of online transactions if personal information is so quickly garnered.
The new web form will be advantageous for eCommerce in terms of the transaction process. Web3 payment applications, being fully decentralized, require no personal information. The self-governance characteristic of Web3 allows users to remain entirely sheltered from hackers. In addition, Web3 renders a faster and cheaper transaction process. A decentralized autonomous organization (DAO) is envisioned as an organization that automates business functions by leveraging smart contracts and blockchain. By knocking down the intricate business process and unnecessary intermediaries, DAOs will be the foundation of Web3 that smoothens online transactions and enhances payment transparency. The implementation of DAOs means a more frequent online transaction, which bodes well for the eCommerce sector. The numerous possibilities that Web3 entails for eCommerce will accelerate the market's growth. Grand View Search suspects that the global eCommerce market size is expected to have a CAGR of 14.7% from 2020 to 2027. Moreover, an increasing number of small and medium enterprises in the eCommerce sector is projected to escalate the market's growth.
Decentralization is the hallmark of Web3. But is the new web truly as decentralized as rumored? Many facets of eCommerce, like payments and communication, will be operated on decentralized blockchain technologies. And blockchains work by decentralizing the storage of information over a permanent ledger. Cryptocurrencies and NFT will allow users to participate in web protocols and give users more autonomy over their online presence. But the accusation of 'decentralization theater' didn't just appear out of thin air. A small number of firms will still control many services on Web3. This is because web3 depends heavily on API, and dApps use APIs to connect to blockchains like Ethereum. The dApps on Ethereum are powered by two companies, Alchemy and Infura. As a result, users have to trust these companies in Web3. Co-Founder of Ethereum, Vitalik Buterin, recognizes the 'decentralization theater' criticism and argues that the future will be different. He said that companies and users will run programs directly on the Ethereum blockchain in the future as it will become cheaper and more accessible for them.
The bottom line
Despite controversies surrounding Web3, the new web will benefit the eCommerce sector. A faster and more secure transaction process means more people will be willing to shop online in a market already accelerated by the pandemic. The overall impact of Web3 on e-commerce will be positive. However, the success of Web3 hinges on regulations and restrictions. Although similar regulations to the internet should be imposed, the decentralized nature of Web3 calls for policymakers to calibrate regulations based on the specific dApps and their associated risks. According to Andreessen Horowitz, "Regulating Web 3 platforms effectively requires its own set of literacy, training, and expertise. Over the medium term, a new approach tailored to the unique attributes of Web 3 platforms may be more appropriate and efficient than stretching the existing jurisdictional authority of a dozen or more agencies." No one knows for sure what Web3 will look like. But we can expect a bit more 'centralization' than expected.