Polygon Labs paid $4 million to host Starbucks Odyssey, the NFT-powered loyalty program that made headlines as a coup in crypto development.
The deal was a hallmark of a “big and flashy” business development strategy that Polygon has since abandoned, people familiar with the matter said.
Companies typically pay their technology providers for services rendered. In Starbucks’ soon-to-be-defunct foray into crypto on the Polygon network, it was the other way around.
Polygon Labs paid $4 million to the coffee giant in 2022 as part of its deal to build and host a blockchain-based loyalty program, Starbucks Odyssey, on the Polygon network, according to two people familiar with the matter. The payout ended a competitive hunt by proponents of at least three blockchain ecosystems seeking to partner with Starbucks, a third person said.
The previously unreported figure adds context to the origins of one of crypto’s most notable crossovers in American consumer culture (and its subsequent flops). Starbucks last week pulled the plug on Odyssey, the 18-month experiment in using collectible, non-fungible tokens as the anchor of a loyalty program.
The figure speaks to the cost of business development in crypto. In 2022, Polygon Labs pursued high-profile partnerships with the likes of Nike and Starbucks, the kind of companies that could increase Polygon’s brand awareness. If major brands were to use Polygon as their launchpad for crypto, perhaps their massive customer bases would follow suit.
They did not.
“These types of large, high-profile deals are a relic of the past and the strategy of previous leadership,” said a person familiar with Polygon Labs’ current thinking. The company, the main developer of the Polygon blockchain, is now more focused on innovative construction technology than forming partnerships, the person said.
Origin of Odyssey
The Polygon deal was probably not just a matter of money. Starbucks seems genuinely interested in finding a Web3 partner that would host Odyssey. The search was led by Forum3, a marketing consultancy whose co-CEO is Adam Brotman was once Starbucks’ Chief Digital Officer.
Brotman had discussions with representatives from both Polygon and Solana in early 2022, two people briefed on the discussions said. Samson Mow, a longtime bitcoin booster, told CoinDesk that he lobbied Starbucks to choose Liquid Network, a bitcoin tier-2.
Forum3 chose Polygon for its technology, a former Polygon employee said. But the deal also included the grant and extensive technical and marketing support to help Forum3 build Starbucks’ loyalty program, that person said.
The journey begins
Starbucks Odyssey tried to reinvent the coffee company’s popular loyalty program with a crypto twist, a case study shows published by Forum3 in January. Members would receive “stamps” (collectible NFTs) for completing tasks. They could use those stamps to qualify for rewards like invitations to coffee-themed experiences or exclusive brand swags.
The loyalty program promised to make Starbucks money. It sold these stamps for as much as $100 each. It probably made more than a quarter of a million dollars by taxing the secondary sales of the stamps. according to on-chain data.
But Odyssey also had benefits for its members, the stamp buyers. They were able to sell the stamps to others through a digital store set up by Starbucks and Nifty Gateway, an NFT marketplace.
Forum3’s case study touted the “measurable monetary value” Odyssey could create for Starbucks and its fans. The first monetized Odyssey NFT series (the Siren Collection) sold out in 18 minutes and quickly traded at a 4x premium, according to Forum3.
As happens with many NFTs, Odyssey found a collector community that believed in its value potential and bet big. One of those collectors was Dan Elitzer, co-founder of the venture capital firm Nascent.
“We haven’t invested much compared to what we normally do,” Elitzer said in a January interview. Still, Nascent believed Odyssey NFTs could have long-term value if Starbucks Odyssey were to survive as the first major NFT loyalty program, he said.
Even before Starbucks said it would close Odyssey, the NFT value proposition was under pressure. The last Siren NFT that was set to sell before Starbucks’ March 15 announcement was priced at $215. On Tuesday, potential buyers offered a maximum of $86 per Siren NFT, while sellers wanted as much as $165.
Representatives of Forum3, which once billed itself as a Web3 company but has since transitioned to AI, the company said website, did not respond to a request for comment.
The Odyssey ends
Starbucks Odyssey managed to gain a niche following during its 18-month run as an invitation-only “beta program.” Along with a vibrant Discord server, it inspired a cult following whose advocates traded the NFTs, boosted the program on social media and even created a “Tips” website to help people determine their point-earning strategy.
That community was in shock last week when Starbucks abruptly announced that the Odyssey was coming to an end. Members exchanged messages of grief, anger, sadness and wistful memories on the private Discord server, according to screenshots of messages reviewed by CoinDesk.
“It’s definitely a little disconcerting as someone who’s put some time and money into it, but overall I understand the big companies’ core values and I’m glad Starbucks tested the concept,” said Bryan Kayne, a crypto consultant and member of Odyssey, in a Telegram message to CoinDesk.
In an email to CoinDesk, a Starbucks representative said, “We look forward to applying our learnings to the future of this program.” She wouldn’t detail what that future holds, nor whether it will continue to work in Web3.
“We value our relationship with Polygon and the contributions it has made to Starbucks Odyssey,” the representative said. She declined to discuss the financial aspects of the business partnership with Polygon.
Old polygon, new polygon
The Starbucks deal was an example of the high-flying, forward-thinking dealmaking style that Polygon pursued under Ryan Wyatt’s leadership. The former online gaming executive served as president of Polygon Labs from early 2022 to mid-2023, when he was ousted, according to two people familiar with Polygon.
“If you look at Polygon Labs now, over the past nine months they have shifted their focus to becoming a technology powerhouse focused on ZK technology and deals that have more of a direct impact on the chain than on marketing value,” said a source. .
The move also reflects the challenges of building crossover Web3 products for a non-crypto audience, paid deal or not. Multiple users and proponents of Odyssey told CoinDesk that the feature was built to cater to those who didn’t have a crypto wallet or understanding of blockchains – in other words, most people (and by extension, most Starbucks customers).
A former Polygon employee who worked on the Starbucks deal said it was no surprise that Odyssey is shutting down.
“Chasing Web2 is a foolish endeavor in my opinion,” the person said, referring to established tech giants. “The crypto-native story is big enough if you play it right.”
Wyatt, who declined to comment through a spokesperson at his current employer, Optimism Unlimited, emphasized his emphasis on the marketing value of dealmaking in recorded conversations he gave after leaving Polygon.
“We were in a really good position where people were looking for positive stories and so a lot of the efforts were amplified,” Wyatt said in a interview with crypto investment firm Variant in September 2023, months after leaving Polygon. Partnerships with “household brand names” helped Polygon “gain credibility,” he said.
It was common for Polygon to tie grants to their partnerships, said a former employee, who called the practice commonplace in cryptocurrency. Wyatt said the same thing in an appearance on CoinDesk TV in December 2022.
“All protocols do paid deals,” he said at the time.