Translated by Lyne Choi
Table of Contents
Introduction
1. UPTN's Mission: "Saving Private OK CASHBAG"
2. Road to Rich: A Dynamic Membership Where Users Design Their Benefits
3. Gamification Elements and Rich Content as Differentiators
4. Expanding the Business Model to the Financial & Publishing Industry in the Long Run
5. Profitability and Expansion Speed Should Be Assessed with Long-Term Perspective
Closing Thoughts
Introduction
SK, the second largest South Korean conglomerate with over 200 subsidiaries, such as SK Hynix, SK Innovation, and SK Planet, recently unveiled its first blockchain project, UPTN. UPTN encompasses the UPTN Chain leveraging the Avalanche Subnet, the OK CASHBAG membership-based NFT project “Road to Rich,” and the UPTN Station wallet, which will serve as a central component within the ecosystem. SK’s longstanding interest in blockchain and the broader Web3 ecosystem has paved the way for this significant milestone. This article aims to examine the underlying considerations driving the Road to Rich project and explore its potential for achieving success.
1. UPTN's Mission: "Saving Private OK CASHBAG"
OK CASHBAG, now transformed into a Web3 service, is SK Planet's integrated rewards program launched in 1999, currently celebrating its 25th anniversary. By offering a rewards program enabling users to earn and redeem points at various member stores, OK CASHBAG has amassed an impressive membership base of over 20 million. This symbiotic relationship benefits both OK CASHBAG's partnering companies, as they naturally enjoy increased marketing exposure through members' preference for using member stores to earn and redeem points, while SK Planet earns commissions from these partnerships. However, as larger franchises started implementing their own rewards programs, OK CASHBAG gradually lost market share and struggled to attract younger users, resulting in its current status as a somewhat outdated service.
The main objective of the UPTN project is to establish the Millennials and Generation Z (MZ generation) as long-term customers of OK CASHBAG, recognizing their significance as a major consumer segment. In order to achieve this, SK Planet plans to integrate NFTs into the OK CASHBAG membership and introduce a range of services aimed at attracting the MZ generation to the ecosystem, positioning it as an indispensable long-term service for their consumption lifestyle. This approach takes into account the digital-oriented nature of the MZ generation, who actively engages in economic activities within the digital space.
2. Road to Rich: A Dynamic Membership Where Users Design Their Benefits
2-1. Dynamic Membership for Customized Benefits
Road to Rich operates as a dynamic membership where users design their own benefits, distinguishing it from traditional NFTs offering fixed benefits. Road to Rich consists of two elements: Character NFTs and TEM NFTs. Holders can create a customized membership tailored to their needs by combining character NFTs with TEM NFTs, each offering unique benefits (refer to the image below).
TEM NFTs are designed to provide benefits associated with over 130 partner companies and more than 50,000 member stores in fashion, food, home appliances, and lifestyle sectors, which are part of the existing OK CASHBAG service. Similar to how consumers can freely utilize points earned from OK CASHBAG at their desired member stores, Road to Rich holders can also enjoy the benefits of their preferred member stores based on the combination of TEM NFTs they possess.
By providing benefits that are customized to individual needs instead of unilaterally offering fixed benefits, SK Planet can expect to achieve user lock-in. Users experience greater satisfaction when they can customize their benefits as needed through TEM NFT transactions, compared to when the benefits are fixed. Moreover, as SK Planet secures more affiliate partners to offer a broader range of benefits, users will experience enhanced value, further increasing the lock-in effect. Considering the primary objective of attracting the MZ generation to the ecosystem, there is a strong likelihood of forming partnerships with services that are commonly utilized by this demographic in the future.
2-2. Addressing Pain Points in NFT Projects: Customized Benefits and Revenue Expansion
Korean conglomerates that entered the Web3 market ahead of SK have also introduced membership-based NFTs. However, their approach differs significantly from SK Planet's Road to Rich. While these conglomerate-led NFTs offer fixed benefits, Road to Rich allows users to design their own benefits, addressing the individual needs of users. This customizable approach makes Road to Rich a more attractive investment, as users are not burdened with unnecessary benefits. In terms of ecosystem scalability, a personalized benefit structure, like Road to Rich, is more likely to foster user engagement and loyalty.
Active secondary trading of TEM NFTs is prevalent in Road to Rich as users modify their benefits over time. As a result, it is less susceptible to cryptocurrency market conditions compared to membership NFTs offered by other large companies. Additionally, the income structure mirrors that of the existing OK CASHBAG, which collects commissions from member stores. For instance, member stores participating as TEM NFT affiliates can benefit from continuous exposure to Road to Rich holders, leading to effective marketing outcomes, while SK Planet can generate advertising fees from these stores. Moreover, UPTN Station, the core of the UPTN ecosystem, is anticipated to evolve into a platform and extend its reach into business models akin to platform companies like KakaoTalk and Weverse. This expansion offers the potential for revenue diversification through multiple channels, including NFT marketplaces, banner ads, video ads, NFT gifts, and merchandise utilizing Racky IP.
3. Gamification Elements and Rich Content as Differentiators
3-1. Gamification Elements Fostering an Engaging Ecosystem
Racky, a character NFT, offers five distinct levels. Users have the opportunity to level up Racky by completing various quests, with rewards including OK CASHBAG points or Hawaiian travel vouchers provided for each milestone. Additionally, users have the freedom to customize Racky’s room based on their level, granting them access to distinct benefits and enhancing their overall experience.
In this regard, SK Planet has implemented various gamification elements such as quizzes, mini-games, and the option to decorate Racky’s room to encourage user participation and enhance engagement. Instead of solely focusing on benefits, SK Planet aims to create an ecosystem centered around user engagement and entertainment. The feature of customizing Racky’s room specifically targets the MZ generation, taking into account the popularity of virtual space decoration and avatar communication apps like Bondee among young people earlier this year especially in South Korea. It is anticipated that the gamification aspect of Road to Rich will similarly attract MZ Generation to the ecosystem and encourage active participation. Additionally, UPTN has plans to leverage UPTN Station as a platform to introduce upcoming features such as live chat, airdrops, and message boards. Similar to community-centric platforms like Weverse, these features will serve as tools to prolong user engagement on the platform.
3-2. Leveraging SK Group's Content Resources
As UPTN is a project under SK Planet, it is anticipated to leverage the rich content resources available within SK Group, in addition to the OK CASHBAG partners mentioned earlier. SK Planet has already announced collaborative plans with 11st, One Store, Tmap Mobility, SK Telecom, SK Stoa, and other ICT companies within the SK Group to expand the UPTN ecosystem. The collaboration with 11st aims to ensure the authenticity of products through NFTs and store the NFT guarantee within the UPTN Station. While the specific details and timeline of collaborations with other SK Group companies have not been disclosed, it is expected that they will follow a similar approach as 11st, utilizing UPTN Station for integration and development.
In the future, the project aims to include not only SK Group's services but also the services of SK partner companies within the ecosystem. By participating in the UPTN project, partner companies can anticipate the soft landing of their Web3 business and benefit from the strong synergy effects resulting from their longstanding cooperative relationship with SK Group. The list of affiliated services of SK Telecom's subscription service, “T Universe,” can serve as an example of the services that are likely to be included in the UPTN ecosystem:
- Online and offline shopping: Amazon, 11st, and Emart
- Foods and beverages: Starbucks, Paris Baguette, and Baemin
- Digital services: Google One, Wave, Flo, V Coloring, Xbox Game Pass, and Spoon Radio
- Mobility services: T-Map and Everyone's Shuttle
- Pet products: AboutPet
- Insurance: AIA Life
It is still early to determine how these services will integrate with the UPTN project. However, with 1.8 million active users in the first quarter of T Universe, there is a potential for it to become a killer content platform in the future.
4. Expanding the Business Model to the Financial & Publishing Industry in the Long Run
4-1. Tokenizing the Existing Rewards System for New Financial Possibilities
While the main objective of the UPTN project is to expand its customer base among the MZ generation, there are also future prospects for UPTN Station to serve as a means to secure multiple revenue channels and achieve revenue diversification. Looking ahead, there is potential for the utilization of OK CASHBAG points to venture into the DeFi space, offering opportunities for further growth. In the long run, there is potential to expand into the DeFi space by leveraging OK CASHBAG points. Customers can convert OK CASHBAG points into cash if they accumulate 50,000 points or more. However, there are limitations on the conversion amount, allowing up to USD 40 at a time, USD 80 per month, and USD 800 per year. As a result, a significant portion of customers' points often remain unused. However, by issuing points in tokens, various financial services that were previously unavailable in the Web2 environment can be introduced. For instance, tokenizing OK CASHBAG points opens up possibilities such as easily exchanging them for other points operated by SK Group companies through the swap function, borrowing points through the lending function, or lending idle points to earn interest. SK Planet can generate additional revenue and expand its business into comprehensive financial services, including loans, investments, and payments by providing these financial services. However, it is important to note that SK Planet's entry into the financial business is not anticipated in the near future due to regulatory obstacles that have resulted in the discontinuation of similar businesses in Korea. The company will likely pursue expansion in this area once domestic regulations on digital assets are clarified and the business landscape becomes more visible, and the consideration of issuing tokens may also be explored in the future accordingly.
4-2. Potential for Blockchain Publishing Services Leveraging Business Expertise
As the Road to Rich project progresses successfully, SK Planet is anticipated to expand its business into NFT publishing in the future. Publishers play a crucial role in the gaming industry, contributing to game promotion through services encompassing game planning, infrastructure development, marketing, server management, translation, and localization strategies. Similarly, SK Planet can offer value as a publisher to companies contemplating a transition to Web3 by operating the UPTN Station wallet, which facilitates NFT storage, trading, and issuance of Road to Rich NFTs. Leveraging its expertise in community management, SK Planet can devise promotional campaigns and events in addition to handling NFT planning, issuance, and transmission. Furthermore, drawing on its experience in integrating with OK CASHBAG, an existing Web2 service, SK Planet can provide comprehensive solutions such as APIs for seamless integration with Web2 services.
A publisher's capabilities evolve through experience and know-how. In the absence of a dedicated NFT publisher, SK Planet has the opportunity to swiftly enter the market, establishing itself as a reference publisher and securing a unique position as the domestic NFT market enters a phase of significant growth. By doing so, SK Planet not only stands to diversify and increase revenue streams but also foster potential collaborations with publishing clients, opening up new avenues for partnership and growth.
5. Profitability and Expansion Speed Should Be Assessed with Long-Term Perspective
5-1. Initial Cost Considerations
Road to Rich entails a significant initial cost structure. To attract users, it is crucial to onboard a substantial number of member companies, which involves investing in subsidies for these member companies. Moreover, the benefits that resonate with the majority of users are likely to be concentrated among a few member companies, resulting in potential losses for those providing the benefits as users flock to them. As a result, member companies are compelled to gradually reduce the scale of benefits to mitigate losses. In such cases, two scenarios may unfold: 1) users become disappointed with reduced benefits and exit the ecosystem, and 2) member stores unable to gain exposure also withdraw from the ecosystem.
Ultimately, SK Planet may need to provide support to member stores to prevent the detrimental cycle of reduced benefits → user attrition → attrition of member stores → further user attrition. In the long run, these costs may be offset if 1) secondary trading of TEM NFTs remains active, and 2) the ecosystem expands to a scale where member stores voluntarily join and generate advertising revenues. However, given the considerable upfront investment, it is essential to maintain a long-term perspective when assessing profitability.
5-2. Patience Required for Business Results to Manifest
While SK Planet is poised to venture into diverse sectors like platforms, finance, and publishing based on Road to Rich, the process of entering these markets and demonstrating substantial outcomes may take longer than anticipated. Establishing a robust user base is imperative for the platform business, while the financial sector necessitates relevant regulations pertaining to token issuance. In the case of publishing, tangible results from Road to Rich must materialize before other companies are incentivized to seek publishing collaborations with SK Planet. Therefore, the expansion of business domains and the ensuing outcomes should be approached with a long-term perspective, understanding that time is required for these ventures to fully unfold.
Closing Thoughts
The UPTN project by SK Planet, integrating NFTs with OK CASHBAG, may entail an initial investment and require time for the business expansion to yield visible results. However, its distinguishing factors lie in the ability for users to personalize their own benefits, the incorporation of gamification elements to foster ongoing ecosystem engagement, and the potential for diverse advantages through leveraging the content capabilities of SK Group and its partners. These aspects are expected to address the revenue instability and limited ecosystem participation that have been pain points in existing NFT projects, while paving the way for business expansion across platforms, finance, publishing, and other domains. For these reasons, the UPTN project deserves attention and observation.