NFTs: Vast potential upside and relatively low risk: why every brand should ask whether NFTs are for them
By Drew Rasansky & Leon Jon
It’s safe to say that almost anyone who’s tapped into the world of technology has heard of NFTs, or Non-Fungible Tokens — as they gained traction in 2021, they quickly became an international fixation. Within months of NFTs’ introduction, a single JPEG by Beeple — an iconic purveyor of digital art — was sold for $69 million. But just as soon as NFTs gained status as a cultural sensation, so did a widespread skepticism on the legitimacy and longevity of the new form of asset. So are NFTs just another ephemeral fad, or should we expect them to be a mainstay of the emerging digital economy? And if they are here to stay, how can a brand intelligently take advantage of this new resource?
ABOUT NFTs
NFTs are unique, certifiable digital assets that can be traded, sold and used just like other, more conventional assets. But unlike physical assets, which are constrained by the limitations of the corporeal world, they can exist in any form at all: images, music, digital art, videos, and tickets, to name a few. And although it may not seem so monumental at first, this ability to transcend the physical world actually makes NFTs the single most revolutionary piece of technology to come out in the last five years.
In order to understand what makes NFTs so seminal, it’s important to first understand what distinguishes them from replicable digital objects. Unlike a typical JPEG, which can simply be right-clicked, saved onto someone’s desktop, and then copied and pasted ad infinitum, each NFT is one of a kind — though there may be others like it, only one with its unique digital signature exists. This measure of authenticity, and the exclusivity that comes with it, can be used to engage and facilitate exceptional consumer experiences.
Since it comes with a built-in scarcity, possession of an NFT signals some degree of cultural and social capital. The whole arrangement is not unlike ownership of a Gucci purse — by holding that purse and flaunting it for others to see, each owner can benefit from the cultural cache that comes with the brand recognition. Furthermore, its incontrovertible authenticity signals that the owner is part of an exclusive community, thereby granting them special privileges and benefits.
But the applicability of this cultural cache is already exceeding what anyone could have foreseen as recently as a year ago. Just by holding these proverbial purses, NFT owners are (and should be) able to gain access to invitation-only events or communities, get discounts on other products, and in some cases, win tickets to exotic locales. With ownership of an NFT, consumers find they’ve suddenly opened doors to unique engagement opportunities and experiences, while brands, having figured out how NFTs can be minted into golden tickets, are finding new ways to exploit them as generators of publicity and cultural capital.
This creates a strong, mutually beneficial relationship between the consumer and the brand. Both parties are deeply invested in the value of the NFTs, even after they’ve been sold: the consumer, now part of an exclusive community, wants to ensure that their new asset retains value; and the brand, entitled to a fraction of any secondary sale, wants to ensure that the assets they’ve commissioned retain or accrue value. Both parties, tied together by a shared investment, work tirelessly to build an exclusive community that’s centered around possession of a rare digital resource.
WHO IS THIS CURRENTLY BUILT FOR?
It’s no coincidence that NFTs are emerging around the same time that people who grew up digitally-native, iPhone in hand, are coming of age. This community of new-age consumers, unlike many of us, is all-too-familiar with the power and utility of digital assets, and they’re extremely passionate about the potential that NFTs hold. Let this sink in — this same generation has only begun to wield much, if any, socioeconomic sway, and its share of the market is only going to grow in the coming decades.
Cognizant of the fact that NFTs represent the wave of the future, many brands are finding original and innovative ways to set themselves up for long-term success today: Pringles released a “Gold Can” NFT; Charmin released a toilet-paper-themed NFT; and Don Julio released a one-of-one artwork by Claudio Limon. And while these are all great forays into NFTs — a sort of trial run, if you will — there’s sure to be several evolutions as the marketplace continues to expand. Below, we look at a few examples of innovative NFTs:
NEW APPROACHES
When we said that NFTs can literally be anything, we weren’t exaggerating — Zed.run is an NFT startup that has created an online digital horse racing platform. These horses can be bred and traded for real-world value before being raced on virtual tracks for real-world winnings. Stella Artois, in conjunction with the horse-racing season in the UK, ran an NFT partnership in collaboration with Zed.run. The two auctioned off rare “skins,” and used the proceeds from sales to help support the hospitality industry. They felt comfortable foregoing any direct revenue from this campaign because the NFTs, by virtue of their mere existence, were already paying sizable dividends for Stella by tapping into a new contingent of consumers that may not have otherwise been interested in their line of products. People who were passionate about horse-racing and NFTs — not necessarily your typical Stella Artois drinker — found themselves engaging on a deep level with the brand.
CryptoPunks, one of the earliest forms of crypto-art, were released in 2017 and continue to serve as a shining example for NFTs that are conceived as status symbols. A series of computer-generated avatars, CryptoPunks are highly coveted, which means that they provide both cultural and material value to anyone who owns one — in March, Jay-Z purchased a CryptoPunk for millions of dollars and set it as his Twitter profile picture. For him, his new CryptoPunk functioned as both a status symbol and a signal of membership in the vanguard of the NFT community. As a powerful influencer in the art, music and pop culture scenes, Jay-Z brought both himself and the NFT community greater influence.
Some movers and shakers in the NFT community are developing unprecedented methods for exploiting the material capital that can come with crypto-art. Gary V has perhaps been the most notable catalyst in this domain has created a tight-knit community that’s powered by a series of 10,255 NFTs called VeeFriends. These NFTs grant owners access to exclusive events and, most notably, VCon, a curated annual conference. VeeFriends have multiple layers to them, and each token is imbued with its own unique utility: Hangout Hawks unlock five 60-minute hangouts each year with Gary V himself, and Gift Goats give access to six gifts per year.
HOW CAN MY BRAND TAKE ADVANTAGE?
With all of these unique applications of NFTs emerging, it’s only natural to wonder how your brand can enter into the NFT space in a creative and interesting way. Thus far, NFTs have proven most vital in cultivating communities of avid fans through the adoption of an “ownership” model. For many brands, there is a large but dispersed group of loyal, passionate fans that aren’t just interested in paying for experiences or a product, but also want to buy into the capital that comes with the brand itself. By selling digital assets that tie them to the success and visibility of your brand, your brand creates a community that’s incentivized to create value for your team. As the brand continues to provide high-quality experiences and products, the members of this growing community become a self-sustaining hype machine that engages and builds up fellow members.
As exemplified by Travis Scott’s Fortnite concert and LeBron James’ Space Jam skin in Fortnite, there’s already plenty of value in digital culture. The adoption of virtual goods, currency and experiences is only going to keep blossoming, which means that any brand with hopes of a prosperous future should try to get a foot in the door while the market is still young. NFTs present a compelling opportunity for brands to establish powerful relationships with cultural icons and sell original experiences to consumers. By focusing on touchpoints such as art, music, film and in-person experiences like tours and tastings, brands can create demonstrable value for their community of enthusiastic fans.
As with any emerging technology, the prospect of getting in on the ground floor while NFTs are still relatively new may sound incredibly intimidating. But their vast potential upside, coupled with their relatively low risk, make NFTs the single most captivating frontier in technology. Like those who had the foresight to invest in the internet or social media early on, your brand stands to gain a great deal from engaging in the world of NFTs sooner than later. By innovating and experimenting in this space now, you’ll set yourself up to provide continual value to your customers in the coming decades. And they, in turn, will become a passionate and loyal community around your brand that actively works to grow your customer base.
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