What are NFTs? Why are they important to marketers and what can brands do with them?
What are NFTs (Non-Fungible Tokens)?
According to Wikipedia, a non-fungible token (NFT) is a unit of data stored on a blockchain (a digital ledger) representing a single digital element. An NFT is a cryptographic token, but unlike cryptocurrencies like bitcoin and many network or utility tokens, NFTs are not mutually interchangeable, that is, they are not fungible.
NFTs are based on blockchain technology and work in the same way as Bitcoin (and other cryptocurrencies). Instead of cash, they are assets like art or music. They can take many digital forms, including images, animated GIFs, music, videos, social posts, games, trading cards, events, and even virtual worlds. A non-fungible asset is completely unique and is neither replaceable nor divisible.
Why are NFTs important to marketers?
What makes NFTs valuable is that they are unique, can be tracked, and can be easily bought and sold. For the first time in history, digital assets can be protected against fraud, forgeries and counterfeits. Assets “minted” on the blockchain have a clear and transparent provenance that cannot be duplicated or copied.
NFTs also create monetization opportunities, as each NFT token includes a ownership history, which is easily accessed and verified through a distributed network. In essence, digital assets can now be created (hit), distributed, managed and measured in unique ways through NFTs. This means marketers and brands can create, manage, and monetize digital assets like never before.
What are the benefits of NFTs for brands?
Beyond the ability to create new digital products and brand extensions, NFTs offer brands a wealth of new marketing possibilities.
For starters, NFTs allow for attribution and provenance that doesn’t exist in digital marketing today. For example, NFTs allow advertisers to access the source and “history” of each communication made, allowing for better attribution and reduced fraud. NFTs also offer copyright protection that was not available before the blockchain.
Brands can create viral-protected content without fear of theft or manipulation. Early use of NFTs by brands achieves exceptional levels of public relations that drive awareness, but this will not last. NFTs inherently offer more opportunities for engagement and experiences for brands. While non-NFT content is ubiquitous, NFTs are really rare (for now, at least).
What are the challenges brands face with NFTs?
While brands’ NFT efforts are still in the gold rush stage, early forays highlight the difficulties of the countryside. Most of the brands’ efforts in the NFT space are publicity stunts: selling digital art for crazy sums like Beeple’s $69 million NFT masterpiece.
Most pioneering brands have not thought about what the NFT asset represents and what it allows its owners to do; they have simply tested the waters. Some of the more practical challenges for marketers include costs (minting money can be expensive and higher than the value of the currency itself). In addition, the creation of NFTs requires energy, which results in a high carbon footprint (which can exclude environmentally friendly brands).
Most importantly, laws and regulations have not kept pace with technological developments, including intellectual property, copyright, licensing and taxation. However, the most important challenge facing those entering the NFT markets today is the likely crash that will follow in the coming months, when the market corrects after the honeymoon.
What are the first examples of brands using NFTs?
Although NFTs have been around since 2017, they have only recently gained notoriety, especially in the arts, entertainment, arts, games, sports and collectibles sectors.
One of the first and most famous examples of commercial use of NFTs is CryptoKitties, a virtual chat exchange game. This game inspired Nike’s CryptoKicks product in late 2019.
Collectible cards have become a big business in the NFT space since CryptoKitties was first hit. According to USA Today, NBA Top Shot has sold more than $200 million worth of NFT cards and related collectibles so far. An autographed Luka Doncic Dallas Mavericks NBA trading card sold for $4.6 million in one of the largest transactions.
What are the main applications of NFTs for brand marketing?
There are a multitude of NFT apps that brand marketers can leverage to increase awareness, engagement, customer retention, and additional revenue. Here are some of the most obvious opportunities that NFTs offer brands:
Brand knowledge
The most obvious benefit of creating NFT is brand awareness. Brands have generated a ton of free press as early adopters: Pringles CryptoCrisp, Taco Bell taco gifs, Pizza Hut pixelated 1 Byte Favourites and Charmin NFT(P), among others.
The natural evolution of awareness can consist of interactive contests (digital scavenger hunts, etc.) and promotions (earn an NFT by performing these actions) to put you in touch with potential customers. A popular application of awareness and goodwill is to use NFT assets to raise funds for charities. Celebrities like Lindsay Lohan have generated significant funds by attracting wealthy early users to invest.
Brand Engagement and Perception
A more practical use of NFTs for brands is to increase brand perception and engagement through the creation and distribution of collectible digital items, experiential events, and limited-edition memorabilia.
Today, most conversations around NFTs are about creating (often collaboratively) limited edition objects. The most powerful application of NFTs for engagement is the creation of unique events or communities. For example, $RAC, a social token issued by the RAC artist, allows token owners to access a private Discord group and gives them early access to the sale of derivatives.
Luxury brands are early adopters, as they see the value of expanding their reach to new markets while maintaining their status. Fashion brand Gucci has created virtual sneakers to allow potential customers to try them on virtually before buying them IRL. Nevertheless, the use of NFTs and VR technology consolidates the brand’s avant-garde and leadership in the fashion and footwear sectors.
Luxury watch brand Jacob & Co. has auctioned a one-of-a-kind NFT digital watch on ArtGrails. The highest bidder will receive all the physical accessories that come with a high-end watch, such as a certificate of ownership and a case. This is just the beginning of what is possible.
Customer engagement and loyalty
The fundamental applications of NFTs for customer engagement and retention include gamification, badges, and associated incentives. In fact, NFTs are a foundation for passive loyalty programs that can collect customer data and incorporate rewards without much effort on the part of the brand or consumer.
Today, NFTs can contain product information, future discounts on purchases, and other information such as source documents. In the future, NFTs could allow customers to resell products they own and receive rewards if those products are resold. Most importantly, NFTs are ideal for controlling access to assets such as websites and events, including product launches.
Product Extension
The most interesting possibility for brands and other content creators is to explore additional revenue streams. At a relatively basic level, NFTs allow content creators to better measure and monetize their assets. At the same time, service companies can create tangible assets and license or monetize royalties based on their use. Consumer brands with a young audience can leverage the energy surrounding online gaming, as Fortnite has demonstrated, by generating revenue from the sale of digital goods in the game. Current examples of NFT games include Ubisoft Rabbids, F1 Delta Time, and Microsoft’s Azure Space Mystery.
Nike CryptoKicks are also a relatively advanced concept of integrating digital into the physical world. These NFT sneakers allow users to “breed” their own custom sneakers that can then be made in the real world. The rest of the fashion industry will follow suit, despite Nike’s initial patents.
NFTs offer a new way to generate revenue, including for an agency. Thus, Reuben Bramanathan, investor of IDEO CoLab Ventures, coined his time: a token of $CSNL was equivalent to an hour of his time and was freely exchanged. Spencer Dinwiddie, the Brooklyn Nets goalie, reportedly intends to launch a digital token for others to invest in his contract, creating NFTs for his future income. This trend will gradually spread to other professions.
Tokenize a product
A natural extension for brands in the publishing or event industry is the use of NFTs to create individual access tokens that allow different levels of subscription, membership, or access to an event. These NFT tickets or tokens can be bought and sold by collectors who enjoy the experience or even nostalgia of the event.
Beyond the game, there is also an NFT application of the “metaverse” type of the virtual world: real estate. SuperWorld is a virtual recreation of Earth, where everything on the surface is for sale (from the Taj Mahal to the Great Wall), and users can create and sell additional goods on the planet. Brands can create their own virtual world or engage with SuperWorld to host virtual events, like Second Life more than a decade ago.
Whether you’re a brand manager, marketing manager, product manager, developer, or creative, NFTs offer a unique opportunity to increase brand awareness, engagement, and additional revenue streams. Start exploring NFTs today before the opportunity eludes you.
