Among multiple stories about the drop in interest in NFTs and their valuations, one that is often quoted is quite vivid. Logan Paul, the popular YouTuber, bought 0N1 Force NFT for $623,000. Today, it’s claimed to be worth around $10. Some of his other pieces, such as Ether Rocks have also fallen significantly in price. Even the Bored Apes Yacht Club, an NFT collection by Yuga Labs that created an elite club full of celebrities and successful investors, has become much more affordable to buy in. However, it is still valued at over $1b market capitalization and the floor price–the cheapest you can buy in–hovers around $100,000.
Similar stories can be read across the whole market and statistics confirm the sentiment. According to Dune Digital’s charts, the number of unique NFT buying wallets is on a downward trend, going from 450,000 during the November 2021 euphoria to about 250,000 in August 2022.
There are fewer participants willing to buy NFTs and that decline in demand likely leads to lower valuations. Of course, this aligns with the global macro sentiment, but even for the crypto world, there’s no denying NFTs have taken a massive hit.
One of Dune’s users that goes by the handle @kingjames23 has published an interesting chart. This analysis of large brands’ NFT Projects on Ethereum, it’s clear that brands that have created their NFT brand experiences were quite successful with them.
The most remarkable is Nike with its total NFT revenue exceeding $184 million. You could argue that it’s just 0.3% of Nike’s total annual revenue. But there’s much more to this story. Nike has made numerous acquisitions in the space. They bought RTFKT, a company creating virtual sneakers for an undisclosed amount–although at the time, it was valued at $33 million, created Nikeland, a Roblox space for Nike and sneakers lovers, and in fact–they were experimenting with blockchain since 2019.
So, was that a fad that had passed, or can your brand still benefit from NFTs, similarly to Nike, Dolce&Gabbana, Tiffany, or Adidas?
Are NFTs dead?
It’s a question worth asking just to hear how the story unfolds. Yes, NFT sales have taken a hit, but that’s what you can see on the surface. Looking closer, you’ll see a continuous stream of acquisitions and funding series coming into the space. The move towards Web 3 is no weaker as companies continue to build the foundations for this new type of digital space.
Let’s look at some of the latest NFT-related investments and plans:
The author considers a three-stage marketing funnel:
One more thing, before we go further. Secondary transactions in the brand stats chart mentioned earlier sits at $1.31 billion. That means that over 67,000 users who searched for Nike’s NFTs with a buying intent, ended up buying other Nike’s products instead. The numbers are much smaller for other brands, although still notable. This indicates that in fact branded NFTs can contribute to the core business.
The point of brand and marketing efforts is driving potential customers to the pre-purchase stage, ideally recognizing the brand at this time.
On the brand components side, that is achieved through NFT product launches that generate hype. This exposes the brand to new audiences, in this case to crypto and tech enthusiasts as well as younger demographics. An effective approach would be collaborating with established NFT collections. This is what Nike did with RTFKT or Roblox–although this one falls more into the metaverse category than NFTs, at least as of yet.
Branded NFTs also create engagement through marketing around a context relevant to the targeted audience. For example, a brand that sells consumer goods and shows up in the NFT space becomes more attractive to a Gen Z who may have different interests, but one of them are NFTs. Now they can relate around a common topic.
On the community building side, NFT communities are often more engaged and form closer connections than traditional social media users. Discord communities engage in real-time, with more one-on-one conversations, which is much different from the usual one-to-many approach of social media such as Instagram or Facebook. Creating a members-only community rewards the most engaged members and at the same time, it has a leverage potential for campaigns outside the community.
The purchase stage happens when consumers are in the process of making purchase decisions.
The mentioned publication points that NFTs create an upselling opportunity, with NFT versions of physical products, bundle NFTs with real products. For example, Dolce & Gabbana sold an entirely digital collection worth millions of dollars. This is because branded NFTs allow their buyers to identify with the brands and show off–not with Crypto Punks that are known mostly to the crypto community, but to those that recognize the brand itself. Another way of engaging customers with the brand is by the play-to-earn NFT games. And let’s not forget about the member-only experiences–the NFTs can be a gateway to the inner circle of brand lovers, which can come as a product itself.
The member-only, or more likely holder-only, NFT experiences are also part of the community building incentives. NFTs that come with real-world traits are getting more and more common–offering discounts, access to founders, prioritized reservations in restaurants, for concerts, and other events of this type. You could also follow the Bored Apes Yacht Club approach and offer private parties and events that are only available to those who hold your brand’s NFTs. In this scenario, NFT gains a real-world value, but the technology makes provenance as easy as it can get.
The post-purchase stage is often as important as the purchase stage, from the brand perspective. There, customers compare the bought experience with the pre-purchase expectation. If met, can lead to developing brand loyalty. As Anatoli Colicev points out, this is the stage that is the least to be affected by marketing activities, as consumers have already made their minds regarding brand experience. However, NFTs can help.
First, by a flexible product ownership structure. NFTs allow for the distribution of IP while the brand can earn royalties. A good example comes from the BAYC–NFT owners have the rights to imprint their NFT on fashion, books, or movie characters. Owning a piece of a logo or other brand element brings consumers closer to the brand and could encourage them to become brand ambassadors. You could also transfer all the rights to that NFTs–the key thing is that it is also an aspect you have in control when designing an NFT brand experience.
The community building aspect can revolve around NFT-based loyalty programs or storytelling that engages members to stay within the community.
How to build an NFT collection?
No matter how you’re approaching the NFT brand experience, if you’ve made the decision to engage in such activity, you’ll need to design and build the NFTs. There’s a few decisions you need to make:
What’s the idea?
How should they be designed?
How and where should they be minted & bought?
What parts of the NFT lifecycle are part of the experience?
Let’s expand on each of those.
What’s the idea?
Of course, the creative idea should come within the brand’s identity and that could mean anything but the idea has to be put into code. If you’d like to create 10,000 unique pieces, that might have to be coded as generative art. The rarities, attributes, and royalty models also have to be decided prior to the development. Remember that it’s a part of the creative idea.
What’s the design?
Anything digital can become an NFT, but the design is one of the key areas. After all, people trust NFTs for the technology, but they often buy what they like visually. If the brand experience is designed for a metaverse platform, that has to follow their design guidelines and would require working with some 3D artist and Unity or Unreal developers.
How and where should they minted & bought?
A brand experience might not be convincing enough if the brand doesn’t control how it looks end-to-end. The cheapest and simplest way to mint NFTs is by using an established NFT marketplace such as OpenSea. That is not a bad idea if you’re working on a tighter budget, but it might make the experience look messy.
To make it really all about your brand, designing and building a custom NFT Marketplace is a must. Using a white-label NFT Marketplace is a good starting point to speed up the development process and quickly go to market. They might have feature limitations, but they can always be added.
If you’d like to build an NFT Marketplace, contact us–we have experience in building those, with our own white-label solutions.
What parts of the NFT lifecycle are part of the experience?
When building a new NFT collection, we’re usually thinking of setting up a primary marketplace. However, most transactions in the NFT world happen in the secondary market. With NFTs, it can also be built-in into the experience, as tracking ownership and lifecycle of NFTs that you minted is not that hard.
Setting up for the future
A survey conducted by Civic Science in 2021, revealed that most of the people interested in NFTs are between 18 and 24 while the second-largest group is 25-34. This is clearly a gateway to the younger demographic, but that’s not the whole story.
Most trends come out from teenagers and people in their 20s, but gradually they are adopted by older generations. This is an important insight for NFTs as it might be early to use them to sell, for example, insurance, but we should wait for its development. It might eventually become a ‘thing’ for the whole market.
Right now, that is a great marketing tool for consumer goods and tech brands, but what’s the future? We won’t know without brands from all the industries experimenting with NFTs.