If you’re reading this article, you probably know that in 2021, an NFT of Jack Dorsey’s first-ever tweet initially sold for US$2.9m. You likely also know that the owner of that same NFT recently tried to auction it off for $48m and received a top offer of $280. Not a great ROI.
Is this an anomaly, a crash to earth for NFT prices, or the beginning of a paradigm shift in which the utility of NFTs will come into focus as brands move to practical and loyalty-driven applications for the technology?
There are essentially four types of “investors” who came to play in the NFT space. There are the first adopters who got in early, not unlike bitcoin investors back in 2010. These groups had no idea what the future held but believed there was intrinsic value in the assets they were acquiring. Next, you have the speculators who jumped on board in 2021 because they saw an opportunity to make money. Pure and simple. Then you have the investors who have been building a vault of NFT assets for long-term value growth. Finally, you have the masses who are coming to the realisation that the chance to buy low and sell high while making millions in the process likely had a very short window of opportunity which has now closed as evidenced by the anecdote above concerning Jack Dorsey’s NFT tweet.
Where we are today
Digital images of apes and kittens have sold for millions. However, we need to look at who is buying and how they got there. And is the current situation really relevant as a business model?
There are many investors with deep pockets who came to the game in 2021 during the growth of the bubble. They saw value in being early to market in terms of acquiring NFTs and didn’t hesitate to acquire these assets at extremely high prices.
However, there is another group who came to the party under different circumstances and we don’t hear much about them.
If you were among the lucky group of early-stage ETH backers in the initial crowd sale, you acquired ETH for the equivalent of pennies. And for many of those who held ETH at that original price point, handing over a few of them to acquire a Bored Ape Yacht Club image takes on a different meaning than if you had acquired ETH over the past 12 months at a much higher cost. In other words, for many ETH holders, the value of the asset they are exchanging may not hold the same weight as for someone who acquitted ETH at a much higher price point.
Unfortunately, many speculators, in the true sense of the word, acquired NFTs on platforms such as OpenSea with the sole intent of flipping them for a significant profit. A quick study of recent drops shows some buyers acquiring their assets at, say, 0.25 ETH and trying to flip them shortly thereafter for 3 ETH. And more and more we’re seeing trade secondary sales fail because of their speculative nature.
Where are we going?
As the early NFT bubble begins to deflate, rather than burst outright, the voice of brands looking for opportunity is getting louder. Unlike individual sales and the drive to “make a killing” by flipping NFTs, brands will be looking to create value or utility for users, customers and loyalists.
Big brands like Asics, Coca-Cola, Taco Bell, McDonald’s and the NFL have all made moves into the NFT space. And most have been very strategic by testing the space and donating all or part of the proceeds to charitable causes. Of course, these brands have strong recognition behind them so it’s easy to understand why they are taking the early plunge into the space but even they are looking for ways to create that real value proposition for their customers.
Lesser known brands will be faced with the challenges of identifying opportunities while determining how to create perceived and actual value with their campaigns. Brands will want to know if digital art is the only NFT application or is it truly just the first step in what will become a revolutionary shift in the way they think about and create marketing as a means of connecting with their audience, engaging them with the brand and building customer loyalty.
How will we get there?
NFTs go far beyond the current digital art format. They can deliver unlockable digital experiences, access to “members only” benefits and merchandise, vested ownership of physical goods, retail marketing opportunities, additional revenue streams and the simple bragging rights of owning a unique, brand-specific NFT.
Collectors, buyers, backers, investors, advocates and admirers must see an inherent value in the assets you create.
And the marketing tactics needed to reach these targets will require a revolutionary way of thinking. The content you create, the messaging you share, your presence on social channels and Discord, will all play a part in generating excitement about your NFT collection and the overall value you deliver to users.
NFTs may offer the opportunity for creating long-term brand loyalty and customer advocacy like no other marketing initiative. The challenge now lies in identifying the framework for success and choosing the right path while creating the appropriate NFT assets.
Corey Padveen is a partner at t2 Marketing International, editor-at-large for iGB and the author of Marketing to Millennials for Dummies. He is also a contributing author to Digital Marketing All-in-One for Dummies.
Stephen Padveen has a 30+ year background developing and executing marketing strategy for some of the best known brands across the globe with clients ranging from gaming and entertainment to CPG, retail and manufacturing. His areas of expertise include traditional, online, social media and influencer marketing.