Cheery yellow digital artwork being auctioned by PepsiCo’s potato chip brand Lay’s is designed to raise the brand’s profile, attract a younger and digitally native consumer base, and drive social impact. No wonder it has the word smiles in its title. What company would not be pleased with this kind of hat trick?
It’s just one early example of how corporates are starting to leverage non-fungible tokens (NFTs), unique assets that can be used to certify the provenance, authenticity, and ownership of a piece of digital media such as paintings and drawings, video clips, music, computer code or even tweets. Like cryptocurrencies, NFTs are minted, tracked and exchanged on a public blockchain in order to certify originality and ownership. Once an NFT is bought, it’s sent to the owner’s digital wallet. Nothing physical actually changes hands.
What started as a quirky niche is quickly becoming mainstream and could very well become a part of every marketer’s arsenal. Billions of dollars of digital NFTs are being traded, generating brand engagement, unlocking new customer experiences, fostering new types of communities and adding new revenues.
Whether your company is focused on food and beverages, fashion, football, banking, insurance or virtually any industry, you would do well to pay attention, says Peter C. Evans, Managing Partner at the Platform Strategy Institute. ,who previously held senior strategy, innovation and market intelligence roles at large global enterprises.
He predicts that NFTS will radically transform the advertising industry and help turn large corporates’ customers into fans. “NFTs change the incentive structure in profound ways,” says Evans. “They bring the customer on an exciting and engaging journey. Instead of being forced to watch something consumers are being given something they can actually use. “ He predicts that loyalty programs will increasingly become NFT-based and unlock both digital and real life awards. “ Any company that want to attract young customers will have to think about clever ways of using NFTS,” he says.
Brands such as Budweiser, Burger King, Coke, Disney, Visa, Verizon, and the NBA, are already experimenting with this new platform. While Gucci, Burberry and European soccer clubs are among the early movers “many European companies risk falling behind,” says Evans. American companies, the first to embrace the Internet and e-commerce, are taking the lead in experimenting with this new form of digital commerce.
Jumping In Feet First
Most big brands are starting their NFT engagements with auctions that raise funds for various causes. Building on a U.S. marketing campaign, the NFT for the potato chip brand’s campaign in Romania (pictured here) is titled “Smiles By Lay’s.“ A compilation of 3000 smiles designed by multidisciplinary artist Harto, the NFT artwork is being auctioned through Lay’s OpenSea page. All proceeds from the sale will be donated to four NGOs: 25% to ‘Teach for Romania’ (for the education of children from vulnerable communities), 25% to The ‘Adi Hadean Association’ (for offering nourishment to the vulnerable), 25% to ‘i’Velo by Green Revolution’ (for less pollution in cities), and 25% to ‘Let’s do it, Romania!’ (for a cleaner environment).
Other companies such as Coke and Gucci have also organized NFT auctions for social impact. Coke’s series of four NFTs were sold as a single asset with proceeds benefiting Special Olympics International. Gucci sold a four-minute-long video clip, inspired by its creative director Alessandro Michele’s recent runway presentation, as an NFT in June, with profits from the sale going to Unicef USA to support the nonprofit’s Covax initiative, which aims to increase global access to COVID-19 vaccines.
Other early use cases include selling limited editions of digital collectibles and wearables, granting exclusive access to real-life events, or using NFTs to guarantee authenticity and track sales to pay royalties. The digital scarcity that NFTs enable is a natural fit for collectibles or assets whose value is dependent on there being limited supply. For example, Marvel Entertainment, which is owned by Disney, has released limited edition digital versions of its comic book characters, such as Spiderman and Captain America, via the NFT VeVe marketplace. It is also selling five variant covers of “Marvel Comics #1,” the firm’s original 1939 comic book.
“We think NFTs will play an important role in the future of retail, social media, entertainment, and commerce,” Cuy Sheffield, Head of Crypto at Visa, said in a blog posting on Visa’s website. To help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store, and leverage an NFT.”
To that end, in August Visa purchased a CyberPunk, one of a limited number of 24×24, 8-bit-style pixel art images of what art auction house Christie’s describes as “misfits and eccentrics.” Visa’s female CyberPunk is one of 10,000 originally minted avatars, of which only 3,840 are female.
“We wanted to collect an NFT that symbolizes the excitement and opportunity of this particular cultural moment,” Sheffield added. “We’re a company steeped in the history of commerce and payments — but with our eyes on the future. With our CryptoPunk purchase, we’re jumping in feet first.”
So is Verizon, the U.S. telecom company. To illustrate ways NFTs can enhance fan experience, Verizon launched its first public beta earlier this summer during Game Changers 2021, a gaming event focused on elevating women and marginalized groups within the esports community, with its esports partner Dignitas. For its first content drop, it offered NFTs of holographic captures of the all-female Valorant team each doing a victory dance, with a separate NFT linking their autograph. This was done during a live signing event over BlueJeans, Verizon’s video conferencing platform. At this live event, the athletes applied their autographs to their AR captures and interacted with fans, doing on-demand dynamic autographs for randomly selected attendees.
“We think these types of innovative interactions between athletes, brands, content partners, and their fans will fuel NFT demand in the coming year, “ Dante Pacella, a Fellow in Verizon’s Technology and Product Development Applied Research Lab, said in a blog posting.
Scoring Fans With NFTs
Sports-focused NFTs are already getting lots of traction. Trading cards in sports have been popular for decades. When converted into NFTS they provide scarcity, which is appealing to collectors, and allow their owners to do things with them, like use them in a game. Embracing NFTs also allows sports organizations to increase revenue by issuing fan tokens and expanding from trading cards into video clip moments.
New players are capitalizing on demand for NFTs. Dapper Labs, the start-up behind digital basketball trading card platform NBA Top Shot, is now valued at $7.6 billion following a September $250 million funding round. Sorare, a French fantasy soccer game that incorporates NFTs, raised $680 million the same week in a round led by SoftBank which valued the company at $4.3 billion.
Sorare’s platform lets users trade digital player cards and manage teams of five in a number of fantasy football tournaments. Spain’s top soccer league La Liga said it will offer Sorare’s NFTs for all its players and Sorare hopes to sign each of the world’s top 20 soccer leagues by the end of 2022.
Part of soccer superstar Lionel Messi’s welcome package at Paris Saint-Germain included the French club’s fan token, which was developed with cryptocurrency firm Socios.com. A number of other soccer clubs , including English Premeir club Manchester have also launched “fan tokens” that allow holders to vote on mostly minor club decisions and receive certain perks. Marc Armstrong, chief partnerships officer of PSG, said in a statement that embracing Socios.com and$PSG Fan Tokens has enabled the club to engage with a new global audience and create a significant digital revenue stream.
Dapper Labs’ NBA Top Shot platform lets users trade and collect basketball match highlights in the form of NFTs. The highlights, or “moments,” are licensed by the NBA, which receives royalties on each transaction. Dapper Labs says it plans to invest part of its new round of funding into new experiences, like paid trips to big games.
NFTs offer significant flexibility in how rewards are structured and delivered, says Evans. For example, a fan who attends an F1 event could have a ticket that has an NFT collectible attached to it. Or it could be the reverse – a fan who collects the right number of rare F1 NFTs could be rewarded with tickets to a race and a unique visit to the pits. Several such deals have recently been inked by the F1 team, Red Bull Racing, McLaren Racing, and Aston Martin Cognizant F1 Team. “These features are opening new ways for influencers, artists, creators, and others to join with brands to issue NFTs that are both certifiably scarce and can be traded for valuable items in the digital or physical worlds,” he says.
Creating New Kinds of Customer Experiences
The opportunity to create new kinds of customer experience is by no means limited to sports. On Sept. 22 Time President Keith A. Grossman announced that the magazine was elaunching TIMEPieces, a new NFT community and initiative featuring original works by more than 40 artists. Owners of TIMEPieces will be able to connect their digital wallets to Time’s site and receive unlimited access to TIME.com through TIME’s 100th Anniversary in 2023. They will also receive exclusive invites to some of the magazine’s future, in-person events and access to a variety of exclusive digital experiences.
Other companies are also offering customers exclusive experiences via NFTs. Elle magazine reported that designer Glenn Martens recently upped the ante on fashion show front-row swag bags by sending NFT invitations (created by the developer Fanaply) to a select group of VIPs to commemorate his first collection for Diesel
Gaming The System
NFTs provide significant opportunity for gaming, thanks to the ownership opportunities they introduce. While people spend billions of dollars on digital gaming assets, like buying “skins” or outfits in Fortnite, the consumers do not necessarily own these assets. NFTS allow gamers playing crypto-based games to own assets, port them out of the game and sell the assets elsewhere, such as an open marketplace
NFTs can also help companies gamify their interaction with customers. For example, Burger King. launched an NFT-based sweepstakes around their BK Keep It Real Meals. The promotion is designed and supported by NFT marketplace and brand activation startup Sweet with a focus on experience and easy adoption of the technology. Customers order one of three Keep It Real Meals curated by pop artists Nelly, Anitta and LILHUDDY. They scan the QR code on the meal box with their phone, download the Sweet app, and receive a collectible NFT game piece. Every 12 hours they can scan the box again to receive a new game piece, keeping the participants glued to the game.
For its digital asset debut, Coca-Cola partnered with Tafi—a Utah-based startup that makes avatars and other virtual content—to resurrect a pixelated version of Coke’s classic 1956 vending machine. However, instead of cans of soda inside, the “Friendship Box” operated like a “loot box” in video games. It included a digital metallic red bubble jacket wearable inspired by the company’s old delivery uniforms that illuminates with fizz.
Digital wearables are now embedded in the gaming world, opening up new opportunities for brands. Digital items can be worn by any sort of digital avatar, in games or on social media.
In August Burberry announced it is partnering with Mythical Games to launch an NFT collection in their flagship title, Blankos Block Party, a multiplayer party game featuring digital vinyl toys known as Blankos that live on a blockchain. Adorned with Burberry’s new TB Summer Monogram, the limited- edition, limited-quantity Burberry Blanko – a shark named Sharky B – is an NFT that can be purchased, upgraded, and sold within the Blankos Block Party marketplace. As part of this collection, Burberry is launching its own branded in-game NFT accessories, including a jetpack, armbands and pool shoes, which players can apply to any Blanko they own. Sharky B can also be trained to master an array of powers, including speed and agility, ensuring both the toy’s uniqueness and rarity.
Meanwhile Italian fashion brand Gucci released a limited digital-only wearables collection that includes handbags, sunglasses and hats for the Roblox online game platform. While the Gucci Garden space on Roblox was open for two weeks last month, the platform’s 42 million users could spend from $1.20 to $9 on collectible and limited-edition Gucci accessories for their virtual alter egos.
The moves by brands like Gucci and Burberry represent a new era of virtual-real world interplay, a space in which product placement meets the desire of consumers to express their personalities in the virtual worldI If consumers collect and trade NFTs and show them off as part of their digital personalities, brands might consider this almost like another social media platform, says an article in Martech, a publication that covers the convergence of tech and marketing.
The trend is spreading to the music world. Genies, an avatar technology company, and Warner Music Group (WMG) have established a global partnership to develop avatars and digital wearable NFTs, for WMG’s artists. Genies, who has built avatars for a broad roster of celebrities, recently launched their new 3D Avatar and Digital Wearables NFT SDK, which allows musicians to sell exclusive limited edition digital wearables – such as clothing, accessories, and tattoos – to their fans’ Genies avatars to mark the release of song or albums . Once a user creates their own Genie, they can use the Genie throughout social media via Genies. Through WMG’s partnership with Genies, WMG’s artists will be able to produce and distribute virtual beings that facilitate fan reach across immersive platforms and metaverses. Through Genies’ partnership with Dapper Labs, WMG’s artists and songwriters will also be able to turn their favorite cultural moments or latest artistic endeavors into exclusive “Digital Wearables Drops” that their fans can own and use on their Genie avatar.
Evans, who previously worked for General Electric and KPMG, is so convinced of NFTs promise that he has taken on an additional role as chief platform office at RCRDSHP, an NFT platform for electronic music. The platform works with artists or labels to help them curate content and video, and add gamification, such as rights in the future to attend exclusive shows, in order to drive sales and fan engagement. For example, artists who have joined RCRDSHP have found a very different revenue and engagement model than found on traditional streaming platforms. Fans collect artist cards and tracks in ways that open up more direct and immediate fan engagement. In one recent case, the community set up challenge to complete a card set that an artist rewarded with an “airdrop” of unique content not available anywhere else. “Artists can generate fan interaction and recurring revenue in ways that are not possible on other platforms,” says Evans. “It is a virtual cycle of engagement and rewards which brings in more people, creating flywheel and positive reinforcing network effects.”
“The classic problem with advertising is it can have negative network effects and drive people from your product,” he says. “NFTs, if done right, do absolutely the opposite, creating positive network effects.” NFTs allows trackability, meaning the artists can receive revenue from secondary sales or auction, ensuring they are recognized for their original creations in subsequent transactions. “This will prompt bigger name musicians to embrace NFTs, further driving positive network effects.”
Pros and Cons
In a white paper it has published to help corporates learn more about the NFT landscape, Visa lists NFT’s three main benefits for companies. The first is fan engagement. NFTs can be much more than a collecticle or piece of art. “Savvy brands are recognizing that the most successful and long-term-relevant NFTs will be ones that have ongoing value and utility,” says Visa. For example, NFTs can better connect fans to their favorite teams or brands by offering voting rights to team decisions, access to exclusive offers and the ability to earn rewards.
NFTs also offer a new way to conduct customer relationship management. Unlike physical goods NFTs are trackable, so it is possible to see what wallet address they reside in. NFTs can open unique segmentation and engagement strategies based on trackable factors related to the NFTs that are owned. This might include the types of NFTs owned, the quantity owned or the duration they’ve been held, says Visa. Another advantage is that use loyalty programs with NFTs means companies don’t have to sharing customer data with third parties or relying on them for their data. Instead, the data from the customers’ interaction with the NFTs is all recorded in the blockchain, providing better access and flexibility to marketers to segment and engage their customers.
NFTs also offer new potential revenue streams. For example, unlike physical goods NFTs can include a smart contract that codes in a royalty percentage designated by the content creator. As such, subsequent sales or auctions of the NFT can generate revenue for the original NFT creator, providing an ongoing potential revenue stream as it is sold or auctioned.
However, like other assets in the fledgling crypto industry, NFTs have proven vulnerable to abuse by bad actors. Digital collectibles marketplace OpenSea disclosed that insider trading had occurred on its platform. Budweiser recently bought the beer.eth domain for almost €100,000 to display NFT ‘fan art’. Obscene images were sent to the wallet and subsequently displayed.
Brands who decide to embrace NFTs will have to make some key decisions. Traditional advertising agencies do not have NFT expertise, so large corporates must turn to startups like Genie, Sweet and Tafi for help developing them. Then, they need to choose the right NFT marketplace. There are more than 60 of them and they are structured very differently.
Open marketplaces, such as OpenSea, are broad marketplaces where anyone call and sell NFTs and more closely resemble the digital equivalents of auction platforms, such as EBay or fixed price marketplaces such as Esty, explains Evans. Augmented marketplaces tend to focus on a niche, such as basketball collectibles for NBA Top Shot, and offer different levels of value-added services to sellers, such as minting and marketing services for NFTs, curation, pricing recommendations, portfolio trackers, and games built on top of the NFT.
Factors to consider when choosing a marketplace include flexibility and control over the branding of the user experience; whether the marketplace allows users to purchase NFTs with fiat currency or requires users to use cryptocurrency for purchases and the general audience of the NFT marketplace, Visa says in its white paper.
Every innovation department should have someone studying NFTs, says Evans. “Go experiment,” he says. “Identify five use cases for your company and then pick one or two and launch a pilot.” It is early days, and there are still risks involved, but doing nothing may be even riskier, says Evans. “Companies that miss out on this first wave risk falling behind their competitors,” he says.
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