Putting the “Fun” in Non-Fungible Tokens for Brands

By Amanda Rotondo, David Irons

NFTs (Non-Fungible Tokens) are enigmatic, tangible-yet-intangible, and hugely buzzing despite few people understanding what they are. With such commotion over something currently both mentally and physically un-graspable to so many, brands are left scrambling to understand if they should be using NFTs as part of their marketing playbook. If so, for what? And for whom? And how?  

One of the basic principles of classic economics is that the value of a thing is based on its marginal cost – the cost it would take to replace it if someone used it or gave it away. The internet and digitization of our lives turned this paradigm on its head, making marginal cost of copying digital items like music, videos, images and software practically $0. This free duplication has left a hole in our perception of ownership and value, in which the seed of NFTs has taken root.  

NFTs are an attempt to make individual digital assets unique through blockchain technology (the same digital ledger technology that cryptocurrencies like Bitcoin are built with), stamping a new sort of value and ownership back onto those otherwise free-to-duplicate digital assets. That is, of course, an oversimplification of a concept native to and dependent upon a complex, decentralized digital economy that controls more than $1 trillion. Trying to understand the infrastructure of the system supporting NFTs is mind-bending, and frankly (and luckily) not necessary to understanding if and how brands can utilize them.  

Should my brand get into NFTs? 
The first question to address is: “Do NFTs offer any marketing advantage for my brand and my customers?” If yes, the second question naturally must be “What is the smartest way for me to begin engaging with NFTs?” Major brands are using  NFTs, despite being difficult for the average the consumer to understand or access them. There are two NFT campaigns that have been successful and have paved the way for other activations.  

By far the most successful NFT endeavor to date is NBA’s “Top Shot.” Top Shot allows basketball fans to own clips of NBA games and collect and trade them like digital versions of traditional paper trading cards. As of mid-May 2021, Top Shot had facilitated trades at an aggregate value of over $560 million. The success of Top Shot illuminates two elements that lead a brand to succeed with a large-scale NFT product.   

Good user experience & Fandom 
To circumnavigate the complex technology, the NBA partnered with Dapper Labs to remove the tech friction by building a proprietary interface that simplified the buying, selling, and trading of Top Shot NFTs. Simply creating a usable experience would not have propelled a successful product without their ability to leverage the deep loyalty of NBA fans. A basketball fan who understands nothing about technology will still want an NFT of their favorite player simply because it is a token of their fandom.

If a brand does inspire loyalty but is not equipped to build an entire NFT transaction platform, it could take inspiration from the more contained Taco Bell NFT campaign. The brand sold a total of 25 NFTs (all digital taco art) for $1 each. With NFTs, smart contracts generate new revenue for the original creator both from the original sale, and from every subsequent sale. So, beginning with that $1 sale, and with every subsequent sale, Taco Bell gained more and more revenue which they put entirely toward their scholarship foundation. The assets skyrocketed in value and were soon selling in the tens of thousands of dollars, with Taco Bell receiving a set share of the price of each transaction. 

Taco Bell meets the requirement of inspiring fandom, and their NFTs did sell out quickly despite being sold on Rarible, a “traditional” NFT platform. Because it was a singular campaign and not an attempt at a full-scale product, it would have been nonsensical for Taco Bell to build their own platform. This shows that many digital natives and those motivated enough by their fandom may work through the bumpy experience, though the size of this audience is still significantly smaller than Top Shot’s custom platform. 

NBA Top Shot and Taco Bell are just two examples of major brands getting into the NFT space. As this is being written, the NFT space continues evolve at a breakneck pace. Many brands, especially in the fashion space, are exploring the use of NFTs to track the provenance of unique real-world items. Nike has patented Cryptokicks which will both attach graphically secured digital assets to physical sneakers and also track the ownership and verify the authenticity. The question remains to be seen: Does it matter? How wider audiences will or won’t accept these NFT applications is hotly under debate. 

As with anything buzz worthy and new there is a certain amount of speculative madness going on. Recently, an NFT by the digital artist Beeple sold at Christie’s for $69.3 million US which puts it in the same rarified space as Manet, Monet and de Koonig. Is there an NFT bubble? Probably. But that doesn’t mean there’s not something there. Given the fact that NFTs solve many of the challenges surrounding uniqueness and ownership in the digital age, they’re here to stay and should be considered by brands when and where it makes sense.