WTF is an NFT anyway?
NFTs are here, but what value – if any – do they have for brands?
NFTs – one of a kind digital assets – are being created in their droves, and routinely selling for hundreds of thousands. Now everyone from Pepsi to Coca-Cola, Dictator Rum to Budweiser want in on the action. But what the hell are they anyway? And what value to they have for brands?
When NFT was named as the Collins Dictionary's word of the year for 2021, 99.9% of the world’s population went ‘eh’? Intended as a barometer of culture – a snapshot of the zeitgeist – previous examples have included ‘podcast’ (2007) and ‘twitter’ (2009). Though in 2016 it was ‘democracy sausage’, so let’s agree it has a varied degree of success.
Yet the year has seen a flurry of high-profile NFT activity. In March, the founder of Twitter sold an autographed tweet for $3 million. And Grimes sold $6 million worth of digital art as NFTs. Youtuber Logan Paul has made over $5 million selling NFTs in February. And also in March, digital artist Beeple sold an NFT at renowned auctioneers Christie’s for $69 million. The work ‘Everydays – The First 5000 Days’ was the first purely digital art ever offered by a major auction house.
On a smaller scale, everything from a looping video clip, a digital flower, image of a sock, and even digital drawings of kittens and puppies have routinely sold for multiples of thousands. Now even the genetic code of Covid-19 has been turned into a variety of songs that are available to own as NFTs. But it is the use of NFTS in the sale of digital art that has been generating most headlines recently; there’s now even a Museum of Crypto Art in which to display it.
What is an NFT?
But what exactly is an NFT? There’s nothing that quite makes you feel like a grandma trying to work an iPhone, than highly conceptional new technology.
Put as simply as possible, NFTs or non-fungible tokens allow buyers to purchase ownership of a unique digital good, a one-off. This good is sort of like digital intellectual property and can be an image, video, illustration, animation etc. In fact, anything digital. It exists as a unique digital token living on a blockchain (a digital ledger of transactions), specifically the Ethereum blockchain, meaning ownership can be proven. Following?
One major flaw is that digital files can be copied and shared. What’s in it for a buyer? In short, bragging rights, and a speculative investment. Just like art, there is only one original, which a buyer owns. Yet, copies are as good as the real thing, and creators can retain copyright. The kudos is in ownership then, and as NFTs are being hailed as the dominant method for future digital art trading, the possibility to resell for a higher value is what is driving the market.
So why do brands care?
With money rapidly flowing over something that can freely be created, no wonder brands are interested and jumping on the trend. November and December in particular have seen a flurry of activity, from luxury brands such as Gucci, and Dolce & Gabbana, through to McDonald’s, though with varying degrees of success. Showing the lack of understanding by brands of the pitfalls as well as perks of this new technology, McDonald’s was caught out after the early transactions contained a racial slur, inscribed directly on the blockchain.
Drinks brands join the fun
More recently, drinks brands have been getting in on the action. Pepsi’s first NFT collection, the “Pepsi Mic Drop” features designs of its drinks, such as Zero and Wild Cherry, with illustrations of microphones. Offered free of charge, in a market driven by extreme pricing, the aim is for them to be inclusive, while also making a statement about the scope and scale the brand sees NFTs taking in the future.
Speaking to Bitcoin.com News, Todd Kaplan, Pepsi’s vice president of marketing said: “Pepsi has always been a brand with a strong heritage in music and pop culture, so it’s only fitting for us to bring that legacy into the new world of NFTs with a ‘mic drop’ of epic proportions.”
Coca-Cola also recently sold its first ever NFT, raising $575,000 for charity. The Friendship Box reimagines a vintage Coca-Cola cooler with dynamic motion and illumination featuring three other NFTs inside. Comprende? The winning bidder also received a fully stocked Coca-Cola fridge.
Budweiser’s NFT Beer Can Collection features 1,936 unique digital cans (representing the year of its first can), made using archived photos, ads and design, selling at between $499 and $999 a piece. Each NFT serves as an entry key to the Budverse, unlocking exclusive benefits, and rewards.
And now Dictador Rum and Lalique offer a rum bottle NFT that can be bought, stored, and enjoyed through the platform, BlockBar. Once purchased the NFT gives you virtual and physical access to “unique experiences” including a private dinner with master blender, Hernan Parra.
So what’s in it for a brand?
Again, kudos. Embracing this cutting edge and much hyped tech early, lends these brands a cool-factor, a prestige, a halo effect of being cutting edge too. And with NFTs in their infancy, of course, they’re useful for generating headlines too. Hype sells.
There are also communities of like-minded consumers that are following specific NFTs; special interest groups if you will. These digital collectables are being seen as the latest way for brands to reach engaged, motivated, and enthusiastic consumers tuned into their products. However, there is little evidence that these groups are very big, or that those in them will become ambassadors of any form.
But joining the trend for the sake of joining it – as it seems many brands now are – has its pitfalls. Firstly, there is still much unknown about the tech; McDonald’s recent blunder being a case in point. Also, NFTs are not without their controversy. There’s mounting headlines concerning the detrimental eco impact of crypto currency mining, and NFTs are not without an environmental cost.
And of course, there’s still a vast majority of consumers who either aren’t engaged, or are dismissive of NFTs. At the moment, they are reaching a very small market. It’s also worth remembering that NFT’s are not these brands area of expertise, and the market for NFTs is not necessarily their market, ergo the consumer is not necessarily their consumer. Are brands then simply throwing arrows in the dark?
Arrows in the dark?
It’s interesting that brands, particularly drinks brands, are attempting to lure their existing core consumer into the world of NFTs with the promise of real-life exclusives. This will continue to be key. But what are the advantages to brands of introducing their core consumers to this complex, murky, and vague new world?
In short, pulling new consumers into NFTs actually leaves brands with a job on their hands, as it becomes their responsibility to educate consumers – especially when asking them to part with their cash – on what NFTs are and what they are not. The potential for negative blow-back seems large. For example, when it comes to NFTs from brands, it is unlikely consumers will be purchasing full ownership, or even exclusive use of a specific iteration of a logo or image.
So, we ask again, what are consumers, and brands, actually getting? Are NFTs the ultimate capitalist heist, a shiny new way of getting consumers to part with their money for absolutely diddly squat? Only time will tell if image really is everything. But as more brands gleefully jump in on the trend in a bid to keep up and be seen as cutting-edge, expect some legal – and reputational – growing pains.
Interested in finding out more about what this might mean for you and your business?
Please contact us at firstname.lastname@example.org or 0207 101 3939