What are NFTs anyways?
Nothing makes me think “huh?” like some NFT and blockchain news filling my inbox. But put simply, an NFT is a digital asset that represents basically any real-world item. They’ve been around for a while, but proliferated in recent years when people started trading digital art as NFTs – sometimes for millions of dollars.
By definition, an NFT is a ‘nonfungible token,’ or an asset verified and stored on secure registers using blockchain technology. Blockchains such as Ethereum are a decentralized way to maintain data without relying on any one entity.
They are ‘nonfungible’ because they are usually one-of-a-kind or uncopyable – that’s why you may have heard NFT advocates refer to them as creators of “digital scarcity.” Unlike bitcoin, which could be traded for other bitcoin with identical values, NFTs have unique identifiers and are considered to be unreplicable. This solves a big problem for artists in a space where any digital work is downloadable and copyright is difficult to regulate.
So, essentially the idea is that the holder has exclusive ownership over this nonfungible, digital asset.
Image Credit: OpenSea
Can’t you just download or screenshot an NFT someone else owns?
That’s the thing. Anyone can make as many copies of this ‘unique’ asset as they want. Unlike a famous painting, where a print would be very different from an original, digital copies of proprietary images look exactly the same.
Like with commercial licensing, the photographer or graphic designer owns the copyright – the right to reproduce, share, or make derivative works from the original. If you own an NFT, you have the right to sell your ownership, but not to license the image unless the copyright has been transferred.
So what’s new?
Unlike commercial licensing, NFTs provide people with a way to change ownership.
But, other people can still make copies. I suppose the difference is owning an original versus a copy of someone else’s property? This could be likened to owning the Mona Lisa, versus owning an exact replica of the Mona Lisa. So, a lot of NFTs’ value adds up to bragging rights (along with the hefty sums they can re-sell for).
What’s the Mona Lisa of NFTs?
Mike Winkelmann, the digital artist known as “Beeple,” famously sold his NFT “Everydays: The First 5000 Days” for a cool $69 million at Christie’s in 2021.
While no one would call Beeple a modern-day da Vinci, his sale was one of the biggest in NFT history, and one of the reasons these digital assets are so prolific now.
Image Credit: OpenSea
Since when did intangible art become worth so much?
NFTs gained traction rapidly in the last couple of years, but non-material art has been around for a while.
There was an interesting development back in 1958 when Yves Klein took a literal approach to capitalize on the growing market value of intangible goods. He entered the New York art scene with a project called The Void, a gallery with literally nothing in it. According to Klein, art can be experienced without intervening materials.
To a similar effect, Italian ‘artist’ Salvatore Garau sold an invisible sculpture (air) in 2021 for $22,000, a price jacked up in a bidding war. After going through what was likely a bad case of buyer’s remorse, the unidentified purchaser decided to sue the artist. Like, yeah, man.
Of course, digital artwork is not comparable to ‘invisible’ artwork, but they are both distinctly different from traditional art forms in that ownership is not materially verifiable. For Garau’s piece, the only proof of goods exchanged was the bill or sale; in the case of NFTs, it’s a transaction record kept on computers to verify authenticity and ownership.
While extreme, this example brings up interesting questions about the definition of art. Does art require materials? Can it be a digital non-fungible asset? Does art even require an artist, or can it be AI-generated and algorithmically produced?
Marketing Immaterial Things
Garau’s invisible sculpture shows us that, in practice, art is anything that can be marketed as art.
His tactic was to situate art as an experience of interpretation on the individual level, rather than a material form. Therefore, viewers had to ‘use their imagination’ to interpret his nothingness… I guess.
NFT and Web 3.0 enthusiasts have been getting a lot of people on board using inventive marketing tactics as well.
No doubt, the concept of NFTs is valuable and some seem to be worth investing in. Not only do they provide creatives with a marketplace for their work, but they also allow the artists to set royalties, so the original creator gets a cut when an NFT is re-sold.
It makes sense why artists are getting on board. But getting people to buy them is a different story.
Visa was one of many big companies to get in on the NFT craze. They purchased CryptoPunk #7610, one NFT from a very popular collection, for $150,000. Granted, that’s not much money for one of the world’s biggest financial giants, but more and more ‘average Js’ are spending a lot of money on digital art.
Buyers are split into two groups: i) people who want to collect digital art, and ii) people who are investing in NFTs to make money off what they hope will be an increased market value.
The former group certainly does not display digital assets like they would traditional art installations, nor do they purchase NFTs for that reason. Instead, you’re paying for exclusivity. For instance, CryptoPunk is an NFT project of 10,000 characters wearing hats, smoking pipes, etc., that was created by a pixelated character generator.
Image Credit: OpenSea
It was one of the first NFT projects on the Ethereum blockchain and there are a limited number of them. Ergo, its value skyrocketed, some going for millions of dollars.
For the latter group, creators and marketers have smartly (and successfully) positioned NFTs, along with cryptocurrency, blockchain, and other Web 3.0 technologies, as an opportunity to get in on the ‘ground floor’ of something big.
This ad by WealthSimple is now widely recognized and a great example of the marketing direction for Web 3.0 technologies.
Using NFTs to Foster Brand Loyalty
NFTs give brands the unique opportunity to engage with their audiences in a personal and interactive way. Artist popularity accrues by building online communities of supporters or ‘fans.’ When brands create these communities, they foster loyal and lasting audiences – a notoriously difficult to achieve and worthwhile goal for marketers.
The problem is that NFTs are high risk and high reward. An NFT might not gain traction at all. Even if it does, many organizations might find that their target audiences aren’t in the ‘early adopters’ NFT and cryptocurrency community. So even if you create something really popular, it won’t drive worthwhile conversions.
That said, many bigger companies (the ones willing to potentially lose some money on a risky investment) have successfully leveraged NFTs to bolster brand awareness. Brands like Coachella, Adidas, and Coca-Cola are a few of many.
This past year, Coachella offered paying guests an NFT of a flower that bloomed on the Friday of the festival. It was an overall successful campaign. After all, everyone loves product giveaways and freebies are a great way to resonate with consumers.
In Adidas’ first foray with Web 3.0, the company sold at least $22 million within several hours after launching a collection of 30,000 “Into the Metaverse” NFTs.
Coca-Cola, a company with some of the most iconic and memorable branding out there, launched four collectable NFTs for a charity auction. The ‘loot box’ included a vintage cooler, a bubble jacket, a friendship card that plays off original 1948 artwork used for Coca-Cola trading cards, and a sound visualizer of a coke bottle being opened and a drink being poured over ice.
The campaign generated more than $575,000, all of which was donated to Special Olympics International, and loads of brand awareness.
Image Credit: OpenSea
It’s hard to tell whether this is a passing fad, or if the world will continue to embrace Web 3.0 technologies.
For the time being, NFTs are great business opportunities and an interesting marketing tool that artists and brands can use to their advantage. Granted, not every business has Visa-level money to be spending on NFTs. But making your own could be a relatively affordable, if not enjoyable, way to market your company and build an online community.
They’re also an interesting (and slightly confusing) example of the direction marketing practices are moving in a Web 3.0 world. At the very least, it’s something for advertisers to keep their eyes on.