You've almost certainly heard of NFTs. Since mid-2021, crypto enthusiasts, celebrities, and brands have paid enormous sums to purchase digital pictures of punks, apes, and birds. But what began as a niche interest among crypto evangelists has morphed into a phenomenon that some people believe predicts a new model for the Internet.
What are NFTs?
NFTs—non-fungible tokens—are unique digital items that are authenticated on the blockchain. The authentication process is the same technology that secures cryptocurrencies, such as Bitcoin, allowing the ownership of each NFT to be tracked on a public, unchangeable ledger.
Why have NFTs become such a hot topic?
Beyond the eye-watering prices, NFTs have spawned communities composed of creatives, collectors, and speculators. Each new successful NFT project gives rise to a new community aligned on a unique set of values, attitudes, and norms.
Those communities, guided by their collective compass, are beginning to resemble audiences, and the creators behind the projects are starting to look and think like brands.
The Bored Ape Yacht Club (BAYC), an NFT collection of 10,000 caricatures of apes that have unique traits, has rocketed to the top of NFT charts—giving rise, along the way, to partnerships with Adidas and Universal Music Group, and, most recently, a movie deal with Coinbase. Owners of the BAYC NFTs have enjoyed celebrity-like status, receiving invitations to events and members-only perks.
Millennials and Gen Z, digital-native generations born into the Internet age, have grown up with the digital world at their fingertips. Social interactions, entertainment, and shopping live at the tap of a button. Nearly anything can be streamed, delivered, or experienced through technology platforms that broker our interactions with the world. The convenience of such platforms is undeniable, but it has also commoditized or eliminated the experience of ownership and membership.
NFTs, as a socio-technological phenomenon, are opening the window to a new type of digital experience that allows people to invest in a unique asset while simultaneously participating in an authentic community. For audiences that have lived their entire lives streaming, renting, and swiping right, that level of genuine participation is a new, often revelatory, experience.
What do NFTs mean for brands?
Digital marketers, keenly aware of the increasing challenges around consumer privacy regulations and skyrocketing customer acquisition costs, are searching for new ways to engage the next wave of super-consumers.
Community-building has become increasingly important as a digital marketing strategy pillar. However, community-building is often a follow-up activity, secondary to traditional brand marketing tactics. The robust communities contributing to NFT projects challenge that paradigm by demonstrating that the community is the brand.
In many cases, the community for NFT projects starts small, with just a few hundred early adopters. But small numbers multiply fast; and thanks to the amplifying effects of social media, those early supporters can set the tone for explosive growth as more people discover the project.
Like those collaborating with BAYC, savvy brands are beginning to see the opportunity in NFTs as a new approach to connecting with a digitally native and crypto-savvy audience.
How can brands get involved in NFTs and Web3?
Marketers considering Web3 and NFTs should strongly emphasize community-building—not as a secondary tactic but as the primary focus of their efforts.
As a tactic, community-building might seem like a dark art or a curious pastime. The countless hours spent on Twitter or Discord (a preferred chat channel for the NFT-savvy) can be challenging to justify for marketing teams under tight deadlines and shrinking budgets. However, investment in a community-building discipline can pay off in spades.
To meet the challenge, marketing teams might need to rethink their team structure and consider tooling to position community-building as a top priority. Look for experienced community-builders, especially those with NFT experience, to lead the effort. Empower the community team to contribute to the marketing strategy in a way that elevates its ideas.
Beyond community-building, marketers should consider how the customer journey can be extended or enhanced using NFTs.
- Will NFT holders gain early access to exclusive events or discounted products?
- How will the brand's reputation change over time for NFT holders, and how will secondary market activity influence the perception of your brand's NFT?
- How can you reward NFT holders for aligning with your brand ethos and value proposition?
There are no correct answers to those questions, but all marketers entering the space should take time to reflect on their brand's unique value and exclusivity.
How can marketers take first steps into NFTs?
A marketer's first steps into the world of NFTs should begin with participation. Become an evangelist for your organization by participating in NFT culture or empowering a team member to become an internal expert on the team.
First-hand knowledge developed through direct participation as an NFT buyer and community member will allow your team to create a sixth sense that will become a guiding light for an NFT strategy.
After getting experience under your belt, you should be positioned to formulate a strategy for a pilot test to gauge your customer's appetite for NFTs. Limiting the rollout to a small audience with a tightly scoped campaign can help sell the initiative to the board room.
Because NFTs are an emerging technology, many marketing teams lack the internal resources to staff even a small pilot test. However, a growing pool of turnkey technology providers can help your team launch and support your NFT initiative. Look for technology partners with a long track record of NFT experience, referenceable customers, and strong technical capabilities.
Once a pilot plan and technology partner have been secured, stay focused on the community by making them part of your journey into the land of NFTs. Share your progress, admit challenges, and "build with the community" as you develop your NFT strategy.
What's next for NFTs?
Naysayers say NFTs are nothing more than "worthless JPGs," a fad destined to fade into the annals of Internet history. On the other hand, many believe that NFTs are the first step toward a hyper-digital future—the Metaverse—in which we will experience a life of mixed-reality experiences enhanced by data, AI, and personalization.
Meta (formerly Facebook) has shifted its entire company strategy toward that vision, and NFTs are central to its adoption strategy.
Regardless of one's personal views, the cultural influence of NFTs is becoming hard to ignore. No marketer wants to be the last one in the room to know about Instagram, and NFTs might be the next unlock that propels brands to a new level of loyalty and relevance.
Savvy marketers will anticipate the next wave of adoption by paying their dues and diving in to learn the ins and outs of NFTs.
