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By Jon Thompson, Jaime Mougan and Elise Alverson
Early last year, NFTs (non-fungible tokens) became, along with “metaverse”, one of the most popular and talked about terms in the technology and business worlds. Today, an entire industry is being built around them.
To truly understand NFTs as one of the pillars of The New Internet (a.k.a. the metaverse), it’s worth mentioning the technology behind them: the blockchain. Blockchain (another of today’s most prominent buzzwords due to its unparalleled “security”), is the basis of everything in the current metaverse, from crypto currencies (like Bitcoin or Ethereum), to digital wallets, and of course, NFTs. Unimaginable a few years back, blockchain technology is best described as a de-centralized ledger, which brings the peace of mind needed for everyone to embrace their digital possessions or assets.
That is why NFTs were such an exciting and unfamiliar concept. Because they’re backed by the blockchain, things that were previously un-ownable—like a JPEG, a song, or a digital work of art—can now be owned by an individual. It is akin having a digital certificate of authenticity. Or, to put it in terms of a more traditional art collection: anyone can buy a Picasso print, but only one person can own the original. That is what is meant by the term “non-fungible” – they can’t be exchanged like for like, and the original work can be verified.
In this chapter of our series on Brands in the Metaverse, we will unlock why these digital possessions are so important for the present and future of the metaverse, how they affect the very meaning of ownership, and how brands can tap into them.
Read Chapter 1 — How Brands Can Shape the Metaverse to Their Advantage
Chapter 2 — How Brands Can Navigate the NFTs Revolution
Understanding the Hype
As with many things in the digital era, NFTs started to get noticed by the mainstream because of a financial bubble. An artist created a digital art piece and sold it as an NFT for thousands of dollars. Followed by the sale of Beeple’s NFT for $69 million, and traditional auction houses Christie’s and Sotheby’s starting to venture into the space, people started to pay attention (and potentially look for a pay day of their own).
It’s important to note that not every NFT makes you a millionaire. A recent analyst determined only 1% of NFTs sell for more than $1,500, and 75% sell for $15 or less. Most of them don’t even sell at all.
So, instead of just blindly following the money, we should pay attention to the value of owning NFTs and the utility that comes with them.
NFT’s are Reshaping Ownership
NFTs add value to digital ecosystems. They can help users to enhance their digital personality in a game or digital platform, they can grant users access to an exclusive event, or they can be a part of a communal experience.
Enhancing your virtual identity
- Such as in the real world, in the metaverse our identities will be shaped by things like what we wear, where we live, and the things we do. NFT’s are a way to shape our virtual identities.
- People will use their “digital wallets” and their different possessions as a way to define and express themselves. It is the evolution of the idea “I am what I own”.
- As younger generations are especially aware of their digital identities, they might end up paying more to improve their digital identity than in real life.
Granting access to exclusives
- NFT’s may soon become your ticket to certain events or exclusives. If you own a particular NFT, you could gain access to a certain club, show, or get early access to a product drop, among other things.
- The security around the asset allows you to play with the personalization of the experience (i.e. because you are the only person that has that particular asset, only you can do X.)
Becoming a part of a communal experience
- Owning certain NFT’s could be the most “meaningful” asset for a particular community.
Owning a NFT is just the first step. The utility and what you can do with it is the big question everyone wants to answer, and brands will have a say.
A new way for brands to redefine engagement
There are a few ways that brands can engage with NFT’s, with the caveat that this is an ever-evolving landscape.
- Today, most brands get involved in the NFT space by tapping into scarcity. They use NFT’s to drop a product or to grant access to an exclusive event.
- Luxury and fashion brands were amongst the first to hop aboard the NFT craze. Brands have started to create exclusive releases of NFT’s, or reward their consumers with NFTs that tie in somehow to physical consumer experiences. Gucci, Givenchy, Balmain are a few examples of the early adopters.
- Brands can also have a presence on metaverse platforms (Decentraland and the Sandbox are two of the most popular platforms at the time), where they own virtual land and sell items in the form of NFTs.
- As these metaverse platforms become more mainstream, this has the potential to become an entirely new revenue stream for certain brands. The ability to buy products in the metaverse is not so different from buying things in real life. If you wear a certain brand of shoes in the real world, you might want to digitally wear them, too.
- That should be just the beginning for brands. Owning a “piece” of the brand should come with endless opportunities for access and ways for a consumer to enhance their experience with a brand – eventually, users will demand it. In that sense, NFT’s and the metaverse will change the way we look at a typical consumer journey. Consumers will want their digital experiences and physical experiences with a brand to feel intertwined. For instance, if you buy a pair of shoes in real life, you could also get them in a metaverse platform.
- There can also be opportunities to engage in the long run and to establish and nurture a loyal fan base—, for example, creating a club around it. Many celebrities are using them to connect with their fans, and similar opportunities exist for brands.
Ultimately, NFTs are ways for brands to get next-level engagement, one that lasts and could create more than advocacy. So, in order make sure the token in question is well received, or desired, brands will need to go make sure they understand their current value in people’s lives, the “distinctive assets” that matter most, and their long-term engagement plan with consumers (as in, what else can people get out of it today and tomorrow).
Coming up in Chapter 3…
In the next chapter of our series on Brands in the Metaverse, we ask: How do you build a metaverse – sustainably? And what role should your brand play in building that greener future digitally and in real life? Opportunities abound in the metaverse, but as we explore a whole new world, let’s better understand the environmental impacts too – both the good and the bad.
