Non-fungible tokens (NFTs) are the latest digital craze, but their sudden rise into the mainstream might have you wondering what all the fuss is about. NFTs seemingly appeared out of nowhere and are now being bought and sold for as low as a few hundred dollars to ludicrous amounts reaching into the millions. Before we dive any deeper, let’s talk about where these “tokens” came from and why people are trading them like fine art at a Sotheby’s auction.
What Are NFTs?
NFTs are one-of-a-kind digital assets like images, videos, GIFs, audio, etc., that are unique to the owner. These digital NFT assets are stored on secure registers using crypto blockchain technology, which offers owners a bit of anonymity and a sort of certificate of ownership. These NFTs are non-fungible and unique, meaning they carry their own individual value even if they are from the same collection and can’t be replaced with something else. For example, it would be like having Patrick Roy's game-worn jersey from the Colorado Avalanche's Stanley Cup win in 2001 (no need to remind us how long it’s been) – you could trade it for his teammate Peter Forsberg’s jersey, but the value will be different because they’re both one-of-a-kind.
NFTs made their first appearance in 2012 as a way to prove ownership of real-world assets with “colored coins” – digital art tokens stored on the Bitcoin crypto blockchain. Following the rise in popularity of cryptocurrencies, the NFT market grew exponentially as more blockchain networks like Ethereum and Binance were created, and more people realized the value and possibilities of NFTs. In 2021, we saw the public awareness and mainstream adoption of NFTs rise, increasing 2,100% in Q1 of 2021 versus Q4 of 2020, and they continue to grow in popularity. Reputable auction houses like Sotheby’s and Christie’s now offer NFT auctions. We have recently seen celebrities like Shawn Mendes and Eminem adopting NFTs ranging from virtual art of their recognizable personal items to unreleased original music tracks. NFTs enable artists to reach wider audiences across many new blockchains since anyone with access to the internet can create, find, and trade NFTs. So, what if it could help businesses do the same?
How Brands Are Using NFTs in Marketing
NFTs offer brands exciting new opportunities for digital marketing. Taco Bell was one of the first brands to incorporate NFTs into their strategy. Earlier this year, Taco Bell began selling a small collection of taco-themed digital art NFTs – all 25 sold out within 30 minutes. All proceeds went directly to their Live Más Scholarship, which increased their brand awareness and supported a good cause at the same time.
Brands have also used NFTs in their digital marketing strategy to purchase an already popular NFT that gets their brand shared on social media in hopes of going viral and reaching new audiences. We recently saw this with Jay-Z changing his Twitter avatar to CryptoPunk #6095. The CryptoPunk collection is regarded as one of the most popular NFT collections. This got social media buzzing with people speculating the meaning behind this change and whether he had actually purchased the NFT. Jay-Z later announced a partnership with Sotheby’s and popular artist Derrik Adams to launch his own NFT project.
Other popular ways brands have had success combining NFTs in their marketing:
- Creating limited digital memorabilia for milestones
- Partnering with well-known artists
- Lead generation contests
- Exclusivity of owning a digital collectible for brand loyalty
Since NFTs are in their infancy, the opportunities for use in a brand’s digital marketing strategy are endless. Brands can take advantage of this new way to engage with their users in the digital space. Coca-Cola was able to do this by creating their own NFT collection where purchasers received the NFT art in a multisensorial fashion with animated digital versions of already collectible 1940s Coke trading cards paired with sounds of a coke bottle opening or a Coke pouring over ice, like what you hear and see in the opening credits at a movie theatre. The data shows that NFTs are increasing in popularity but incorporating these assets into marketing strategy comes with risks.
NFTs aren’t all sunshine and rainbows. NFTs are a high-risk, high-reward investment. Sometimes, an NFT collection won’t gain the community, publicity, and traction it needs to be successful and won’t provide a significant return. An NFT’s success relies heavily on the community, partially relying on social media shares and word of mouth to create the publicity and traction for a successful project. For new and smaller NFTs that don’t have publicity from a well-known source, this community is crucial as it usually provides the initial funding and hype for the project’s launch. If the community isn’t large enough, the project might not reach the recognition it needs to have a competitive demand. Another risk is having a target audience that doesn’t overlap with the same audience that is following NFTs, so now you have exposure and a collectible item but no KPIs to justify the investment for marketing.
So, What’s the Verdict?
NFTs help brands create new, memorable experiences for their consumers, reach new audiences, and offer a new way to engage in the digital space. In our opinion, if your brand can afford the risk, has overlapping audiences, and wants to test new digital marketing strategies, we recommend incorporating NFTs into your marketing. Since NFTs are new, and the space and capabilities have yet to be explored, your brand can help pioneer this new technology.