Earlier this year, the designer and artist Mike Winkelmann—known better by his handle Beeple—sold a piece of art, Everydays: The First 5000 Days, for $69 million at Christie’s. In an art market where eight- and nine-figure price tags are commonplace, that might warrant little more than a shrug. However, the eye-popping amount paid for the piece—a collage of diurnal drawings, doodles, and diagrams that took more than a decade to create—didn’t generate global headlines because, as a digital artwork, it is not a tangible object. Rather, the sale of The First 5000 Days made front-page news because it represented a high-water mark for the sale of non-fungible tokens (NFTs).
NFTs are tokenized representations of assets that can be traded on a blockchain and have been around for years, but only recently have they emerged as a way for artists and creators to mint original artworks for a mass audience. Sales on OpenSea, one of the most popular NFT marketplaces, reached nearly $2 billion in August of this year compared with roughly $8 million in January. Part of that meteoric rise is due to an increasing number of artists minting new works exclusively for the NFT marketplace. But it’s also being driven by an increasing number of digital collectibles, ranging from the NBA’s most memorable highlights to a series of cartoon apes wearing different costumes.
This broader appeal of NFTs is where companies are beginning to see opportunities to deepen their engagement with current and potential customers. “If you’re a brand and you’re only engaging with your target demographic through ‘digital 1.0’ means, like Facebook or Instagram ads, you’re missing out on a huge opportunity,” says David Markley, director of business solutions at the blockchain platform Algorand. Markley’s company is building an NFT development platform with the digital agency Dept that will streamline the launching of NFT platforms. Instead of hiring expensive engineering resources to create and maintain an NFT infrastructure, brands can use the Algorand platform to streamline the process in one place.
“Leveraging new technologies like blockchain gives brands a more intimate way of evolving a relationship with customers,” Markley says. “This new technology and new engagement tool is only now becoming mainstream. NFTs open up avenues for all consumer brands to do innovative things.”
WHAT’S OLD IS NEW AGAIN
Brands minting collectibles, of course, is nothing new. Everything from special magazine issues to limited runs of toys derive much of their value from their scarcity, something that was difficult to mimic in the digital world until NFTs arrived.
The ability to digitize and certify memorabilia is a potentially huge profit center, but Brandon Aaskov, director of web at Dept, says that many companies are being deliberate about their choices with NFTs. “Brands don’t want to look like it’s a money grab,” he says. “They want it to be an authentic experience for their fans and are thinking about what assets they have that actually would be valuable to them.”
The ability to create scarcity out of both new creations and archival assets is valuable for brands that are competing for customers on a digital playing field. But NFTs are more than digital certificates of authenticity for new lines of memorabilia. When linked with physical assets, they have the potential to create mixed-reality experiences for wide swaths of consumers.
Aaskov brings up season tickets for sports teams, an asset traditionally associated with the most dedicated fans. Instead of simply providing people access to a seat, NFT tickets could be linked to stadium QR codes that could overlay augmented reality “Easter eggs” on a ticket holder’s seat or have a “memory” attached to them, so future owners could know who once sat in that specific seat. “Who knows what teams will offer?” Aaskov says. “I think it’s really interesting seeing something like the history of a season ticket holder. It’s a really neat way to use NFTs.”
BREATHING NEW LIFE INTO BRANDS
For legacy brands that have a deep history from which to draw, NFTs also present a unique way to give those assets another life. Ted Kraus, managing director and head of ventures for NAX Group, helps brands create new markets and ecosystems around dormant assets, and sees NFTs as a boon to that market. “NFTs are going to provide another way to increase monetization for an existing asset, whatever it is,” he says. “If a brand’s commercialization strategy has attractive incentives for customers holding an NFT, then NFTs can absolutely move the needle for both small private companies and large public companies.”
Part of giving those potential assets a new blockchain-enabled existence is equipping brands with tools like the ones Markley’s team is building at Algorand. By reducing the barriers to entry for brands of all sizes, the platform has the potential to open the door to a new era of customer engagement. “At scale, this will unleash new revenue streams for consumer brands,” Kraus says. “Our work with Algorand is going to be significant for companies looking to unlock the dormant value of their assets.”
The First 5000 Days may have lit the spark for NFTs, but forward-thinking brands know that their value in driving value for customers is only the beginning.