How does NFT Affect the Branding of Web 2 Companies?
Updated: Aug 19, 2022
One of the most resounding recent conversations in the commercial sector should be the NFTs. The NFT market reached an impressive $2.5 billion market cap last year, alerting wolf-liked companies or entrepreneurs to hunt this business opportunity in their ways. Although the number is constantly in flux, it’s undeniable that this tremendous number is a huge potential capital for all the brands to compete with if they can successfully share this NFT market by linking this latest trend with their brands.
In 2022, NFTs are following a meteoric rise with a familiar adoption rate on social media. It is easy to discover NFT avatars on Twitter and Reddit, with Facebook and Instagram soon launching the NFT cognization function. Driven in part by FOMO anxiety, companies are launching their NFT collections at a dizzying pace, hoping to slice the action with brands leveraging to attract new customers and retain existing ones. More than just a fad, the underlying blockchain technology in NFTs offers a vehicle for traditional commerce to expand their brandings and reclaim ownership of their digital consumer relationships without a centric platform in Web 2.
For more than a century, brands have been built through mass media, from magazines to radio, and then revolutionized from TV advertising to digital marketing in the recent decade. Today, NFTs are doing what social media did in 2010 – drastically improving their potential for brand awareness and audience reach. Brands are facing a new world of digital consumerism, seeking a meaningful way to utilize the Web 3 infrastructure for cultivating a mass following in a short period of time. Instagram and other social media platforms have become mediums for uninterrupted, highly strategic branding, and now NFTs are used to disrupt this marketing order. NFTs seem inextricably convolute with digital collectibles. Thus, many brands have chosen to launch their collections as the gate to step into the NFT business, such as Campbell’s soup can art and Lamborghini’s space-themed NFTs.
(Lamborghini’s space-themed NFTs)
But the first step in this NFTs water isn’t mean that companies have been in the NFT market pool. A brand won't be built with only one single step in the market. Contrastly, NFTs might be Pandora's box and affect brands negatively if companies have a short-term focus, extractive behavior, greed, and a lack of understanding of the technology and use cases to execute their NFT project. Liverpool, one of the professional and famous football clubs based in England, launched the “LFC Heroes Club” NFT with much fanfare in the first quarter of this year and was attached a label of “Never buy alone” by its fans. Far away from the expectation of £8.5 million in revenue, Liverpool sold only 9,721 NFTs, which is equivalent to 5.6% of the total supply, with an income of £550,000. The reasons behind the boycott perfectly embody the greediness of the NFT market without sufficient knowledge and planning on the NFT campaign. Most of the fans thought that the issuance of NFT merely wanted to make money from millions of supporters. Each of the NFTs sold at £57 with 170 thousand collectibles, affecting the scarcity of the NFTs profoundly. Meanwhile, unlike the mainstream NFTs trading, Liverpool chose to sell NFTs in US dollars but not cryptocurrencies. It highly violated the convenience of speculation in the secondary NFT market on the blockchain. Most importantly, holders could not find a single gateway to interact with Liverpool by using the NFTs. The entire campaign was neither fans-centric nor linking the holders with the brand. Therefore, smart brands today need to be asking themselves what comes next after their first NFT collectibles to cultivate the NFTs as a resource to link with brands. If executed well, the NFT can bypass Web 2-centric marketing to spark belief and spring the owners to action for buying tons of soup cans or even a car. A smart and innovative NFT plan can pave the way for developing a positive brand.
(The LFC Heroes NFTs)
One of the most common ways brands use NFTs to facilitate branding connections is by extending their digital product line. NBA is a well-known sports media brand that topped US$10 billion of revenue for the 2021/22 season, mostly from merchandising, tickets, and concessions. Just right before this year, this brand created a new class of media assets, expanding its brand from offline to online with the launch of NBA Top Shot Moments NFTs which gives users the ability to trade digital assets based on the different rarity of video clips and iconic photos from NBA games. This is far away from watching video highlights on YouTube, each Moment is an NFT that’s officially licensed by the NBA and minted with a unique serial number and data, including game and player stats. The NFTs' authenticity connects the owners with this huge NBA brand directly by adding value and prestige in between. Every NBA lover would love to occupy their unique Moments recognized by the NBA. It’s that pride of ownership that sets NBA Top Shot Moments apart, building a sense of belongings to the brand by owning the NFTs. Analogously, Ralph Lauren has digitalized their physical polo apparel and sold them on virtual worlds like Zepeto.
(The sales of LeBron James Dunk Moment reach the limit of $20,000)
Extending product lines into the digital world is just the beginning of the NFT market. Mostly say, NFT collectibles are used for trading or fulfilling people's satisfaction with the brand that they love. However, under the fierce brand competition, the NFT collectibles are difficult to please people's expectations gradually. In light of this, each of these projects ports a current product line into the broader application like app and metaverse, expanding consumers' engagement and brand experience. Note that most of the applications are exclusive to the NFT holders only, it will become clear to the people which companies have the sincerity to bring real value to their customers and expand the customer base to increase the intrinsic value of the NFT collectibles.
Nike has been among the first famous brands to push the idea of Web3 assets. Nikeland, the brand’s micro metaverse from Nike, has attracted nearly 7 million visitors since it opened. It allows the participants to try on virtual products, gain NFT rewards via games, and explore and interact with others as avatars. The NFT-based digital sneakers even allow owners to customize their unique skins and effects and use them in the physical experiential stores. This indicates that Nike clearly understands the value of personalization to consumers today; the key here is the NFT experience. In a world where a positive experience with a brand is more important than pricing when associating with buying decisions, Nike is using Web 3 technology to create memorable shopping and leisure experiences to reinforce the bonds between customers and the brand. As such, customers will be more likely to search for Nike's products when they crave sports products next time, no matter the physical or digital variety.
While NFTs are primarily classified as digital assets used in the virtual world, merchants are starting to think about the formability of NFTs in the physical world to catch up with their main business in reality. As a Web 2-dominated commercialization, most brands don’t aspire to remain in the business of creating and selling digital commodities in the long term. Therefore, connecting the reputation of their NFTs collection with physical brands and products, in reality, is vital. Thanks to blockchain technology, the NFT owners are authenticated without any fear of duplication. This identification acts as an essential catalyst to strengthen people's connections with brands via NFTs. Like a passport, the digital NFT collectibles are officially tied to the ownership of physical products or event accesses. Brand loyalty is subtly increased when fans obtain exclusive benefits offered by the companies. When Coach launched an NFT collection featuring the art of animals from its holiday promotions, it also promised a custom Coach bag to each NFT holder; beverage company Anheuser-Busch hosted an exclusive event at its flagship brewery for its NFT holders to enjoy free beer, tours, giveaways, and performances. Obviously, the brand-associated physical experiences under the NFT issuance have turned into a good marketing campaign to attract fans and potential customers without much effort on Web 2 promotion. This is a one-of-a-kind asset to the continuous development of a brand.
When talking about the physical application of NFTs, it is no surprise to hear that using NFT as a ticket to enter physical kinds of stuff by the proof of NFT authenticity on the blockchain. This is a useful tool for the entertainment industry to make their first step on Web 3. But connecting the NFT with a ticket function means nothing to a brand at all. A smart entertainment company needs to utilize its innate advantage to enlarge the potential of its brand into more dimensions.
The One Cool Group, a film studio based in Hong Kong, has thought out of the box and pushed the boundaries of filming by launching OneCool Collective NFTs in its latest movie -- Warriors of Future, a multi-million-dollar science fiction action movie produced by Louis Koo. Inspired by the movie’s powered armor, the 10,000 unique 3D avatars adopt an innovative interchangeable mechanism, allowing holders to interchange traits ( including weapon, armor body, arms, helmet, and the background) within the NFTs they hold and reflect in real-time in the NFT marketplace. What's more, this company cracks the stereotype of being a film brand through NFT and steps its first step in the gaming market. The holder will be able to use their NFT in action as an avatar in the upcoming Warriors of Future mobile game, interacting with its brand with NFTs in two different dimensions thoroughly. Indeed, this campaign will engage with fans through a series of physical sales and events, and future ecosystem participation with a community.
Powered by blockchain and NFT, the entertainment industry does have the potential to explore more possibilities and unleash more experiences and values for all stakeholders. NFT is like a bridge between fans and brands. It enriches experiences and consolidates the bond by holistically merging virtual and physical worlds, changing the rules of the future of the entertainment industry.
(The launch plan of OneCool Collective NFTs)
Branding turns out to be related to people’s perceptions. No matter what product is launched or what strategy is taken, once people have a good perception of a company, a brand will be invincibly established in the market. Companies started to look for a binding strategy to connect the brand with customers. Eventually, they came up with the answer—Corporate social responsibility (CSR). However, this binding connection to consumers is hard to fully construct due to the missing incentive of wealth generation to customers. Yes, it sounds contradictory and ironic, but this is the reality of living in a capitalist society. The ultimate business goal of holding CSR is to attract more buying powers from supporters, so it is not shameful for customers to seek return under the CSR program. Hence, the NFT is a fascinating landscape for establishing sustainability by connecting CSR with the secondary market and community. Many brands have started to use proceeds from NFTs and donate them to charity to seek attention from the public. Coca-Cola, for example, has minted a single group of four NFT collectibles as a part of a charity auction for International Friendship Day and sold for over $575,000, which went to Special Olympics International entirely. These four super-limited collectibles are available for the winning bidder to sell on the secondary market like Opensea. MAC Cosmetics also sold collectible NFTs to raise funds to support organizations in the fight against HIV/AIDS. This NFT-CSR model is an excellent business strategy to instill a brand as a valuable asset to the community while boosting the potential growth of sales by attracting purchases from purpose-driven brands.
(First-ever NFT collectibles of Coca-cola)
NFT is just like a double-edged sword towards branding: If executed effectively, it would be a powerful tool to proceed with brand communication; otherwise, it would harm the reputation and prominence of a brand. Nevertheless, much like in the early days of the Web, it is critical for brands to simultaneously ensure that they don’t fall behind. As millennials have gained considerable purchasing power on digital assets over the past years, connecting NFTs with brands may cause an astronomical buzz around the market in the future. Let us witness how this technology makes waves in the commercial sector – for better or worse.