Why should brands pay attention to NFTs?
- Gaeun Lee
- Feb 23, 2022
- 4 min read
A world without boundaries between the virtual and the real world is approaching. Metaverse, a system that expands reality to a digital-based virtual world and enables all activities in a virtual space is developing. It is also a network of 3D virtual worlds that focuses on social connection. There The Sandbox, one of the metaverse platforms is combined with blockchain and Non-Fungible Token (NFT) functions in 2020.
Along with the growth of metaverse, NFT is also playing a role as a medium connecting virtual and reality. It is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded. Types of NFT data units may be associated with digital files such as photos, videos, and audio. Since each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin. A particular feature of NFTs that attracted many multinational brands, is that growth in value in the virtual world corresponds to a growth in the real world also and is constantly expanding. As a result, NFTs have become a marketing method for many brands to increase their value not only in reality but also in virtual spaces.
NFTs allow brands to do what cannot be done in the real world. Firstly, they can create new and unique brand experiences. NFTs often become a part of a brand’s storytelling and something tangible that customers can own, representing their experience of the brand. Such uniqueness not only helps to foster greater brand awareness but also establishes stronger brand loyalty. In addition, brands can build their image and support social causes. Today’s consumers put a great emphasis on whether brands correspond to their values. Many brands demonstrate their dedication to social causes by donating their NFT revenue to support charities. Lastly, revenue can be further increased from a newly generated interest in the brand that uses NFTs for marketing.
Some multinational brands are already using NFTs. One of the most successful cases is the National Basketball Association (NBA) Top Shots. Fans can enjoy the digital version of the basketball trading card by buying and selling NBA's game video highlights with unique numbers assigned on each blockchain thanks to the NFT technology. NBA's Top Shot platform recorded $300 million in sales in 2021, with the NBA star LeBron James' highlight video selling for $200,000. In addition, the card is not only a possession but also linked to the game Internet-Protocol address. If you own the card on an NFT platform, one can enjoy games as the player on the card. Additionally, the NBA is developing more content that can be played by linking this card. Many experts suggest the reason behind NBA Top Shots’ success seems to be in the efforts to build an ecosystem of content beyond the concept of purchase and possession, expanding their purchased NFTs to new services in conjunction with IP content.
Older brands such as Coca-Cola have also made the NFTs and auctioned them off. Each NFT was created to celebrate elements that are core to the brand, and it was a reinterpretation of a virtual world in unprecedented ways. They made four digital collections including the Friendship Box, the Sound Visualizerof pouring Coca-Cola on ice, the Friendship Card, and the Bubble Jacket. These four were for the Special Olympics, an international sports competition involving athletes with intellectual developmental disabilities, which has been sponsored by Coca-Cola for more than 50 years. The first-ever Coca-Cola NFT collections were sold at $575,000 in 2021.
The food industry has actively used the NFTs. McDonald's issued four pictures of its flagship menu as NFT tokens and used them as prizes for social media events. Due to their scarcity, they are said to be held without anyone using them as currency. Taco Bell also developed its flagship Taco image as NFT art through collaboration with five artists and auctioned them which were sold out in 30 minutes. The transaction started at $1.79 but eventually closed at $700.
Also, the fashion industry has shown a keen interest in NFTs. In particular, luxury brands have attempted to increase their value in metaverses using NFT. Burberry launched a game character “Shaki B” decorated with Burberry clothes on the blockchain game "Blancos Block Party" in August 2021. 750 of Shaki B NFTs were sold out in 30 seconds after launch. With the initial sale price at $300, the resale price has since jumped to more than $1,100.
Other luxury brands have used NFTs to prevent forgery and alteration. Louis Vuitton's parent company LVMH, Prada, and Cartier formed a blockchain consortium named "Aura." They decided to insert electronic chips into their real products and issue "digital genuine product certificates" linked to them through NFTs. This was possible as the blockchain, the basis of NFTs, has a core function that prevents forgery and alteration.
According to a report by NonFungible Corporation, an NFT channel, the total market capitalisation of NFTs in 2019 was only about $210 million, but the value tripled in 2020. Many experts have predicted its market size to soon reach $1 trillion. Such explosive growth of the NFT market originated from its ability to recognise the unique value of digital assets and prove them to be original. Then as the virtual world such as game spaces and metaverses gradually expanded, related services and products have been released in industries such as fashion, entertainment, and more. Thus, brands of all sizes should pay more attention to NFT, which connects the virtual and the real world.
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