How Brands Are Building a New Type of Company With NFTs
When I started this post, the title was going to be “How media companies are building revenue using NFTs.” But to write that would miss something far more interesting.
Brands are making a lot of money through non-fungible tokens, or NFTs. In fact, the top 13 brand NFT projects on Ethereum have netted over quarter of a billion dollars to date. Even if this is all NFTs ever amount to, that’s a pretty good day at the office considering these are purely digital products that did not require raw materials, manufacturing or shipping, will not break, and will generate more revenue for these brands every time they’re sold*.
*Yes, royalties are complicated and this isn’t always true.
Table of Contents
- What is an NFT?
- Beyond revenue
- Nothing new under the sun
- Aligning incentives
- Why does this matter?
- How WordPress VIP and Woo can help
What is an NFT?
An NFT is a type of digital asset that represents ownership or proof of authenticity of a specific piece of digital content—such as an image, video, or music file—using blockchain technology. NFTs are typically created using the Ethereum blockchain, which allows for the creation and transfer of unique digital assets that cannot be replicated or duplicated.
The concept of NFTs has been around since 2014, but they gained popularity in early 2021 when several high-profile NFT sales made headlines.
People use NFTs most commonly for:
- Collecting and trading digital art
- Creating unique digital experiences
- Verifying ownership of digital assets
- Monetizing digital content by selling it as a unique asset
Brands use NFTs to engage with their audiences and create unique experiences. For example, a company might release a limited edition NFT as part of a marketing campaign or offer exclusive access to NFTs as a reward for loyalty. NFTs can also authenticate merchandise or collectibles, such as sports memorabilia or limited edition sneakers.
Overall, NFTs offer a new way for creators, artists, and brands to monetize and authenticate digital content while providing a unique and immersive experience for collectors and fans.
Nike has leaned into the NFT space heavily, acquiring a hot NFT studio called RTFKT and shooting to the top of the brand NFT leaderboard. They’re now leveraging the RTFKT asset to launch .SWOOSH—their own Web3 community.
The language they use there gives us clues to their intention.
THE HOME FOR NIKE’S VIRTUAL CREATIONS
.SWOOSH is a new community experience, designed to give you the opportunity to co-create the future of Nike.
- Create, collect, trade, flex
- Unlock special access
- Build with our community
- Pull up to Nike events
Nike customers can claim their .SWOOSH Web3 username and become part of the Nike-exclusive community. Rather than relying on Facebook, Instagram, or TikTok, Nike built their own space—one they can directly control. Here, they don’t need to pay to reach their audience; they can simply message their customers by email or through the same crypto network that provides users their wallets.
Besides identities, wallets, and a communications layer, the same network also gives Nike and their community the ability to buy, sell, and transfer products, and to track community participation. Nike can see what everyone has in their wallets—how everyone is connected and interacts.
These interactions and visibility also allow Nike to crowdsource ideas, designs, inspiration, marketing and creativity from their community. Fans and customers can become their creators and, possibly, even financial stakeholders.
Nothing new under the sun
Brands, no matter their product or service, have been trying to do the same things for years:
- Create products that people love
- Sell products for a profit
- Build an audience of existing and prospective customers
- Deliver value to shareholders
What’s happening here is a continuation of existing trends related to these goals. I’m old enough to remember when crowdsourcing and crowdfunding were new ideas, brought about by the heady world of Web2. Affiliate and loyalty marketing have been transformed by digital experiences. Social media enabled brands to build huge audiences—enough that Red Bull is better thought of as a media company than a drinks manufacturer.
But opportunities and challenges remain. Brands are often reliant on social media platforms for reach. Individuals and micro-businesses can challenge incumbent brands because of the asymmetries that social media provides. Ecommerce brands are often dependent on centralised marketplaces to access customers. The list goes on.
What’s really happening in the marketing space is a merging of incentives. In the Venn diagram below, each circle represents the incentives of a particular stakeholder group. As you can see, NFTs allow brands to increase the overlap between stakeholder groups, aligning their common incentives.
Brands use NFTs to create explicit connections between their stakeholder groups. Once those are established, the smartest brands use those connections to align and ratchet together incentives across those groups.
Individuals increasingly belong to multiple or all sets. Now, it’s easy to imagine someone who is already a fan and a customer getting to co-create a new sneaker design for Nike, and in return receiving NFTs (or other tokens) that represent their contribution (and potentially rights). It gets better. Say this fan-inspired shoe is a runaway market success. Our contributor wins several ways: explicitly, as both the value of their tokens and community appreciation accrue, and implicitly, with the satisfaction of contributing to a cause they value.
Why does this matter?
This alignment of incentives—when used for good—can be considered an example of prosocial design. Done well, this promotes:
- Positive relationships within stakeholder groups
- Rewards and recognition for individual contributions
- Shared goals across the community
- Positive group norms born of shared values
- Altruistic behaviours
Companies work when they are aligned on achieving shared goals. What happens outside the formal company structure is much harder to control but is also critical to success. NFTs give companies explicit ways to create connections with their audience that haven’t been possible to date.
In this way, NFTs are:
- Owned directly as connections within a decentralised cryptographic network (rather than within a third-party social media platform’s database)
- Directly economic and communicative
- Uniquely utilitarian
On this last point, one single NFT can encompass:
- Notarisation of creative contribution including assertion and control of intellectual property rights
- Representation of the right to vote in governance decisions
- A mechanism through which to claim or receive financial rewards
- Access control for arbitrary systems either digital or physical
- Representation of one or more relationships within a network
- An actual digital product
This culminates in a toolset that lets brands create a scalable, virtuous economy to include broader stakeholder groups beyond the traditional company bounds.
How WordPress VIP and Woo can help
WordPress VIP and WooCommerce provide a platform that brands can own directly. If your main communication channels are at the whim of a third party, there’s no point investing in a community that you can interface with directly.
There are already great NFT and token-gating solutions available for WordPress on the WordPress VIP Platform. For example, WooCommerce provides crypto payment processing partners to help you accept payment for a new digital product line.
Working seamlessly together, WordPress VIP and WooCommerce give brands the ownership and control needed for successful NFT product management.
About the author
Dave Lockie is Web3 Lead at Automattic. Born and raised in the UK, he now lives in Portugal.
Working with WordPress since 2007, Dave’s been a freelancer, agency owner and entrepreneur. In 2017 he became fascinated by crypto and found himself compulsively thinking about how his two technology passions would intersect. This has naturally evolved into curiosity about technological innovation and disruption both for WordPress and ultimately, humanity.