The innovations of web3 are gradually making several companies reconsider how they conduct their business processes. Several top brands are exploring ways the web3 revolution and its underlying technologies can help them improve their business and possibly generate new streams of income. Among the array of solutions in the web3 arsenal, NFTs are proving to be one of the most beneficial in the traditional business world.
After years of staying within the shadows of cryptocurrencies and DeFi, NFTs had a breakthrough year in 2021, hitting a market capitalization of $41 billion.
Many creators - artists especially - saw NFTs as a means to easily launch content, make good profits and connect better with their fans. And this wasn't just a prediction as the top 10 most expensive NFT sales of all-time are all arts. It's however expected, considering the NFT boom cycle was sparked by the $69 million sale of Beeple's art masterpiece, The First 5000 days.
The Bored Ape Yacht Club grabbed the opportunity that came with this spark and launched its 10,000 pixelated Bored Apes collection. Several other projects went on and leveraged the NFT concept to create different art concepts - from the popular Meebits, Azuki, Art Blocks, Clone X, etc.
In a bid to move along with the train, many brands are diving into the space by minting and selling digital collectibles as NFTs. While this approach presents a fairly easy opportunity to get into the web3 space and partake in the NFT mania, the architecture of NFTs can benefit brands in far more superior ways.
Ways Brands are Leveraging NFTs
NFT (non-fungible tokens) are a piece of immutable and publicly verifiable data that can be used to denote ownership over an underlying asset. Integrating these features into your brand plus the ever-evolving possibilities of blockchain technology can enable you to capture value from a booming region in the web3 market.
Below are some ways launching an NFT can help your brand move on to the next level:
Boost Community Engagements and Improve Overall Brand Experience
Most brands find it hard to attract and retain community members. While some top brands may have many customers, there's hardly any interactive communication between them and their customers aside from the traditional product enquiries discussions. In essence, these customers are not community.
With NFTs, brands can easily integrate a unique form of gamification that helps to quickly transform customers into key community members. A brand can decide to reward users with NFTs for performing specific tasks like retweeting a video/image or for being active in community events.
McDonald's used this method to boost visibility and reach new audiences on Twitter by asking fans to retweet a post for a chance to win one of its ten exclusive McRibNFT.
Most top brands are also leveraging NFTs to tweak their reward system beyond online badges or labels. Brands are beginning to think beyond the regular "thank you for shopping with us" to "you just earned a rare NFT mystery box for your last purchase."
This NFT can signify access to an exclusive merchandise, content or community event. As a result, the NFT becomes something of value and in turn, attracts new customers that want to gain access to such exclusive events and merchandise.
Brands can further tweak the flexibility of NFTs to unlock a new kind of experience that can spur unique conversations within their community.
For example, coffee giant Starbucks will introduce NFTs into its loyalty program in September.
According to the company's interim CEO, Howard Schultz, the initiative will "introduce new ways of emotionally engaging customers, expand their digital third place community, offer a broader set of rewards including a one-of-a-kind experience. And hence, "create a new set of digital network effects for Starbucks that will attract new customers and be accretive to existing customers in their core retail stores."
Raise Money For Philanthropy Efforts/ Social Causes
You may want to ask: what can NFTs possibly do to change how brands conduct philanthropy?
Well, brands can use NFT to promote a new kind of fundraising where people who donate funds are rewarded with a super rare NFT or collectible for their donations. This helps a brand generate buzz, improve public perception and raise awareness for its cause.
In 2021, Coca-Cola auctioned its first set of Friendship NFTs collection for $575 thousand and donated the proceeds to Special Olympics international.
While just recently on July 30th, the company integrated a marketing approach by airdropping a generative collectible to holders of the Friendship NFTs to commemorate friendship day. The second collectible has a share-to-reveal functionality where the artwork reveals itself after it's shared with a friend. Hence, extending Coca-Cola's fanbase in the blockchain space.
Taco Bell also played this card by auctioning 25 taco-themed NFTs on Rarible.
The NFTs which were sold out in under 30 minutes helped Taco Bell to drive brand awareness by supporting a good cause innovatively - all proceeds from the sale went to the Taco Bell Foundation, Inc. "to empower youth to discover and pursue their career and educational pathways.”
On the side of donors, NFTs enable them to easily prove their participation in charity causes. And as soulbound tokens (SBTs) may become a thing in the future, people may eventually prefer participating in philanthropy only through NFTs, considering it can form part of their publicly verifiable on-chain reputation.
Generate New Income Streams
NFTs present brands (content creators especially) with the opportunity to maximize earnings from their work. Artists and creators can cut out the several middlemen that take a large part of their earnings while also improving the experience of fans and forming a stronger bond with them.
For example, popular rock band, The King of Leon's launched NFT versions of their album on YellowHeart which was priced at $50.
They used three types of tokens for the launch with one featuring a special album package, another offered live show perks, and the last came with exclusive audiovisual arts.
The sale lasted for only two weeks, after which holders can trade the album as a collectible. This allowed King of Leon's to generate extra revenue from their album launch while also strengthening brand loyalty.
A more compelling example is the celebrity DJ 3LAU. In February 2021, 3LAU sold 33 NFTs tied to his Ultraviolet album for a whopping $11.6 million without a record label.
He further went on to launch Royal, a music platform that allows artists to establish economic relationships with their fans.
Artists can allow fans to share in the copyrights of their music by fractionalizing it into a series of NFTs. This means that whenever an artist earns cash flow for their songs, fans can also earn a small share in royalties alongside other additional experiences baked into the token.
In addition, this allows artists to quickly raise funds from their fans rather than relying on record labels which swallow up a large chunk of their earnings. Fans can decide to sell the NFTs to other fans or investors while artists can integrate an extra income source by earning royalties upon each resale of these NFTs.
Improve Supply Chain Management
There are lots of discrepancies in supply chain management that many companies struggle to get past. One of the most pressing problems is the inability of stakeholders to effectively track products throughout their journey in the supply chain.
The traditional process takes up to weeks and sometimes months before companies can trace errors and verify where they took in the chain.
The integration of NFT with RFID tags can solve this problem by significantly improving traceability in the supply chain. As a product travels through the supply chain, different stakeholders can update the related NFT with relevant information until the product reaches stores or the final consumers.
Stakeholders can monitor products throughout the chain and easily detect the weak link or when a deviation occurs. Consumers, on the other hand, can easily validate the authenticity and quality of products on the blockchain network employed by a company.
For example, Walmart ran a pilot program using IBM's Hyperledger Fabric to track the origin of mangoes and pork sold in their U.S. and China stores respectively.
The tracking time reduced from a lengthy 7 days to just 2.2 seconds using the Hyperledger Fabric.
Participate in the Metaverse
The Metaverse may as well become a world where most people spend most of their time in the future. However, for people to enjoy living in a virtual world, they will need a virtual form of most of their physical properties and experiences. Hence, top brands are making strategic moves to ensure they have a first mover advantage.
This has enabled Nike to start producing virtual shoes for their customers who may eventually start using them in virtual concerts, work, meet-ups, etc. Some other brands are selling virtual clothings and accessories. Brands like Adidas have positioned themselves by acquiring a virtual land on The Sandbox to conduct their virtual commercial activities.
In the future, we may have brands providing virtual forms of almost all current physical goods/services - from real estate, cars, food, concerts, etc.
Potential Challenges Brands Can Face From Launching NFTs
While NFTs present interesting opportunities for brands to leverage, there are some potential downsides that every brand must pay attention to before employing NFTs in their businesses.
And considering many brands are working on ways to become more sustainable, launching NFTs on Ethereum may not be the best option. In addition, gas fees in the Ethereum network are quite high plus the scalability issues that rock transactions.
Brands can navigate this hurdle by launching their NFTs on other sustainable and scalable blockchain protocols in the market. However, this comes at the risk of sacrificing more reach and security for sustainability.
Alternatively, brands can wait for The Merge, an event happening in a few weeks that will eventually transition Ethereum to a more sustainable blockchain, reducing its energy usage by 99.5%. And hence, opening the doors for more brands to leverage its network.
Additionally, the smart contract functionality of most blockchains is susceptible to attacks from bad actors. For example, the OpenSea marketplace has experienced several attacks where malicious entities were able to exploit NFT projects including the mighty Bored Ape collection.
While navigating these challenges may seem daunting, our team at SIGNVM has proven itself in helping brands strategically integrate NFTs into their operations while maximizing their reach and maintaining sustainability. Reach out to us here.