Big Brands Invest in NFTs for New Revenue
Introduction
Non-fungible tokens (NFTs) have recently exploded in popularity. Big brands invest in NFTs to capitalize on this growing trend. NFTs are unique digital assets stored on a blockchain. They verify ownership of digital content like art, music, videos, and more.
Big brands invest in NFTs to boost customer engagement and brand recognition. Additionally, NFTs present new revenue opportunities for major corporations. This article explores how big brands utilize NFTs and the benefits they provide.
Understanding NFTs
To understand why big brands invest in NFTs, we must first comprehend what NFTs are. NFT stands for non-fungible token. Non-fungible means the asset is unique and cannot be replaced by something identical. For example, cryptocurrencies like Bitcoin are fungible because 1 BTC is interchangeable with any other 1 BTC.
In contrast, NFTs are completely unique. No two are exactly alike. NFTs digitally represent real-world items like art, music, videos, tweets, and more. They verify authenticity and ownership on the blockchain.
Big brands invest in NFTs because each one offers distinct advantages and value. Additionally, NFTs present new opportunities to engage customers. Next, we’ll explore some high-profile NFT initiatives from major brands.
Prominent Brands Embracing NFTs
Many prominent brands are diving into NFTs headfirst. Luxury brands, sports franchises, soda companies, and more are tapping into this emerging technology. Here are some noteworthy examples of big brands investing in NFTs:
Adidas
Sportswear giant Adidas invests in NFTs through niche collaborations and exclusive digital product drops. In December 2021, Adidas released an NFT collection called “Into the Metaverse” featuring digital and physical products. The NFTs provided access to Adidas Originals virtual gear in The Sandbox metaverse.
Buyers also received real-world counterparts like a tracksuit and beanie hat. The full collection of 30,000 NFTs sold out within hours, generating over $23 million in net sales. This initiative provided a gateway for Adidas to establish a presence in the metaverse.
McDonald’s
Global fast food chain McDonald’s is another brand investing in NFTs. To celebrate the 40th anniversary of its famous McRib sandwich, McDonald’s launched a series of limited-edition McRib NFTs in November 2021. Only 10 of these NFTs were minted, exclusively gifted to select Twitter users.
The NFTs featured original collectible art representing the return of the elusive McRib to McDonald’s menu. This novel promotion generated substantial social buzz and engagement on Twitter around the iconic, cult-favorite sandwich.
Nike
Sports apparel manufacturer Nike delved into NFTs by acquiring virtual sneaker studio RTFKT in December 2021. RTFKT creates digital sneakers and sells them as NFTs. In April 2022, Nike and RTFKT launched a virtual sneaker collection called Cryptokicks.
The collection consists of 20,000 NFTs representing uniquely customizable virtual sneakers. Owners can alter different design elements like materials and colors to distinguish their kicks. The highly anticipated drop demonstrates Nike’s commitment to serving digital-native consumers through innovation.
Coca-Cola
Even soda juggernaut Coca-Cola is jumping on the NFT bandwagon. In July 2021, Coca-Cola auctioned its first NFT collection, branded “The Friendship Box.” It contained digital memorabilia like bubble jackets and beatboxing Coca-Cola Polar Bear GIFs.
Proceeds from the auction went to Special Olympics International, generating $575,883 for the organization. Coca-Cola effectively leveraged NFTs for charity fundraising while also increasing awareness of its brand history and iconography.
Big brands invest in NFTs to explore new promotional channels, foster customer engagement, and diversify revenue streams. Next, we’ll examine the benefits driving more companies to embrace NFTs.
Why Do Big Brands Invest in NFTs?
NFTs present a range of potential benefits that make them an attractive option for major corporations:
Enhanced Customer Engagement
Big brands invest in NFTs as a novel way to engage customers. For example, Nike delivered an immersive product reveal using mysterious NFT boxes. This built anticipation and cultivated an active social media community around the launch.
Brand-associated NFTs function as digital memorabilia and collectibles for fans. Owning branded NFTs also confers membership and status within brand communities. Furthermore, NFTs enable new experiences through branded metaverse worlds and virtual products.
Revenue Generation
NFTs provide a supplementary income source for brands via primary and secondary sales. Brands earn revenue selling limited edition NFT drops directly to collectors. Royalties can also be coded into smart contracts to earn revenue from secondary sales.
For instance, Adidas garnered over $23 million from initial sales of its “Into the Metaverse” NFT collection. It also earns royalties from secondary trading. As a new profit center, NFTs diversify income beyond physical products and services.
Marketing & Promotion
Releasing limited edition NFTs generates publicity and social media engagement for brands. McDonald’s NFT drop created sizable buzz surrounding the elusive McRib sandwich, for example. Brands can leverage this attention to build awareness for new product launches or other initiatives.
Additionally, the blockchain enables more transparent and direct relationships between creators and consumers. There’s potential for brands to augment loyalty programs by integrating NFTs and tokens.
Innovation & Technology
Investing in NFT platforms positions brands on the cutting edge. They can influence the development of new experiences at the intersection of the physical and digital.
Brands investing early in metaverse real estate and NFT products can shape these emerging spaces in their favor. Being trailblazers also fosters perception among consumers that the brand is forward-thinking and tech-savvy.
Big brands invest in NFTs for several compelling reasons from enhancing customer engagement to unlocking new revenue streams. However, brands must also carefully consider challenges in the NFT landscape.
Risks & Challenges for Big Brands Invest in NFTs
While promising, NFTs also pose certain risks and implementation challenges which brands should contemplate:
Speculation & Volatility
The NFT market is rife with hype-driven speculation, as in the traditional art world. But most branded NFTs don’t hold inherent investment value beyond merchandise or collectibility. Brands must ensure reasonable pricing aligned with intrinsic value.
Pump-and-dump dynamics and excessive speculation can damage brands if disillusioned customers are left with worthless NFTs. Market volatility also means NFT initiatives cannot guarantee ROI.
Environmental Impact
Most NFTs currently operate on the Ethereum blockchain, which relies on energy-intensive proof-of-work consensus. The ecological impact of minting and transacting NFTs challenges brands marketing themselves as sustainable.
Opting for eco-friendlier blockchains like Tezos or Solana may mitigate environmental issues. Yet brands must still grapple with public perceptions around unsustainable mining and transaction energy usage.
Legal & Regulatory Uncertainty
Brands exploring NFTs face ambiguous regulatory oversight and lack of legal precedence. Defining NFT intellectual property rights is challenging given their novelty and global nature. Additional country-specific laws add complexity for international brands.
Until more regulatory clarity emerges, brands risk exposing themselves to potential legal action, especially if customers feel exploited or misled. Proper legal vetting is critical when structuring NFT projects.
While promising, NFTs have downsides which brands must carefully weigh before fully diving in. Next, we’ll examine best practices brands should follow when investing in NFTs.
Best Practices for Brands
When strategically implemented, NFTs can yield multiple benefits for major brands. Here are some best practices for brands exploring NFT initiatives:
Choose Sustainable Platforms
As mentioned, most NFTs currently operate on the Ethereum blockchain which has high carbon emissions. Brands should select more eco-friendly alternatives like Polygon, Solana, or Tezos to mint and transact NFTs.
This mitigates reputational risks and negative environmental impacts. Brands like Adidas have opted for the Polygon network citing sustainability advantages. Selecting greener networks aligns with corporate social responsibility values.
Offer Utility Value
Focus on crafting NFTs that provide some form of experiential utility, exclusive access, or membership benefits. Avoid selling NFTs with only superficial artistic or collectible value.
Providing ongoing value and utility helps justify the initial purchase cost and builds lasting engagement. For example, Adidas NFTs unlocked virtual products, while McDonald’s offered food rewards.
Promote Transparent Marketplaces
Brands should leverage NFT marketplaces facilitating transparent transactions, reasonable fees, and community-focused governance. Opacity, unfair pricing, and poor governance in NFT markets can negatively impact brands and customers.
Platforms like Foundation and SuperRare enable creators to set primary sale terms and secondary royalty splits. Look for marketplaces aligning incentives between brands and collectors.
Proper strategy and execution minimize risks and challenges associated with NFTs. When managed diligently, big brands investing in NFTs stand to unlock novel value.
Future Outlook
NFTs are still an emerging space with ample room for growth. Here are two likely NFT trends and innovations to expect:
Mainstream Adoption
More big brands across industries will continue exploring and investing in NFTs. In a 2021 survey of US marketers by Forrester, 17% of respondents already leverage NFTs, while 31% plan to do so.1
As brands realize success, others will be compelled to follow suit to remain competitive. The technology will rapidly mature from early adopters to mainstream incorporation.
Metaverse Integration
Usage of branded NFTs will likely shift towards metaverse utility and experiences. Rather than just digital art, brands can issue virtual assets like apparel for avatars. Virtual events and activations in metaverse environments will involve branded NFT products and wearables.
Real-world loyalty and rewards programs can also be supplemented using branded token gating mechanisms. More robust, interactive brand metaverse presences will emerge.
Big brands investing in NFTs today cement their position at the forefront of the next digital frontier. Despite the risks, first-mover advantage and massive growth potential make NFTs a worthwhile play. Brands embracing NFTs with coherent strategies and eco-friendly principles are poised to reap rewards.
Careful, selective NFT experiments exhibiting core brand values can pay dividends in engagement, innovation, and revenue. However, brands should avoid careless NFT cash grabs and maintain focus on long-term utility. As virtual worlds expand, purpose-driven NFTs will help brands deepen digital relationships.
Conclusion
In summary, big brands invest in NFTs to unlock new promotional channels, foster customer engagement, and diversify revenue streams. However, challenges like environmental impact and speculation still exist. Sustainable platforms, utility value, and transparent marketplaces help maximize benefits and minimize risks.
Mainstream adoption will accelerate as more brands validate the value of tailored, strategic NFT programs. Integrating NFTs into metaverse experiences also offers immense potential. Despite growing pains, NFTs ultimately provide brands a future-proof avenue to digitally engage consumers and augment physical offerings.
Big brands investing in NFTs today solidify first-mover advantage to shape this emerging space. Their forward-thinking leaders understand NFTs represent the next frontier of creative marketing, commerce, and loyalty. With prudent strategy, brands in the NFT arena today construct the digital bridges leading into the metaverse economy of tomorrow.
Insights
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