‘Scarcity and utility’: Coke’s NFT creator on where trend is heading for brands
Morten Grubak is the global executive creative director at Vice-owned creative agency Virtue. Last year he helped Coca-Cola sell branded NFTs for over $575,000. We catch up with him to get his take on the use of NFTs in brand marketing.
Non-fungible tokens (NFTs) reintroduce scarcity to digital purchases. That, in theory, reintroduces some cache and value to products sold online – a central tenet of the promise of a user-centric web3.
What do brands need to consider when launching NFTs?
For brands, it creates the opportunity for worthwhile digital products, longer-term relationships with the users who purchase them, and the chance to extend a brand into the burgeoning metaverse space.
In theory, anyway. The reality of NFTs at this early stage of brand experimentation is more nuanced. For one thing, while some luxury sectors have seen success in tying NFTs to physical products, other brands have abandoned the scarcity aspect and arguably watered down the value of their NFTs in the future. Moreover, some companies have underestimated the dislike of NFTs among their communities and been forced to backtrack within hours of launching their schemes.
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Team17 is today announcing an end to the MetaWorms NFT project. We have listened to our Teamsters, development partners, and our games’ communities, and the concerns they’ve expressed, and have therefore taken the decision to step back from the NFT space.
Team17 is today announcing an end to the MetaWorms NFT project.
We have listened to our Teamsters, development partners, and our games’ communities, and the concerns they’ve expressed, and have therefore taken the decision to step back from the NFT space.— Team17 (@Team17) February 1, 2022
Morten Grubak is global executive creative director at Virtue. The Vice-backed agency was among the first to dip its toes into the NFT space in a serious way last year, selling Coca-Cola branded NFTs for over $575,000. He believes that the use of NFTs in brand marketing is being polluted by brands doing it just for the sake of it, rather than adding something to the community it is aimed at.
Grubak tells The Drum: “Creating NFTs is not really the hardest part. It’s about doing it on the terms on which the community is functioning, so teaming up with [avatar company] Tafi was a huge thing while creating the Coca-Cola project.
“Also, we wanted to make sure we didn’t just do a huge collection. Back then, there was a huge conversation around the environmental impact of doing an NFT, which was turning everything upside down. So we advised Coca-Cola to just do it very small.”
At the moment, the use of NFTs is dominated by high-volume, low-utility examples. These are the frequently derided ‘profile pictures’, such as those recently adopted by Twitter. These are effectively a token attached to a piece of art that can be bought or sold on as a status symbol alone.
Grubak argues that for the NFT to take off as a concept for brands, they need to add something tangible to the relationship between brand and consumer. That can either be a digital native experience or tied to a physical product or service.
“It’s more like the old school traditional utility of access to stuff. A token in the metaverse can be an opportunity to get into a specific room. Just like you might need a membership card to get into an exclusive restaurant or club… in the future we’re seeing that being turned into NFTs.
“With Coke, one of the assets was a question mark that basically gives the holder access to something they like. We talked about it a lot when we were planning. What should it be tied up to? Is it unlimited VIP seats at any World Cup soccer competition? Or is it limitless VIP seats at any Fortnite competition? Whatever it is, that holder would have an experience going with it. And those type of connections between a digital product and a physical one is going to be what really drives the desire for NFTs in the future.”
Creating value, counting the cost
Part of selling the NFT as a concept to wider audiences involves addressing the ecological damage that comes with buying and selling on the blockchain. The World Wildlife Federation was roundly criticized for announcing a series of NFTs with the claim that they were environmentally-sound, which was at best an obfuscation of the reality of energy use on the blockchain.
While the energy cost of minting NFTs is often minimal, the use of cryptocurrencies such as Ethereum to trade them is extremely energy intensive. That’s one of the key arguments against brands getting into NFTs, and something that Grubak believes needs to be considered.
“Everybody is waiting for layer two to happen, right? But there’s always going to be a carbon footprint on whatever we’re doing. We pride ourselves with being the first clothing collection created without any carbon footprint, because we were running the whole agency on green energy for three months while we were producing it.
“But it’s definitely something that, when we’re talking with clients, we’re advising them on finding alternatives. When we were talking about doing the Coke stuff, we really looked into a platform called palm.io – a platform that’s almost carbon neutral. But if you want to be on the bigger marketplaces, they use Ethereum. And it’s extremely hard to circumvent that.”
Once that problem has been addressed, however, Grubak argues that the wider financial strictures on younger audiences will drive the uptake of NFTs. Brands have the opportunity to work collaboratively with those audiences to create value in a decentralized space, untethered to real-world properties.
“This space is also an opportunity for a lot of young people to actually create wealth or invest in assets that they are not able to in the real world. For my generation, getting on to the property market is extremely hard. If you didn’t enter the market early on, it’s going to be impossible.
“That’s also how I try to sell it to brands. People are able to not only participate in culture, they’re able to invest in it. You can now buy in to cultural moments if you’re a huge fan. There are a lot of people doing that. It has value.”
NFTs are untested in the long-term. It is unlikely that the low-value high-volume majority of NFTs will retain a fraction of their value in the long-term. There is no guarantee we will ever get to the point where the energy cost is acceptable. For brands then, the opportunity lies in scarcity and utility. Building that around cultural moments and communities with empathy for a brand could help buck those downward trends and provide a long-lasting touch point with audiences.