Can brands ride out the NFT slump?
Brands including Nike, Coke and Burberry were quick to experiment with NFTs, but entering the turbulent space means being prepared for the highs and the lows. So how are they riding out the pricing slump that hit the market this week?
The NFT market is volatile - so what place do brands have in the space?
NFT (non-fungible tokens) are commanding sky-high prices among collectors – or at least those in the right markets are.
The South China Morning Post recently announced the sale of its 1997 Premium Series as part of the newspaper’s NFT project Artifacts. The series contains the Post’s coverage of 1997’s momentous events, including the handover, the Asian financial crisis and Avian flu.
Those aren’t the most auspicious stories to sell off, although by their nature they are extremely limited in number. It builds upon similar sales conducted by The Economist, Reuters and The NYT, which have raised money to the tune of hundreds of thousands of pounds for the publications themselves.
Brands including Burberry and Coca-Cola have also launched NFTs in order to take advantage of speculators’ hunger for the tokens. The Premier League’s plans for NFTs, meanwhile, have progressed to the point that it has shortlisted four crypto companies to provide the underlying technology.
Even brands that don’t have the upmarket reputation and limited items of those properties are getting in on the game. Playboy launched a run of almost 12,000 ‘rabbitars’ to take advantage of the buyer’s market and McDonald’s launched NFTs to coincide with the 40th anniversary of the McRib.
“The market for digital objects could well surpass the market for physical objects in the future and brands are starting to prepare for this environment,“ says Sophie Harding, head of futures and innovation at Mindshare UK. “Nike has stepped forward and trademarked its assets for these spaces, preparing to fight against digital counterfeiting, for example.
“Budweiser led the way with a highly successful NFT collection, selling out within the first hour. You only need to look at this year’s Super Bowl ads to see that the buzz around NFTs has been sustained in 2022 – the NFL even gave every fan who attended a customized NFT Super Bowl ticket. Even brands like Gap and Selfridges are getting in on the NFT action.”
The NFT slump
But despite the vast amount of interest, particularly in the entertainment space, NFTs as a concept remain a hard sell to the majority of the public. Research from YouGov has found that, overall, if a company started offering NFTs, 27% of respondents would feel ‘much less favorable’ and a further 16% would feel slightly less favorable. That compares to only 1% of respondents who would feel much more favorable, suggesting that the vast majority of the subsection of the public who know what NFTs are have negative associations with the technology.
That was demonstrated on the March 15 when DTC underwear brand MeUndies finally broke its silence about its about-face on NFTs. It had originally announced the launch of a partnership with Bored Ape Yacht Club (BAYC), only to reverse course after backlash from its users. On its official subreddit, MeUndies said: “We’ve made the decision to cancel our partnership with Bored Ape Yacht Club and sell our NFT. Since our announcement, we’ve spent time researching and educating ourselves on the NFT space, and most importantly, listening to our community.
“We wanted to make a print, and BAYC had the distinction of being one of the few collections of NFTs that could be licensed to make that possible. For us, buying an NFT was similar in terms of cost and strategy to our other licensing and partnership agreements, and simply put, those prints are very popular. For our purposes, BAYC seemed like the right place for us to start.”
Bored Ape Yacht Club is probably the most visible of the NFT markets, and has been linked to various brands and celebrities already. Despite that, it has been hit by a recent slump in NFT prices that some experts warn could spell the end of the first initial surge of interest in the tokens. The floor prices – effectively the minimum price at which an NFT can be sold – saw a significant decline in the back half of February.
The floor price did rise afterwards, however – and yesterday BAYC announced its own cryptocurrency to back the NFTs, which prompted another jump. It is ultimately a reminder that the NFT market is extremely volatile and that brands need a clear idea of what they add to their consumers before they enter the market.
Seyi Awotunde is founder of Deliciae, an NFT marketplace that specializes in linking the tokens to real-world luxury items. He said brands play a key role in legitimizing NFTs – provided they add value to the ecosystem: ”In the past seven days, we have seen an increase of unique buyers and active market wallets. As we approach mass adoption, utility and substance behind NFT projects is fundamental. The past year alone has seen a rise of over 280% in secondary sales, which means more people are trading the fastest growing asset in history.
”Brands influence the market in three ways: maintaining their reputation in the NFT market, authenticating their work and having a good understanding of the NFT community. There are many opportunities to collaborate with emerging artists in the NFT world and this helps brands create credibility in the space.”
The consequences of being seen to be doing NFTs for the sake of revenue generation alone can be seen from the collapse in value of John Terry’s NFT range. The Premier League footballer’s range of tokens reportedly plummeted in value by 90% earlier this month, indicative of both the public resistance to NFTs and the difficulty of marketing something that has no practical value beyond a speculative investment.
Despite those very high-profile failures, it is too early to write NFTs off as a format. There is still a lot of experimentation to be done in the space.
Cameron Chell is chairman and CEO of CurrencyWorks. He argues: "Brands need to think and ask themselves what it is they’re offering and what they want it to be. Is it something connected to the brand, is it an extension of an existing product or service, is it intended to be something collectible or to be speculated on? Also, does their brand lend itself to an NFT? If the audience doesn’t align with the concept then it would be probably better to wait until it does.
Harding says early adopters among gaming audiences will also drive interest: “Epic recently revealed that it profited $50m selling 3.3m NFL-branded skins in the space of just two months. And it goes beyond Fortnite – with 45% of UK early adopters having previously bought virtual things to use or wear when gaming, there is clearly big money to be made.”
It is likely that the value of tokens will increase again as brands and organizations enter the space and public awareness increases. It remains incumbent upon those brands to ensure they consider audiences when launching NFTs, rather than simply seeing it as an additional revenue source.