Understanding NFTs (And Why You Should Care) | LOOMIS Explains
Two weeks ago, I was recording a podcast at Luminous Sound Studios with two friends who, like me, are marketing and advertising-savvy 50-somethings and our conversation wound its way to NFTs and the implication of their legitimacy and acceptance. While we had a cursory knowledge of the concepts, it’s fair to say that in that moment none of us could have written a persuasive essay on the topic. That’s when our engineer and intern – both 20-somethings – chimed in and spent the next 30 minutes explaining the intimate details of non-fungible tokens (NFTs), blockchain, cryptocurrency, Bitcoin, Ethereum and why this is anything but a passing fad.
For those new to NFTs, “non-fungible tokens” are digital tokens that are tied to assets that can be bought, sold, and traded. Think a certificate of authentication for a “one of one” asset in cyberspace – an original piece of digital art, an official digital snapshot of an iconic moment in an NBA game, your proof of ownership for a piece of virtual California property in an alternate digital multiverse. A recent TIME feature article explained NFTs this way:
NFTs are best understood as computer files combined with proof of ownership and authenticity, like a deed. Like cryptocurrencies such as Bitcoin, they exist on a blockchain—a tamper-resistant digital public ledger. But like dollars, cryptocurrencies are “fungible,” meaning one bitcoin is always worth the same as any other bitcoin. By contrast, NFTs have unique valuations set by the highest bidder, just like a Rembrandt or a Picasso. Artists who want to sell their work as NFTs have to sign up with a marketplace, then “mint” digital tokens by uploading and validating their information on a blockchain (typically the Ethereum blockchain, a rival platform to Bitcoin). Doing so usually costs anywhere from $40 to $200. They can then list their piece for auction on an NFT marketplace, similar to eBay.
Clearly, there’s a lot to unpack about NFTs, blockchain, and the raging debate about whether the whole crypto-phenomenon is the future of capitalism or the emperor’s new clothes. Regardless of where you net out on the discussion, the acceptance of NFT legitimacy has clearly reached a tipping point, and the size and volume of recent transactions suggest there’s a massive investment wave that’s only beginning to grow.
According to the TIME article referenced above, in 2020, collectors and speculators spent $250 million on NFT-based artwork, memes, and GIFs. In just the past month, collectors and speculators have spent more than $200 million. That’s mind-boggling, but not surprising when you consider some of the most notable recent transactions and these equally staggering numbers from nonfungible.com, the largest database of blockchain gaming and crypto collectible markets:
- All-time, the top 10 NFT dealers have sold digital assets in excess of $433.8 million
- In just the past seven days, the same top 10 NFT dealers sold assets topping $33.7 million.
- On March 11, a digital artist known as Beeple set a record for digital art selling a single piece at famed auction house Christie’s for more than $69 million
- Recently, Twitter founder Jack Dorsey put an NFT of his first Tweet up for auction – it’s expected to fetch more than $2.5 million
For instance, the record-setting Beeple artwork called “Everydays: The First 5,000 Days” is actually a .jpeg of a digital collage made up of the 5,000 digital images artist Mike Winkelmann created between May 1, 2007 and January 7, 2021. The man who purchased the .jpeg for north of $69 million owns that image, but not the 5,000 images in it and does not have the right to sell or use those images in any way. Winkelmann retains the copyright and, in fact, sold one of the 5,000 images that make up “Everydays” in March for $6 million on the NFT marketplace Nifty Gateway.
Are NFTs The Future Of Marketing?
Admittedly, art speculation and collectibles are nothing new and, in that capacity, NFTs make sense. Frankly, they offer artists who would normally be overlooked and underpaid a lucrative new revenue stream. But what of all the talk that NFTs will revolutionize marketing and change capitalism as we know it? As with every new technology or platform, those of us in marketing and advertising are keenly interested in how NFTs and future migration to the multiverse, especially among younger generations, can be leveraged to reach consumers in new and engaging ways.
Just as art speculation turns on the concept of scarcity, so too do many aspects of marketing. I recently purchased some theatre tickets and as I was considering which section I wanted to sit in, a note came up that told me only 16 seats were left in that section. I choose my seats and a five-minute countdown clock started reminding me I was on borrowed time to make my final purchase before losing my seats. Don’t wait! Act now! Get them before they’re gone!
As consumers, we’re highly accustomed to the Limited Time Only (LTO) promotions that come and go throughout the year. The Starbucks Pumpkin Spice Latte. The McDonald’s McRib. Samuel Adams Winter Lager. The Presidents Day, Memorial Day, 4th of July and Labor Day sales at every mattress company, furniture store, and car dealership. Girl Scout Cookies.
Last Fall, when COVID shut down the Texas State Fair, Golden Chick partnered with Fletcher’s to sell their beloved corny dogs at Golden Chick locations and sold 475,000 of them. When framed and marketed well, scarcity works. Scarcity sells.
In the very near future, thanks to NFTs, promotions may look different and be safer. Since NFT ownership is public and inarguable thanks to the digital transparency of blockchain, could NFTs render the promotional fraud that rocked the McDonald’s Monopoly game a moot point? Could the technology be used to lower coupon fraud, eliminate duplication issues and even help deliver customized, one-to-one offers to a brand’s most loyal customers?
In the very near future, loyalty programs could lean on NFT technology to create more engaging, personal, valuable connections with brand evangelists. Imagine, the most loyal customers being granted elite access to exclusive content only they could own. Better yet, imagine brands creating customer-specific content with an NFT that proves it was created just for them.
There’s a lot to think about. But one thing remains certain – the future is coming fast.
MIKE SULLIVAN is president and CEO at LOOMIS, the country’s leading challenger brand advertising agency and a top Dallas advertising agency for digital, social, mobile and user experience. For more about challenger branding, advertising and marketing, leadership, culture and other inspirations that will drive your success, visit our blog BARK! The Voice of the Underdog and catch up on all of our posts.
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