NFTs - fad or future?

In spring of 2021, I finally aped in.

Non-Fungible Tokens (NFTs) had been on my radar for a while, but I hadn’t taken the time to learn how they worked or why they had appeal. 

That changed after learning about the Bored Ape Yacht Club (BAYC). Like almost every startup entity, they had a business plan, but it was...umm...abbreviated. Instead of a series of PowerPoint slides, it was simply a concept.

That business plan?

A storyline - a bunch of “apes” (people who go all-in on something) are so bored with their extreme wealth that they take up residence in a swamp.

The BAYC sold pictures of cartoon apes as a membership in this club. These cartoons are NFTs - unique digital items with proven ownership on a blockchain.

Sounds ridiculous, right?

As of early 2023, their parent company (Yuga Labs) is valued at approximately $5 billion. The BAYC clearly struck a chord, and NFT was named the word of the year for 2021 by Collins Dictionary.

Celebrities (Steph Curry, Jimmy Fallon, Paris Hilton, Justin Bieber and dozens of others) have purchased a Bored Ape NFT to show they’re hip with the culture. Joining the BAYC will now cost you a minimum of $114,000.

The Bored Ape Yacht Club highlighted a really cool feature of NFTs that's almost never discussed - it's a method of fundraising.

NFTs as a fundraising method

Let's compare it to a Kickstarter campaign.

Projects launched on Kickstarter showcase a prototype of a product or other new idea. A project's founders will say, "Do you like this idea? Send us money now and you'll get the first batch when they launch."

The campaigns, then, have a time restriction and a money-raised goal. If the campaign hits the goal, the Kickstarter founder(s) will send you the first iterations of the product...probably.

Even if the money is raised, you'll sometimes get your product and sometimes won't. It all depends on the founder(s) execution of the concept.

NFTs are very comparable, but instead of a physical product, it's a concept.

For the Bored Ape Yacht Club and others like it, it's a membership in a club. For others, like well-known brand Clinique, it's a customer loyalty play.

Clinique NFT Case Study

Clinique's goal with their NFT project is to reward loyal consumers, offer exclusive products, and onboard them to Web3 for a new, unique experience.

The Campaign:

Dubbed MetaOptimist, Clinique prioritizes engagement and entertains their consumers. The goal is to increase their target list, thereby attracting younger audiences & modernizing their brand.

The Process:

• Launched a promotional campaign
• Only those a part of their Smart Rewards Program could participate
• Users shared stories on social media about "optimism" using the campaign hashtag
• Three winners each received a special-edition NFT, qualifying for limited-edition physical products once a year for the next decade

"So what?" You might ask. "Sounds like any other contest/raffle/giveaway to me."

NFTs as a technology

NFTs are a one-of-a-kind item residing in an individual's digital wallet. Think of it like a branded loyalty card with a major perk - Clinique, in this case, has a direct line to the NFT holder.

Brands are in a constant struggle to reach their customers consistently because they don't control the communications methods. That's why you get messages like, "Sign up for our email list!" or "Follow us on Facebook."

However, email gets relegated to promotions/spam folders, and exposure on social media is consistently moving from free to paid.

Once a customer signs up/follows you, there's no guarantee they'll actually see what you send them.

NFTs use the power of blockchain technology. Blockchains, a publicly auditable series of records, allow brands to take a snapshot of their NFT holders at any time.

What does this mean? If you're holding an NFT that has perks, you want to hear from that brand. In Clinique's case, their NFT holders look forward to their yearly free product.

As Clinique's project moves into Year Two of its existence, I expect them to have stipulations similar to the initial campaign -

"We have a new product coming for you as an NFT holder - share [stipulation] on social media and your NFT will be activated for your next claim."

NFTs use a technology called smart contracts - provisions that trigger outcomes. It's a series of boolean (if, not, or, then, etc.) computer programming language affecting the contract.

If x trigger occurs, then do y outcome

These smart contracts allow methods to engage both back & forth with customers like never before. Instead of constant (and expensive) marketing & advertising as an attempt to reach an audience, customers are excited for your next communication since they directly benefit.

The future of NFTs

Clinique and other brands are building NFT projects for customer loyalty & publicity, while others (like the Bored Ape Yacht Club) used NFTs for their initial round of funding.

I suspect the term NFT will be supplanted by a broader term - digital asset.

Much like .mp3 technology, which helped pioneer digital music, the average person won't care about the underlying technology.

"Can I listen to the music I want, when I want?" Yep.

"Can I get benefits from owning this digital asset?" Yes.

If you found this content valuable, may I ask for your help?

1. Which Web3 topics (crypto, blockchain, metaverse, NFTs) would you like me to cover here in more detail? Please leave your comments.
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Thanks for reading! - Spence

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