It seems everyone is getting excited about non-fungible tokens, or NFTs. Whether it’s artists creating digital NFT artworks or even musician Snoop Dogg looking to pioneer the first NFT music label, it’s a new technology that’s fast gaining traction.
Although artists and crypto investors often like to experiment and embrace cutting edge trends, businesses are typically looking for the opportunities. With sales booming, the NFT market is being transformed with collectibles hot property at the moment and a host of new branding opportunities being created.
So just how are NFTs affecting Aussie businesses and how can they be ready to embrace this new digital phenomenon?
NFT sales are smashing records
To appreciate what NFTs will mean to business, it’s worth first getting an understanding of the technical elements and where the market is right now.
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Put simply, an NFT is a token that is a certificate of authenticity attached to a unique digital file, like a digital artwork or a digital version of a sneaker or almost any other digital version of an object. When someone purchases an NFT artwork or other digital entity it’s recorded in a blockchain database where they’re identified as the owner of the digital good, or token.
The NFT market is growing at an exponential rate, with unprecedented liquidity. The market for NFTs recorded sales worth US$25 billion ($35 billion) in 2021 and one NFT artwork alone fetched a record breaking figure of US$69.3 million ($98 million) at a Christie’s sale. Even big brands like Coca-Cola and Gucci are getting in on the action.
Sales on OpenSea, the largest NFT marketplace reached nearly US$5 billion ($7 billion) in January this year, a giant leap from the US$8 million ($11 million) a year before. Already sales have totalled about US$11.8 billion in 2022. And although we are witnessing a proliferation of networks and solutions technologies, Ethereum remains by far the main blockchain when it comes to NFT transactions, with 78% of the entire market according to a recent report by NonFungible.com.
However, in saying this, the market is more speculative and volatile than ever before. This kind of growth usually sees market instability, unrealistic expectations and even disappointments.
Where business is concerned, NFTs can represent existing physical objects, whether it’s real estate or sneakers, or entirely new creations such as artworks, collectibles, sports memorabilia and other rare objects. Indeed it’s often sports, like the arts, where you find some of the newest trends being embraced — and monetised.
The excitement is in collectibles
One of the most significant trends in NFTs right now is the popularity of collectible NFTs. In sales, NFT collectibles outstrip by a huge margin sales of games, art, metaverse and utility NFTs. It’s probably why the Australian cricket board and players union just recently inked a multi-year licensing deal to issue NFTs to make the most of the demand for digital collectibles.
Yet like many hot markets, NFTs, particularly when it comes to artworks and collectibles, may be a passing fad and the digital entities may not hold their value when they come to be resold as you’d expect with more conventional investments like paintings and physical memorabilia.
While NFTs can sell for crazy amounts of money, that doesn’t mean it’s a sure bet as an investment. An NFT of the first tweet issued by Twitter found Jack Dorsey initially sold for US$2.9 million ($4.1 million) in March 2021, but when the owner, crypto entrepreneur Sina Estavi, tried to resell it recently, he was offered a measly US$6800 ($9622). In short, the NFT market may be in a bubble, but it’s never clear this is the case until it’s too late, when the bubble bursts.
Extending brand connection into the digital realm
Just because Coca-Cola and Gucci have created NFTs doesn’t mean every business should rush to create their own digital tokens. While FOMO might push a business to try to avoid missing out, these huge, global brands can afford to take a punt on an unknown investment like a branded NFT. If it works, it can add to the brand equity in this new, virtual space and if it doesn’t, it was just an experiment.
Yet there is a lot more to the potential of NFTs than just some niche digital collectibles, if executed well. Although it requires a well-developed strategy and an ongoing investment in time and money to make NFTs a genuine part of a multi-faceted digital consumer experience, the opportunities are significant.
Extending product lines into the digital realm, whether it’s t-shirts, soft drinks or property, present some exciting possibilities. Brands like Nike are already thinking alone these lines, according to its CryptoKick patent that links a pair of Nike sneakers with a virtual twin. This sort of innovation gives buyers a stronger sense of ownership of the brand in both the physical and virtual realm and allows the brand to market to consumers and understand more about their preference into the digital space.
How your business can be NFT-ready
The rise in popularity of NFTs shows that the digital realm opens up many exciting possibilities for businesses and that consumers are willing to engage and invest money and value in digital products.
Yet the market is highly changeable and while collectibles may be popular right now, there’s no guarantee this will continue or that the cost of digital creations in the form of NFTs will hold their value.
To be prepared, businesses can look at ways to create NFTs with exclusive value that will be attractive to customers, whether that’s limited edition artworks or collectibles or unique attributes or exclusive offers.
And bear in mind that like Uber, Airbnb or Twitch, new digital experiences and services can come along and change everything — so too with digital products like NFTs. The key is to see the potential of new markets and where to convert your business’s existing product or service into a viable, valuable digital offering.