Welcome to NFT marketing. A good place to start in 2023 is with a discussion of how value for NFTs is created. As Harvard Business Review remarked ” How much could a cluster of pixels possibly be worth? More pointedly, why is it worth anything at all?”
The idea of value – that is, what people will pay and why – for an NFT has and still is evolving over time. Demand went down in 2022, while the supply went up, but increasingly project creators are extending NFT projects utility beyond the digital image itself. NFT buyers can attend private owners-only meetings and events, receive tickets to other external events, enjoy drops of physical objects or additional NFTs and discounts, obtain a degree of governance over the community, have partial or full commercial rights, and have early access to new releases.
Here are some factors that use cases show determine value to understand before building out a marketing strategy.
1. Supply and Demand
Successful projects build in the idea of scarcity, to create FOMO.
For an artist, the limitation it may be 1 of 1, for a series of 7 NFTs of original paintings. Even if the artist has a following of only several hundred, they may sell out based on scarcity.
One use case for a scarce “First right to purchase” was a Delorean manufactured for the first time in 100 years, worth $25,000 to buyers at the 2022 NFT conference in LA, because it was a limited number, and only NFT holders could purchase the cars when they were released.
Anytime the size of the community is large enough to run up prices for a “limited number” supply and demand are in your favor.
Conversely,
2. Utility/Real world value
In 2022, the utility was the new darling of NFT marketplaces. The digital art can come with extended uses, or vice versa, a strictly utilitarian NFT can upload a piece of digital art and drop enhanced images as needed.
Some ideas used around utility: NFT Memberships can come with the ability to use proprietary apps or Dapps, QR codes for ticketing, courses such as this one, VIP treatment at a night club (11Miami), meetups with other golfers interested in Web3 at a premium golf club (LinksDAO), or 10% off loyalty cards (Versify and Metadigm). One utilitarian aspect is the ability to solve counterfeiting by including an NFT with the sale of rare brand, thus raising its value in the future resale market.
3. Historical firsts
Many of the projects such as Bored Apes may have a historical component, such as the first NFT in a category, or a catalyst to a generation of projects. Their value is linked to this historical if geeky, accomplishment. One entrepreneur created a “first in the world NFT auction of a house,” a concept that excited a lot of participants in the fast-growing market of St. Petersburg, Fl, gained news coverage, populated the launch party and sold the house. Research your channel on Opensea and Solsea and see if there is a “first” of any kind you can tap into. Historical firsts don’t often have as much lasting resale value, but they do get attention, and thus demand, at the outset.
4. Entertainment and community
An increasing number of Metaverse, gaming projects, and high-end NFT are selling NFTs that create a different kind of value to the purchaser: Something they can use to interact in a different way. They can join the game, attend a meetup (Bored Ape Yaught Club) and participate in other ways that turn their investment into a community.
5. Addition of physical items
Sometimes ownership of physical items is contained in the NFT, or offered with the buyer meets a threshold. Sometimes this is a physical piece of art or a frame for the digital NFT, or first right of refusal over a new brand drop. We’ve also seen projects that have sold a shoe with the NFT printed on it.
6. Cause marketing
Attaching your NFT to a cause that is cutting edge or has a large following by supporting them in some way is part of the general ‘feel good aspect of the concept, related to the community function. One member’s NFT project donates part of the proceeds to reward people scammed by other projects, and another donates (by vote of the NFT owners) to a charity that helps solve food insecurity.
7. Tied to a brand, celebrity or built in community
Increasingly, NFT news is focusing on celebrity or famous brand releases, often intent on showing how the strength of the market to attract these high-profile players. Attachment to a high-end brand or celbrity also adds cache in addition to a list of potential community members. One member, who literally has stood on his head for a photograph all over the world during his business trips, could, for example, partner with an airline, or international chain of business hotels, or work his way into a movie that involves travel to increase the profile and news hook.
We’ve also seen big communities that already have both a brand and a built-in audience of buyers launching exchanges; Reddit was only the first of these, but their launch created huge value increases ove-night in the dead of the crypto winter.
8. It works better as an NFT
We always throw this part in as the acid test for the concept. The days of FOMO ridiculously fueling price surges are largely over. Is the utility of anti-counterfeiting a project that can best be served via blockchain technology? Can the brand attract a newer, more international higher-tech audience by incorporating an NFT strategy (hint: the largest NFT market is South and Southeast Asia)? Does the NFT marketplace, such as Audius, provide an option more disruptive than its off-chain competitor (in this case Spotify)? Given that fewer than 10% of Americans even hold a blockchain wallet, an NFT project needs to either extend a real-world brand or else provide a significant advantage.
9. Professionalism that checks all the boxes investors expect
Investors vetting NFT project score it higher in value if it “checks all the boxes” they expect: A professional website; creators are doxxed and findable (bonus if they are well-known); there is a roadmap with the structure of releases; the size of the social channel relative to the size of the collection makes sense; there are a variety of prices selling above the floor price and reasonable activity relative to the size of the collection (see what investors want for a full break down).
10. Market conditions
When a huge exchange collapses, millions of would-be investors simply exit the marketplaces, especially “flippers” in it for a quick hit. This is a great time for entrepreneurs, or other artists with their own real-world communities to start creating. After Celsius and Voyager collapsed, for example, NFTs got a boost from Reddit’s entry into the market with its massive user base ready to buy on the invigorating news. When FTX collapsed, NFT markets fell, but again, did not evaporate. Expect more major media with creative content to partner or develop their own marketplaces, as TikTok is doing with a DAO for its creators to earn tokens based on popularity.
Finally, there is no shortage of value in how excited the creator is by their own project.
Not only will creators excite others with their passion, but they will also have the drive to stay the course with the project over time; that is once the initial launch is over and another collection/utility/community will be formed. As the poet Mary Oliver once wrote: “Tell me, what else should I have done? Doesn’t everything die at last, and too soon? Tell me, what is it you plan to do with your one wild and precious life?” For creators, this is a great question to ask yourselves prior to a big launch.
Have an interesting project, or idea, let us know at alisa@web3collab.org . We’d love to hear from you.
Next up: Creating a brand.