NFTs are blazing hot right now. So hot that the most popular secondary marketplace for NFTs, OpenSea, reached dizzying new heights. OpenSea recorded $3.3 billion in sales volume in August, compared to $325 million in July — an increase of 900%!
Yes, that's all fine and dandy, but what does this have to do with marketing, you ask? More than you may think.
What is an NFT?
First of all, where have you been? Every major news outlet and blog has beaten this topic into the ground, so this post assumes you know what a non-fungible token is at this point. If not, hit Wikipedia or this Digiday WTF article quick and then come back here.
The rest of this article will assume you understand what an NFT is at the most basic level. My two-sentence answer:
A non-fungible token is a one-of-a-kind digital asset that lives on a blockchain. The owner of the NFT can prove their ownership using their private key or wallet.
NFT Project Teams
NFT projects are like mini startups. A team of people band together to create, launch, market, and maintain NFT projects. The roles you will find filled for any NFT project are:
The most dominant asset category in the NFT space is digital art. It is hard to launch an art project without art to sell. Artists create the actual assets tied to an NFT.
Even though NFTs can represent many things, like game items, music, or even lists of text, the context we will stick to for this article is image-based NFT art projects.
There are three main types of NFT art.
1. Avatar NFT
Artists create pieces of avatar NFTs, but programs generate the final images algorithmically. Each character possesses a set of traits or attributes, and the algorithm assigns the value of each trait to an NFT.
So one character might be wearing a baseball cap, but another could wear a cowboy hat and so on. The artist creates the trait items that are combined to create a final avatar.
2. 1/1 NFT
A manually created, unique, and original piece of art. If the Mona Lisa were an NFT it would be this.
3. Generative / Programmable NFTs
One of a kind but generated on demand via a set of program instructions stored on the blockchain. Art Blocks is the prime example of this NFT type. Each NFT in a collection will possess a shared visual style but are randomly created using a program and guaranteed to be unique.
Anybody can create and launch an NFT on a marketplace like OpenSea. However, as any entrepreneur knows, building a business on top of another business is never a good practice. Most projects employ developers to conduct their initial sales (called mints) or offer exclusive features.
Any legit NFT project creates its website and mint process to educate the public about their project and to help their users avoid fees associated with secondary marketplaces.
Many NFT projects offer differentiating features to separate themselves from the pack. For example, one of the most popular NFT projects, Bored Ape Yacht Club, offers members-only areas that only ape holders can access by verifying their ownership.
Building these features requires developers who understand how to create contracts on the Ethereum blockchain. Other features could include offering an ongoing commission of all sales to NFT holders of the project or additional NFTs gifted to owners. These features are a part of a project roadmap and follow the mint to create continued interest in the project.
The name of the game in NFT projects is hype. If an NFT project sells out during the minting process, it is almost guaranteed to command a much higher price immediately following the mint.
How do you create hype for an NFT project? Marketers know there are many avenues to market a product, but for NFTs at this current point in history, there are three main tools leveraged by all projects to raise awareness:
Tool 1: Twitter
Every NFT project has a Twitter account. The number of followers of that Twitter account usually directly correlates to the amount of hype surrounding it.
Tool 2: Discord
NFT projects create a sense of community by leveraging the chat application Discord to interact with fellow owners or others interested in the project.
Tool 3: Website
Every project will have a website to educate the public about the project, host mints, or serve as a portal to additional features.
Community / Social Media Managers
As a project grows, so does its participation on Twitter and Discord. Managing a community of thousands or even tens of thousands of people can turn into a full-time job. Once projects reach an unmanageable size, they bring on dedicated community and social media managers.
Marketing NFT Projects
Projects need to focus on two areas when marketing their NFTs:
- NFT Mints
- Ongoing Promotion of Projects
The first influx of revenue for NFT projects is during the initial sale. The mint is the initial sale of each NFT where projects set a mint price and allow consumers to deposit cryptocurrency in the project's wallet in exchange for an NFT.
With so much financial incentive at stake, NFT projects are motivated to promote their creations to the largest possible audience.
The ultimate goal pre-mint is to gain a large enough following to sell out. Selling out generates even more hype in the project since it will create scarcity, drive up the price, and produce FOMO (fear of missing out).
Ongoing Promotion of Projects
The other way for projects to make revenue is to earn a commission from ongoing sales of an NFT on a secondary marketplace. OpenSea allows project owners to earn a commission percentage of their choosing on every sale of an NFT.
When you sell an NFT on OpenSea, you must pay the OpenSea and Project fees. In the example above, the Koala Intelligence Agency set a 5% commission on their project.
Following the mint, projects want to encourage liquidity since they profit with every sale on secondary markets.
How do NFT projects market themselves?
Currently, NFT projects market themselves via grassroots and growth hacking methods rather than traditional advertising.
NFT projects drive engagement using Twitter and Discord. Sometimes, the art can speak for itself, and users organically follow the project. The project's Twitter profile will gain followers or Discord server members based on an appreciation of the art alone, and marketing becomes a secondary concern.
Other methods include shilling or self-promoting the project through typical organic social media growth methods. Social media managers will participate in the communities of other NFTs or reply and interact with NFT enthusiasts and projects on Twitter to gain attention.
However, a more surefire way to gain hype for a project is to leverage an influencer.
Many influential people are jumping on the NFT bandwagon. It is unclear at times why influencers pump a project. Whether for direct payment, skin in the game, or genuine interest, an influencer vouching for a project will gain an aspiring NFT creation immediate interest.
Advertising NFT Projects
You can see examples of NFT projects advertising on websites and tools dedicated to NFTs. One example is Rarity.tools, a website that lists upcoming NFT projects and provides features to ascertain the rarity of a given NFT. Rarity.tools offers several advertising opportunities on their home page.
But will there be a point in time where we will see banner, video, or native ads across the web and walled gardens for NFTs?
It is conceivable to think that projects could use advertising to gain brand awareness for mints and ongoing promotion. However, I believe there are a couple things to consider:
Target Audience Advertising Aversion
I believe there are two audiences interested in NFTs.
1. NFT Flippers / Speculators
These are the people looking to earn revenue from acquiring and marking up NFTs.
This group loves the concept of NFTs and wants to collect them because they think they are cool, novel, or interesting.
The flippers earn their revenue from the collectors. The collectors collect because they either enjoy the art, community, or concept behind an NFT project.
Flippers may want to know about upcoming projects via advertising, but collectors may be turned off if a project advertises. If a project needed to advertise to drive hype, then a collector could think it did not achieve that hype through its merit.
At this point, I do not believe NFTs will turn to widespread advertising through traditional channels since the genesis of hype occurs through communities. Forcing hype in any way may repel potential collectors and cause them to question the integrity of a community.
But as NFTs progress from a nascent and niche concept to a mainstream form of art, projects may need to advertise to cut through the noise and gain some attention.
Ad Platform Category Blocks
Another hindrance to NFT advertising is that it could conflict with policies set following the aftermath of the 2017 cryptocurrency boom.
Many advertising platforms set rules following that event since rampant speculation led to:
- Increased scrutiny by the government
- Uneducated investors losing their savings in a frothy and speculative market
So ad platforms put rules in place to restrict advertising a potential token sale.
Are NFTs considered token sales? While most major ad platforms do not call out NFTs specifically, they all mention token sales.
- Google Policy requires advertisers of initial coin offerings to follow a rigorous registration process
- Twitter prohibits cryptocurrency token sales
- Facebook requires pre-authorized permission for advertisers that promote cryptocurrency
Due to their unregulated nature, NFTs will surely gain the same level of scrutiny by ad platforms as any cryptocurrency or token sale.
What else do I need to know about NFTs and marketing?
The massive gain of interest in the NFT space is creating a new type of advertising agency. The X10 NFT agency is one of a few agencies now offering marketing services to NFT projects. X10 offers services to assist with project launch, PR, influencer marketing, and growth hacking.
I would expect more specialty agencies to pop up to assist aspiring project creators. I also anticipate existing agencies to experiment in the space.
Corporate NFT Participation
Well-known companies are leveraging the NFT craze in reverse. Rather than marketing NFTs, they are using NFTs to market themselves.
Visa gained a ton of media attention by purchasing CryptoPunk 7610 for around $150,000. The purchase of a CryptoPunk by Visa was a cultural inflection point and elevated NFTs from fringe interest to an asset class worthy of attention. See below for why Visa chose to join the NFT movement:
To help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store, and leverage an NFT.
Visa believes that more companies will enter the NFT marketplace. They want to understand firsthand how to purchase and store an NFT. It sounds like they anticipate more companies joining the NFT movement and want to assist them in the future.
Companies are also creating their own NFTs to join in the fun and to promote their brand. Taco Bell released a series of NFTs on the Rarible marketplace that sold out in under 30 minutes. These NFTs were taco-themed GIFs and images that also granted their original owners $500 in taco bell digital gift cards.
NFTs could currently be in an over-hyped bull-cycle, but there is no way to close this Pandora's box. An entirely new marketplace has formed right before our eyes and is causing many to ask questions like:
- What is art?
- What is ownership?
- What makes something valuable?
As the world grapples with these existential questions, many people are profiting from the world of NFTs. NFT project creators, flippers, collectors, and marketers alike have seized a blue sky opportunity and are not looking back.