23 Feb

What Is an NFT? And What Does It Have to Do With Marketing?

By Matt Fickenworth, Account Associate

Is it a scam? Still up in the air. Is it cool? Still up in the air. Is it one of the latest tech frenzies to sweep the globe? Not up in the air. While NFTs may be extremely confusing, which we’ll get to in a bit, there’s no doubt about the popularity and rise in interest: the statistics are in, and they’re mind-blowing. In Q3 of 2021 alone, the trading volume of NFTs amounted to nearly $11 billion. How? And why?? Let’s take a deeper look.

An NFT is a non-fungible token. It’s unique and cannot be replicated – if everything else after this confuses you, take away that: they’re one-of-a-kind. They’re digital assets, similar to an image or a gif, however, what makes them different is the blockchain. The blockchain is a way of publicly documenting transactions, essentially a public record of your proof of ownership (think of an online ledger). The only way to own an NFT is to buy it through a transaction that is recorded on the blockchain. Before NFTs, digital assets could be easily duplicated: screenshot a picture, and then you have two of them. But, if you screenshot an NFT, you own a copy, not the real thing – it’s just like taking a picture of the Mona Lisa: you don’t own the Mona Lisa, you own a digital copy.

And one of the reasons why they’re so difficult to grasp is because they don’t exist in the real world – they’re not tangible. They’re solely held on the blockchain – which gets a little more confusing. Nearly all NFTs require you to purchase via ether, the (crypto)currency of the Ethereum blockchain that most NFTs are a part of. And you do this by using a cryptocurrency wallet that contains ether you’ve previously purchased or have been gifted (yes, that’s a thing – and so is being gifted an NFT). NFTs establish authenticity and chain of ownership for a digital piece, much like art in real life – and they’ve become scarce and valuable in the process. So valuable, that teen artists are making millions.

So why use them? Well, that’s a great question. One of the common answers to this: “You shouldn’t, they’re useless.” Which to some, might very well be true – being held on the blockchain, the list of uses is certainly limited. While selling for a profit, bragging rights, membership to exclusive communities, and music albums are all very common uses, let’s take a look at how a few brands have been utilizing them.

  1. McDonald’s: they introduced a McRib NFT, celebrating the return of the sandwich on its 40th anniversary. McDonald’s picked 10 winners to receive the NFTs, aiming to recreate hype across digital channels.
  2. Great British Olympic Team: released this past summer, the GB team was the first Olympic team to introduce NFTs. With commemoration of past history and the recent Tokyo Olympics, the GB team gave fans an opportunity for immersion with the team and famed Olympic history.
  3. Clinique: in a different approach (NFTs are typically sold in a bidding system), Clinique gave away three NFTs in a competition to those with stories of optimism and hope for the future.

What might be perplexing at first, the opportunities that brands hold with NFTs are abundant. Curating experiences for consumers that go beyond the product or service being sold, an ability for brands to demonstrate their leverage with the latest tech to create direct consumer relationships, and moments to enhance loyalty programs with unique experiences tailored to those that own NFTs are just a few. You can see why brands are spending millions, why there was an NFT conference with over 5,000 attendees, and why SNL took advantage of the craze.

However, people are being scammed because of a lack of knowledge, and on the other side, there are those looking to get it into the market solely for the get-rich-quick scheme. NFTs are still very complex, very difficult, and very confusing. We could talk about them for hours and one might not have a full grasp on them yet. Which is why it’s worthy to mention that while this piece is a good starting foundation, there’s so much more to NFTs than we can cover. Be careful and be safe.