Nifty Corporates

VISA, Budweiser, Marvel, and the Positive Sum Corporate NFT Awakening

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Hi friends 👋, 

Happy Monday!

Over the past few weeks, something strange has been happening: the corporates have come for the NFTs. That’s a good thing.

Let’s get to it.


Nifty Corporates

The corporates are coming for the NFTs. 

Last week, VISA’s $150k purchase of a CryptoPunk caught everyone’s attention, but Budweiser’s foray into rare jpegs was much funnier. 

On Wednesday, Budweiser changed its Twitter profile picture to an Non-Fungible Token (NFT) it purchased for 8 ETH, a Budweiser-themed rocket from Tom Sachs’ Rocket Factory: 

The 145-year-old brewer also spent 30 ETH to acquire the Ethereum Name Service (ENS) domain beer.eth, which are essentially like domain names except backed by NFTs that are owned, not rented, by the owner.

Budweiser is part of a growing wave of brands getting involved in NFTs, and its purchases more than paid for themselves in free marketing value. I’m writing about it right now. I kind of want to drink a Bud. It’s also a lesson that incumbent brands who want to get involved in web3 need to give up a little control and get comfortable with the weird. Because as people checked out Budweiser’s beer.eth wallet, they didn’t just find the Rocket. They also found some dicks. 

web3 is open and permissionless. When Budweiser let it be known that its wallet was at beer.eth, they opened the floodgates. Anyone can send them anything, and anyone can see what’s in their wallet by searching beer.eth on Rainbow. So of course, people do what they do with any fresh canvas: drew pensises. As a Harry Potter fan, my personal favorite is PeePeeBoy #16. (Budweiser, if you’re reading this, I made you an offer for PeePeeBoy #16 on OpenSea, happy to take it out of your wallet!)

It’s all too much fun, playing at the edges of a new frontier. Crypto and web3 more broadly have consumed a ton of my brainspace in 2021. 

It started with a curiosity about some niche thing happening at the fringes of the internet that might be important in the future, and has evolved into a belief that the transition to web3 will be the next major platform shift. It’s as big as, or potentially bigger than, the internet and mobile. Commercially, if the internet changed how products are sold, web3 changes what products are sold.

web3 feels like one of the ones that changes everything. web3 isn’t just crypto, it’s a more decentralized, peer-to-peer, and liquid version of the internet, often but not necessarily powered by crypto.

The parallels between the internet’s ascent and web3’s are striking. 

Just like the internet, web3 started out as Chris Dixon’s thing that “the smartest people do on the weekend.” It’s becoming clearer that it’s “what everyone else will do during the week in (less than) ten years.” 

The internet started with university researchers (the first transaction facilitated by the internet was a 1972 weed deal between Stanford and MIT researchers via Arpanet) and spread to message boards and chat rooms before going mainstream. By 1999, internet startups were raising at eye-popping valuations and every incumbent company needed a website. Adding “.com” to a corporate name sent stock prices soaring. 

Similarly, web3 spent its first decade or so as a playground for researchers, coders, and degens. People bought drugs with crypto, too. Last year, corporates started dipping their toes by buying Bitcoin with their balance sheets. Over the past month or so, though, it really feels as if web2 companies are waking up to the fact that they need to figure out their web3 strategy or they’re not gonna make it. In addition to the VISA and Budweiser purchases, in the past month alone: 

Those are just a few public examples. Many of the non-crypto startups in the Not Boring portfolio are realizing that web3 lets them do things they couldn’t otherwise. I’m seeing more crypto companies with real-world applications beyond trading coins back and forth. Board rooms around the world are calling in “that shadowy super coder on the eng team who knows about crypto” to get them up to speed.

In most of the web3 analysis I’ve done in Not Boring, I’ve focused on new projects, web3-native companies, and web3’s impact on individuals. Now, the corporates are coming. Incumbents are realizing that web3 is no longer just a cute oddity, but a threat and an opportunity. In Who Disrupts the Disrupters? I wrote about how web3 projects might disrupt today’s biggest tech companies. In Status Monkeys, I covered how NFTs scratch the same itch that social networks do, and how that explains their value in the eyes of individuals. This piece is about how corporate incumbents are getting involved with NFTs, and their potential to increase the value of the overall ecosystem, and likely make some hilarious gaffes, in the process.

Within the next five years, nearly every consumer company, and many B2B companies, will be web3 companies, just like nearly every company became an internet company in the early 2000s. They’ll use tokens, embedded DeFi, and NFTs to strengthen network effects, increase switching costs, build novel user experiences, improve margins, and turbocharge growth. 

It’s hard to see now, because it’s so early and NFTs still feel like a toy, but companies are already beginning to play with NFTs for marketing, and they’ll soon make them a core part of their business models. The ability to imbue low marginal cost digital products with the same attributes that make physical products valuable and new capabilities only made possible by web3 is deeply underappreciated. 

Today, we’ll appreciate, by covering the early corporate moves into NFTs and exploring what they suggest about corporate adoption of NFTs and web3 tech more broadly going forward. 

  • Mania, Bubble, or Hype Cycle?

  • Corporate NFT Adoption 

  • Today: Marketing Via NFTs

  • Tomorrow: New Business Models Built with NFTs

  • From Pizza Hut to Domino’s

If it feels bubbly, that’s OK. History doesn’t repeat itself, but it rhymes. We’re partying like it’s 1999, and that turned out just fine. 

Mania, Bubble, or Hype Cycle?

It’s easy to dismiss incumbents getting into crypto as just another sign that we’re in a bubble. We’ve seen this movie before. Early web3 mirrors the early commercial internet. 

In 1999, during the frenzy of the dot com bubble, practically every company built a website, and any company that added “.com” to their name soared in value. One 2001 study in The Journal of Finance found that companies that added “.com,” “.net,” or “Internet” to their name saw their stock prices increase 74% in the days following the name change. 

It’s fun to look back and make fun of all of the silliness 1999/2000 silliness. Pets.com! Lol. Webvan haha! Internet.com teehee! 

In the beginning, these shifts feel like bubbles. Internet mania drove the tech-heavy NASDAQ up 3.4x from 1,619 at the beginning of 1998 to a peak of 4,696 in February 2000. It crashed even harder, to a low of 1,172 in September 2002. Oof. 

But after an early peak and valley, the internet obviously stuck around. The dot com bubble looks like a big blip. Today, the NASDAQ sits at 15,129, 3.2x higher than it’s dot com peak. Internet companies have created trillions of dollars in value. The technology is so ubiquitous that we no longer talk about “dot com” companies or “internet” companies. The most valuable companies were born of, or pivoted hard towards, the internet. Early hype helped fund that shift.

NFTs today feel similar. 

If I had an ETH for every time I’ve seen someone compare NFTs to Tulip Mania, I’d be able to buy up all the CryptoPunks. But I think there’s a key difference: manias like the one that gripped the Dutch in the 17th Century or Beanie Baby collectors in the 1990s were isolated and non-composable. Money thrown at Tulips or Beanie Babies didn’t spur innovation that others could build on. There was no directional arrow. They were time capsules, captured to be revisited and analyzed by future anthropologists. 

If they are a bubble, NFTs are more like the dot com bubble. They’re a different, more productive sort than Tulips. (Alright alright, except for this $3.2M Tulip NFT). Unlike Tulips, bubbly demand for internet stocks or NFTs brings more money and experimentation, which increases the likelihood of building valuable use cases that gain mainstream adoption. Is there some dumb shit being bid up to incomprehensible prices? Certainly. But in these cases, enthusiasm becomes activation energy, and over time, foolish behavior fades and a new paradigm emerges. The internet and NFTs follow the old Not Boring favorite: the Gartner Hype Cycle

The Gartner Hype Cycle is a useful framework through which to view new technologies, particularly powerful for the fact that nearly every new major technological innovation follows its curve. It’s not that all technologies are the same, or become useful at the same rate; instead, the Hype Cycle is a mirror that reflects humanity’s collective attitude towards new things. 

  • Some new technology gets built

  • We get really excited and imagine the myriad ways it might be used 

  • Then we get disappointed when it doesn’t immediately fulfill all of them

  • Then, over time, the truly valuable technologies find mainstream adoption as they become part of the fabric of the way we do things.

According to Gartner itself:

Gartner Hype Cycles provide a graphic representation of the maturity and adoption of technologies and applications, and how they are potentially relevant to solving real business problems and exploiting new opportunities. Gartner Hype Cycle methodology gives you a view of how a technology or application will evolve over time, providing a sound source of insight to manage its deployment within the context of your specific business goals.

Ultimately, it helps companies think about when to implement a new technology.

Each year, Gartner places emerging technologies on the Hype Cycle. Last week, it released the 2021 Hype Cycle. Right at the top of the Peak of Inflated Expectations, of course, are NFTs. 

Gartner’s customers are companies, not crypto degens. If Gartner is including NFTs on the Hype Cycle, it means that companies are thinking about how to incorporate them. Gartner seems to think that we’re at the Peak of Inflated Expectations for NFTs, the point in the cycle at which, “Early publicity produces a number of success stories — often accompanied by scores of failures. Some companies take action; many do not.” 

NFTs’ placement at the top of the Peak likely contains a little bit of truth and a whole lot of desire to grab headlines. There’s probably an interesting thing that happens when the Gartner team chooses where to place things. They might say, “Which technology could we place at the Peak of Inflated Expectations to drive the most clicks?” and whatever the answer is is probably also the technology that really is at the Peak of Inflated Expectations. 

Anyway, we’re still early. At this point in the cycle, some companies experiment with the technology, many don’t. A handful of the ones who do are going to drop some embarrassingly harebrained NFTs or acquire NFTs for too much money. We may have the opportunity to look back in a year, from the Trough of Disillusionment, and laugh at the most ill-conceived. But that doesn’t mean we should dismiss NFTs. Au contraire. Technologies that Gartner places at the Peak often go on to create orders of magnitude more value than they’re worth at the time of Peak placement. 

See, I love the Hype Cycle, but it’s also a bit misleading. With just a glance at the graph, it would seem as if technologies never live up to their initial hype, like investing at the peak would inevitably lead to losses. Even the companies that survive the Trough of Disillusionment can only hope to end up at the dull-sounding “Plateau of Productivity.”  

But the Y-axis represents “expectations,” not value, and just looking at the chart dramatically undersells the value that mass-adopted technologies create. Take Web 2.0, for example. 

When it burst onto the Hype Cycle in 2006, Web 2.0 sat atop the Peak of Inflated Expectations. That year, Web 2.0 poster child, Facebook, was valued at $500 million. Web 2.0 disappeared in the 2007 edition, reemerged in 2008 heading towards the Trough of Disillusionment, made it onto the Slope of Enlightenment in 2009, and then dropped off the Hype Cycle. Web 2.0 just became the internet, and created enormous companies. Today, Facebook is worth $1.05 trillion, a full $1 trillion more valuable than when Gartner placed its category on the Peak 15 years ago.

In fact, the Peak of Inflated Expectations seems to be a strong predictor of immense future value. 

  • 2009: Cloud Computing - $250 billion market today

  • 2010: 4G Standard - powered the mobile revolution, trillions in value creation

  • 2011: Internet TV - YouTube did $20B in 2020 revenue, Netflix’s market cap is $247 billion, TikTok is valued at $425 billion

To be sure, other technologies that once sat at the Peak failed to live up to the hype yet. This imgur page has all of the Hype Cycles from 2000 to 2016, and some, like 2003’s “Process Portals,” never became a thing. But for the most part, technologies that made it to the Peak have become ubiquitous and hugely valuable. 

When thinking about where NFTs are today, then, and the potential for long-term value creation, it might be more useful to look at another framework: the technology adoption S-curve

It’s still incredibly early for NFTs. If the target market is ultimately “anyone who buys anything online” (which it should be),  and over 2 billion people have made an online purchase, then only 0.01% of the target market has purchased an NFT, using OpenSea’s 292k all-time traders as a proxy. 

Even including Axie Infinity’s ~1 million NFT owners and renters, we’re still under 0.1%. To move up the S-Curve and into the Plateau of Productivity, will require a bunch of things: 

  • New NFT projects that appeal to new audiences, like Axie

  • More fractionalization projects, like Fractional and PartyBid, to make the rarest and most valuable NFTs available to more people

  • New tools and platforms, and increased adoption of existing tools and platforms, that make it easier to mint, trade, and show off NFTs, like Rainbow, Cyber, Gallery, Showtime, and Rare Circles.

  • Lower gas fees for Ethereum NFTs and NFTs on low-fee blockchains like Solana to make lower-value, more mass accessible purchases economically feasible

Each of those growth avenues is worthy of a piece of its own, but for now, let’s focus on the most ironic way that NFTs and web3 will grow: corporate adoption

Corporate NFT Adoption

It seems odd that one of the main ways for a decentralized movement to grow would be via participation from centralized entities. I’m calling them “corporates” here, but when I use that term, I really mean any non-crypto-native company or organization. Not Boring would be included in “corporate” here, as would Coca-Cola. 

Back in January, in The Value Chain of the Open Metaverse, I wrote: 

The vocabulary around Web3, like that of many early movements, is very idealistic. It’s all about using technology to create trustless systems, wrest power from corporations, and give it back to the people. I think that vocabulary is why I haven’t taken it seriously as a real alternative to the status quo...

Curiously, almost every example of a corporate getting involved has been cheered. Bitcoin holders loved it when MicroStrategy aped into bitcoin, and when Elon Musk added it to Tesla’s balance sheet. Similarly, the web3 community seems to welcome and celebrate companies like VISA and Budweiser purchasing NFTs. In Value Chain, I followed up that last quote with: 

What has been missing for me is a clear use case, like NFTs, and an understanding of the business models and value chains underlying a lot of these concepts. Yes, there’s idealism, but there’s also a sense of building a new economy in which the value accrues to the people who create the value. That’s capitalism, baby. 

This is the sneaky power of web3: it aligns incentives such that individuals benefit from institutional and corporate involvement. It’s not about who can’t participate, it’s about the fact that everyone can. 

Bitcoin holders cheered MicroStrategy and Tesla because more demand made their holdings more valuable. ETH and NFT holders embraced VISA and Budweiser and the other corporates purchasing NFTs because it increases awareness and adoption and drives up the value of their assets. When everyone can be an owner, everyone wants what’s best for the ecosystem.

There’s an interesting dynamic at play: individuals and web3 startups will innovate and tastemake, and companies will follow on, providing capital and mainstream eyeballs. Win-win.

While much of the value created in and by web3 will come from individuals, new projects, and new companies or DAOs, corporates will also play an important role in web3 adoption and value creation. Companies commercialized the internet, and while web3 is more decentralized and peer-to-peer, companies will once again play an important role in mainstream adoption. 

In the beginning, today, that’s mostly taking the form of companies leveraging web3 for marketing, most notably by purchasing and creating NFTs. 

Over time, by the time the initial marketing buzz wears off, they’ll need to take advantage of the unique capabilities of web3 and NFTs to create new business models and drive sustained competitive advantage. 

Today: Marketing via NFTs 

Just like early corporate internet usage was marketing focused -- a way to experiment with a new medium while raising awareness in the process -- companies are beginning to publicly experiment with NFTs largely to generate attention in the crypto community and beyond. Their efforts fall into two main buckets: Marketing by Purchasing NFTs and Marketing by Creating NFTs.

Marketing by Purchasing NFTs 

The easiest and most en vogue corporate use case for NFTs is marketing by purchasing NFTs. Buying NFTs before other companies do is a free way to get exposure to the crypto community, who want to see signs that more money and interest is piling into the space, and hopefully the mainstream press. 

If web 2.0 marketing was about brands and ad platforms working together to generate value from consumers, web3 marketing can be about brands working to generate value with consumers. 

Previously, if VISA or Budweiser had run a successful ad campaign, Facebook or Google or TV networks would have won in the form of advertising dollars, and VISA or Budweiser would have won in the form of the new customers, and the customers would have been left out of the upside. 

With NFTs, though, that flips, as seen in the case of VISA’s CryptoPunk: 

Everyone in the ecosystem wins, with VISA itself actually taking the most risk. Its purchase drove up visibility and demand for CryptoPunks, and over $20 million worth of Punks traded hands in the hour after VISA’s announcement. 

NFT collector gmoney had an excellent thread on why VISA’s Punk purchase was such a monumental shift: 

He argued that VISA turned what’s historically been a cost center into an asset on the balance sheet. If marketing spend becomes a profit center, that could dramatically increase companies’ marketing budgets and alter how they spend them. VISA purchased CryptoPunk #7610 for 49.5 ETH. Already, the CryptoPunks floor, the lowest price you could pay to buy a CryptoPunk, has nearly tripled to 134 ETH. On paper, VISA has gained $270k from its marketing investment.  

With the buy, VISA: 

  • Increased its legitimacy in the growing crypto community 

  • Proved its crypto bonafides to clients and partners who may want to get involved in web3 and are now more likely to turn to VISA when they do 

  • Stood out above a sea of marketing noise and owned the narrative

… and it gained $270k at current prices instead of spending $150k. Plus, the story was interesting enough that it jumped from Crypto Twitter to mainstream media. My friend Jarrod Dicker’s interview about the purchase on CNBC is just one example among many of awareness spreading beyond crypto insiders and to the general public: 

When a person spends $150k or more on a jpeg, it seems incredibly expensive. When a company invests $150k in marketing via jpegs, and comes away with an asset, it seems incredibly cheap. Worst case, it goes to $0, like it would have in any other marketing campaign ever. That might introduce a wave of corporate money into the ecosystem, driving up prices and benefiting all owners. Some brands will buy Punks, but that’s been done now, and brand #2 likely won’t get as big a bump as VISA did. Other brands will need to get more creative. 

Budweiser, for example, bought the Budweiser Rocket from a lesser-known project: Tom Sachs’ Rocket Factory, which allows owners to choose to have a physical version of their NFT rocket launched in “meatspace.” On Saturday, they held the first launch of ten rockets on Governors’ Island in NYC.

Sachs designed the rocket NFTs using corporate brands, including Budweiser’s, and instead of suing, Budweiser decided to get in on the fun itself and support the project. 

That’s been a win for Budweiser and a win for Rocket Factory -- I’m talking about the project now, as are many others, largely due to Budweiser’s involvement. 

Taking it one step further, AriZona Iced Tea “aped into” a Bored Ape and used the purchase to collaborate with Bored Ape Comic. 

As part of the Twitter announcement, AriZona teased that it was going to be involved in the first Bored Ape Comic, an unofficial project launched by three Bored Ape Yacht Club members. 

By purchasing a Bored Ape, AriZona gained initial exposure around the announcement, and essentially bought ad space in the first Bored Ape Comic, which will give it continued exposure should the comic take off. That said, the purchase wasn’t without hiccups. The Bored Ape Yacht Club founders told Decrypt that AriZona used the Bored Ape logo commercially and without its permission in the announcement tweet, a reminder that just because a brand purchases an NFT, it may not be able to do whatever it likes with it or with the project’s brand. 

Certainly, more brands will try to gain exposure and show that they “get it” by purchasing NFTs, That said, not every company can buy an NFT and get as much out of it as VISA, Budweiser, or AriZona did. As with everything in crypto, early participants are disproportionately rewarded. There will be diminishing returns -- the 100th company to buy a CryptoPunk or Bored Ape will get a fraction of the press and attention that the first does. But that’s a feature, not a bug. In addition to money, it encourages creativity and early support for new projects, and pushes companies to become creators themselves.

Marketing by Creating NFTs

Brands large and small are also getting involved in web3 by creating, minting, and selling their own NFTs. For now, these projects, too, seem like mostly a marketing play since the amounts are too small to matter to any of the brands we’ll discuss, but they also holds the seeds of new, high-margin business lines that will give early adopters an unfair advantage and force competitors into adopting NFTs as well. 

Three recent examples stand out: Coca-Cola, the Chicago Bulls, and Marvel. 

Coca-Cola’s Charity Loot Box

On July 30th, Friendship Day, Coca-Cola auctioned off a loot box of four NFTs -- a trading card, a bubble jacket, a sound visualizer of iconic Coke sounds, and a digital vending machine -- plus an actual, physical vending machine full of Coke shipped to the winner. 

The winning bid came in over $575k, with all proceeds going to the Special Olympics. 

Coca-Cola has a lot of money. No one would ever donate to charity on Coca-Cola’s behalf. But they wouldbuy NFTs from Coca-Cola. The whole thing probably cost less than $50k to pull off, and the company was able to generate buzz, experiment with a new technology, put its brand out there in a new format, and raise money for a great cause. The owner gets the satisfaction of winning and donating to a great cause and the opportunity to sell the NFTs in the secondary market. I have a feeling that NFTs will be enormous for charitable giving, and that more companies will use charity auctions as a test balloon for deeper experimentation with NFTs. 

Chicago Bulls Rings on Shopify

The same week as Friendship Day, on July 26th, Shopify announced that it would begin letting merchants sell NFTs through their Shopify storefronts, starting with the Chicago Bulls. That day, the Bulls launched nft.bulls.com and kicked off a series of 6 NFT drops, one a day for the week, each one featuring a 1990s Bulls NBA Championship Ring. 

For the drop, Shopify integrated with Sweet, which “pioneered Flexible NFT Distribution,” letting people and brands create, sell, gift, drop, and auction NFTs anywhere, including their own storefronts. Sweet in turn builds on the Ethereum and Flow blockchains, allowing companies which blockchain they want to use. The Bulls chose Flow, likely due to the NBA’s relationship to Dapper Labs via NBA TopShot. 

The Bulls sold out all six drops, selling 567 NFTs for $49,801. That’s not a meaningful amount of money for the Bulls, but it generated awareness, particularly given the push by Shopify’s marketing machine, and allowed the team to test its fans’ appetite for NFTs. 

NFTs make a ton of sense in sports. Grown men and women wear expensive jerseys, paint their faces, and spend hours at the stadium to prove their loyalty to their favorite teams. They’ll certainly by digital items to do the same. When I was a kid, I loved the Bulls. If I ever got in trouble, my punishment was “No Bulls game tonight.” I would have begged my parents to buy me the Championship Ring NFTs. NFTs will infiltrate the core offering more deeply than that, too. It’s not hard to imagine NBA tickets coming with an NFT so fans can show off which games they attended and where they sat, for example. The Bulls Drop was just a test run. 

Marvel Brings its IP to NFTs

The corporates that will do the best, the most quickly, with NFTs are the ones with valuable and beloved Intellectual Property (IP), like Pokemon, Star Wars, and of course, Marvel. Marvel is on a hot streak, with the Marvel Cinematic Universe (MCU) accounting for seven of the top 25 box office grossing films of all time, and two of the top five. They’re also the first brand to make real money, in the tens of millions of dollars in the first month, selling NFTs.

Fans love the Marvel characters, and in addition to watching all of the movies on opening day, many buy comics, figurines, and other merch. NFTs are a no-brainer, and Marvel is leaning in as hard as incumbent. 

In June, Disney-owned Marvel announced plans to sell NFTs via the VeVe marketplace. On VeVe, August is “Marvel Month.” It kicked off with the Spider-Man digital statue collection on August 7th, which sold out over 60,000 editions, ranging in price from $40-400 based on rarity, in under 24 hours. 

The Marvel Mightys #1 - Captain America drop on August 17th sold out over 40,000 total editions of five Captain America characters for $13 a piece in under 15 minutes. This weekend, Marvel and VeVe dropped Marvel Mightys #2 - Fantastic Four, selling thousands of $13 “blind boxes” that revealed the character post-purchase.

Beyond digital statues, they’ve also sold thousands of digital editions of rare early comic books, all sold as $6.99 blind boxes and readable within the VeVe app, starting with Marvel Comics #1 earlier this month. 

On August 31st, they’ll wrap up Marvel Month with Spider-Man #1 and premium Captain America digital statues. 

All told, Marvel will sell hundreds of thousands of digital items for tens of millions of dollars in one month. They’re using their own IP, spending a little in upfront costs, and nothing for each marginal unit sold except for fees to VeVe. Over time, it’s hard to imagine that that cost will disappear, as Marvel or Disney brings those capabilities in-house or sells on more open marketplaces. 

Marvel’s drops are a bridge between the way that corporates are creating and selling NFTs today, as novelties and experiments, and how they might turn them into new, high-margin business lines that build even stronger affinity and allow fans to spread the MCU across the internet with them. Seeing Marvel’s success, there’s no brand in the world with beloved IP that’s not thinking about how to do the same thing themselves. 

Tomorrow: New Business Models Built with NFTs

One way to think about how corporates will use NFTs is that every company will start monetizing like video game companies, adding loot boxes, skins, play-to-earn, emotes, and more into their product experiences. But that’s a ways away.

It’s clear that brands are still in the experimentation phase with NFTs. They’re getting press, learning a new technology, and beginning to dream up new use cases. VISA and Marvel are showing that buying and selling NFTs can be good for business, and their success will attract more corporates who have been slow to adopt NFTs until now. 

To make the transition from marketing curiosity to fundamental new business models, corporates will need to understand how NFTs work with their specific business, and make decisions on how they want to approach the space. 

For example, Marvel made the decision to sell NFTs of digital collectibles within a fairly closed VeVe ecosystem, just like they chose to sell Marvel skins within the closed Fortnite ecosystem. Both are new revenue streams, but not necessarily new business models. It will be interesting to see when companies like Marvel, with valuable IP, allow their items to be sold in more open ecosystems that allow them to be traded and used across web3. The promise of the Open Metaverse is that you can buy a Captain America skin on OpenSea and wear it in Decentraland, the Sandbox, Fortnite, and anywhere you traverse online. 

Coca-Cola’s drop, while done for marketing, experimentation, and charity as opposed to revenue, was done on OpenSea as an Ethereum-based ERC-721 NFT, and the owner can show off their haul anywhere they choose, from Rainbow to Cyber to Gallery and beyond. 

My hope is that more companies choose to sell into open ecosystems, and that those ecosystems become more interoperable over time. Shopify’s Sweet partnership might be a good on-ramp, allowing brands to sell through a familiar Shopify storefront with credit cards, but giving customers ERC-721 NFTs that can be displayed in Ethereum wallets and galleries and traded on marketplaces like OpenSea. RareCircles, a Not Boring portfolio company, will also let brands mint and sell NFTs in multiple currencies via a familiar ecommerce interface. 

This early wave of creators and corporates will realize that NFTs have a few key benefits: 

  • Low Marginal Cost. Create once, sell thousands of copies an almost zero marginal cost.

  • Environmentally Friendly. NFTs allow fans to buy status and digital experiences without having to manufacture and ship physical goods. As Ethereum shifts to Proof-of-Stake with Eth2, NFTs will become even more environmentally friendly. 

  • Internet Native. Increasingly, our identities are formed online, and NFTs allow people to show off their identities in new digital environments. Brands will fight to be a part of their fans’ online identities, whether via Instagram or web3 platforms. 

  • Direct-to-Avatar. Coined by Crucible founder Ryan Gill, the Direct-to-Avatar economy combines all of the above in a high-margin, low environmental impact, digitally native business model that allows creators and brands to earn higher margins. 

But that’s just the beginning, like Jeff Bezos realizing that it made sense to sell books online. Over time, individuals, corporates, and web3-native companies will come up with new experiences and business models enabled by NFTs and web3’s unique capabilities. A few possibilities come to mind:

  • NFT-Gated Drops. Supreme fans and sneakerheads spend hours and even days online or in line waiting for drops. What if, instead, drops were gated only to those who owned certain limited edition NFTs. Like any NFTs, they could be acquired cheaply through early adoption and effort, or by aping in and spending a lot later on. These NFTs would mean high-margin revenue and loyal customers for the brand, and convenience, access, status, and a tradable asset for consumers. 

  • NFTs with Physical Purchases. Legitimate gives brands an easy way to give buyers NFTs when they buy physical items. They might gift limited edition NFTs with purchase, or give owners of physical goods access to exclusive digital experiences. They might represent digital twins of the item -- NFT Nikes to rock in the Metaverse that match the ones you’re wearing in meatspace.  In some cases, the digital NFT may become more valuable than the physical purchase, essentially paying consumers to buy the product. 

  • Early Adopter Signifiers. New brands need ways to bootstrap early demand and build loyalty without spending all of their money on Facebook and Google ads. A new DTC sneaker brand might bundle NFTs with online sneaker purchases that are more rare the earlier you are, or even show off your customer number. The Allbirds #1 NFT would be a weird, cool status signifier among certain groups. 

  • NFT-Gated Communities. Corporates might also give NFTs to their users that grant them access to NFT-gated communities and experiences. Some people will just want the product they bought, and not the access, and could sell their NFTs to people who just want the access, not the product, for a discount.  

  • Ticketing and Experience NFTs. Within five years, it’s going to be hard to go to any ticketed event or concert and not walk away with an NFT. Just like people collected scrapbooks of tickets, NFTs will be a living journal of the things we’ve done.

These are just a few possibilities, among an infinite set. The beautiful thing about a new technology, like the internet or NFTs, is that they become a new primitive with which millions of entrepreneurs can build. Collectively, they’ll go into the lab and come up with new products and business models that any one person could never dream of today. 

What is knowable today is that NFTs have structural cost advantages over physical products, that they (and other web3 tools like community tokens) can bootstrap network effects and increase switching costs, and that as more places to display and use NFTs online pop up, their brands will spread through the Metaverse on the backs of their biggest fans. Those fans might be financially rewarded for their efforts in some cases, as early CryptoPunks adopters were, or they might just get the intangible satisfaction that all humans feel in touting their association with the things they love. 

Whatever specifics the future holds, it’s clear to me that the Peak of Inflated Expectations for NFTs is just the beginning of their value creation. 

From Pizza Hut to Domino’s

We’re in the Pizza Hut phase of corporate NFT adoption.

As more companies experiment with web3 technology, like NFTs, there will inevitably be early experiments like Pizza Hut’s 1994 PizzaNet that we look back on with a chortle. 

Some of today’s corporate web3 forays will undoubtedly look silly in retrospect. There’s growing and legitimate concern that many NFT traders are “painting the tape,” trading between wallets all controlled by the same entity to inflate the price before selling to a sucker at inflated prices. There are also rumors that NFTs are being used to launder money, which I have no doubt have merit. Companies are going to release downright laughable NFT projects in an attempt to be cool and cash in on the trend. 

They’ll be rightly ridiculed. Projects will blow up. Prices of many projects will drop, losing owners a lot of money. Hucksters will take advantage of this new world. Bad things will happen. Being bullish on NFTs doesn’t mean believing that every single NFT will go up only. But those who focus on the failures and the downsides will miss the forest for the trees, and miss out on being early in a space that rewards being early. 

Because for every Pizza Hut website, there will also be success stories like Domino’s, whose stock has risen 3,601% since 2004 thanks in large part to its ability to adopt new technology like online ordering, mobile, and of course, the Pizza Tracker.

Corporate use of the early internet was a marketing play, too. Companies needed a .com to show that they were up on the trends, and to give consumers a place to learn more. 

In the intervening twenty years, however, the internet has become essential to commerce. It changes the way that brands sell, and even changes what they sell. Spotify, Netflix, Amazon, Stripe, myriad SaaS companies, Instagram, Epic Games, Airbnb, Uber, and thousands of today’s largest, fastest-growing, and most impactful companies would not have been possible without the internet. The internet was a new substrate on top of which unimaginable innovation has grown. 

Similarly, corporates are largely using NFTs as a marketing tool today. They’re experimenting, testing the shape of the Metaverse, and just trying to keep up with the head-spinning pace of innovation in the space. But their arrival is a good sign. It’s another indicator that NFTs are here to stay. 

Over the next twenty years, NFTs will transition from novel to normal. I think we’ll look back and wonder how commerce happened at all without digital ownership, a liquid, always-on global marketplace, and items that come with experiences baked in. As with the internet, the companies that dismiss NFTs and web3 will be left behind. 

New web3 companies and DAOs are being formed right now that will be worth hundreds of billions in market cap. That’s inevitable. New companies born in the new paradigm will create and capture a huge portion of the new value. But the incumbents, new and old, that use new tools to align incentives, share value with customers, and create new experiences, will also benefit. They learned from the graveyard of pre-internet companies what happens when you don’t adapt.  That might require giving up some control, and letting consumers shape your brand narrative, but the rewards will likely outweigh the risks. 

If it feels wild out there, it is. But the hype will die down and be replaced by real value creation. That’s the way the Hype Cycle goes. As always, advice is to stay open-minded, experiment, and start getting involved. If you’re reading this, you’re still early. The Peak is just the beginning.


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