To Avoid Fad Status, NFTs Must Become More Inclusive

It’s OK to admit it: For many, the rapid emergence of NFTs—nonfungible tokens—can make your head spin. An eye-popping $70 million for a digital asset we can all view online for free? Are we caught up in a speculative, hype-driven fad, or is there tangible and long-term value here? This shift will happen sooner rather than later according to UTA’s newest study, NFTs’ Path to Primetime. Its findings reveal several relevant themes for marketers. A permanent NFT marketplace According to the survey, eight in 10 U.S. consumers aged 16-54 believe NFTs are not hype. Even in these early days, 10 million Americans have already owned NFTs and 65 million are interested in doing so. Contrary to the headline-grabbing sales at the top of the market, the average NFT owner has a household income of $92,000. A role for brands While today’s marketplace may be dominated by digital art and collectibles, 92% of consumers who express interest in learning more about or purchasing an NFT see a future for brands. Of particular note, 40% want brands to help lead the way to the "phygital" world—creating NFTs connected to physical goods and rewards. Think exclusive or early access to products or experiences. Nike saw this application early, filing a patent in 2019 for CryptoKick. This allows buyers of its shoes to unlock a virtual twin that can be mashed up with other sneaker NFTs to create custom kicks. Community is key One in four consumers want NFTs to access an event or experience. And one in five want NFTs to access a club or community. With the ability to code into the blockchain, think of your NFT like a digital VIP access badge. Owners of the popular Deadfellaz NFTs are granted access to its private Discord server, additional NFT collectibles and real-life meet-ups. For artists and brands, this is the future of fandom. NFTs will become more inclusive We are at the top of building this next frontier. This gives brands a special responsibility and opportunity to shape its contours and values. Today, the marketplace is majority male (59%) and overwhelmingly white (66%). With NFTs rapidly going mainstream, this will not last. Brands that prioritize inclusion—not only in the consumers they target but also in the architects of their digital assets—could unlock their own advantages. Case in point: L'Oréal. Currently, women make up only 5% of NFT sales and just 16% of the NFT art market. L'Oréal Paris commissioned five female artists to create NFT art inspired by the shades of red in their lipstick. The Reds of Worth NFTs were auctioned in December. The artists retained 100% of the initial sales revenue. Leveraging the ability of NFTs to embed ownership rights in future sales, 50% of secondary market sales will be donated to L'Oréal's philanthropic initiative, Women of Worth. L'Oréal's recent trademark filings suggest the cosmetic company is expanding its investment in the digital world, with plans to create its own metaverse and online marketplace to buy, sell and trade virtual goods across several popular brands in its portfolio. Education unlocks opportunity The biggest barrier to NFTs going mainstream? Nearly 70% said they don’t know how to purchase an NFT or what to do once they own one. Brands that not only offer a compelling incentive—unique products and communities—but an easy-to-navigate NFT experience can help unlock the opportunity. Consumer as creative director As we continue to enter the world of Web3, consumers are demanding more agency over their own digital presence and a more active role in shaping what comes next. So, it should come as no surprise that three in four said they are interested in creating an NFT: That’s 125 million Americans. Sustainability matters, even digitally There are legitimate concerns relating to the environmental impact of the energy-intensive crypto mining and the vast data server farms needed to support the metaverse ecosystem. Brands must extend their sustainability commitments to this burgeoning digital world, embracing and supporting less carbon-intensive blockchain, renewable energy and other ongoing efforts to develop more environmentally friendly methods. Not only will the NFT industry continue to grow, but brands will also play a big role in the mainstreaming of digital assets. They should carry their values, their market objectives and their aspirations for customer relationships confidently into the phygital future. The Metaverse Can Be a Force for Good in the Real World