Many businesses and big brands have already jumped on the nonfungible token (NFT) bandwagon, including Nike, the National Basketball Association, Peps
Many businesses and big brands have already jumped on the nonfungible token (NFT) bandwagon, including Nike, the National Basketball Association, Pepsi and even Taco Bell. But are these just for the show, or are these NFTs creating value? Much like digital services have become essential for every business in and outside of the technology sector, I believe that tokens — and, specifically, NFTs — are likely to become equally crucial in the emerging Web3 economy for at least two reasons.
First, my view is that NFTs tokenize ideas at the atomistic level, creating rivalry and exclusivity around goods or services. Markets cannot form when goods and services are non-rival — when one person’s consumption does not trade off with another’s — or when they are non-excludable — when it is prohibitively expensive to gate access to a good or service with a price mechanism. NFTs, on the other hand, create rivalry and exclusivity by leveraging smart contracts on the blockchain that deliver NFTs to peoples’ digital wallets when they make a purchase.
Second, I also believe that organizations can use NFTs to efficiently attract and engage different tiers of customers each in their own unique way. Whereas traditional marketing involves selling goods and services at a discount, perhaps for a limited duration of time, NFTs allow brands to target specific customers and reward those who want to engage. For instance, perhaps a fashion brand decides to airdrop discount codes or special offerings that are not available anywhere else to NFT holders. Normally, that would be prohibitively expensive to do at scale, but NFTs provide a way.
Related: Why are major global brands experimenting with NFTs in the metaverse?
Building community
To date, however, most of the NFT applications have been among bigger brands — or at least, so it seems based on media coverage. But either way, smaller organizations and even independent business owners will benefit from NFTs in the years ahead if they invest the time and energy to understand how they work. In fact, just think about the types of businesses that are most likely to benefit from NFTs: It is precisely the smaller organizations that do not have as much of a marketing budget to implement large-scale campaigns and discounts that benefit from the reduction in cost that NFTs provide to target consumers and invite them into a community.
Forget thousands or hundreds of thousands of dollars that go toward buying email lists, creating sales funnels, and conducting surveys and market research. Understanding competition and knowing your consumer is always going to be important, but the landscape is fundamentally different when you think about reaching people on a blockchain based on their opting in and the ability to track what people are actually buying and engaging with in a transparent way.
That’s not to say marketing doesn’t matter. Marketing and visibility do matter insofar as consumers need to learn about the goods and services that are being offered. But the mechanism behind it all is changing — simply having a big budget is not going to have as much bang as a smaller organization or independent business owner who has a clear community of loyal customers. NFTs are simply a new technological mechanism for conveying rival and exclusive goods and services to people who value them — they are not a substitute for creating valuable goods and services in the first place.
Related: Web3 relies on participatory economics, and that is what is missing — Participation
Take, for instance, the positive effects of airdrops and governance tokens, which I’ve covered in Cointelegraph Magazine before, citing Gary Vaynerchuk and 3LAU. When used with intentionality and prudence, airdrops are a great way of rewarding early users and building a close community. Then, as momentum builds, the community grows and enters into a new phase.
Enhancing B2B services
Although it’s easy to see how NFTs can enhance the consumer experience, ranging from fashion to content creation, what about businesses that sell services to other businesses?
The principles are the same. Imagine, for example, a consultancy where businesses bid over time with different consultants by buying their NFTs. Then, consultant income would vary based on market demand and supply, providing stronger incentives for each person to carry their weight and add value in the process, as well as an opportunity for businesses to hire their preferred top talent.
The same could go for an institution of higher education where faculty produce NFTs of their content and can license it out to businesses as an additional source of revenue, decreasing the need for growing tuition. Such an approach would also encourage faculty to create content that actually engages with the demands of the marketplace, rather than just talking about them.
Beyond the outward-facing component, think about the impact that tokens could have on the internal labor market of an…
cointelegraph.com