NFTs have a perception problem that won't go away
When your main selling point is Get Rich Quick, the product needs to live up to the promise.
Welcome to this week’s edition of The Dispash. Many thanks to those who sent comments after last week’s coffee shop analogy. For anybody who wants a follow up, Coffee Shop C shut its doors for good last week.
Onwards.
Mainstream adoption of cryptocurrencies and NFTs is dependent on perceptions and product
The world is rarely black and white. Marketing is rarely black and white, until you get to the end of the financial year balance sheet. The sensible answer to most marketing questions usually starts with “It depends.”
When it comes to NFTs, viewpoints are a lot less unequivocal. The majority of opinions in this space are either they’re the future of marketing or another tulip market.
My own view tends to lean towards the latter - or at the very least that NFTs are a very expensive tactical lever to pull that offer very little in the way of tactical returns - but there’s also two big issues that businesses that are betting big on NFTs need to consider if they haven’t already: perception and product.
The product problems aren’t wildly dissimilar from those in the video call software category.
Zoom had a good 2020 because many companies weren't set up for video meetings at scale and many individuals needed easy-to-use software to stay connected during lockdown, but the product itself wasn't particularly unique and was easy to replicate, so businesses figured out there were alternatives such as Google Meet or Teams that did what Zoom offered and a bit more, while individuals ceased to need a scalable video product once lockdowns were eased.
Similarly, Clubhouse had an exciting product but one that was easily copied, whereas TikTok succeeded because their product was both different and exciting and hard for competitors to easily replicate until TikTok was well established.
Cryptocurrencies, NFT businesses and exchanges operate on similar principles. With the right technology, anybody can launch their own token or even cryptocurrency. Brand recognition becomes even more important, hence a glut of Superbowl adverts this year.
The existential threat to crypto and NFTs
Web3's utopia is built on decentralisation but their biggest threat comes from established financial institutions, who can offer a point of difference such as security against losing money and integration with everyday financial products.
Meanwhile, Bored Ape Yacht Club may not produce particularly good art and cost more money than seems reasonable for a cartoon monkey, but they have a strong brand and a clear target audience.
BAYC may ultimately end up becoming an expensive trading game for very wealthy individuals, but that may also be all it needs to make money. Other lower entry NFT projects don't have the same luxury. BAYC offers entry to a perceived exclusive club, many other NFTs just offer rights to a jpeg.
The category itself is a mix of high complexity combined with very low barriers to entry. Scarcity - limited or single edition NFTs and limits to crypto coins in circulation - don't in themselves limit entry. Anybody can buy an NFT at the lower end of the market or open a wallet and purchase digital currency.
If the target market is anybody with disposable income then at some point, the only way an exchange or an NFT business will grow is to move beyond the brand beyond the segment marked 'crypto fanatics'.
In most cases, this probably depends on growing the category first, unless you're BAYC and become an NFT equivalent of a luxury fashion house.
Limited audience, limited interest
NFTs may have become Collins Dictionary's word of the year and spawned awkward conversations between Jimmy Fallon and Paris Hilton but they're not mainstream or common purchases yet.
Research from the Financial Times in January suggested just 360,000 individuals held NFTs, with 80% of the total value of all NFTs combined sitting with just 9% of owners. In contrast, a tie up between the NFL and Fortnite saw Epic Games shift 3.3m branded character skins in a month.
That disparity suggests there's a lot more people willing to buy virtual goods than those who are currently willing to buy an NFT. This may change but to do so NFTs will have to overcome what is fast becoming a major perception issue among some of their most obvious mainstream audiences for expansion.
As somebody who has spent close to 25 years poking around in internet subcultures, I've generally noticed that when you get sports fans and/or light gamers on board then mainstream adoption or adaptation usually follows.
Early days of forums aren't wildly dissimilar to Reddit or even Twitter. The mistrust both (large) subcultures felt towards mainstream media publications is now more, well, mainstream.
And yet both communities, in a large sense, appear to have serious misgivings around NFTs and crypto in general. Games publisher Square Enix ran into backlash after blockchain and NFT announcements. Crystal Palace's fanbase have protested against their club's decision to sign a partnership with fan token Socios.
These groups are often aggressively tribal in defending their club or favourite developers and tend to be early adopters. Their scepticism suggests there is a lot of work for the category to overcome, let alone individual brands.
Grift is not a sustainable recipe for growth
Even being charitable there are a lot of scams, unsavoury behaviour (pumping and dumping), and what could be best described as Ponzi-economics in the world of crypto and NFTs. That may not be true of all currencies and all NFTs, but the lack of regulation coupled with a steady stream of negative stories shape perception.
Web3 proponents may argue this is at best misguided and at worst a misrepresentation. Even if they’re right, this isn't really the point. Once a perception of scamming and grift is formed it can take a long time to undo that perception, true or otherwise. And this is an separate issue to the environmental impact.
That alone should make brands wary about jumping on the NFT and crypto bandwagon for the sake of showing up or being on-trend. Corona wasn't harmed by sharing the same name as the cause of a global pandemic because the average person could tell the two weren't related. If the beverage started minting NFTs that people lost money on, that's a much bigger problem for the brand's reputation.
How far a non-crypto brand wants to integrate itself into the world of non-fungible tokens is a mixture of strategy (should we do this?) and brand reputation (what's the worst that can happen?). It doesn't mean crypto and NFTs should be avoided by all brands, but it does limit their strategic and tactical application.
NFT executions that make a degree of sense
So Hennessy's NFT collaboration with Blockbar that allows the holder to own a very limited edition Hennessy-8 makes sense because the same people who would buy a limited edition cognac are the same people who would spend large amounts of money to buy entry to BAYC.
It also reinforces the exclusivity of Hennessy as a brand in a way that it would be possible for Corona or Pringles to replicate. The Blockbar concept of physical x crypto would work equally well without NFTs but NFTs are a logical extension.
Similarly, Nike's forays into the metaverse make sense because customising avatars is already A Thing and Nike trainers are already a status symbol. It's also telling that their virtual store sits inside Roblox, which has a large active global userbase and consciously doesn't position itself as a metaverse company.
So the questions that Nike would have asked before building in Roblox would have looked a lot like the questions Nike would have asked ahead of opening a new flagship bricks and mortar store in a major city.
Cryptocurrency, while not completely mainstream, probably has enough of a toehold to be part of the future, although the market and category will probably look different in the future due to regulation and established financial players entering the market, such as ANZ Bank’s recent stablecoin launch.
NFTs on the other hand still feel like a technological execution that is still looking for a use case. That may change, but as long as the current use case remains close to that of a get rich quick scheme, the product problem will continue to also be a perception problem.
Advertising earworms
Audio has been having a renaissance in marketing of late, with plenty of academics and experts such as Mark Ritson discussing sonic branding as a distinctive asset. I’ve often spent long periods of time working with creative agencies and production companies to hit the right tone for a piece of video. Sound Out recently conducted research around the psychology of music in advertising and discuss this in depth with psychologist Professor Daniel Mullensiefen. More of this please. LINK (via Wendy Moores).
The state of podcasting
I’ve not had the opportunity to read Edison’s 2022 Infinite Dial research, but their past reports have been invaluable when proposing or discarding podcasting for clients. LINK.
LinkedIn’s fake headshot problem
LinkedIn doesn’t get mentioned as much as Meta, Twitter or YouTube in terms of disinformation but it still has its own fake profile problem. It removed 15m fake profiles in the first half of 2021. The profiles NPR uncovered seemed to be used for lead gen rather than destabilising nation states. LINK.
How Starbucks lost its way
Growth isn’t always straightforward when you have a strong brand like Starbucks. what’s profitable in the short term may erode the brand in the long-term. Every brand needs to evolve to be in step with the market - the McDonalds saladification of a brand - but hole-in-the-wall with no barista interaction would appear to be the anthesis of Starbucks brand. As an aside, ordering via QR codes and apps in-store are much more unnecessarily complicated than a staff member taking your order. LINK (via James Whatley).
Medical care by algorithm
Healthcare has always got tech and data people excited as, by current standards, it’s somewhat inefficient and the payoffs could genuinely be life changing or even saving. But transferring theory to reality can be a lot harder due to regulations, testing and the general state of data. The healthcare focused PR agency I used to work for was talking about algorithms assisting in clinical decisions a decade ago, but even using tech to diagnose a condition like sepsis is fraught with difficulty. LINK.
Thanks for reading this far. Hopefully you’ve found it mildly diverting. Like what you’ve read? Forward it onto somebody and ask them to subscribe.
Playing us out this week: Koffee - West Indies. One of those genuinely uplifting tracks that instantly transports you to another part of the world. If Bob Marley has an heir apparent in 20202, it’s Koffee.