The NFT landscape is rapidly developing and there is barely a day that goes by where there is not a major brand launching a new NFT project or a platform announcing a new NFT integration. Some recent highlights include Disney announcing a new ‘Golden Moments’ NFT series through VeVe, Nike filing for ‘virtual goods’ trade marks, Twitter developing a NFT profile picture authentication tool, and Coinbase rolling out its own NFT marketplace.
With big brands using NFTs for marketing initiatives, social media giants exploring integrations, and celebrities and sports stars showing off their Bored Ape Yacht Club NFTs on their social media accounts, it’s clear that the technology is beginning to reach mainstream audiences.
The likelihood is that the average consumer will first hear of NFTs through a brand that they follow. The corollary is that brands are going to play an educational role and will need to take care in how they market and describe the NFT drops they are pursuing. Explaining what an NFT is can be challenging; and is not helped by its clunky full name, Non-Fungible Token. To demonstrate why it is difficult to explain what they are, consider that the following are all examples of NFTs that are currently available:
- A profile picture / avatar from a limited 10,000 item collection.
- A ticket to a music concert.
- The title to a real-world diamond.
- A plot of land in a virtual Metaverse.
- A virtual hat, handbag or other apparel.
- A one-of-a-kind piece of digital art.
- A video-game.
- A membership token to a DAO or community.
- A contractual right to feature on an artist’s next song.
- A tweet.
- Ownership naming rights to a real-world bull.
The application for NFTs is almost limitless. That is because the NFT is simply a token, or a record of a transaction that is entered on a blockchain. It represents and refers to a separate real-world or digital asset, but (except in rare circumstances), the NFT is not the asset itself.
Unfortunately, this distinction is not commonly understood. The prolific and reductive use of the term ‘NFT’ leads many to be confused by what it is and what they are getting when they buy it. For example, there have been numerous instances where people have asked, in relation to digital art NFTs, whether they are buying the copyright to the artwork, and some have even asked if they are buying the ‘pixels’ to the image represented by the NFT. We have considered these issues in previous articles, but you can see the problem; some people are paying extraordinary sums of money for NFTs on secondary markets without fully appreciating what they are purchasing.
Right now the term ‘NFT’ holds a lot of marketing power and brands are keen to take full advantage. However, as more innovative use cases become apparent, it is going to be incumbent on brands to be very clear with consumers on what is being offered. Clear marketing copy, careful selection of terminology and easy-to-read terms and conditions will be key to achieving this. Advertising rules and consumer protection regulations demand transparency and accuracy, both of which are going to be critical for brands to avoid their NFT project backfiring.