Non-fungible tokens (NFTs) have taken the world by storm with over $25 billion in sales volume in 20211 and $37 billion in less than 6 months in 20222. While the exponential number of use cases and growth of NFTs are exciting, you may still wonder exactly what an NFT is.
An NFT is a digital asset, such as art, collectibles or even event tickets. This data typically includes the owner, origin, chain of custody and some kind of digital item (digital image, art, identification, etc). All of this data is stored — or “tokenized” — on the blockchain in the form of the NFT. Simply put, an NFT is a tokenization of value.
The NFT space has evolved to include tokenized land and items in virtual worlds and NFTs as a medium to grant access or utility to engaged customers. Traditional brands are now waking up to the movement and looking to capitalize on NFTs, but there is a much bigger picture: the evolution of the internet toward web3, a decentralized internet structure with interoperable platforms that innovators and investors are currently working toward. With seemingly endless opportunities, it is important to go beyond the hype. Leaders in this space need sustainable NFT strategies that can deliver benefits today and set them up for long-term growth into web3.
As this technology is still relatively new and constantly evolving, there is not yet a playbook for entering the NFT space. Nor should there be. Every company should have their own unique approach to participating in this market aligning with the uniqueness of their corporate strategy.
We have developed a framework for evaluating NFT projects, based on our work with our clients’ NFT projects, discussions with developers and an active presence in the web3 community. We have found that every successful NFT project will do at least one of these three things:
Not every campaign needs to aim for the middle of the diagram to be successful, but brands can apply this framework to evaluate how NFTs can integrate with their existing strategies and support long-term goals. The value of an NFT strategy comes from building a foundation for the future, not from the initial, temporary hype it creates. Successful companies in this space should look beyond immediate revenue opportunities and toward a strategy that enables organic growth, long-term engagement and authentic connection with customers.
We have seen successful companies approach their NFT strategies by first building alignment on their goals, audience and assets before designing an NFT. We suggest considering the following questions:
Why does your brand want to use web3 and NFTs? Does it support your larger, organizational strategy or achieve a near-term goal? Your approach, priorities, and end products will change based on what you are hoping to achieve. For example, the growth of your latest action-figure line has plateaued and you need a new way to engage customers and regain early excitement.
Who do you want to reach: your most engaged customers, brand new customers, or some combination? How much education/support will your audience need to engage with the NFT? Think about your target audience and how your strategy will impact existing and prospective customer experiences. For example, a publication that wants to build a community around their most loyal subscribers could launch an NFT that gives unlimited access to the publication, as well as other access perks.
What assets do you already have available? Are they good candidates for tokenization? How much are you willing to collaborate with your customers? For example, you may have a piece of art, a character or other content suitable for tokenization, and others that, for strategic or legal reasons, shouldn’t be NFTs. Carefully consider the boundaries you set for your intellectual property.
How can you leverage NFTs to achieve your goals? Do you have personnel with the right skillset to operate in this space effectively and securely? Once you have defined your strategy, we suggest gathering the right components that will help you achieve your NFT goals.
Building a sustainable NFT strategy in a fast-changing environment can be difficult. Strategies that worked a month ago may not work today or in the future. The most successful companies in the long run will have built robust and adaptive strategies that can work in the current market and have a place in the foundational world of web3 yet to come. Building the foundation today can set you up to play in the market of tomorrow.
While understanding web3 may seem daunting, there are resources and subject matter specialists that brands can leverage to become confident web3 participants. PwC’s global community of solvers works to help you navigate this unique space. Our team has been on the ground with the web3 community, contributing to discussions, gathering insights, and building the projects that power our clients’ tomorrow.
1 "NFT sales hit $25 billion in 2021, but growth shows signs of slowing,” Reuters, January 11, 2022, accessed via Factiva, June 2, 2022
2 Locke, Taylor, “The NFT market is probably not as down as you think it is,” Fortune, May 5, 2022, accessed via Factiva, June 2, 2022.