Dirk Jehmlich, Senior Advisor at strategy consultancy diffferent
Maria Meermeier, Director Banking, Financial Services & Insurance
Who would have thought that a simple “Merry Christmas” text message could be worth €107,000. That was the outcome of an auction held – appropriately – just a few days before Christmas. It was the world’s very first SMS, sent in 1992. The text message was auctioned as a non-fungible token (NFT), i.e. a unique, non-replaceable and non-interchangeable digital object.
Sceptics regard it as just the latest gimmick, but digital works of art and collectibles created as NFTs are already achieving record prices in the international art market. A standout transaction took place around a year ago, when auction house Christie’s sold a collage by digital artist Beeple for some $69 million. As an NFT, it was an exclusive digital asset. What may sound like the latest boundless hype, and look like over-the-top speculation in the global art world, actually has implications far beyond this highly specialised niche market.
The potential of NFTs is huge – for companies, for brands, for marketing and for new business models. There are opportunities in the B2B sector, around customer retention, as an incentive for communities and in the digital licensing industry. Estimates put the value of the global market at more than a trillion dollars over the next ten years.
But let’s start by looking at how NFTs work. This blockchain-based technology creates something that seems completely at odds with the digital world: exclusivity, and thus scarcity. Taken to the logical extreme, this means a totally unique item where the artificially created uniqueness refers to the possession of a digital certificate of authenticity and ownership, rather than to the object itself. In turn, scarcity typically creates desire and value, which gives rise to new markets and growth opportunities for businesses.
Almost anything that can be represented digitally can also be turned into an NFT: images, videos, audio, rights, trademarks, text, domains, data, digital twins, consumer goods, even securities and real estate. They can all be collected, sold, auctioned, gifted, displayed or licensed. Accordingly, the applications for NFTs in the long term are almost limitless. The transition from vision to reality makes them of great interest to marketers.
More and more companies are already using NFT technology in a variety of ways. Nike has patented crypto-shoes, for example, enabling it to create certificates of authenticity for sneakers in a bid to combat pirate copies. Louis Vuitton and Dolce & Gabbana are launching fashion collections as NFTs. Porsche and the König art gallery have teamed up to present digital art on giant LED screens in Times Square, New York, with the artworks then being available to Porsche fans as NFTs. Coca-Cola, meanwhile, offered snowballs and coke bottles as NFTs over the Christmas period. Samsung is even bringing out a smart TV with an integrated NFT purchase function. And going back to Nike, the sports goods group recently snapped up an NFT maker and the first NFT lifestyle brand in the shape of creative studio RTFKT.
Sceptics will nonetheless point out that most people probably still regard NFTs as pretty exotic, that the usability of NFTs isn’t intuitive yet, that most consumers are not crypto-literate and that there are too many different platforms.
Such objections are no reason to ignore NFTs, though. Innovations should never be measured against the KPIs of existing, optimised systems. Those who wait will miss out. It’s thus vital that corporate leaders, managers and heads of marketing develop an understanding of NFT technology so they can leverage it to add value before their competitors do.
NFTs have the power to transform the operating model behind communications, CRM and sales, and also how these functions are executed. They can support new and innovative business models. NFTs are trendsetters that will influence the zeitgeist. They are already revolutionising the art scene, which is always a seismograph for future developments, and creating a new aesthetic. In the future, NFTs will also shape how we see advertising and communication.
But NFTs can also do much more – they can be a force for good. The seller of the historic “Merry Christmas” text message, now preserved as a unique piece of digital history in the form of an NFT, was mobile telecoms group Vodafone, which donated the proceeds from the auction to the United Nations High Commissioner for Refugees (UNHCR).
NFTs can support new and innovative business models. They are trendsetters that will influence the zeitgeist.
Dirk JehmlichSenior Advisor Innovation der Strategieberatung diffferent
Here are my five key takeaways:
- NFTs are exclusive digital assets. Exclusivity means scarcity: scarcity creates value and thus new markets and growth opportunities for businesses.
- Like any other innovation, NFTs will be overvalued in the short term and their long-term impact underestimated. NFTs and crypto are where artificial intelligence (AI) and big data were five years ago.
- For big-name brands with strong fan communities, NFTs offer huge opportunities for growth in the context of merchandise, digital licensing and customer engagement.
- NFTs are shaping a new aesthetic and creating new perceptions of value and value creation.
- NFT technology is still young, it lacks the usability required by the mass market and it will take some time to realise the associated growth opportunities. Importantly, that gives businesses the time they need to prepare for the exciting opportunities ahead.