Depending on who you ask, non-fungible tokens (NFTs) are either an innovation graveyard or the future of marketing. The technology has attracted an even mix of evangelists and harsh critics (see Mark Ritson calling NFTs "idiot magnets"), and triggered fiery debates in the marketing press and on social media.
The divisiveness of NFTs was evident in a recent Spot Survey we conducted of our readers who work in the advertising, marketing, technology or communications industry. One-third of respondents said they believe that NFTs are a "fad" and "passing trend" for brands, one-third were unsure about their longevity, and the final third said they believe the technology will stand the test of time.
Tessa Conrad, head of innovation at TBWA Asia, explains that NFTs are divisive because they’re new and represent change. "Change can be unsettling to some people," she says.
"Innovation and technology have challenged and changed the nature of working for decades, and if you track the adaption of these new approaches, there has always been a shake-up," she adds. "It’s extreme at first, then subsides over time as the aberrant becomes the normal, and then something even newer pops up, taking the heat off the topic at the time. For NFTs specifically, it’s probably more extreme because they’re still relatively 'niche' but with a very vocal community. With that, comes easy conflict and a chance to get quick rises out of people."
While new technology always draws criticism until its value has been substantiated, marketing technology experts believe NFTs are particularly misunderstood.
More than digital art
NFTs are often misunderstood as merely representing digital art, since this has comprised the majority of brand experiments so far. "I can understand the resentment towards this use case," says Tuomas Peltoniemi, APAC EVP and managing director of RGA. "In reality though, NFTs can represent so much more for brands—from access tokens to unlocking utility, to airdrops of exclusive digital goods and much more, enabled by smart contracts. Many of these NFT use cases have real customer value beyond the secondary markets for digital art."
The vast majority of respondents in our survey said they believed there are other applications of NFTs that are relevant to brands beyond digital art. Examples cited by respondents included wearables for metaverse characters, authentication of luxury products, supply chain transparency, raising money for social impact, access keys for ticketing events, and linking a digital and real-world experience together. One respondent said they believe the 'art' side of NFTs "is a full-blown bubble" and the majority of current projects "will be worthless in a few years' time".
Conrad says looking at NFTs as just digital art "dismisses all that exists around them".
"Just like physical arts, if you narrow your perspective to just the art, you’re limiting your experience and not seeing or celebrating the communities, galleries, museums, popups, mass production, limited edition, periphery businesses to name a few. Because a lot of art is physical, this shouldn’t prevent you from discovering all the touchpoints that surround it. The same is true about NFTs. Sure, they can be 'just art', but virtual. But they also are at the center of DAOs, gaming, music, events and more," Conrad says.
Laurent Thevenet, head of creative technology at Publicis Groupe APAC and MEA, says the industry should be looking beyond art to tap the mechanics associated with NFTs, such as uniqueness and traceability, to deliver more advanced experiences. "Loyalty, ticketing, limited physical collections are some of the areas in which the NFT technology could be used," he said.
"We may even have to let go of the NFT term as it's complex in itself and not understood by all from a mechanic perspective," Thevenet suggests.
In our survey, most respondents stated unique, collectible assets as the biggest benefit of NFTs. This is followed by giving artists greater control. There were other benefits cited by those in the ad industry. One respondent noted that a creative use of smart contracts allows for a multitude of uses such as access to limited edition events or goods.
Some cited NFTs potential to create positive change, such as “ownership in a worthy, worthwhile, promising business”, or “facilitating real, substantial conversations around addressing important issues while fostering collective efforts towards making a real tangible change without having to rely on slow and largely hierarchical politics”.
For brands, the biggest benefits cited were opening up new revenue streams, and rewarding and incentivising customers. Several respondents cited the ability to build communities with NFTs and use unique experiences to drive exclusivity. While some see NFTs as a channel to increase brand awareness, others believe the audience currently interested in NFTs and the metaverse is too small to increase awareness.
The complexity of Web3 technologies opens them up to misdirected criticism and poorly executed campaigns, experts believe.
"Getting into the Web3 world is a bit more technical, a bit more complicated and a bit more niche so far compared to the big waves of the commercial internet, the rise of social media and ecommerce, for example. The barriers to experiment and experience Web3 are definitely higher, so there will naturally be brands and companies who are better suited to be early movers in this space," says RGA's Peltoniemi.
The industry can be quick to criticise brands who experiment with new technology without trying it out for themselves. For example, only half of respondents to our NFT survey said they had personally, or as part of a team, minted an NFT.
Thevenet suggests it’s very difficult to do relevant work in a new space "without deeply understanding the mechanics that govern it".
"NFTs are much more than just uploaded images and only people who have participated in the ecosystem can understand them," he says. "For agencies and clients who want to do meaningful work with NFTs, my advice would be to try these technologies and truly understand what makes NFTs unique, instead of jumping onto the bandwagon."
However, Thevenet believes the capabilities required to enter the NFT universe are much less taxing than with something like artificial intelligence, for example, that requires advanced software and data engineering.
"The first usage of NFTs being largely art, the creatives from our industry jumped on it much earlier than with previous innovations. It required less engineering knowledge. In a way, it has equalised the level between the traditional and digital agencies in regards to that specific innovation. It felt like everyone was on the starting line at the same time for once," he says.
From chasing 'fads' to long-term innovation planning
TBWA's Conrad agrees that brands and agencies get into trouble "when there’s no proper research and understanding matched with a true creative idea". A large part of the problem is referring to new technology as "fads" instead of considering technology as a long-term evolution that requires a clear strategy, Conrad believes.
"It can be easy to jump on the bandwagon and get a quick hit of fame through the press—but it’s also easy to make a misstep that way or miss out on the deeper undercurrent that is moving some things from being 'trends' to becoming 'norms'. Fads are fun to participate in and with research and an idea, it’s okay to dip in a toe," Conrad says. "But when it comes to innovation it’s important to have a long-term plan around what you’re innovating for: Is it for your customer experience? Your products? Your employees? To future-proof your offering? To get your share of PR? Or any of the other endless KPIs that you might set in your sights? With a long-term plan, you can thoughtfully pick which 'fads' to jump in on, and how to assess whether your involvement with the fad can be more long-term.
"Also, we should stop referring to most things in tech as 'fads'. A fad is very often a snapshot of a cultural moment—like bell-bottom jeans or a certain hairstyle. Technology is something that can evolve forever and is harder to just 'go away'."
Peltoniemi believes there's no downside to experimentation "if the experiment is well thought through".
"Whatever we create has to be based on principles of commercial creativity that fits a particular company, category or brand. It’s then up to us as an industry to ensure we are creating experiments that are inspired, inclusive, equitable, accessible and ethical," he says.
Thevenet suggests the most innovative brands systematise experimentation as part of a larger engagement strategy. "If we look at innovative brands like Nike, they would have these internal units focused on testing new possibilities early on, both in terms of marketing and product experiences," he says. "These units would constitute only a fraction of the larger engagement with customers out there for the brand. Innovation and potentially chasing fads, but learning along the way, should be systematised. It is like a licence to experiment (e.g. with xx% of the budget or twice a year) which would inform and modernise the larger brand strategy."
In our survey, more than half of respondents said brands should limit their investment in NFTs to 0-5% of their marketing budget. A third would push the investment to 5-10%, and only a handful to 10-20%.
Some believe NFTs are only relevant to certain categories of brands—chiefly gaming and fashion brands—but others believe the vast use cases mean most brands can benefit from the technology.
Bad actors contribute to lack of trust
The relative newness of NFTs has attracted brands who believe in an early-mover advantage, but this is also the biggest risk of NFTs. Marketplaces are unregulated, opening them up to tax evasion, fraud and scams.
The biggest concerns our readers have about NFTs are lack of regulation and unproven value for brands, according to the survey. Respondents specifically cited “volatility” and “unpredictability” of the market as concerns. One respondent said “scams are rampant” and some regulation or protections are needed to build confidence in the technology and industry. Another said “a flush out of overpriced illiquid NFTs will be required before this is a sustainable marketplace”.
Thevenet explains: "Whenever some new technology comes up, there will be good and bad usage of it. While artists were sincerely trying to use NFTs at first to promote and sell their art, copycats and scammers rapidly recognised the potential and started creating an incredible amount of NFT collections with bad art, no roadmap and no other objective than to make a lot of money for themselves. These scam projects have made it extremely difficult for honest artists and projects to emerge on open platforms like OpenSea and others due to the sheer amount of bad work there."
The scalability of NFTs was also called into question by one survey respondent: "I just can't imagine for now how this is scalable, from an ecological perspective, and a cost perspective (as NFT is used now) to your average consumer who don't have (much) disposable income, which let's be honest make up the vast majority of consumers."
RGA's Peltoniemi suggests that Web3 has limited scale for now because it "suffers from a user experience problem". But without brand investments, the technology won't evolve.
"There are exceptions as always but most of the experiences in the entire ecosystem are borderline unusable from a customer experience perspective," he says. "These can be complicated concepts to understand and the margin for error is huge in some cases, and therefore very prone for scams and costly mistakes. We need to innovate in the Web3 usability and experience for audiences to reach scale."
Conrad suggests the industry will have a greater trust of NFTs when more utility cases arise around the technology. "The industry must be more focused on learning as much as possible about the new, and being a part of the vetting, the experimenting and the creating phase."
In addition, the sudden surge in NFT creation has triggered a vast ecological impact. Only a handful of respondents in our survey cited environmental impact and plagiarism as a major concern—which experts attribute again to a lack of understanding around the damaging impact of technology.
"Perhaps the lack of concern around NFTs’ impact on sustainability highlights the lack of understanding around how crypto and other ventures of the metaverse are impacting the environment," Conrad says. "It’s hard to be concerned if you don’t fully understand it, and it can still be tricky to wrap your head around it."
Thevenet goes on: "I do feel that the sustainability of a technology like Ethereum was rarely taken into account by early adopters. Sustainability should always be in our minds, no matter what we are doing. As a technologist, knowing how dirty tech can be for the planet, I always have sustainable tech solutions in mind. This can go from optimising images for a website to prevent too much network traffic and data center usage to using alternative blockchains like Tezos that are much more sustainable for NFTs."
The majority of respondents in our survey believe brands should invest in NFTs now or in the next sx to 12 months. Several believe brands should wait to invest only when they can be assured of the ROI, while a handful believe they should wait until they can offset the emissions of the technology.