Are Brands Misreading Metaverse Marketing?

In April last year, the launch of BAYC Bored Ape Yacht Club detonated the entire NFT (non-fungible token) market. NFT began to become a new thing that everyone was talking about, but few people could explain clearly.

Coupled with the popularity of "Metaverse" and "Web3.0" in recent years, NFT naturally has a certain bubble, but we can also see that many brands are actively exploring NFT-related issues. NFT may be able to bring more value to brand management.

Previously, a large number of media in the industry have reviewed brands’ NFT marketing cases, such as LV integrating NFT into games, Burberry creating NFT virtual peripherals, Pizza Hut releasing NFT pizza collections, etc. There is also a call in the industry that “everything can be NFT”. But it is worth noting that the vast majority of the cases discussed by the industry come from overseas markets.

There are still many gaps in how to combine NFT and marketing and implement it in the Chinese market. There are likely to be huge differences in the development paths of NFT marketing in China and overseas.

It can be found that in addition to platform companies such as Alibaba, Tencent, and JD.com, the brand companies that have truly taken the lead in exploring NFT marketing in the domestic market include not only traditional multinational brands such as Oreo and McDonald's, but also a large number of local brands such as Li Ning, Amul, BYD, and Xtep. In terms of the depth of NFT marketing practice, local brands have even gone further than multinational brands, and are not limited to the release of digital collections.

For example, in the first half of this year, NFT marketing represented by the sportswear industry has exploded:

• In January this year, ANTA and Tmall jointly released digital collections of ice and snow with the theme of the Winter Olympics, and built the ANTA Digital Museum using VR and other technologies;
• In March this year, Xtep released an NFT digital collection called 160X-Metaverse at a new product launch conference, and built an official Metaverse mall, announcing that it would become the first sports fashion brand to enter the Metaverse.
• Just this April, Li Ning launched the Bored Ape Trendy Sports Club. Li Ning purchased the Bored Ape #4102 avatar and incorporated its image into its clothing products and communication materials.

It is worth noting that the cross-border marketing between Li Ning and Boring Ape deeply integrates NFT with products, allowing Boring Ape to truly integrate with product sales, rather than stopping at the release of "digital collectibles". This move may open up greater imagination space for NFT marketing.

Image courtesy of Li Ning

If NFT is the future direction of digital marketing for brands, then Chinese local brands may be able to achieve first-mover advantage. But the first thing we need to ask is why multinational brands have only dabbled in NFT marketing in China? Why do many foreign NFT gameplays not seem to be reused in the domestic market?

At the same time, we might as well further explore what is the use of NFT marketing? Is NFT just a temporary gimmick, or does it have long-term internal logic? Can NFT become an important variable in changing digital marketing?

1. Different NFT models at home and abroad bring different marketing values

Discussions about NFT at home and abroad are often not in the same context, so we cannot copy the foreign NFT marketing model. From the final perspective, the development of NFT at home and abroad is likely to show two completely different paths.

Simply put, most overseas NFT trading platforms are built on decentralized public chains (such as Ethereum). The so-called public chain means that users can enter and exit freely, which leads to at least two results:

1. In the decentralized public chain NFT system, users have real ownership after purchasing NFT;
2. After last year's development, the overseas NFT market is dominated by secondary transactions. The market has gradually matured and has a head effect, with obvious financial attributes.

Image from Essence Securities

But in the domestic market, most NFT trading platforms are based on centralized "alliance chains" (such as Ant Chain). The so-called "alliance chain" is actually a "private chain" recognized by the alliance participants. The entry and exit of users actually need to be reviewed by the "alliance chain" administrator. This also leads to the following results:

1. After purchasing NFT, users do not have full ownership, but rather a right to use, which is essentially still subject to the constraints of the platform managers;
2. NFT places more emphasis on attributes such as collection and aesthetics. The circulation of NFT in the secondary market is restricted, the issuance of NFT becomes more important, and NFT has a clear tendency to de-financialize.

It can be found that there are essential differences in the current NFT operating models at home and abroad, which is largely due to the guidance of national policies. The financialization of NFT is likely to breed illegal activities such as money laundering, and it also has a certain impact on the existing financial system. Therefore, if the national policy orientation remains unchanged, the future domestic NFT development model is likely to have logical differences from overseas.

In fact, domestic platforms now rarely use the term "NFT", but instead use the more compliant name "digital collectibles".

For overseas markets, the decentralized blockchain technology behind NFT is its main attraction. When this no longer exists, NFT's attractiveness to brands declines sharply.

The centralized nature of domestic NFT works and the circulation constraints in the secondary market have resulted in NFT not having the dissemination effect of continuous circulation and diffusion. At the same time, it is necessary to build or rely on a related "alliance chain" platform, which not only has the characteristics of high investment and high risk, but may also ultimately present results that are no different from conventional joint champions in practice. This may also be a major reason why multinational companies have not yet actively tried NFT marketing in the Chinese market.

Therefore, many brands may be confused. Apart from releasing digital collections to gain attention, what can NFT marketing bring after the marketing? If NFT cannot be circulated and traded, does it have any marketing value just relying on users’ collection and appreciation and personal spontaneous display?

2. In addition to digital collectibles, what value can NFT bring to marketing?

As a brand, we need to try to change our thinking and explore the Chinese model of NFT marketing.

A more centralized NFT model can aggregate user data within the brand. The brand can connect directly with users through NFT and have the opportunity to conduct more refined user operations. The NFT platform system may eventually become the direction of digital upgrades for the CRM system.

Shiqu once pointed out in "4 Marketing Dividend Opportunities in the Next 15 Months" that the " Metaverse Marketing Three-Piece Set" is: brand virtual people, brand NFTs, and brand metaverse space. Virtual people are the upgraded version of brand social media accounts, NFT is the upgraded version of the new membership system, and the metaverse space is the upgraded version of the Campaign Site, which was originally a product of the PC era. Coupled with the interactive connection between the three, marketing will have a new look in the future metaverse era.

Specifically, NFT marketing has at least the following application scenarios:

• Provide users with exclusive gifts, coupons, and membership benefits;
• Form users' sense of brand participation and identity, and NFT works become "social currency" displayed by users;
• Through the linkage between NFT works and physical products, a matrix and premium are formed;
• Carrying out cross-border marketing with leading NFT projects is equivalent to leveraging IP;
• Through the issuance of NFTs, we can test and collect user feedback to feed back into the product development system;
• Reward user contributions through NFT, forming a community creation economy under the NFT points system;
• …

If we analyze from the perspective of brand digital upgrade, we can find that NFT and "Metaverse" are not marketing gimmicks, but have internal logical support for their long-term development. However, a large number of brands may not yet realize their strategic significance in the Chinese market.

Judging from the current market trends, mature sportswear brands such as Li Ning, Anta, and Xtep have a large user base, and their products have certain fashion-leading attributes. At the same time, sports themselves also have a clear path to promote virtual reality, making them the first field to take a bite of the "metaverse" cake. As the benefits of "metaverse" marketing continue to spread, various consumer categories may quickly enter "metaverse" marketing in the future.

Of course, the "metaverse" itself is also a long-term and gradual process of realization, which requires a large number of virtual reality-related industrial supporting facilities. Now, governments in many places are already promoting the "metaverse" industry layout, and Shanghai will also directly include the "metaverse" in the 14th Five-Year Plan.

The practice of "Metaverse" involves the overall digital transformation of the enterprise. Therefore, we recommend that brands avoid a betting mentality while actively trying "Metaverse" marketing, and control risks and allocate budgets more reasonably.

3. With the help of NFT marketing, brands usher in a new round of IP opportunities?

"Bored Ape" is obviously no longer just a series of NFT works, but has become a cultural IP, which can be seen from the release of Li Ning's "Bored Ape Trendy Sports Club". It is with the blessing of the IP effect that the price of "Boring Ape" in the secondary market can rise sharply.

According to the statistics of the cumulative transaction volume of NFT projects on the Cryptoslam platform, it can be found that overseas NFT transactions have already had an obvious head effect ("Bored Ape" ranks third in the figure below), and the head NFT projects have obviously become IPs, and their status is not expected to change in the short term. So the question is, what far-reaching impact do NFTs like “Bored Ape” have on the IP incubation model? Are there new IP opportunities that can be captured by brands?

Image via Cryptoslam

Let's first briefly analyze the IP path of "Boring Ape". In addition to the first-mover advantage in time and the attractive image, the following two points may be more important:

1. The rights and responsibilities clause states that the user actually owns the ownership and all intellectual property rights, which means that after the purchaser (owner) authorizes external commercial use, he can obtain copyright fee income, which is extremely rare in previous NFT projects. The free flow of intellectual property rights allows owners to become authors, satisfying the users’ interests in active dissemination;
2. The "Boring Ape" project is indeed constantly operating and updating, and has tried some innovative operating methods. It seems to be a relatively solid and stable project, which is valuable in the blockchain field where "leek cutting" is frequent. Therefore, it has won the recognition of many senior users.

As for the spread of the message through Twitter influencers and celebrity effects, it was more of a result of the above reasons, which ultimately led to the popularity of "Bored Ape" on social networks.

It can be found that in the NFT marketing of Li Ning and "Bored Ape" mentioned at the beginning of this article, the reason why Li Ning can directly apply the purchased "Bored Ape" NFT image to product prints and materials is that "Bored Ape" has opened up all intellectual property rights, and Li Ning can use and redevelop it at will without asking the author for authorization again. In fact, in addition to Li Ning, companies such as Greenland and Beurer have recently attempted IP marketing by purchasing NFT works of "Bored Ape".

The picture comes from the public account Greenland G Premium Club

The circulation of this intellectual property right has greatly accelerated the application and promotion of NFT works, reduced IP cooperation costs, improved IP cooperation efficiency, and is also expected to bring more IP marketing space for brands.

On the one hand, the creator of "Bored Ape" directly converts the long-term licensing income of intellectual property into one-time sales income; on the other hand, the creator of "Bored Ape" can also continuously create new Bored Ape images to enhance the overall value of the IP. It can be said that in this environment of intellectual property circulation, the logic of IP incubation is also significantly different from the traditional model.

With the help of more brand IP cooperation, the IP value of "Bored Ape" may be further magnified in the future. Cooperation with IP projects such as "Bored Ape" may become an effective means of brand NFT marketing.

At the same time, we can expect that as a global IP, "Bored Ape" may also be able to help companies spread their brand value in overseas markets. For example, the cooperation between Li Ning and "Boring Ape" has received a good response in the "cryptocurrency circles" at home and abroad, allowing more overseas users to pay attention to the national trend value of Li Ning.

If we look to the future, there may be more projects similar to "Bored Ape" with free circulation of intellectual property rights. Although these emerging projects are not expected to achieve the mass influence of "Bored Ape", they may penetrate into specific circles. These emerging projects can also become the focus of brand NFT IP marketing.

4. In the context of the Metaverse, how do companies build their own IP?

As far as the current situation is concerned, the free flow of intellectual property rights is rare in NFT projects, which also leads to the popularity of the "Bored Ape" IP to a certain extent due to its scarcity. When similar projects appear in batches in the future, it is still unknown whether they can replicate the popularity of "Bored Ape".

But now let’s take a look at other popular NFT projects and try to explore whether brand companies can use NFT and metaverse-related tools to build their own metaverse IP in the new IP paradigm.

In the above-mentioned NFT list compiled by Cryptoslam, the first-ranked "Axie Infinity" is an NFT game, the second-ranked "Cryptopunks" is a veteran blockchain project, and the third-ranked "Bored Ape". Perhaps worthy of a little attention is the sixth-ranked "NBA Top Shot", which is an NFT card collection game officially authorized by the NBA.

Image from NBA Top Shot

The "NBA Top Shot" cards are equivalent to derivatives of the NBA brand and can be understood as the "NFT digital figures" of its players. On the one hand, it amplifies the original IP effect of the NBA and expands its circle; on the other hand, it finds more IP monetization methods for the NBA. At the same time, according to Nielsen data, the average age of NBA viewers is as high as 43 years old, and "NBA Top Shot" also has the effect of rejuvenating the brand.

Looking back, due to the segmentation of the "alliance chain" of major platforms and the restrictions on secondary market transactions, the domestic NFT market is expected to have a lower probability of producing IPs and less influence than overseas. It may be difficult to create purely original IP projects such as "Bored Ape", but there may be opportunities to further expand brand IP through projects like "NBA Top Shot" and realize the expansion of brand value in the "metaverse" scenario.

Compared with third-party IP incubators, the quality of the brand lies in its ability to more closely bind NFT projects with its own business and to adopt richer combinations to enhance the brand's own IP value. For example, in addition to NFT works, brands can also interact with users through virtual digital people and connect real products with NFT works.

In other words, through the combination of "virtual digital people + NFT + metaverse space", coupled with long-term and continuous brand operations, corporate brands may (compared with third-party institutions) have a better chance of becoming the top IP in the domestic NFT field.

The IP logic behind this is that virtual digital people, as interactive images of IP, become the basis for amplifying brand influence, while NFT can serve as a community key and monetization mechanism, as a channel for IP community and commercialization, and the metaverse space as an interactive scene carries various brand interactions in the digital age.

It can be found that the IP incubation model of "virtual digital human + NFT + metaverse space" is more efficient than the traditional "Disney-style" IP creation. However, it is not difficult to foresee that the IP incubation model of "virtual digital human + NFT" will face more intense competition in the future, so the first-mover advantage may become more important.

In the short term, there is no obvious top IP in the domestic NFT market yet, and this may be a major opportunity for companies that are actively deploying "Metaverse" marketing. In the long term, embracing the "Metaverse" can be seen as the direction of brand digital transformation, and it will also be the only way for future brand development.