Welcome back to In Media Res. I have been pretty slack with regular posts, the below post has been in the drafts for 6 months now! What are my excuses? Here's what I've been up to recently...
Job: Earlier this year I started a new role as the Head of Communications Strategy at DDB North America. It's a really exciting time to be part of a creative agency and focus on work that earns attention. I'm looking forward to sharing some campaigns that grab attention soon.
Reading: I've learned so much in the past 6 months on NFTs, the Metaverse and creator-economy dynamics. It's both inspiring but has me very cynical on current sentiment, as you'll see below. I'm looking forward to writing about all of these more regularly.
Fly Fishing: I started to learn the ins and outs of fly-fishing, and am seeing big parallels between the art of fly fishing and the art of management. I think I'll do a post on that when I learn more about fly fishing, and more about management.
Today I'm going to talk about NFTs, they’re becoming increasingly important in the world of media, brands and marketing, and I think it’s worth exploring what I believe is a ‘misbranding’ of NFTs. We’re going to specifically look at NFTs misguided launch moment, how NFTs aren't delivering on some of the problems we were promised they would solve and where I believe NFT's true value can be unlocked.
Let's talk about how to launch a new product.
A key challenge when launching a new product is establishing instant and clear understanding, with as large an audience as possible, of a product’s unique value.
One way brands achieve this is through cognitive shortcuts that simply demonstrate the value of a product via a specific use case. Impossible Meats did this with the Impossible Burger.
It would have been a difficult marketing task for Impossible to establish understanding of how their product was going to change the world, the science behind Impossible and the application of Impossible as a substitute to a wide range of meat dishes. Instead they simplified their message with a cognitive shortcut to help any consumer instantly understand their value: Impossible makes the best non-meat burger of all time. This is a convincing introduction to Impossible. Everyone knows what a burger is, and they can compare the taste of a 'real' meat burger to an Impossible burger to understand the magic of Impossible Meats. It’s a cognitive shortcut that delivers mass brand comprehension.
NFTs
New York Times has a good two line explainer on what NFTs are: "An NFT is an asset verified using blockchain technology, in which a network of computers records transactions and gives buyers proof of authenticity and ownership". Basically an NFT allows someone to have unique ownership of a digital asset, which motivates demand for digital assets and unlocks a wide range of applications from creation of unique pieces of content, digital interactions, community access and most visibly, art.
The NFT launch moment
NFTs are complex, the technology is hard to understand for the average audience. Instead of trying to get everyone to understand the ins and outs of blockchain transactions NFT’s emerged into the mainstream with a simple cognitive shortcut: NFT’s are a better way to buy art. However it was this simplified framing that delivered a miscasting of the NFT brand.
There were three key art world problems that NFTs were framed to solve:
Gatekeeping access to art
The fine art world is famously difficult to enter as a collector without contacts and money. Galleries regularly pre-assign works to significant collectors before a show opens. Many galleries won't even sell to a collector unless their collection is significant and comprised of particular artists.
Only a small % of arts value goes to the artist
Artists famously won’t receive the lion's share of their art sales. They receive 50% of the sale of their works, galleries receive the rest. Most critically they won't receive any profits made from subsequent sales and auctions of their works, where prices start to significantly increase.
Art value is controlled top down by auction houses and galleries
Powerful institutions have centralised control over the art world. Institutional auction houses like Christies amplify trends through controlled auctions of select art to influential buyers. Galleries like Gagosian can directly influence global art trends through their curation and exhibitions of certain artists. For more on this I highly recommend reading Sarah Thornton’s 7 days in the art world.
In theory NFTs could solve these problems
Gatekeeping access to art
Anyone can buy an NFT, there's no individual or group controlling access.
Only a small % of art value goes to the artist
Ideally NFT artists would get both direct profits from their first sale and a percentage of subsequent sales.
Art value is controlled top down by auction houses and galleries
NFT supply is by design de-centralized. There aren't large institutions controlling distribution, trends and access to NFTs. NFT collections emerge from fragmented corners of the internet.
However in reality, NFTs didn't solve these problems, but ended up creating a new set of problems instead
Gatekeeping access to art
While NFTs are technically open to all, they tend to benefit a new class of online elites over the masses. The most desired and valuable NFTs are also the hardest for regulars to have initial access to. This is because news of their release is not distributed to the general public. Exclusive Discord communities will discuss upcoming NFT releases with seasoned online creators, coders and community builders. Essentially if you aren't 'extremely online' it's very hard to be on the NFT front line.
Then there are the DAOs like Friends With Benefits. FWB described itself as: "A collective of unique individuals pushing for a bright future. A world in which prosperity is abundant and technology acts as a communal connective tissue. We believe in a web3 world, where data and payments are fluid and controlled by the creators. We believe in the pursuit of open knowledge for the greater good. The tools for connecting the dots are finally here."
In reality FWB is as exclusive a community as any high end art collectors group.
It costs 75FWB tokens to join their Discord, which at current value is an entry price of around $8,000, a whole $6,000 more than a Soho House membership. Not the most open pursuit of knowledge. Whilst the traditional art world is gatekept from most, NFTs are creating a new elite generation, one defined by online status, in-group lingo and crypto wealth.
Only a small % of art value goes to the artist
In theory artists receive 100% of the initial sale and 5-10% of the resale of their NFT. This is a very promising deal for artists, but it’s worth uncovering some realities in the NFT world.
Let’s look at initial sales:
The majority of NFT sales are under $300, so an artist might get 100% of the pie, but that pie is small.
There are also fees associated with NFT platforms that can greatly reduce profits, particularly from primary sales.
And finally, in a market where a jpeg of a rock can sell for $1.3M it can be hard to instill confidence in an artist to make a career off of their talent. Art is subjective, but high speculation makes it difficult for talent to win over buzz.
Art value is controlled top down by auction houses and galleries
The very same institutions that have outsized control over the art market have come in to capitalize on the emerging blue chip NFT world. Christies holds the record for the most expensive NFT sold at $69m and Gagosian was behind Damien Hirst’s NFT project, Currency, which picked up $25m in sales thus far.
The NFT market has also created outsized returns for whales with big wallets. When Steve Aoki is making millions trading NFTs and the average NFT artist makes less than $300 per piece it’s hard to be convinced that the NFT market is geared to support creators over collectors.
NFT art vs NFT technology
As you can probably tell by now, I'm a bit disappointed by the current state of NFTs. However when the technology behind NFTs are applied in interesting ways it can be incredibly exciting. Here are two examples:
Serenade
Serenade is a digital marketplace for NFTs created by musicians. You can buy limited edition artworks, songs, and a whole range of unique content directly from the bands you love. I like the platform because it allows for a more intimate relationship between fan and artist and delivers a rarity normally found with vinyl to the digital age. We are also living in a time where artists get paid $0.004 per stream on Spotify, platforms like Serenade that embrace NFTs give artists a new income stream in a bleak environment. Disclosure: My cousin is the founder of Serenade
Zed.Run
Zed.Run is a digital horse racing platform. You can purchase an NFT horse that is priced according to various characteristics such as breed, age, lineage and colour. On Zed.Run you can race your horse for ETH, breed, trade or sell NFT horses. Your NFT horse also changes in value over time depending on race performance. This is a great example of taking NFT technology and applying it in a dynamic fashion to create an engaging game that you have a lot of skin in. I also like that this is delivering the adrenalin rush of horse racing, without the animal cruelty.
How I buy NFTs
For all my pessimism on NFTs, I have made a few purchases, mainly as a way of educating myself on the ecosystem. Below are the filters I have used for NFT purchase, ironically these filters are very similar to how I approach art purchases, which I learned from a family friend and contemporary art collector - Danny Goldberg, you can read more of his approach here.
Is this something I personally like?
Your personal taste is more important than trends. If you buy something because everyone else is, eventually you'll grow tired of it. Purchase NFTs that you personally love, not ones that are gaining traction.
Value to you > Value as an investment
It's incredibly hard to predict the future value of art, and it’s similarly impossible to predict the future value of NFTs. This difficulty is magnified if you aren't tapped into Discord communities, exclusive DAOs and the right twitter people. If you purchase an NFT that has value to you, this value is sustained, regardless of future market worth.
Added layers of creativity
Just as decorative art with thin narratives are boring, NFT jpegs of cartoon apes and pixelated personas aren’t too inspiring, but there are interesting NFTs to be found. I recently bought a 'desert mini' which is a miniature watercolor created by an artist during her residency in Joshua Tree. With original purchase of the work I get a token that I can use to redeem a physical copy of the art work. This is a unique angle on NFT ownership that sets it apart from the crowd, and I get something I like up on my living room wall. For me it’s proof that beyond the hype, speculation and elitism, NFT technology can lead to beautiful and exciting experiences.