4 min read.Updated: 07 Nov 2021, 08:36 PM ISTMEGAN GRAHAM, The Wall Street Journal
Brands are using nonfungible tokens to explore new strategies and engage new audiences
State Farm Mutual Automobile Insurance Co. rolled out an augmented-reality treasure hunt last week targeting football fans, the latest company to use nonfungible tokens as a way to reach potential customers with a new medium.
In the State Farm quest, fans can use mobile phones to search college campuses and other locations for more than a million virtual footballs that may contain prizes, including NFTs to keep or sell. NFTs are vouchers of authenticity for digital assets that can be traded and tracked indefinitely with blockchain technology.
Interest in NFTs is exploding among collectors, investors and speculators, generating $10.67 billion in trading volume in the third quarter of this year, up 704% from the second quarter, according to digital analytics firm DappRadar. There have been a number of headline-grabbing NFT deals, including the sale of a digital image by an artist in March for $69.3 million through Christie’s auction house.
Some marketers are experimenting with NFTs. Last week, fashion retailer American Eagle Outfitter, Inc. put a collection of 120 NFTs up for sale at $1 each, and fast-food chain McDonald’s Corp. began a sweepstakes giveaway of 10 McRib-themed NFTs. Brands including Campbell’s, Pizza Hut, Taco Bell, Charmin and Pringles have also launched NFT-related promotions this year.
Last month, skin-care and cosmetics maker Clinique Laboratories LLC, part of global beauty brand Estee Lauder Cos., invited consumers to enter contests to win one of three NFTs inspired by its products.
“We started to see consumers shift into the NFT space. And for us, we just really wanted to explore," said Roxanne Iyer, Clinique’s vice president of global consumer engagement.
Clinique plans to continue investing in the area, Ms. Iyer added. “All of the things that we are able to work with the consumer on in the physical world is something that we are thinking about potentially in the digital world as well," she said.
But NFTs face criticism for the amount of energy used to authenticate them and their transactions. These tokens usually are bought with cryptocurrencies, which likewise consume high amounts of electricity and produce carbon emissions.
The environmental impact of many NFTs may be at odds with sustainability pledges many brands have made, said Mike Proulx, research director at Forrester Research Inc., in an email. “This could result in consumer backlash of brands that purport to be green."
NFTs have also been called a fad, and, as marketers have moved in, the value of owning a brand’s virtual slice of pizza or virtual football may not be obvious to many consumers, despite a certificate of authenticity.
“Brands that are getting into the NFT space have headwinds to contend with," Proulx said. “Blockchains, cryptocurrency, and digital wallets are still foreign territories to the everyday consumer…Plus, legal ambiguity exists on whether NFTs grant ‘ownership’ of the actual digital asset or simply the token associated with the asset."
NFT advocates say the digital assets could play a role in future virtual platforms.
Interpublic Group of Cos. digital ad firm R/GA in London, for example, is working with brands to help create virtual stores in metaverse platforms, including one that will launch next month for British clothing brand Vollebak on the virtual platform Decentraland. The store’s digital merchandise can be bought and worn in the digital environment and are affixed with NFTs.
“These NFTs become assets, digital artifacts that you can then bring into your kind of virtual worlds that you’re exploring, living in, playing in," said Tiffany Rolfe, R/GA’s global chief creative officer.
Brands also are exploring linking NFTs to the real world. Clinique’s NFT sweepstakes, for instance, promised winners a selection of the beauty brand’s physical products for the next decade. American Eagle’s NFTs come with woven patches with a corresponding image and a gift card.
“Over the past few months, many of the successful projects have had that element of utility really underpinning the value," said Avery Akkineni, president of consulting firm VaynerNFT, a division of communications company VaynerX that worked with American Eagle on its NFT promotion.
Many brands dabbling in NFTs are doing so hoping to earn media coverage, but they should be taking a longer view, Ms. Akkineni said. Brands could give owners of their NFTs the ability to get early access to merchandise, enter conferences, or even to vote on certain company matters, she said.
“I do think that the collectible market is a niche use case for NFTs. It’s one that is resonating right now, and I think will continue to resonate," Ms. Akkineni said. “But it’s not ultimately a game-changing opportunity."
Some consumers may feel more invested in a brand, both emotionally and financially, if they own its NFTs, said Craig Elimeliah, executive creative director at WPP advertising agency VMLY&R. Owning NFTs is like investing in “cultural stock," he said.
“It’s kind of like you have skin in the game, right?" Mr. Elimeliah added. “If this thing goes up, you might make a lot of money."
For State Farm, the NFT treasure hunt was a way of getting in front of those under the age of 40 years and pursuing its broader project of using technology to pull consumers closer, said Alyson Griffin, the company’s head of marketing.
“It’s around being able to continuously tell our story to that person over time," she said.
This story has been published from a wire agency feed without modifications to the text
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