Acting as certificates of authenticity on a public blockchain network, non-fungible tokens (NFTs) have revolutionised the concept of ownership by providing a secure and immutable record of digital assets. Their market has been growing steadily and they now offer opportunities for various industries. Vitor Lima and Marc Oberhauser highlight the opportunities and challenges of using NFTs as a marketing tool, deriving four insights from the football industry’s pioneering marketing initiatives.
In March 2021, a digital piece of art called Everydays: The First 5000 Days was sold as a non-fungible token (NFT) for a staggering $69 million. This marked the beginning of a global NFT market, whose value reached $15.7 billion in 2021 and was expected to keep growing at 34 per cent a year until 2028.
NFTs, which are certificates of authenticity on a public blockchain network, have revolutionised the concept of ownership by providing a secure and immutable record of digital assets. Managed through smart contracts, which is a pre-defined agreement with conditions on what, how, when, and by whom actions can be done, NFTs offer unique opportunities for various industries, especially marketing-driven ones.
Despite their acceptance in the arts, broadcasting, and sports industries, NFTs are only now beginning to attract the attention of marketing managers, who see increasing opportunities for many industries. However, companies are unsure about how to approach this new technology and may miss out on valuable brand-building opportunities. This failure to benefit from NFTs is not only related to firms’ internal lack of knowledge but also to their external stakeholders. For instance, 90 per cent of the Japanese population, 83 per cent of Germans, and 79 per cent of British citizens do not know what an NFT is.
Poor understanding
In addition, a recent survey showed that a lack of understanding of NFTs is the second most important reason why people do not invest in them. This is followed by the high inherent risk of losing money. Lastly, critical voices have pointed to the fact that NFTs are highly energy-intensive and thus detrimental to the environment, while not providing a larger societal value. Thus, while providing unprecedented opportunities, before using NFTs as a marketing tool firms will need to address NFTs’ legitimisation issues.
Sports, as an institution, intuitively followed the hype around NFTs and football as an “industry”, in particular, has been quite successful making the promise a reality. We looked at this far-advanced case and identified four ways these issues can be addressed:
Solution 1: educational content
Even though NFT was recognised as the 2021 Word of the Year, some sceptics consider it a passing fad, while a large ratio of society simply doesn’t know what an NFT is and how it works. To overcome legitimisation challenges due to a lack of knowledge, marketing managers should invest in educational strategies.
These strategies need to make NFTs and their functionality transparent. Internal stakeholders such as employees and external ones such as consumers (fans) need to be informed about the value NFTs create for them. One way to do it is through branded content explaining what NFTs are, how they work, and why they are relevant to the business (becoming, for instance, a new line of revenue) and consumers (fans) (providing, say, a unique souvenir from football clubs).
Solution 2: collectibles
The association of NFTs with cryptocurrencies and their volatile market dynamics make them a risky marketing resource. If the hype diminishes, the financial value dissipates, leading to fan frustration. Football clubs’ managers emphasise the need for solid investments rather than speculative ones like NFTs, citing cases like Paul Pogba’s involvement in a failed crypto scheme. The uncertain nature of NFTs presents challenges from the perspective of fasn and institutions, with limited knowledge and regulatory absence hindering their use in marketing campaigns.
Framing NFTs as collectibles, such as an NFT Panini sticker album, rather than as financial assets, and detaching them from the volatility of the speculative market, could reduce their inherent risk. For instance, traditional Brazilian club Santos launched an NFT marketing campaign called “Santos of the World” in celebration of its 110th anniversary offering exclusive NFTs related to its rich club history.
Solution 3: influencer marketing
Players like Lionel Messi and Neymar Jr. have already embraced NFTs, contributing to their framing as the future of art collecting. The emotional connection between fans, players, and clubs influences managerial decisions to work with NFTs, as they offer a unique source of income and enhance brand perception.
Football players are playing a crucial role in legitimising NFTs as marketing tools for their clubs. They serve as “agents of legitimacy” (Scott, 2014) and act as brand influencers from a marketing management perspective. To leverage these dynamics, marketing managers should consider investing in influencer marketing strategies to strengthen the positive associations between football clubs and their players. This approach aims to enhance fan interest and increase the likelihood of success in future initiatives.
Solution 4: NFT 2.0
Today, hardly any product or technology remains unquestioned for its environmental and societal impact. NFTs are subject to much criticism, particularly due to their high energy consumption and not-so-clear societal value. Managers drawing on NFTs to create unique and especially novel brand experiences need to think beyond their current scope, aim for a reduction of the environmental harm and create additional social value through them. These NFTs 2.0, which go beyond the monetary value and potential profitability for the consumer, are more likely to receive broad societal legitimisation.
“The major challenge to NFT legitimisation and adoption in business and beyond seems not to be technological but sociocultural”
For better or for worse, NFTs seem to be here for the long haul. Their major legitimisation and adoption challenge, in business and beyond, seems not to be technological but sociocultural. All actors, including internal and external stakeholders, need more information about what NFTs are and how their technology can be used to create social value beyond a highly energy-intensive Panini sticker album.
As many critiques highlight, we find ourselves in the rare situation of having a chance to look at a harmful technology before it is deeply embedded in societal systems and simply say: should we?
- This blog post is based on NFTs as a marketing resource: Lessons from the football industry, part of ESCP Business School’s New technologies and the future of individuals, organisations, and society impact paper series.
- The post represents the views of its author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
- Featured image provided by Shutterstock.
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