Brands are stumbling into the dark side of NFTs as the technology becomes more mainstream in marketing, and perhaps no case highlights the risks more than McDonald’s McRib NFT.

In November, McDonald’s paired the return of its famous McRib sandwich with its first NFT, offering 10 non-fungible token collectibles depicting a glowing GIF of the sandwich to fans who replied on Twitter. This month it was discovered that an anonymous user initiated a transaction to McDonald’s crypto-wallet address and encrypted a racist message within the metadata field, which read, “Ay yo [slur] gibsme sum of dat mcrib.”

The unfortunate message was only visible to someone if they searched through the code associated with McDonald's wallet, but it was amplified when another user came across it and shared it to Twitter.

There was no way to erase the message, because as McDonald’s and many other brands are finding out, NFT records are permanent. 

“Those who are familiar with this space will know that once the address for a crypto wallet (where NFTs are stored) is public, which McDonald’s address was before this incident occurred, anyone can initiate a transfer to that account,” a McDonald’s spokesperson said in an email statement. “Those transfers can include encrypted messages that are extremely difficult to regulate or trace. While there is so much excitement and hope for emerging spaces such as crypto, it is tremendously disappointing to see the platform used in this way.”

Now McDonald’s is rethinking how it approaches NFTs in its marketing, if it ever tries again.

“We will take appropriate action and will be carefully evaluating any future NFT programs,” the spokesperson said. “This bad actor is using the McDonald’s brand to promote a deplorable message that is wholly inconsistent with our values, which is unacceptable.”

Read more: A list of brands using NFTs 

Open and closed

The McRib incident was just one example of how brands—new to non-fungible tokens, NFT markets, blockchain ledgers and crypto wallets—can get burned. Although the crypto marketplace is designed to provide ultimate transparency by recording all the steps along the process, it is made murky by anonymous accounts. Of course, the NFT marketplace is not the first piece of technology to give marketers trouble when trying to navigate a new space. Brands have contended with social media trolls for years, and projects that encourage user participation often go awry in unforeseen ways. 

But, “any anonymity brings the potential for nefarious behavior,” said Luke Hurd, VMLY&R’s director of XD and an expert in the metaverse, NFTs and augmented reality. Like most advertising specialists, Hurd is working with brands to explain the skyrocketing interest in NFTs, which can be collected as simple digital pieces of art, or can be part of more sophisticated programs like building communities, managing loyalty rewards, creating smart contracts, and digitally certifying intellectual property.

“For the most part, I would say as far as a brand goes, most brands are doing this at a pretty easy level of entry,” Hurd said.

While crypto enthusiasts see NFTs as the future of the economy in the metaverse, where big-name brands like Nike, Adidas, Ralph Lauren and Gucci have introduced digital swag, detractors say the art is no more valuable than a GIF or JPEG, and that secondary markets, where NFTS are resold, are ripe for fraud.

Thanks to the permanent digital record of NFT transactions, which can be reviewed on marketplaces like OpenSea and Rarible, it is possible to look back on the brand NFT projects of the past year. Ad Age analyzed a few of the high-profile drops from brands, and the trail is filled with inside jokes, sluggish secondary markets, deflated values, and some unfortunate examples like the McRib NFT.

See Ad Age’s 2021 Year in Review here.

Many of the earliest brand NFT launches are languishing, even if the owners of them are doing their best to hype the value. Here is one prime example: The first Pringles NFT, titled “CryptoCrisp,” is currently for sale for 420.69 ETH, or $1.6 million based on the current value of Ethereum, from an NFT collector who goes by the handle CryptoCrisp #01. (NFT collectors are likely familiar with “420” and “69” in price tags—jokesters use “420” as the universal code for weed, while 69 is meant to represent sex.)

In March, the CryptoCrisp #01 account purchased the Pringles NFT for 37 cents. “I bought the very first CryptoCrisp. Check the Log. That makes it worth more, right? Buy it, you chicken. ;),” the collector said in a blurb on the NFT marketplace Rarible.

No one has jumped at the $1.6 million price tag, though; it has been listed since May. Ian Schafer, an entrepreneur, founder and former CEO of digital ad agency Deep Focus, could be one of the only people who made money on a Pringles NFT, when he bought one for $2 and quickly flipped it in March for .8 ETH, which was about $1,500.

Schafer was just playing around with what he thought might be a piece of brand history by buying the golden GIF of a glossy Pringles can. “I’m sure it did nothing for the Pringles brand,” Schafer said in a recent phone interview with Ad Age. Schafer said the McDonald’s example is the worst-case scenario, and shows the dangers of the marketplace, too. “Uncharted territory is not comfy territory for brands,” Schafer said.

Still, one of McDonald’s McRib NFTs could potentially fetch a high price. One of the 10 McRib collectibles appears on Rarible for 420.69 ETH. A collector who goes by the pseudonym BitcoinMike listed it for sale on Dec. 8. BitcoinMike appears to be a spoof of a Michael Scott character from “The Office,” who had an alter ego named Prison Mike. Bitcoin Mike’s online avatar is a photo of Prison Mike.

Meanwhile, a Taco Bell NFT called “Swivel Taco,” part of a series of NFTs from the food chain that were made in March and sold for about $2, is for sale for 100 ETH, or $376,362.

While the collectors have been swinging for high-value flips, the activity around most of them show that the market is not that hot for a Pringles GIF or digital taco.

Taco Bell and Pringles declined to comment for this story.

Budweiser's drop

Some brands, like Anheuser-Busch InBev, have had success with their first NFT drops. This month, Budweiser launched a Heritage Collection, which sold 1,936 NFTs that depicted Bud cans through the years. The collection sold out within an hour, raising close to $1 million, and there has been secondary market action for collectors to resell them.

“There are a lot of brands that are playing in this space, and you are seeing a lot failures,” said Richard Oppy, VP of global brands at AB InBev. “So, we went into this eyes wide open.”

AB InBev has been working with VaynerNFT, a division of the ad agency VaynerMedia, to test how NFTs fit into the brands’ marketing. Budweiser is trying to build a community of loyal consumers by creating perks for holders of the NFTs. The project came with risks, too, because Budweiser had to verify that any original purchasers were above the legal drinking age. Budweiser also built into the smart contracts affiliated with the NFTs that it would not collect a percentage of any resales of the tokens, which was partly to underscore that the promotion was not a cash grab, where the brand would reap a windfall from any Bud NFT bubble.

“There’s been a lot of transactions happening on the secondary marketplace,” said Spencer Gordon, VP of digital at Anheuser-Busch InBev.

One of the benefits of many NFT projects is that the creators keep a percentage of the resale value. Some of the Budweiser NFT cans are being listed on OpenSea’s marketplace for more than 13,000 ETH, which is close to $50 million.

While none appear to actually command that high a price for the resellers, some of the cans have sold for about $2,000.