Tacos for $187,336 and digital basketballs for $69,000 ... the crypto-bubble comes to marketing
A Taco Bell taco is on sale for more than $187,000, but it's not the kind of taco that one eats.
Taco Bell's "Swivel Taco" is a non-fungible token, or NFT, meaning it only exists in digital form, and it is currently priced at 100 Ethereum. "Swivel Taco" is one of five NFT artworks created by Taco Bell, making it one of the first brands to dip its toes into the growing digital collectibles market. Last week, Taco Bell sold its NFTs for .001 Ethereum, which is almost $2, but the benefit of an NFT is that the buyer can resell the item. "Swivel Taco" is currently listed for 100 Ethereum. No takers yet.
But Taco Bell’s digital taco is not even close to the most expensive item for sale. NFT-based artwork has sold for $69 million. Digital NFT trading cards called TopShot, from the National Basketball Association, can be valued close to $200,000. There are eclectic virtual characters called Cryptopunks that have sold for more than $10 million in recent days.
At this point, jumping into the world of NFTs, which were born out of the boom in cryptocurrency and enthusiasm around the blockchain, is like exploring the internet when AOL was still mailing CDs with 400 hours of free internet. It's highly likely that there is a bubble forming with many of these shocking big-money purchases, but there also is no doubt that NFTs, and the underlying technology, will help change the internet.
Who knows, this article could be its own valuable NFT some day.
Why brands care about NFTs?
Aside from the potential to create a super-valuable collectible, there are promotional and practical reasons for brands to embrace NFTs. For one, a NFT can’t be forged or copied, introducing a new level of security to online property. Brands could issue rewards, redemption certificates for physical products, digital goods, and media that can’t be pirated.
Brands are coming up with ways to build deeper promotional events through NFTs, says Tom Mizzone, CEO of Sweet, a NFT startup that works with brands and artists. “It creates an incremental revenue opportunity for brands, but there is also all kinds of fun, social engagement,” Mizzone says. “Fans love to collect these things. They keep them. They own them. The idea of getting that one [NFT] scan that’s uber-valuable, something that is really cool, like from a utility perspective with a brand. It really gamifies it.”
McDonald’s could put a QR code on the side of a Happy Meal that links customers to a virtual toy instead of a real-world toy. That would be similar to how McDonald’s put Pokémon trading cards in Happy Meals just last month. The physical cards became instant collectors’ items and they were being resold on eBay for hundreds and thousands of dollars.
NFTs also are transferrable in resale markets. When a fan sells the NFT, the creator or the brand gets a cut, too. The returns exist in perpetuity because NFTs are based on the blockchain, which is a digital ledger that records every transaction in the life of the virtual commodity.
The technology also is especially useful for brands that care about intellectual property, like movie and music studios. The studios and labels can distribute media online in the form of NFTs, and they retain some control over the content. Even if the value of some virtual collectibles never holds up, the NFT technology will have a part to play in the future of a more transparent and secure internet.
WTF is NFT?
NFT is basically a digital certificate of authenticity. It’s similar to taking a painting to an appraiser or a contract to a notary public, only it’s online. Any digital item, a JPEG, GIF, PNG, PDF, or anything that lives online, can be turned into a NFT. Tweets are being turned into NFTs. It’s a process known as “minting” or “tokenization” that typically uses the Ethereum blockchain as the underlying technology. Ethereum is a cryptocurrency like Bitcoin, and the blockchain is the digital ledger that records all activity around Ethereum—the mining, the ownership and transactions.
“You could actually publish digital collectibles on the blockchain and each one, an individual asset, is unique in and of itself,” Mizzone says.
What does Taco Bell have to do with NFTs?
Last week, Taco Bell created five pieces of digital art inspired by tacos. One was “Swivel Taco,” which is a GIF of a sketch of a taco. Another one was called “Transformative Taco,” a synthwave-esque rendering of a taco. Taco Bell turned the digital files into NFTs, and put the art for sale on an online marketplace called Rarible.
“At Taco Bell, we love pushing boundaries. Being one of the first brands to emerge in the NFT space was an exciting opportunity for our fans to own a digital piece of the brand they love,” said Nikki Lawson, chief global brand officer at Taco Bell, in an email. The NFTTacoBell collection sold out in 30 minutes.
To be clear, Taco Bell sold the taco art for .001 Ethereum, which is almost $2. But part of what makes NFTs collectible is that they can be resold, like a person selling their baseball card or art collections. NFTs also have a unique digital stamp, which means they can’t be forged. The technology allows the provenance to be tracked from buyer to buyer, so anytime one is resold, the original creator can get a piece of the sale.
In the case of “Transformative Taco,” Rarible’s marketplace shows that Taco Bell sold it for .001 Ethereum and the buyer resold it for 10 Ethereum, which is close to $20,000. The buyer at that price is only listed on Rarible by the name Blackstar, and the collector is currently looking to get 11 Ethereum to resell the artwork.
Why are they so valuable?
“It makes it very, very cool in the collector's mind,” Mizzone says. “Because for the first time, there is a true authenticated proof of ownership, right of ownership, and proof of scarcity.”
Think of any piece of fine art, a print or a collectible coin. One of the reasons they have any value, is there is a fandom that appreciates them and there is a limited quantity. There are comic books that only have, say, 10,000 copies, and books where the “first edition” is considered the most valuable. It’s the same with an NFT.
A digital file, turned into a NFT, can be stamped as one of 100 in a set, or one of 10 in a set. That’s what Sweet did recently with hip-hop artist Lil’ Pump, when they created five “rare” NFTs of the artist's jewelry, called “Esskeetit Diamond VVS,” which they listed for sale at $10,000. Also, there were two Lil’ Pump trading cards, one free with 500 copies, and one with 2,000 copies that cost $9.99 apiece.
To laypeople, the idea of owning a digital item that could cost thousands or millions of dollars, that might seem exorbitant. But the same bystanders might equally roll their eyes at any collectibles market. The sneakerhead movement, for example, has seen masses line up for “drops” of new kicks outside stores, and a pair of sneakers can also sell for thousands of dollars. Baseball cards have been trading for wild prices in recent months. Tom Brady, the National Football League quarterback and reigning Super Bowl champion, just had a rookie card sell for a record $1.32 million.
How can brands ride this?
“We’re looking for brands that want to digitally engage,” says Rikin Mantri, chief operating officer at Curio, a startup that creates NFTs and develops other technology to foster the ecosystem. “It’s just like when social came on, this is just a new avenue to want to do new fun interactive things.”
Curio most recently worked with Fremantle, the TV and movie production company. Curio and Fremantle developed NFTs for the Starz show “American Gods,” which were digital trading cards featuring the main characters. If fans collect all the characters in a set, they unlock rewards. For instance, Curio is thinking of ways to get NFT-holding fans early access to episodes or exclusive online talks. NFTs can come with video and audio files embedded, which makes them useful for sharing movies and songs.
An NFT can be tied to a real-world item, so the owner also gets to hold actual merchandise, or other perks. “The fine art drops are really cool, we’re fans of that model,” Sweet’s Mizzone says, “but we do more holistic campaigns where it’s a combination giveaway, maybe it’s a high-end piece bundled with physical pieces.”
What can publishers do with NFTs?
In the case of fans of Bleacher Report, the publisher used NFTs to boost its merchandising operation around the NBA All-Star Game. A recent NFT promotion came with a virtual collectible basketball and a real limited-edition basketball.
Bleacher Report produced its “BR Open Run,” which had four hip-hop artists squaring off in a two-on-two game. Bleacher Report typically creates jerseys and other apparel for fans to buy, but in this case the team designed NFT-based basketballs, and the most rare version came with rights to own a specially designed basketball in real life.
“Dropping an NFT as a digital product to compliment what we would do from a physical merchandise perspective usually, just made a lot of sense,” says Tyler Stewart, VP of brand and experience at Bleacher Report.
Bleacher Report made 600 “silver” NFT basketballs to be sold online at a set price, and 10 editions each of four specialty “gold” NFT basketballs that were sold in an auction, like most NFTs. The first of 10 “gold” basketballs designed for the rapper Two Chainz drew the highest price—$69,000.
“We had a lot of fun seeing the auction go back and forth,” Stewart says.
The collectible NFT is now in the possession of an owner online, that owner can resell it or keep it, and ultimately the person in control of the NFT on May 1 is the one who can redeem the physical basketball based on the NFT.
Also, Bleacher Report and any brand or creator that gets in the NFT market, gets a piece of any subsequent sales. That way, the NFT is more valuable than a physical collectible to the creator.
“That’s one of the crazy things about NFTs and digital blockchain, as a whole, is that the original owner is still known and intact,” Stewart says. “And for any resale there is a percentage of that that goes back to the creators. So if any of our NFTs are sold on the resale marketplace after the fact BR will technically get a piece of that sale.”