Last Friday, Arizona Iced Tea used it’s Twitter feed to announce to the world they had acquired an NFT from the popular Bored Ape Yacht Club (BAYC) collection.
The Bored Ape Yacht Club Collection is a series of 10,000 randomly generated profile pictures of, you guessed it, bored apes. The NFT series has surged in value since the spring, and is arguably one of the premiere NFT assets available today.
Not to be outdone, three days later, Visa announced via their @Visanews Twitter handle they had acquired Crypto Punk #7610 for nearly $150,000. The Crypto Punk collection of 10,000 randomly generated characters is considered one of the very first NFTs on the Ethereum blockchain, and set the precedent for many generative NFT projects like BAYC.
Seeing legacy consumer facing brands like Arizona Iced Tea and Visa publicly support some of the most popular NFT collections on the market is certainly a bellwether for both Web3 and for legacy Web2 brands. But how will these decisions be received by consumers, and what is the ultimate purpose that these brands are trying to achieve in their very public NFT acquisitions?
The Market Effect
So, what happens when legacy brands join a bunch of NFT degens? What reaction will all the .jpg lovers out there have to large, deep pocketed consumer brands sweeping up the floor of popular NFT collections?
Well, it seems like, regardless of what the public sentiment may be, the NFT market reacted with a buying frenzy.
In the hour after Visa’s announcement, Crypto Punks saw over $20M of trading activity, and by the end of the day, there had been over $100M in trading activity. Also, while Visa paid a little under $150k for their Crypto Punk, as of writing, the cheapest punk is now over $250k.
Crypto Punks as an asset, it should be noted, could be the new trend for large organizations looking to diversify their holdings. Tesla made waves when it announced that they had bought $1.5B in Bitcoin back in February, but the valuation of Crypto Punks has actually outperformed both Bitcoin and Ethereum this year.
Meanwhile, while the “‘Zonies” were being welcomed aboard the Bored Ape Yacht Club, popular Youtuber and boxer, Logan Paul, announced on Twitter his purchase of two rare NFTs from the Bored Ape Yacht Club Collection for over $105,000 each, and the floor of the Bored Ape Yacht Club collection saw a similar bounce to what the Crypto Punks experienced after the Visa news. Just a few days later, Logan ponied up another $600K+ for the Bumblebee K4N1, a rare piece of the 0N1 Force. Similarly, this news drove a buying frenzy in that community as well.
Less than one month ago, the floor of the Bored Ape Yacht Club collection was at 10ETH, and today the floor is over 25ETH.
Things move fast in NFT-land.
On Brand?
It’s fairly straightforward to see that these NFT acquisitions by Arizona Iced Tea and Visa will most likely perform very well as far as investments go, but what is the overall play here for the brands themselves?
When Arizona Iced Tea announced their acquisition, they teased they had “some huge things planned”, and referenced a surprise reveal in the first issue of the Bored Apes Comic project. The Bored Apes Comic project is not affiliated in any way with the actual Bored Apes collection, and is an example of what can emerge from the generous Bored Apes ‘terms of use’ that gives a commercial license to owners to use the images as they see fit.
We can anticipate that the surprise reveal in the comic will probably be an ape consuming Arizona Iced Tea. Is this the first instance of product placement within an NFT? We’re not sure. However, Arizona Iced Tea may need to be more careful in how it appropriates the branding of this popular NFT series.
Responding to the announcement, Yuga Labs, the creators of the Bored Ape Yacht Club, tweeted support, but also told outlets that Arizona Iced Tea had crossed the line in using the actual Bored Ape Yacht Club branding in their tweet. The commercial license applies to the images of the apes themselves, but not to the branding or brand name of “Bored Ape Yacht Club”.
The narrative behind Visa’s announcement took a more historical perspective, saying that they were adding their Crypto Punk to their existing collection of “historic commerce artifacts” like paper credit cards, the zip zap machine, and more. In addition to their announcement, Visa also published a 17 page report called “NFTs: Engaging Today’s Fans in Crypto and Commerce” as well as an interview with Cuy Sheffield, their Head of Crypto. While the report is designed as a primer on NFTs and tailored for Web 2 investors, the interview provides a high level view of how this 60 year old company views the growing NFT landscape.
In addition to providing basic insights for Web2 investors as to what NFTs are and why an investor may want to own one, Sheffield claims that the main reason that Visa acquired their Crypto Punk was because, “First and foremost, we wanted to learn”.
To purchase their Crypto Punk, Visa partnered with Anchorage Digital, a digital asset platform that caters to institutional investors. Anchorage positions itself as a platform that gives “institutions easy and efficient access to crypto custody, trading, financing, staking, and governance services, all from within the world's most advanced and proven security architecture.”
Now that Visa has their first NFT acquisition under their belt with the help of Anchorage, Sheffield shared that they feel more confident in helping their partners navigate this growing space.
What role Visa can play in the NFT space is still to be determined, but in addition to learning and signaling support for the broader NFT industry, Sheffield did mention that they are thinking deeply about “how we can apply our expertise in enabling seamless and secure digital payments to make NFT-commerce accessible and useable for buyers and sellers.”
Schelling Points
As Chris Cantino points out, “Businesses spent the last decade dialing in their online strategy—relying on digital ads, content creation, and influencers. But old models are facing increasing cost pressures and competition. Brands are struggling to own and retain their audiences. To be authentic. “
As consumers awake to the fact that the value they generate on Web2 social platforms is increasingly tough to capture, they’re keen to switch to decentralized incentive based communities.
This is evidenced by the aforementioned NFT communities in Crypto Punks and BAYC. They certainly won’t be the last ones either. Over the weekend we saw the dramatic rise of the 0N1 Force, with many other communities coming online every week.
Some will be avatar based, some will be interest based. Some will be worth millions, some will be worth hundreds. Some will fail, some will succeed. But the overall trend indicates this is the direction consumers are going.
Which leaves us with an interesting Schelling Point. Communities are active, and brands want in. But where do these communities actually want to meet brands? And how can brands organically provide value to these communities? Arizona Iced Tea led the way, but the community backlash shows that there is much to be desired.
As with all things tech, it’ll first be unbundled solutions. Partnerships, collections, licensing, purchasing, access, etc. There will be some incredibly creative executions within this time period. And then we’ll move to the bundled phase. Brands, if not already, will become synonymous with their communities. Ownership communities will become some of the most noteworthy brands on earth. And that’s when the real fun begins.
A Coming Wave?
One week in Web3 is starting to feel like a full year in what we’ve been used to with Web2, and the announcements from Visa and Arizona Iced Tea are surely a sign of things to come from legacy brands looking to bridge the gap between Web2 and Web3.
As more and more brands consider the unique ways that they can wade into the NFT waters, it’s worth considering the tactics and narrative around these strategies. It’s all too common to see brands try and hop on trends, only to come across as cringe worthy. So, hopefully brands leverage the unique perspectives and expertise that can be found in places like JUMP, Forefront, Seed Club, and others.
Author credits
This essay was written by Chad Huggins.
Thank you to Jeremy Olken and Domingo Bette Encour for reviewing the essay’s draft and contributing additional insights.
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