[Thoughts #55] The Beginning of the End of PFP NFTs?
[Thoughts #55] The Beginning of the End of PFP NFTs?
What does this clickbait title mean?! What's next?
It’s the beginning of the end for PFP NFTs.
^pfp = profile pic
Alright, alright. Let me clarify before I get cancelled by the Web3 community I hold so near and dear to my heart.
It’s the beginning of the end for (Web3 native) PFP NFTs (for long term success, unless it’s already a top tier established brand/project, a member pass, related to gaming/art/music/DAO, related to a large Web2 brand, doing something truly innovative and creative, a bull market resumes, or degens overwhelm logic).
Can we all agree now? :) That’s not as good of a title as the simplified version, huh? So let’s peel the layers of this onion a bit more.
But before we start…
Dammit TPan you always do this.
Yes, context is important folks.
This is a generalized statement based on observations and trends I’ve come across. I don’t have the time nor resources to comb across every exception to the rule, and I’m making generalized points.
I will happily be wrong. It’s good to have strong opinions, loosely held. If PFP NFTs have a second coming, I’d love to see what that might look like and I’ll join in on the fun.
Not everything I mention in this post will be directly related to PFP NFTs. It’d be good to understand how and what the ‘flavor of the week’ is evolving to and what might take over. Pattern recognition is key. Early pattern recognition is major key 🔑 (shoutout DJ Khaled, IYKYK lol).
Ok? Let’s dive in.
What does it mean to be the ‘beginning of the end’ for PFP NFTs?
For anyone that follows the NFT space, we’ve seen practically every type of PFP NFT. Every animal, every marketing tactic, every partnership giveaway under the sun. I’m not saying there isn’t room for innovation (eg: Subway Rats has done some interesting stuff as a relatively unknown project), but we’ve seen all the easy and basic stuff.
Hell, let’s take a stab in the dark since I’m writing this piece live. I’m going to look on Twitter for a ‘Badger’ NFT project. I haven’t come across one personally, but I would wager there’s one out there.
Well…here we are. And that’s just the top of the search results. There’s more.
I don’t think I need to beat a dead horse (should I search for horse NFT projects now? Dammit), we get the point.
We’re in a bear (another animal?!) market. It’s pretty hard to argue against that. I don’t care what the White House says, or some specific metric from the Bureau of Labor Statistics. We’re in one.
The supply/demand of these PFP NFT projects has a material delta in this environment. Too much supply, too little demand.
There’s nothing unique about a vast majority of these projects. Similar websites, similar Twitter strategies, similar Discord strategies, similar hype-building strategies, etc.
Reminds me a bit of this during COVID 😉
So which PFP NFT projects are succeeding despite these odds?
NFT Projects that have grown into companies and brands: Your usual suspects — Yuga (Bored Apes, Mutants, Cryptopunks, Meebits, Otherside), Doodles, Cool Cats, Azuki, World of Women, RTFKT, Moonbirds. These NFT brands (they’re more than some dinky ‘project’) have a moat around the points I mentioned above:
They have the runway and resources to survive the bear market
There is consistent demand for limited supply. Even if it’s Gen 2, 3, 4, or a separate project under the umbrella brand (eg: Yuga’s Otherside, Doodles’ Genesis Boxes)
These projects have innovated and inspired new best practices for the broader NFT and consumer Web3 space.
Is it possible that any or all of them might fail? Yes.
Is it possible that Amazon, Apple, Faceb- Meta, or Netflix might fail? Yes.
IMO, worst case for the leading NFT brands is that if they do ‘fail’, they’ll be acquired by or merged with other Web3. Or Web2 consumer brands.
Some recent examples of successful projects in this market:
Goblintown (unique art, unique play on culture, unique activations that surprise and delight)
Moon Runners (unique lore)
God Hates NFTees (unique play on culture, also Sandbox acquired several 🤔)
Time will tell if they hold long term potential to be more than a meme. But there’s something there beyond a PFP NFT with a vanilla roadmap. In fact, the above projects intentionally don’t have a roadmap.
What’d you say about Web2?
Let’s go through the longer version of my initial statement again.
“It’s the beginning of the end for (Web3 native) PFP NFTs (for long term success, unless it’s already a top tier established brand/project, a member pass, related to gaming/art/music/DAO, related to a large Web2 brand, doing something truly innovative and creative, a bull market resumes, or degens overwhelm logic).”
I predict that PFP NFTs from large Web2 brands will explode onto the scene. Who knows when, but that’s not the point (Starbucks mentioned later this year). Here’s an example:
Most of us are aware that this is Elsa from Frozen, an IP owned by Disney. This movie has spawned a sequel (and maybe Frozen 3 on the way), TV shows, sooooo many toys and collectibles, and even theme park rides at Disney Land and Disney World.
Now imagine Frozen NFTs, whether it’s generative versions of Elsa, Anna, or Olaf. Or other types of Frozen digital collectibles that grant special access or benefits.
Once Disney, Sanrio, McDonald’s, (insert major Web2 consumer brand) descend onto the populace with their NFTs digital collectibles, they’re going to suck the air out of the room filled with goldfish attention spans.
McDonald’s doing virtual concerts with some big artists that Gen Z/Gen Alpha loves? Pretty sure we know what’s next…
This is a good thing for general mainstream adoption of NFTs, but will be an ominous sign for most of the small and mid-tier PFP NFT projects if they’re still around at that point.
Will they die off? Maybe, maybe not.
Will their chances of being the next breakthrough Web3 native NFT brand be reduced? Drastically.
I guess Elsa’s smile in the photo above is more 😈 than 😇
So what’s next?
No idea. However, here are some trends I’m observing:
Passes: These have become more popular particularly in art. Sorta like having a subscription for art. Can you imagine that in the TradArt space? Pretty cool. Some examples:
GODA (Gallery of Digital Assets)
Noble Cards, wrote about them last week. They incorporated some pretty cool Growth/Marketing mechanics as well.
Venice 99’ by Manic an up and coming digital artist. This one’s fun because I bought one of his art pieces a few months ago and shortly after he airdropped an art pass token.
By holding this token, Manic airdrops more of his work as a form of a ‘thank you’ to his early supporters every now and then. Fun stuff!
The pass model is popular among alpha groups and other small communities:
Degenz Access Pass - An alpha group of sorts that also has art airdrops (both founders are ex-Wall Street traders and one of them is also an artist!)
Metaverse HQ - Another alpha group. Can confirm the alpha is worth the price, though I was fortunate enough as one of the early members that was able to claim it for free.
Proof Pass - One of these exclusive passes (89 ETH floor) is almost worth a Bored Ape (92 ETH). This is from the company that created Moonbirds.
Some others that also incorporate a pass concept. Too early to tell if they’ll be successful though:
Caffeinated Lions: A cafe/venue in Brooklyn that grants holders access to promotional use of NFT screens, event space rental, and discounts on purchases.
Metamakers: Building the first decentralized furniture brand.
The House of Insomnia: Exclusive fashion drops from Japan.
Note: I’m a holder/plan to be a holder of the above 3, but as mentioned who knows what will happen 🤷
SaaS (B2B): Ah yes, the unsexy (but more profitable) relative of B2C. I’ve had many great conversations with entrepreneurs and builders in this part of the world. Some areas I’m excited about:
Communication: Who’s going to be the Hubspot of Web3? Who’s going to build a Web3 version of Discord?
Martech (marketing tech): Brings me back to my User Acquisition days. The Wallet ID is the new identifier. Who’s going to build infrastructure to market and acquire users based on what’s in a user’s wallet? Who’s going to find the right balance of privacy vs. user growth and build the tools to support that? Who’s going to connect Web2 and Web3 identifiers in a way that’s easy for any marketer to understand?
Analytics Tools: Who’s going to build the Web3 tools with a defensible moat vs. Google Analytics or Tableau?
Many spaces that are more established but with plenty of opportunity still: Marketplace platforms, fiat payment tools, creator tools.
Gaming and Music: These two spaces have been building for some time and I believe will be large onboarders for new people into Web3. They’re a large part of culture and need to focus on fun and quality of entertainment respectively, first. And I believe they are.
For gaming: If the tech, tokenomics, and ability to own your digital assets are there, but the game isn’t fun, consumers won’t want to play. Then it doesn’t really matter.
For music: If the tech, tokenomics, and ability to support your favorite artists is there, but the music isn’t good, consumers won’t want to listen. Then it doesn’t really matter.
That’s why it will take more time for these respective spaces to come out with the right games and content, respectively. This isn’t an effort where you’d hire a Fivver artist and you get the finished product in a week.
When the right ‘thing’ hits in these respective spaces, we’ll know. I think some of it’s already happening. 😏
How might TPan be wrong?
Bull market resumes in the near future with an influx of new users: Throw what I said out the window and anything that is not done by a 5th grader (actually, there’s been several successful projects by children lol) has the potential to see at least short-term success. Over a longer period of time, there will always be a flight to quality. IMO, my point about large Web2 consumer brands getting into Web3 still stands: When they enter they’ll suck the air out of the room.
Degens will degen: The itch of throwing a small bets at a random assortment of projects with the hope that 20% of them provide 10x or more returns overwhelms the logic that I presented. I will admit that I still have the urge to participate in some very low priced or free mints every now and then. Almost all of them end up failing. This will always be a part of the space, sorta like how penny stocks are a thing.
Probably some other points where my logic fails, so feel free to comment.
Remember: Strong opinions, loosely held 😉
Web3 is a NYC metro station
WTF, metro station? Where do you get these analogies from TPan?
Maybe from my time at NFT NYC, but hear me out. Whenever I headed to the conference in Times Square, there was a variety of ways to get there. And some of these routes had multiple lines I could take.
If I took the first, third or fourth option, the common denominator is taking the L. From there, I could take the N/R/W lines, walk some more and take the 1/3, or take the A/C/E.
If one of these lines is delayed, the ETA and route options get jumbled up. If I miss a stop or take the metro in the wrong direction, also messes up the ETA.
What I’m trying to say is, these trends and patterns have windows. Some of these windows are open for a while (maybe the L line comes once every 30 minutes), or some may be tight (if there’s any delays, I’ll miss the connection and have to wait another 10 minutes).
The nice thing is these windows never fully close because another train will come, but they might be tighter. You might have to thread the needle more than if you did the same thing a year ago. Especially if you’re a PFP NFT project.
On the other hand, if you’re working on a Web3 SaaS/B2B product, that window is still wide open and you can waltz right into that train, whether it’s now or 10 minutes from now. No need to run to your connection. But that window will eventually narrow as well.
Web2 is the big ‘this line is under repair’ surprise that forces you to take the bus, bike, rideshare, the rest of the way. It’ll be an uphill battle to reach your destination on time, but it’s not impossible.
Alright enough with this NYC metro analogy, I hope it made sense :)
Who knows what will happen with PFP NFTs and my predictions. I know I’ll see you tomorrow though. ✨