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Hi friends 👋, 

Happy Monday!

Over the past few weeks, something strange has been happening: the corporates have come for the NFTs. That’s a good thing.

Let’s get to it.

Nifty Corporates

The corporates are coming for the NFTs. 

Last week, VISA’s $150k purchase of a CryptoPunk caught everyone’s attention, but Budweiser’s foray into rare jpegs was much funnier. 

On Wednesday, Budweiser changed its Twitter profile picture to an Non-Fungible Token (NFT) it purchased for 8 ETH, a Budweiser-themed rocket from Tom Sachs’ Rocket Factory: 

The 145-year-old brewer also spent 30 ETH to acquire the Ethereum Name Service (ENS) domain beer.eth, which are essentially like domain names except backed by NFTs that are owned, not rented, by the owner.

Budweiser is part of a growing wave of brands getting involved in NFTs, and its purchases more than paid for themselves in free marketing value. I’m writing about it right now. I kind of want to drink a Bud. It’s also a lesson that incumbent brands who want to get involved in web3 need to give up a little control and get comfortable with the weird. Because as people checked out Budweiser’s beer.eth wallet, they didn’t just find the Rocket. They also found some dicks. 

web3 is open and permissionless. When Budweiser let it be known that its wallet was at beer.eth, they opened the floodgates. Anyone can send them anything, and anyone can see what’s in their wallet by searching beer.eth on Rainbow. So of course, people do what they do with any fresh canvas: drew pensises. As a Harry Potter fan, my personal favorite is PeePeeBoy #16. (Budweiser, if you’re reading this, I made you an offer for PeePeeBoy #16 on OpenSea, happy to take it out of your wallet!)

It’s all too much fun, playing at the edges of a new frontier. Crypto and web3 more broadly have consumed a ton of my brainspace in 2021. 

It started with a curiosity about some niche thing happening at the fringes of the internet that might be important in the future, and has evolved into a belief that the transition to web3 will be the next major platform shift. It’s as big as, or potentially bigger than, the internet and mobile. Commercially, if the internet changed how products are sold, web3 changes what products are sold.

web3 feels like one of the ones that changes everything. web3 isn’t just crypto, it’s a more decentralized, peer-to-peer, and liquid version of the internet, often but not necessarily powered by crypto.

The parallels between the internet’s ascent and web3’s are striking. 

Just like the internet, web3 started out as Chris Dixon’s thing that “the smartest people do on the weekend.” It’s becoming clearer that it’s “what everyone else will do during the week in (less than) ten years.” 

The internet started with university researchers (the first transaction facilitated by the internet was a 1972 weed deal between Stanford and MIT researchers via Arpanet) and spread to message boards and chat rooms before going mainstream. By 1999, internet startups were raising at eye-popping valuations and every incumbent company needed a website. Adding “.com” to a corporate name sent stock prices soaring. 

Similarly, web3 spent its first decade or so as a playground for researchers, coders, and degens. People bought drugs with crypto, too. Last year, corporates started dipping their toes by buying Bitcoin with their balance sheets. Over the past month or so, though, it really feels as if web2 companies are waking up to the fact that they need to figure out their web3 strategy or they’re not gonna make it. In addition to the VISA and Budweiser purchases, in the past month alone: 

• Coca-Cola sold four NFTs. 

• Arizona Iced Tea bought a Bored Ape. 

• Discord surveyed its users on web3 features. 

• Twitter named a new head of BlueSky, its decentralized social network project. 

• Cannabis delivery company Eaze is hiring a Principal Blockchain Engineer to facilitate payments with crypto and reduce the dependency on payment processors that has plagued OnlyFans. 

• Shopify launched NFT sale capabilities, and the Chicago Bulls availed themselves of the capabilities to sell NFTs to their fans. 

Those are just a few public examples. Many of the non-crypto startups in the Not Boring portfolio are realizing that web3 lets them do things they couldn’t otherwise. I’m seeing more crypto companies with real-world applications beyond trading coins back and forth. Board rooms around the world are calling in “that shadowy super coder on the eng team who knows about crypto” to get them up to speed.

In most of the web3 analysis I’ve done in Not Boring, I’ve focused on new projects, web3-native companies, and web3’s impact on individuals. Now, the corporates are coming. Incumbents are realizing that web3 is no longer just a cute oddity, but a threat and an opportunity. In Who Disrupts the Disrupters? I wrote about how web3 projects might disrupt today’s biggest tech companies. In Status Monkeys, I covered how NFTs scratch the same itch that social networks do, and how that explains their value in the eyes of individuals. This piece is about how corporate incumbents are getting involved with NFTs, and their potential to increase the value of the overall ecosystem, and likely make some hilarious gaffes, in the process.

Within the next five years, nearly every consumer company, and many B2B companies, will be web3 companies, just like nearly every company became an internet company in the early 2000s. They’ll use tokens, embedded DeFi, and NFTs to strengthen network effects, increase switching costs, build novel user experiences, improve margins, and turbocharge growth. 

It’s hard to see now, because it’s so early and NFTs still feel like a toy, but companies are already beginning to play with NFTs for marketing, and they’ll soon make them a core part of their business models. The ability to imbue low marginal cost digital products with the same attributes that make physical products valuable and new capabilities only made possible by web3 is deeply underappreciated. 

Today, we’ll appreciate, by covering the early corporate moves into NFTs and exploring what they suggest about corporate adoption of NFTs and web3 tech more broadly going forward. 

• Mania, Bubble, or Hype Cycle?

• Corporate NFT Adoption 

• Today: Marketing Via NFTs

• Tomorrow: New Business Models Built with NFTs

• From Pizza Hut to Domino’s

If it feels bubbly, that’s OK. History doesn’t repeat itself, but it rhymes. We’re partying like it’s 1999, and that turned out just fine. 

Mania, Bubble, or Hype Cycle?

It’s easy to dismiss incumbents getting into crypto as just another sign that we’re in a bubble. We’ve seen this movie before. Early web3 mirrors the early commercial internet. 

In 1999, during the frenzy of the dot com bubble, practically every company built a website, and any company that added “.com” to their name soared in value. One 2001 study in The Journal of Finance found that companies that added “.com,” “.net,” or “Internet” to their name saw their stock prices increase 74% in the days following the name change. 

It’s fun to look back and make fun of all of the silliness 1999/2000 silliness. Pets.com! Lol. Webvan haha! Internet.com teehee! 

In the beginning, these shifts feel like bubbles. Internet mania drove the tech-heavy NASDAQ up 3.4x from 1,619 at the beginning of 1998 to a peak of 4,696 in February 2000. It crashed even harder, to a low of 1,172 in September 2002. Oof. 

But after an early peak and valley, the internet obviously stuck around. The dot com bubble looks like a big blip. Today, the NASDAQ sits at 15,129, 3.2x higher than it’s dot com peak. Internet companies have created trillions of dollars in value. The technology is so ubiquitous that we no longer talk about “dot com” companies or “internet” companies. The most valuable companies were born of, or pivoted hard towards, the internet. Early hype helped fund that shift.

NFTs today feel similar. 

If I had an ETH for every time I’ve seen someone compare NFTs to Tulip Mania, I’d be able to buy up all the CryptoPunks. But I think there’s a key difference: manias like the one that gripped the Dutch in the 17th Century or Beanie Baby collectors in the 1990s were isolated and non-composable. Money thrown at Tulips or Beanie Babies didn’t spur innovation that others could build on. There was no directional arrow. They were time capsules, captured to be revisited and analyzed by future anthropologists. 

If they are a bubble, NFTs are more like the dot com bubble. They’re a different, more productive sort than Tulips. (Alright alright, except for this $3.2M Tulip NFT). Unlike Tulips, bubbly demand for internet stocks or NFTs brings more money and experimentation, which increases the likelihood of building valuable use cases that gain mainstream adoption. Is there some dumb shit being bid up to incomprehensible prices? Certainly. But in these cases, enthusiasm becomes activation energy, and over time, foolish behavior fades and a new paradigm emerges. The internet and NFTs follow the old Not Boring favorite: the Gartner Hype Cycle. 

The Gartner Hype Cycle is a useful framework through which to view new technologies, particularly powerful for the fact that nearly every new major technological innovation follows its curve. It’s not that all technologies are the same, or become useful at the same rate; instead, the Hype Cycle is a mirror that reflects humanity’s collective attitude towards new things. 

• Some new technology gets built

• We get really excited and imagine the myriad ways it might be used 

• Then we get disappointed when it doesn’t immediately fulfill all of them

• Then, over time, the truly valuable technologies find mainstream adoption as they become part of the fabric of the way we do things.

According to Gartner itself:

Gartner Hype Cycles provide a graphic representation of the maturity and adoption of technologies and applications, and how they are potentially relevant to solving real business problems and exploiting new opportunities. Gartner Hype Cycle methodology gives you a view of how a technology or application will evolve over time, providing a sound source of insight to manage its deployment within the context of your specific business goals.

Ultimately, it helps companies think about when to implement a new technology.

Each year, Gartner places emerging technologies on the Hype Cycle. Last week, it released the 2021 Hype Cycle. Right at the top of the Peak of Inflated Expectations, of course, are NFTs. 

Gartner’s customers are companies, not crypto degens. If Gartner is including NFTs on the Hype Cycle, it means that companies are thinking about how to incorporate them. Gartner seems to think that we’re at the Peak of Inflated Expectations for NFTs, the point in the cycle at which, “Early publicity produces a number of success stories — often accompanied by scores of failures. Some companies take action; many do not.” 

NFTs’ placement at the top of the Peak likely contains a little bit of truth and a whole lot of desire to grab headlines. There’s probably an interesting thing that happens when the Gartner team chooses where to place things. They might say, “Which technology could we place at the Peak of Inflated Expectations to drive the most clicks?” and whatever the answer is is probably also the technology that really is at the Peak of Inflated Expectations. 

Anyway, we’re still early. At this point in the cycle, some companies experiment with the technology, many don’t. A handful of the ones who do are going to drop some embarrassingly harebrained NFTs or acquire NFTs for too much money. We may have the opportunity to look back in a year, from the Trough of Disillusionment, and laugh at the most ill-conceived. But that doesn’t mean we should dismiss NFTs. Au contraire. Technologies that Gartner places at the Peak often go on to create orders of magnitude more value than they’re worth at the time of Peak placement. 

See, I love the Hype Cycle, but it’s also a bit misleading. With just a glance at the graph, it would seem as if technologies never live up to their initial hype, like investing at the peak would inevitably lead to losses. Even the companies that survive the Trough of Disillusionment can only hope to end up at the dull-sounding “Plateau of Productivity.”  

But the Y-axis represents “expectations,” not value, and just looking at the chart dramatically undersells the value that mass-adopted technologies create. Take Web 2.0, for example. 

To learn why NFTs are at the beginning of the S-Curve, how corporates are getting involved today, and what NFT-based business models they might adopt in the future…

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