How These Digital Assets Will Redefine Loyalty Programs and Subscription Services – By Combining Them Together on the Blockchain
NFTs have taken the world by storm. Unless your social distancing habits have involved masking up and staying six feet apart from the internet, these three seemingly random letters have taken over mainstream media — and everyone from Kate Moss to Eminem wants in on the action.
And while it seems that people are trying to NFT everything and anything (Want NFT toilet paper? Charmin’s got you covered), the inherent characteristics of NFTs and what they can enable are profound. These traits have the potential to reimagine and redefine business, products, and general ways of working across all industries.
From video games to digital art, supply chains to marketing, there is virtually nothing in between that will likely be left out as NFTs push for increasing adoption in every corner of the globe.
NFTs Today — Mostly Stupid Art
Let’s be honest. The majority of NFTs available for purchase today are cash grabs. From “Weird Whales” to “Nyan Cat”, these non-artistic pieces of “art”, and others like it, have been making headlines for all of the wrong reasons throughout 2021.
To the casual observer, it is of little wonder why so many question the purpose of NFTs. With art pieces selling for hundreds of thousands (or millions) of dollars — there is little, if any utility that can be derived from the majority of the NFTs currently on the market. In line with the tulip mania phenomenon of the 1600s, NFT art pieces today may potentially see a similar reckoning in the months and years to come.
At best, today’s NFTs are speculative digital assets. At worst, they are downright scams — playing on the “get rich quick” mentality of so many individuals around the world.
But NFTs are destined for so much more than for just speculation — and for being this generation’s tulips. Even today, while NFT “art” is being shilled harder than ever on Twitter pages around the world, there is growing acceptance, adoption, and the beginnings of consideration of these digital assets in other spaces.
NFTs Tomorrow — Serving as a Next Generation, Subscription-Based, Loyalty Program
Before breaking down exactly how NFTs can move beyond their use-case today, it helps to revisit the definition of what NFTs are to begin with. Understanding their properties and what they can enable will be critical when thinking about how they can be applied in the future.
In general, NFTs are cryptographic tokens on a blockchain which represent a “one of a kind” asset. These assets can exist in the real-world and/or the digital world. NFTs allow holders to prove its authenticity, as well as the provenance of the underlying asset. Their existence allows for the introduction of the concept of scarcity in the digital world.
Using the above definition, it’s easy to apply this directly to assets like art — which explains the massive interest in this field today. However, viewed differently, these one-of-a-kind assets and the scarcity which it introduces can be applied differently — introducing (or updating) existing business models and how we can interact with the blockchain in the future.
NFTs — The New Model for Subscription and Loyalty Programs
Mention loyalty programs today and one will quickly conjure up images of their Starbucks app, their supermarket rewards card, or perhaps their frequent flier membership. Everyone can join and everyone can earn — what would incentivize businesses to replace these models with NFTs?
Think further, and one will realize that these are the loyalty programs of yore. For most, they provide passive benefits (a free drink here, a discount there), and only really incentivize those hard-core users (million-mile fliers and Starbucks addicts). But over the last few years, a new type of loyalty program has emerged.
OnlyFans may be an internet content subscription service, but make no mistake, it is a loyalty program too. Sites like this one clearly illustrate that the successful use of the concept of “gated content” is on the rise. From online newspapers to adults-only sites, online businesses are increasingly leveraging a freemium (or downright premium) model to make money and to pull customers.
Leveraging the gated content concept, businesses like OnlyFans, Patreon, and others are providing the framework for what NFT loyalty and subscription programs will eventually look like. With the recent announcement (and revocation) from OnlyFans that they would ban adult content from their site, creators far and wide are increasingly coming to the realization that a decentralized platform for them to do business is the ideal (and possibly only) way to go in the future.
How Will NFTs Leverage the Gated Content Concept and Enable Future Subscription & Loyalty Programs?
Gated content is information that is put behind a paywall. That is, users need to make some sort of payment before being given access to the content which they wish to view. While much of the internet content remains “free”, there are an increasing number of paywalls which are appearing online.
While this business model is continues to be adopted, it is gaining traction for centralized platforms only — not surprising as we continue to live in the Web2 world. However, NFTs enable a gated content format which is decentralized — something that simply does not exist at scale today.
Creators in the future will be able to create content, put it on the blockchain, and gate the content with NFTs. Generally speaking, what this means is that users who wish to view that content will need to buy and hold the relevant NFT before the decentralized platform allows the user to access that content.
As an example, using the overwhelmingly popular Korean boy band, BTS as an example, imagine that their next music video will not be uploaded to YouTube (or any other content sharing platform) for viewers to watch for free. Instead, BTS decides to sell 1 million NFTs, which give each of the holders the rights to watch that music video.
For those who are aware of the BTS Army, it is not difficult to imagine that their legions of fans will quickly consume those 1 million NFTs, and leave behind a scorching hot secondary market for those NFTs for those who were not able to snatch one up in time.
BTS — in an effort to increase loyalty to their fanbase, may encourage their NFT holders to continue holding, by continuing to release content accessible by this NFT, or by rewarding holders with other items (random drawings for concert tickets, merchandise, and more).
Is This Really Necessary on the Blockchain?
For a band like BTS, such a model is probably not something they completely need to rely on as a business model. BTS could just as easily gate their content through a centralized platform, and still garner the same frenzy and response from their fanbase.
But for every BTS band, there are millions of other musical acts which have a significantly smaller fan base. These artists, who may rely fully on centralized platforms (e.g. like YouTube) for their livelihood, would benefit greatly from releasing NFTs on a decentralized platform.
Here, we revisit again the OnlyFans announcement. Regardless of an individual’s stance regarding the website, the reality is that there are many adults who rely on that platform as their primary source of income. This income helps these individuals to pay monthly bills, buy groceries, and to take care of the family. When a centralized platform can revoke or significantly change the primary means of an individual to earn money — one can quickly see how a decentralized platform, one where no such centralized power exists, can be an extremely valuable tool to look into.
NFTs are useful in this case because they build upon the gated content model of today. They will help creators and businesses cultivate the loyalty of their customers in the future, and these creators and businesses can do so without ever needing to worry that the platforms which they operate on will change the rules on them.
A New Subscription Model is Being Born
NFTs are enabling a new way of looking at how users interact with businesses and creators online. They are invoking a new way of looking at loyalty, and building upon what was previously explained, a new way of also viewing subscriptions. By holding on to an NFT to gain access to content, an individual has essentially subscribed to the content producer. It is no different than Netflix issuing NFTs, where holders of those NFTs will be able to watch unlimited content on their video streaming platforms, so long as they hold the NFT.
While it is arguable that what NFTs are enabling is nothing new (subscriptions and loyalty programs), the way that it is being delivered is drastically different. Providing these services in a decentralized manner gives significant control and power back to the businesses and creators — and thereby empowering them more than ever.
For those who think NFTs are just gimmicky, pixelated pieces of digital art, you may be in for a surprise in the months and years ahead.