NFT As Media
NFT As Media
How NFT communities are changing media. An interview with an insightful practitioner.
Welcome to People vs Algorithms #39.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses, most recently as global President of Hearst Magazines, one of the largest publishers in the world.
It was hard to justify spending $2000 on a bear cartoon. This wasn't a famous Paddington, Pooh, Rupert or Grateful Dead Aiko bear. It was a Killabear. I chose #1045, one of the least expensive from a collection of 3333 Killabears, an NFT project created by my friend Ben Cohen and a few of his co-conspirators.
I reminded myself that it's an investment, small in the scheme of sought after NFTs. It’s research… and semi-liquid. There’s a good chance I’ll get some of it back. I pressed "buy" on OpenSea and moved 1.125 ETH from my MetaMask wallet.
I had recently reconnected with Ben wanted to understand his project better. The NFT smoke has cleared a bit. It's a good time to circle back. I am pretty convinced there are long-term media implications here. To my mind, this is a new media type and emergent media discipline. Let me try to contextualize.
NFT as membership
A quick refresher. NFTs are digital things you can own. Notable examples include Bored Apes, Crypto Punks or more recently Kevin Rose’s Moonbirds. These are a type of NFT collection called “PFPs”, short for “profile picture.” They are typically collections of thousands of NFT's where the "traits" of each character are algorithmically generated — basically generative digital art. Trait combinations drive NFT rarity and value. People like them because these traits create unique collectible personalities, sometimes chosen as a reflection of the collector.
Collections are released to the market for free or at a floor price. Thereafter you can buy or sell them on a marketplace like Opensea. Because the art is easy to create, sellers of NFTs focus less on their intrinsic worth and more on the “utility” they afford the owner. This utility could be anything, digital or physical, access to content, future NFT drops, community interaction (typically through a private Discord server), merch, tickets, events, etc. Think of them as membership tokens, a card that gets you into a social club.
The number of times you will hear unspecific words like “community” and “utility” will make you want to strike the words from the lexicon. Fair warning, I will use them many times below.
The proceeds from the original sale, and / or a percentage of the proceeds from secondary sales go to the creators of the collection. This is used to fund a treasury and sustain the project (often referred to as the "roadmap") and, in some cases, finance the project creator’s houses in Miami or undisclosed locations, though this happens less now.
Creating a collection that enables unique community value will sustain price over time. This is the hard part.
It is the sustained connection between a group of people that interests me. After all, what is media but a valued, persistent connection between a content creator and an audience. Media is ever more powerful when those connections are reinforced in and between members of the audience and, ultimately, when media functions as an identity signal. Community coherence is the mark of a great media brand. The Rolling Stone in its heyday, the New Yorker, Phish, Star Wars all stand as iconic examples.
Media’s evolutionary path
The bears got me thinking about media more broadly, specifically the changing nature of the media practitioner when success is driven by the connections between a group of people as much as it is your ability to feed content to them.
Pull back for a second. There are a few dimensions to any media brand. Traditionally, the content is the heart. The brand encapsulates the media idea and relationship to the audience. This is your IP. Some media brands are IP led on account of the uniqueness and market power of that content. The NFL is an example of profound IP-based market power. The product is unique and extremely difficult to replicate.
Your distribution position is how you get the content to an audience. A billboard on Sunset Boulevard is an example of a media business that is pure distribution. Distribution connections vary in strength depending on the resilience of the connection to your audience. A paid subscription relationship to the New York Times would represent a strong connection, a follower on Instagram, weak. Media companies sit on a spectrum from IP led to distribution led. Most are a mix of both. IP brands long for a direct connection to the consumer. Distribution leaders would love a little IP.
“Social” represented a new type of media company, whose strength was enabling a broad group of people to make media and connect with one another around it, a potent mix of communication and content. The unique asset here was an identity-fueled network effect. Tools to make and share content, powered by a user profile and the “social graph” of personal connections spawned a wildly successful new type of media entity, one rich in audience data and free of content costs. Early in it’s life, social was dismissed as a illegitimate advertising environment. Brands and their media buying lieutenants had only known “professionally” created media offerings. The inevitability of time spent and ultimately, performance, changed minds.
Social added the vital ingredient that previous open web media, or any media that came before was missing: identity. The web has a history of being free and anonymous. Authentication systems came to the web long after the concept of a web page was popularized. Social networks basically solved the identity puzzle, and reaped the rewards of doing so. Identity enables all parts of the modern media experience — communication, personalization, algorithmic feeds, ad segmentation, and integrated commerce. I point this out because identity becomes increasingly central to all media in the future.
The community dimension
NFTs, and the power of collective ownership, extend our media model further to encompass a more profound mode of community participation. Let's call this community led. The difference here is that the media entity is essentially a joint venture between the IP creator and a community of participants that benefit from its ownership — a group of NFT holders who all share in its success.
Which brings us back to Ben and his Killabears. What stood out to me was the collection of 3333 were minted and distributed for free. Post mint, the value of the lowest price NFT's has sustained just about 1 ETH (now about $2000), a fact of which Ben was very proud.
I asked him a bunch of questions about how he did it (answers below). What made ownership feel valuable enough that people who got their hands on a Killabear through the initial mint would not just turn around and dump them?
It is helpful to think about this kind of project as a type of niche media, to the extent that all media is a community of folks with shared interests. We tend to think of media as content creation. That is the first order. A better way to think about it as a group of people that are connected through content. The stronger the connection between the content, the audience and between members of the audience, the stronger and more valuable the media brand.
What Ben and others have done is start by bringing together a group of people... a group with an admittedly tenuous shared interest in a NFT project. I am sure the group spans speculators, the NFT curious, collectors who liked the bear art to people just looking for a fun way to connect online. He has established a base set of values and behavioral boundaries around the group, an admirable positive vibe, but it is a game-like community connection, little more at this point. A grand unified narrative or community mission has yet to emerge.
Think of it as building 101 Dalmatians, starting by doling out the Dalmations. The story comes after. Then games, merch, physical experiences, etc.
The art of community programming
What happened after I bought the bear suggests a new type of media activity that will become increasingly important to how we think about the act of media creation. I think of it as community programming — how you activate and foster connections between a group of people in a way that entertains, reinforces and grows the community. Activities play out across the multitude of mature communication platforms that surround us.
After I bought the Killabear, the community organizer issued a warm welcome on Twitter. Other holders jumped in and did the same. The conversation continued with an invite to a thoughtfully organized Discord server. The back bone to the onboarding was the impressive part, a 12-step onboarding guide to getting the most out of the Killaverse (duh) including the beginnings of Killabear folklore, simple directions on how to connect on Twitter and Discord, tools to make and share graphic extensions of your NFT, a weekly schedule of Twitter Spaces, info on forthcoming drops (an important commitment to value appreciation), and a tease on a "staking" program. The staking logic is important because it acts to discourage a “pump and dump” mentality.
In simple terms, staking is when you promise not to sell your NFT in exchange for some future benefit. It's like investing or keeping your money in the bank so someone else can use it. Here it serves the purpose of discouraging rampant speculative behavior, locking in owners and stabilizing the price floor, giving community managers breathing room to engineer member value around the NFT. It’s membership lock-in.
So the good and bad news here. Ben has built a group of invested users around a promising but thin starting construct. He and the community are co-invested in its growth. It's a membership mechanism and financial incentive in one. The team will continue to find new ways to inject energy into the community or it will slowly evaporate. They will do it through share incentives in the form of new NFT drops, live gatherings, staking, and eventually more ambitious long-term content investments. Its short term activation and long term IP aspiration. Ambitious and successful PFP projects share similar goals.
The value creation mechanism is driven by the teams ability to understand shared emotional threads across a disparate group of people, inject prompts into the community everyday to make ownership delightful and engaging and thereby continue to increase the financial value of the collective. Growth will drive increasingly ambitious content investments and activations. Financial success for the creator is intimately connected to health and vitality of the community. It's just a new way to think about media.
I see this as one of the most rational blockchain use-cases. The ability to connect and track a group of people across multiple touch points, where everything is transparent and immutable, where membership value is quantified and resell-able and only as valuable as a group of shareholders deems it to be right now.
Here, the connection between IP creator and community (or artist and fan) is decentralized. This is important. There is no platform risk. Communities can be rendered against a backdrop of social and communication utilities without a dependence on a single entity. Blockchain offers a lego box of community building utilities, all free, all interoperable — payment rails, marketplace functionality, complex financial mechanisms and importantly, a means to manage the identity of the participant. Which means IP can be extended by the community in new and unexpected directions.
I am deeply involved in another company called Medallion.fm that is building the infrastructure for musicians to connect their fan bases in similar ways. More on this company in a subsequent post. Both stand in sharp contrast to what we did before. Start with identity before content. Enable co-ownership. Connect content and transactional worlds deeply. Grow IP into meaningful, sustainable fan to fan connections.
All of which is to say, given the number of hucksters and SNAFUs of this emergent technology, your NFT skepticism is not unreasonable. But there is something here that is changing media.
And finally… my Q&A with Ben:
There's lots of negativity around NFTs and generative collections like KillaBears. How do you see it?
The reason for this is the "derivative project". This is usually a play on a legitimate and prominent project... The artwork of the real collection is copied and manipulated just enough to make it different but still resemble. Some talented graphic designers are able to make these in just hours, which introduces to the NFT market, projects that don't have an intention of delivering real utility or economic value to holders, they are just quick cash-grabs by the creators. The onus here will be on marketplaces tightening up requirements to get a collection listed and verified. The Apple AppStore had a similar issue with game developers making quick derivatives drawing off of pop culture, they turned into quick viral successes but fizzled out quickly. The only winners are the devs, usually people jump onto these hype trains and lose big.
You kicked this off as a free collection. Why?
We didn't plan to, we planned to sell a portion of the supply to the whitelist members at .05 ETH and the general public at .08... We learned very quickly on mint day that we might struggle to sell out and didn't want to let FUD or doubt begin to take attention away from the art, team and roadmap that was already well underway. Within about 15 minutes of mint opening, the founders got onto a quick FaceTime and we all agreed that we had the confidence we'd make it regardless of how we got the party started. We were lucky in the respect that the founders are all well established entrepreneurs and didn't need a full treasury to begin the project.... In the end, without knowing it, we began the trend of free mints, but the true reality is that a few months later - only two of us (Killabears + Goblintown) have been able to make it past the hump. (1ETH floor price as the Mason Dixon line.)
How did you distribute the collection ?
Minting took place on our website www.killabears.com - once minted out, the trading took place mostly on OpenSea and some other NFT marketplaces that are known in the space.
It seems like the value is holding. What’s the incentive for folks not to dump them? How do you sustain a community and the value in a NFT?
Value is indeed holding, we made the decision from Day 1 to get close to the community/holders. This gave us the chance to showcase our pasts and also our vision for the future. In addition, we proved very early on to the holders that we have the creativity, planning and most importantly, the execution level needed to build this to a global brand with a ton of different commercial opportunities that can ultimately funnel back to the holders as additional value provided to them. We are incredibly focused on what we can do for the holders, not what they can provide to us (financially). Our holders feel we are the next "Blue Chip NFT" - so while we sit at a 1ETH floor, they can imagine a 10ETH one in the not too distant future, because we've already come so far and it's still just the beginning.... so why sell? Buckle up and let's take the ride together.
So now you are sitting on a brand, a collection of NFTs and a group of owners. Where is the value here. Where do you go from here? What makes the community and NFT collection more valuable?
As I mentioned earlier, we made the decision to get as close to the community as possible. Most decisions we "test launch" with a select few to make sure that we are on target... and this extra level of care has proven to be worth the extra effort. Behind the scenes we are obsessing over details on how to get from A to B.... and on the front-lines, the community is making a lot of noise, and creatively finding ways to bring more people in to the project. It's a true partnership, we arm them with material to tell the world about the Killabears, and they make sure everyone hears about it. Without the community, we are entirely incomplete. The community is aware of our plans to continue charging forward and leveraging our teams skills to shine brighter and ultimately, do things differently than the titans before us. We don't look at BAYC, Punks, Moonbirds and copy/paste their strategies... we look at the reality in front of us, and see where we can add value... with deep audience listening to make sure we are on target at all times.
This is a little like inside-out media. You start with a connection to a group of people and build from there. Is this how you see it? What is the advantage to building a media brand this way?
The quick feedback loop is the answer. In short, the advantage to this style of starting a company is you get immediate and honest feedback from the community. Within minutes of releasing our short film, - we knew we "nailed it". If we had not, we would have been aware very clearly and receive constructive feedback. The truth, though, is that we didn't set out to start a media company - our guiding light is where we see the brand in the long-term, and along the way there will certainly be media properties.
Critics would argue this is backwards. You are starting with a bunch of illustrations and looking for a reason to exist. What does this miss?
"Because it's always been this way" is perhaps the most dangerous saying I heard over and over again in business. I challenge myself, and my colleagues to look at a problem with fresh eyes and evaluate what is the right way to engage with it... oftentimes there is a more straight line, that is contrary to what's been done. I say to those folks who think we're backwards... to think about that phrase and what that type of thinking might limit.
Many people don't like the Web3 craze - as a 34 year old living in an upper middle class town full of doctors, lawyers and finance professionals (and even internet professionals) - I am met with a ton of opposition. Virtually no one likes what I'm doing, but when they'll actually have a conversation with me - I learn that it's not WHAT I'm doing that gives them trouble, it's just that they don't understand it. I think the lack of understanding is what brings fear, and thus, opposition.
It's new and different, but we've heard this before, haven't we? Remember 2005 when we started hearing about Facebook? How about 1997 in the initial web1 bubble? Here we are again.
The critics will see that this train can not be stopped. NFTs are special because they live at the intersection of art and entertainment with a unique use of community / social media (Twitter + Discord, mostly) tools to give them sunlight. IP ownership is the real star of the show, that people haven't quite figured out yet.
is there any coherence to the community? How do you create alignment and meaning when it seems kinda random?
I've mentioned community being paramount to our success. As long as project leaders don't forget this and we devote significant time to get into alignment with the community and co-develop different strategies to solve different problems together.
Where do you go next to create value? For yourself and the owners?
It's both... we have a clear idea on what we'd like to do in the short, medium and long terms... the key is to check in with community here and there to verify that the appetite for different things we'd like to introduce are of interest.
This is following the ape and punk playbook with important differences. What are they? What can we learn from the early experiments?
We are doing things incredibly different from them. They were early and had the luxury and tailwinds that come with being a first mover. They've done incredibly well. I anticipate if either of those projects were introduced tomorrow as a new mint, they would not have nearly the amount of success they've enjoyed. The space is moving fast, and I encourage anyone who asks, to not copy those who came before us... and find your unique approach and leverage the skills you have in-house to make your mark.
Have a great weekend…/ Troy
Follow up:
Last week i did a post on Trade-offs. Later I came across an excellent interactive demonstration.
I just finished the Chris Blackwell biography. It was enjoyable. Reminded me of this gem.