Bored Ape Yacht Club (those NFTs) recently secured an investment of 450 million dollars. The big question: will similar companies only increase in value simply by existing, or do they have to start developing countervalue for the owners?
Surely you have heard of Bored Ape Yacht Club? No? Then I'll explain. So that is the club where you can buy an image of an ape, they are Non Fungible Tokens or NFTs. You knew that, right? An NFT is therefore a contract by means of which a virtual image becomes your property. You can buy such an image and with a bit of luck (or expertise, that is the question), that image increases in value.
The company behind Bored Ape Yacht Club, Yuga Labs led by NFT king Jimmy McNelis, was in the news recently and it naturally again concerned (a great deal of) money. As it happens, Yuga Labs secured a 450 million investment from companies like Andreessen Horowitz and games studio Animoca Brands, as a result of which the company is now estimated to be worth 4 billion dollars. And it was only founded in 2021.
Trend or hype
Okay, so it seems a little like the internet bubble from around the turn of the century when small internet companies suddenly proved to be worth millions. Yet it is too easy to dismiss it as a boom, because those companies were naturally over-valued at the time, but it is not as if the internet was a flop. It is therefore fascinating to analyse where trends turn into hype and I can recommend the guys from This old Marketing Podcast for this analysis. They recently discussed the abovementioned and the question was: do those sums even mean anything anymore?
Robert Rose thinks it is necessary to create genuine countervalue. ,,Now it is just a sign of wealth. There is no intrinsic value.'' Pulizzi disagrees. ,,It is a membership with all kinds of events and you gain access to an exclusive channel on Discord.'' Rose finds it disappointing. ,,But the value is determined by the people who are members there; it is about belonging to the same club as Paris Hilton and Jimmy Fallon. You belong to a club of rich people – it is like having a Ferrari; a social symbol that you are wealthy, but not necessarily the best car. I think that kind of value will diminish over time and that you therefore need to create genuine value. The novelty will wear off at a certain point and the value will then decline. The question of what they are going to do with that 450 million dollars is an interesting one. Maybe start a film or a television show, but that is a steep hill to climb.''
Baseball cards analogy
Joe Pulizzi, who has embraced the NFT and crypto world to a greater extent than Rose, disagrees. ,,I think some monkeys simply do better than others without you having to look at performance. Just like some baseball cards do well.'' Rose jumps in. ,,But the value of those cards fluctuates depending on the performance of the players? If they don't deliver memorable achievements, there is no value. And that's the way it goes with the apes too.'' Pulizzi is referring to CryptoPunks, the NFTs that have become worth far more without significant countervalue. I think this NFT business model works differently to the way you think; it is all so fast-moving and you need a far smaller audience to create value.'' Rose: ,,A badminton card will never accumulate as much value because that sport is not that big, but it is different in the case of Babe Ruth. You need to offer more than just being able to say you are in the same club as Paris.''
The interesting thing is that the discussion continued in the following episode, but now with the addition of a case study. LA restaurant owner Andy Nguyen spent 267,000 dollars on buying Bored Ape 6184 and he used those apes for the Bored & Hungry concept. Pulizzi: ,,He wanted to prove that a JPEG could serve as a brand for a restaurant.'' Rose finds it very compelling. ,,This could therefore affect all the other owners of Bored Apes.'' Pulizzi: ,,You can do this with anything; beer and coffee, because you own the rights. Plus you gain access to 10,000+ users. This is not based on the Bored Ape Club, the buyer of the NFT holds the rights.''
They key question is, of course: are NFTs just hot air, or is there actually something to this? Of course the latter is true, but Robert Rose is right about countervalue in the long term. The unique thing about NFTs is naturally that it is not the company that drives the countervalue, but the buyers themselves.