Evaluating the global NFT landscape and understanding trends among various stakeholders

Context

A global PE firm wanted to understand the overall value chain of NFT issuance and commerce (marketplaces, exchanges, etc.). They also wanted to understand the purpose and strategic rationale for creating NFTs across various user types (artists, brands, gaming companies, etc.)

Our approach

• Identified existing business models in the NFT space to develop an exhaustive landscape
• Developed a generalized value chain for buying and selling of NFTs, elaborating the roles of various stakeholders
• Created case studies for top NFT marketplaces from trending sectors like Gaming and Sports
• Performed product benchmarking of top NFT platforms on features like NFTs sold, blockchains and wallets supported by the platform, and social media engagement, among others
• Conducted in-depth interviews with various stakeholders:
• With NFT creators (N=14), understood their motivations to enter the space, the decision-making process behind content and pricing, and the challenges faced
• With brands/companies (N=8), understood the brand’s motivation for executing an NFT venture, choice of the vehicle of entry, and perceived value-add for customers and the company
• With NFT players (N=8), developed an in-depth understanding of their business models, opportunities, and challenges
• With experts comprehended various drivers and barriers of adoption for NFTs going into the future

• The concept of NFTs is in sync with human needs for ownership & authenticity. While there is a spate of NFT issuances, only projects with a long-term strategic roadmap will eventually sustain once the industry stabilizes. Most NFTs are likely to converge to the metaverse, e-commerce, and formalized membership models. 
• A significant portion of the sudden rise of NFT sales last year was captured by Opensea, which accounted for around 20M unique users as of Dec’21, outperforming competitors like Rarible with about 1.2 M unique users
• Current NFT market offering can be segregated into three emerging business models – Primary marketplaces (NFTs can be created and sold), Secondary marketplaces (NFTs can be created, sold, and resold), and SaaS model (enabling the creation of customized marketplaces for companies)
• A significant differentiator for the marketplace players will be setting up infrastructure for interoperability (allowing the sale & use of NFTs issued on other platforms using different blockchains and underlying technology)
• For individual issuers, deciding upon prices for NFTs issued is the most challenging aspect as the value of NFTs presently is mainly perceived value as against utility value
• For brands/businesses planning to enter the NFT space, there are 3 routes: enter via open marketplaces, with white-label solutions, or build an in-house exclusive marketplace. Key discussion criterion includes investment budget, marketing plan, and future roadmap