Rethinking the PFP thesis
To become an enduring brand, you need to play the long game.
I’ve been thinking quite a bit about PFPs (profile picture NFTs).
PFPs like Bored Apes, Azuki, and DeGods dominate the mindshare and market cap in the NFT space today. One trigger was coming across David Horvarth’s substack. It's an absolute gem. Digesting David’s succinct yet full-of-wisdom posts made me completely rethink my thesis around PFPs.
If you’re not familiar: David Horvath is the creator of the well-known @uglydolls characters, an enduring brand of 20+ years. And more recently, Bossy Bears — now a Nickelodeon series. David is also involved with NFTs and the leader of Nouns Studio1, an organization dedicated to proliferating Nouns in the traditional IP business.
There were 3 key takeaways for me:
1. David emphasizes the concept of "Evergreen Ubiquity".
Evergeen Ubiquity means being something that everyone knows. It means lasting for generations. If you truly want to challenge Hello Kitty, you need to strive to be around FOREVER. Not just a flash in the pan.
The path toward Evergreen Ubiquity is a long one, and determined by the decisions you make. It requires passing on short-term opportunities in favor of choices that keep the world in love with your brand.
Many character brands follow the red-line path instead of pursuing Evergreen Ubiquity and fizzle out after some time. They get replaced by newer red-line character brands. The cycle continues. Does anyone remember Biker Mike from Mars? Cowboys of Moo Mesa? No? Be the blue line instead.
2. Aim to become one with culture, not market to it.
It’s tempting, but spending on ads, promos, activations, and celebrity endorsements isn't going to get people to fall in love with your brand. They bring eyeballs, not an emotional connection.
How do you become one with culture?
Stay away from the noise & marketing.
Strive to become discovered and make a meaningful connection, rather than forcing people to pay attention.
Grow your tribe before going "big".
Juxtaposition: be found next to things that add meaning to your brand. e.g. Toys that are found in MoMA have a very different vibe from those found in Walmart.
3. David says: Avoid big brands in the early days
These brand behemoths give you validation, but you need to purposefully use them, rather than let them use you. Does collaborating with Coca-Cola actually create surprise and awe among your tribe? Otherwise, these brand collabs are just noise.
Big-name brands do collaborations with 1,000s of smaller brands all the time. They use them to stay relevant to the subculture. If you let them drive your brand in the formative period, the sense of discovery and wonder disappears. When they get sick of you, your brand dies too.
Ideally, build one great product line/core product that brings in baseline revenues, that keeps everything else alive. This allows you to live long enough to make more longevity-based decisions, which keeps the brand alive. It’s probably not wise to spread yourself thin at the beginning.
Everyone Has Their Shot At Fame
Now how does all this apply to NFTs? My thesis all along has been that building a consumer brand takes lots of marketing firepower. The winners need to run at 200km/hr, in order to be heard in an increasingly noisy consumer space.
So I found myself paying the most attention to the projects that were doing splashy deals, appearing in the press, and raising VC funds:
Doodles raised $54M
PROOF/Moonbirds raised $50M
And rumors that a PFP project raised $100M+ recently
Now I realize that's probably the wrong mental model when thinking about building a decentralized brand.
Counterintuitively, PFP teams that have taken VC money may have a more difficult time achieving long-term success. Investors want to see results every quarter, pushing teams to do big deals and collabs — even if the brand is not ready. You can't buy how much your tribe loves you.
Wale.swoosh had a pretty interesting thread about how VC funding impacts NFTs:
Anyway…what excites me now are NFT teams that relentlessly focus on CREATING A SENSE OF WONDER & DISCOVERY for their audiences. Those that continually craft experiences that serve as an invitation for discovery and evoke an emotional attachment in their audiences.
This means that the playing field is more level than we think. Even NFT projects at the bottom of OpenSea’s ranking today have a shot of achieving long-term success. Some aim to become lifestyle brands (like Hello Kitty) while others intend to be storytelling brands (like Star Wars). Both can work. As long as they keep shipping, pay great attention to details, and build an engaged tribe.
All NFT projects that intend to become brand/IP players are really only at the starting line today. Yes — even Bored Apes and Azuki despite their initial successes. We’re barely past a year into this journey of decentralized brand building. I hope we will see a number of enduring NFT-driven brands emerge that will last for decades.
Floor Prices = Cultural Value
One more note before I end this post…
In the past year, we've seen a big divergence in floor prices of PFP NFTs. Some like Azuki, Bored Apes & Pudgy Penguins have emerged strong Others like Clone X, Moonbirds & Doodles seem to be faltering. I was initially a little puzzled about exactly why, but it is now making sense to me.
One big unlock in my NFT journey was realizing that floor prices are a quantified representation of the perceived cultural value of a collection/community.
→ Host an amazing IRL event? +50 points
→ Milk your community for money with an expensive new drop? -100 points
NFTs are (usually) not about:
Revenue
Treasury & Assets
P/E ratios
Voting rights
Those metrics are much more suitable for evaluating equity & fungible tokens. An entirely different mental model is needed for NFTs. It also explains why a lot of DeFi people still don’t understand NFTs.
Of course, NFT floor prices are only a snapshot of a period in time. They're noisy and fluctuate based on many factors, including psychology. But over a longer period of time, trends become exceedingly obvious.
I’ve always maintained that people who have a good taste for culture will do well in NFTs. Keep honing your cultural radar if you want to succeed.
Stay safe and best regards,
Teng Yan
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