a16z Partner: Why can NFT bring better economic benefits to creators?

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Successful creators only need 1,000 loyal fans.

Written by: Chris Dixon, partner of Andreessen Horowitz (a16z) Translator: Lu Jiangfei

Kevin Kelly, the founding editor-in-chief of Wired magazine, wrote a classic article “1000 True Fans” in 2008, in which he predicted that the Internet will change the economics of creative activities, he wrote Road:

To be a successful creator, you don’t need “millions”-you don’t need to earn millions of dollars, you don’t need to mine millions of customers, you don’t need to install millions of client software, You don’t need to acquire millions of fans. If you are a craftsman, photographer, musician, designer, writer, animator, app maker, entrepreneur or inventor, you only need 1,000 loyal fans.

The so-called “loyal fans” refer to fans who can buy your products. These “diehards” will drive 200 miles to listen to you singing, and they will buy the hardback, paperback, and even audition versions you launched; even if your next sculpture is not completed, they are willing to pay for the reservation; they will do it for you The free YouTube channel “best” DVD version pays; they will come to their favorite chef’s table every month to taste the food.

Kevin Kelly’s ultimate vision is to make the Internet the ultimate matchmaker and to promote mutual benefit for everyone in the 21st century. Creators-no matter how large the niche market is-can more easily find their true fans who are willing to show their enthusiasm through “real money”.

But sometimes, the Internet is very good at going in circles. For example, some centralized social platforms have become the main way for creators and fans to establish contact. These platforms have now become new “intermediaries”-they insert advertisements and algorithmic recommendations between creators and users, and at the same time ” Most of the income was captured.

The good news is that the Internet is re-developing and returning to Kevin Kelly’s original vision. For example, the income of many top writers on Substack has been much higher than the salary they get from 9 to 5, and the low platform commission and enthusiastic supporters make these people rich. On Substack, as long as 1,000 newsletter subscribers are willing to pay authors $10 a month, those authors can earn more than $100,000 in net income a year.

Cryptocurrencies, especially NFTs (non-fungible tokens), can accelerate the trend for creators to directly profit from their fans. In terms of building audiences, social platforms can still play a role (in fact, there should be better decentralized alternatives to replace traditional social platforms), but creators have now begun to rely more and more on other methods to make money (including NFT and crypto economy).

NFTs are records based on the blockchain. These records can uniquely represent media segments. The media can be in any digital form, including art, video, music, gif, games, text, meme, and code. NFT contains highly trustworthy documents about its own history and origin, and can attach code to perform almost anything programmers dream of (currently a popular code function is: to ensure that the original creator of the work can be traded in the resale Earn income). Not only that, the security technology used by NFT is actually the same as Bitcoin. You know, Bitcoin is now owned by hundreds of millions of people around the world, and its market value has exceeded trillions of dollars.

Due to the soaring sales, NFT has received a lot of attention recently. In the past 30 days, NFT’s sales have exceeded 300 million U.S. dollars, as shown in the following chart:

It should be noted that the charts provided in this article are for reference only and should not be used as a basis when making investment decisions, because past performance does not represent future results.

Cryptocurrency has a rise and fall cycle, and NFT will also have ups and downs.

So, why can NFT fundamentally bring better economic benefits to creators? In short, there are three important reasons.

The first reason: As mentioned above, NFT cancelled rent-seeking intermediaries. The logic of the blockchain is that once you purchase an NFT, you can completely control it, just like buying a book or sneakers in the real world. The NFT trading platform and market already exist and will continue to exist, but unlike other trading platforms and markets, the fees for the NFT trading platform and market will be limited because the ownership based on the blockchain will be transferred to creators and users ——You can even “shop around” to shop around, and then force the trading platform and the market to squeeze out the fees. (Please note that reducing intermediary fees may have a multiplier effect on the creator’s disposable income. For example, if you earn $100,000 in income but the cost is $80,000, if you reduce the commission rate by 50% , You can increase the disposable income from 20,000 U.S. dollars to 120,000 U.S. dollars, an increase of 6 times.)

The second reason: NFT brings granular price tiering to the creator economy. In the advertising-based model, regardless of the enthusiasm of the fans, the revenue generation is more or less consistent. Like Substack, NFT allows creators to “select” the most enthusiastic users by providing creators with special projects at higher prices. But NFTs go further than non-encrypted products because they can easily be divided into a series of pricing tiers. Taking NBA Top Shot as an example, the price of NFT cards ranges from $100,000 to a few dollars. If you are a fan of Bitcoin, you can buy as much as you want. You can buy at least 0.0000001 BTC—depending on your enthusiasm. Encrypted granular price stratification allows creators to capture greater value under the demand curve.

a16z Partner: Why can NFT bring better economic benefits to creators?

The third reason: One of the most important ways to change the creator economy is to allow users to become “owners”, thereby reducing customer acquisition costs to a level close to zero. If you log on to the official website of the US Securities and Exchange Commission and look at the S-1 forms submitted by those companies applying for listing, they will disclose that they have invested huge costs in acquiring users/customers, and usually these costs will flow to online advertising or sales staff. In contrast, in the process when the total market value of cryptocurrencies exceeded $1 trillion, there was almost no marketing expenditure. Bitcoin and Ethereum are not “supported” by any organization, let alone marketing budgets, but this does not affect Bitcoin and Ethereum being used, owned and loved by tens of millions of people.

In the past month, NBA Top Shot, the NFT’s highest revenue project, has generated $200 million in sales, but marketing expenditures are very small. The reason why these NFT projects can develop so efficiently is because every user feels that he is the “owner”-it is precisely because of this that NFT can gain the upper hand in the “crypto game”. With the help of community, market boom and ownership, NFT has realized true P2P marketing.

a16z Partner: Why can NFT bring better economic benefits to creators?

Currently, NFT is still in its early stages, but it will definitely continue to move forward. As the digital experience surrounding NFT becomes more and more mature, NFT will be more effective, covering trading platforms, social networks, displays, games, and virtual worlds. Other consumer-oriented encryption products that match NFTs are also likely to appear. For example, modern video games like Fortnite will have a built-in encryption economy and equate V-Bucks with tokens, NFTs, and skins. Virtual goods are mixed together.

The concept of “1000 loyal fans” is based on the original concept of the Internet, that is, users and creators are globally interconnected, free from intermediary agencies, and can share ideas with each other and share economic benefits. Traditional social media platforms have deviated from this vision because creators are locked in rigid distribution and profit mechanisms. Accordingly, there are now two ways to challenge these social media platforms:

  • Take away the user
  • Take the money

Cryptocurrency and NFT provide us with a new way to make money, let us realize it together!

Source link:a16z.com

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