NFT Auctions: The Ultimate Guide for Brands
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NFTs are an effective way to build brand community and expand your market reach. But once you mint your NFT project, the game isn’t over. You have to get it out into the marketplace and distribute your collection.
NFT auctions are one of the most popular ways to sell digital assets.
In this article, we’ll review everything you need to know about NFT auctions to win in the space (and not get left behind).
What are NFTs?
“NFT” stands for “non-fungible token.”
A non-fungible token is a digital asset recorded on a public decentralized ledger, called a blockchain. It can be verifiably owned and impossible to forge.
Today, NFTs often involve digital art and creative endeavors, like digital art pieces or trading cards. These assets lead to high-potential use cases like memberships, customer loyalty programs, exclusive events, and more.
What is an NFT auction?
Onchain NFT auctions work similarly to traditional auctions. The primary differences are focusing on an NFT as the asset, the blockchain, and the online experience.
One precursor to NFT auctions would be eBay and other online auction sites where visitors would spot something they wanted and virtually place a bid. They would follow the auction and make incremental bids if they wanted to win and, at the end of the auction, own the item.
But today, NFT auctions are a better and safer option because they link to smart contracts, public ledgers using blockchain technology, and cryptocurrencies.
When someone wants to participate in a company’s NFT sale, they’ll visit its branded auction. Companies can partner with white-label engagement platforms like Mojito to create a smooth, efficient, and successful launch.
Once the NFT auction is ready, visitors can connect their wallets to the site and start bidding.
Fans want to dive into the brands they love, and collectible NFTs are the best way to fire up the community. There’s nothing better than a passionate customer base that’ll move your brand forward. And NFT auctions supercharge that movement.
How NFT auctions work
While NFT auctions might resemble a traditional or online auction, there are some clear differences.
Web3 technology has revolutionized the efficiency and security of transactions, and NFT auctions take advantage of those innovations.
Smart contracts play a pivotal role in the process. They establish the parameters for the transaction and auction rules.
Smart contracts can define the start and end time, minimum bids, bid increments, and a reserve price.
When a buyer meets all the criteria as the highest bidder, the smart contract and connected wallet automatically initiate the transaction and transfer of ownership (which is recorded on the public blockchain).
Unique ownership with blockchain
When NFTs became a big topic in the media, the first question most people asked was, what does digital ownership actually mean?
After all, what’s the difference between a JPEG and an NFT if graphics and pictures are easily accessible online?
Your NFT ownership is specifically tied to you—no one else can claim it. This concept revolutionized digital assets and made tangible ownership possible. The blockchain works as a public ledger that records the transaction made, and each NFT has an identifier, much like a serial number, representing one version.
Even if the NFT is part of a serialized collection, you own yours (similar to the millions of iPhones in existence—you physically own a single, identifiable device).
When you sell an NFT through the marketplace, the blockchain records that transfer of ownership.
Types of NFT Auctions
Below are the most popular ways a brand may hold an auction:
1. English Auction (Normal Auctions)
A foundational NFT auction requires potential buyers to bid for the asset. The highest bidder wins the NFT and becomes its owner.
Auctions remove the lid for the highest selling price possible by letting the market decide. But, like traditional auctions, you risk undervaluing the asset. That’s why proper execution and market distribution play an essential role in the auction process.
You can expect an auction to look like the following:
- Starting price: $100
- First bid: increased to $200
- Second bid: increased to $300
- Additional bids: accumulated to $800
- Last bid: $950 (the highest bidder wins)
- End time: auction closed
2. Dutch Auction
Unlike a traditional auction, Dutch auctions start at the highest price and slowly decrease until it meets the reserve price or the bidder wins the final asset. It’s designed to sell through an entire collection and, in turn, achieve the highest possible average selling price.
In a type of reverse bidding, the going price lowers until someone makes the bid, determining the current market value.
The auction continues for the NFT collection, selling each digital asset. This is an excellent strategy for NFT drops. Hesitant customers can wait until they can jump in on the opportunity but at a price point they feel comfortable with.
For example, a Dutch auction might look like the following:
- Starting price: $1,200
- Reserve price: $350
- NFT prices decrease in increments based on determined parameters
- Customers bid and purchase NFTs as the collection sells out and prices lower
- The collection starts to establish its worth
- At the end of the drop, a buyer bought the last NFT for $700 (and the collection has sold out)
Dutch auctions test the value of an asset in a more controlled environment and offer an effective way to drop a collection. While it doesn’t have unlimited earning potential since there is a set high price, you can test consumer behavior and get the most possible within your parameters (and identify the fair sale price).
3. Buy now
While technically not an auction with bidding increments, “buy now” offers a way to showcase a set price, and the quickest buyer can win ownership.
Brands can include NFTs within the marketplace ecosystem and offer an asset for eager customers and fans to immediately jump after. Brands and sellers have total control over the price.
If you want to learn more about these types of auctions, web3 trends, and analytics, sign up to receive our newsletter with 2,000+ other agency leaders.
How much does the average NFT sell for?
Just like any digital market, prices can drastically vary.
Much depends on your brand equity, the perceived value of the asset, the marketing strategy, and your customer’s passion for the brand. Thankfully, NFTs can help grow all of these markers.
NonFungible.com published a 2022 market report stating that the average individual NFT value in the year's first half was $823.50. On the other hand, Beeple, the digital artist, sold an NFT for $69.3 million dollars in 2021, making him one of the wealthiest living artists in the world. And just one NFT from the CyptoPunks collection can sell in the millions.
While many factors will influence how much your brand can sell an NFT for, you can partner with a platform and service that can build your strategy and infrastructure to increase and position you for a successful and valuable launch.
Key concepts in NFT auctions
Below is a list of essential phrases and words that may come in handy:
- Bidding process is when buyers place incremental offers for the desired NFT asset until there is a winner.
- Buy now price is the fixed price for an NFT so the buyer can purchase the asset immediately.
- Reserve price is the seller’s lowest price for their NFT—a fixed parameter in a smart contract so the asset will not sell lower than the desired minimum price.
- Starting price is the starting price of the auction.
- Gas fees are the cost of a blockchain transaction that brands pay when minting and selling NFTs.
- Minting is the creation of a unique NFT recorded on the blockchain.
- Provenance is the record of ownership and transaction history of the NFT that lends authenticity.
- Royalties are the percentage original creators receive when a buyer resells the NFT.
- Allowlist is a list of wallet addresses identifying people with access to an NFT collection before it drops.
- Drop is a limited release and minting of an NFT collection on the blockchain, often promoted as a big announcement for customers and communities.
- Airdrop is a free-to-claim NFT given by brands based on a range of criteria like high engagement, retail purchases, and event attendance.
Risks and considerations
There are many pros to NFT auctions, but there are also risks that every brand should consider.
While these risks exist for everyone, they multiply when brands don’t have the right partner. Mojito prevents and safeguards against many of these issues—check us out to see how you can start leading successful NFT auctions.
1. Financial risks
The crypto and blockchain arena is still new and cryptocurrencies and the NFT market are volatile. Brands must take responsible steps like choosing a partner like Mojito to navigate these sensitive factors.
Mojito is a Merchant of Record and facilitates compliance, tax, fraud detection risk, and consumer technical and financial troubleshooting.
2. Consideration for artists and creators
As brands create their collections, they should consider the culture that has fostered NFT growth within creative communities. In other words, supporting artists and developing fair parameters for NFT art auctions is key.
Mojito can help navigate these communities and customer expectations for your brand as Web3 experts.
3. Security
While blockchain adds some of the best security for online transactions, bad actors still exist. Mojito arms brands with the best tools and resources to prevent avoidable risks.
The advantage: NFT auctions for luxury brands
There are many creative opportunities for luxury brands.
Besides enhancing community engagement and investing in Web3’s future, brands can use NFT auctions to improve the customer experience for everyone.
Picture this:
You gather your most passionate customers together, the crème de la crème, for the most exciting virtual showroom in history.
These customers can purchase NFTs, unlocking access to exclusive events. You present them with the best products on the market, some aren’t released yet, and others never will be—they’re only available to your NFT community!
As your most dedicated customers explore your showroom, they can pick which products they want. They could get the physical product and a linked NFT when they purchase it.
Your customers can then spread the word on social media about how they’ve experienced their favorite brand—intertwining luxury products, digital art, and a vibrant community.
These moments and opportunities spark incredible movement and word-of-mouth opportunities for expansive ROI.
Once customers embed your brand into their digital lives, it paves the way for other Web3 opportunities, like a metaverse where communities can build relationships virtually and talk about the brands they love.
Additionally, luxury brands can add a new revenue stream within the secondary market—earning royalties when an NFT is resold.
Luxury brands can position themselves as innovative leaders, driving the future for their market and immersing their customers in an evolving digital landscape.
How do I start an NFT auction for my brand?
As more consumers expect brands to participate in NFTs, brands should shift towards the future and cement themselves in tomorrow’s economy.
Starting an NFT collection involves creating artwork or a digital asset, minting it, and distributing it on a marketplace. It also includes strategic community components like nurturing the owner base and offering airdrops, perks, or events.
A lot is going on in this whirlwind of a sector and you don’t want to delay until it’s too late.
That’s why we recommend partnering with someone who masterfully executes successful NFT projects and communities for the largest brands in the world.
This way, you can trust that it’s done well, maintained, and helps grow your brand and strengthen customer loyalty.
Mojito facilitates NFT auctions so you and your customers can experience the best Web3 auction.
We merchandise and monetize your digital assets through dynamic drops. You can launch your NFTs with the best marketplace, seamless checkouts, community features, robust API integrations, and more.
Mojito offers the top features for successful NFT drops and communities:
- Primary marketplace API
- Secondary marketplace SDK
- Multiple types of auctions
- Sophisticated bidding features
- Compliance AML
- Crypto payments
- Fiat payments
- Web3 e-commerce
- Web3 marketplace
- NFT auctions
Click here to learn how to customize your NFT drops with the best tools available. Onboard, engage, and monetize your community.
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Adopting the Avatar: the Core of Consumer Customization
A brief playbook for brands building for the digitally-native generation.
According to McKinsey, fashion companies are expected to double their investment in technology by 2023. This statistic was one of many released during 2021's digital assets boom, revealing an important truth: consumers — and especially Gen Z — care deeply about owning their digital identities. In the two years since "NFT Summer," we've learned a lot about the evolution of consumer habits in digitally-native spaces. These insights can help guide the future of how brands operate and consumers engage in virtual environments.
As a short follow-up to our last blog post on how web3 is driving a return to the internet's golden age of customization, we're sharing some additional thoughts on how you can build for the next wave of consumer adoption. This evolution is already showing signs of incredible value for forward-thinking brands like Gucci, Valentino, L'Oréal, Adidas, Nike, and many more.
Web3 Returns the Internet to the Golden Age of Customization
This is what it feels like when the future enables what so many users loved most about the past.
MySpace, StumbleUpon, GeoCities, LiveJournal, Tumblr — the early internet thrived on user-driven, customizable experiences that, while rudimentary in design, clunky in function, and altogether useless for major brands (i.e., not monetizable or targettable), offered humans some of the earliest opportunities for representing themselves online.
Two decades later, across multiple transformational eras of the internet (more on this below), what can we learn from these now archaic — and predominantly extinct — platforms? To start, let's set the stage of the golden age of the web and the subsequent erosion of online customization that followed.
These early platforms referenced above were among the first to offer users a customizable digital sandbox that lacked the restrictions — and intrusive, expensive, increasingly ineffective advertising practices — that is now commonplace across tech. These were platforms on which people created, not platforms on which products were sold.
FAANG companies undoubtedly standardized the internet user experience. These companies built easier ways for people to create and disseminate information while creating the ability for the world's biggest brands to reach these new, content-craving audiences through new experiences and digitally-native business models. However, FAANG-style companies have also contributed to the flattening of the once-loved, now-nostalgic digital aesthetic, eliminating (or narrowing) users' ability to find customization online.
Example: go to StumbleUpon right now, and you'll just get dragged between identical Pinterest boards.
Implementing Web3 CRM: Wallets Are the New Email Address
How to Implement Web3 CRM for Consumers
Your customer relationship management system is your business's beating heart. It’s how you nurture customers, track vital information, and make strategic decisions.
Now that web3 has entered the fold, traditional CRMs can be augmented. So the question is this: Is your brand prepared for it? And what does the future look like?
Brands can expand upon their CRM data with wallets and token interactions to build loyalty in the changing digital economy.
If your CRM is the heart, what happens if it can't support your entire customer base along with their actions and interests? Consumers are adopting web3, and you want to be there from the start.
And with increasingly more limitations on what consumer data brands can collect, store, and use, along with apps and systems that don't talk to each other, brands miss out on data everywhere.
You need web3 CRM capability to connect wallets and token usage to your web2 data to accurately paint a picture of your customers.
Enhancing your CRM with web3, you can track and reward engagement across virtually any physical or digital touchpoint and connect it all in one place to analyze and manage.
Onboarding customers to create web3 wallets is the first step to getting started. The good news is that, with Mojito, the process is seamless for new users. They can set it up and manage it with an email address. In many ways, wallets have become the new email address, offering more benefits for customers and providing brands with the holistic data and CRM capabilities they need.
Mojito's web3 CRM collects and pulls all these moving pieces from different parts of the web together to create one remarkably effortless customer experience.
In this article, we’ll compare the differences between a web2 and web3 CRM, the benefits of using a web3 CRM, and how Mojito might be the right fit.
What’s the difference between web2 and web3 CRM?
The CRMs most brands use do not facilitate the needs that web3 has—the biggest one being connecting offchain and onchain data and creating an integrated portrait of customers across all physical and online interactions.
Web2 CRMs provide essential data and communication tools to manage emails, SMS lists, social media followers, eCommerce buyers, event attendees, and more.
But it's difficult to connect every data source you'd like to trigger into your web2 CRM, let alone add new data sources in web3.
Brands can instead use a web3 solution to augment their CRM by connecting data sources in a different way that brings everything together. Companies can create the most connected, data-rich CRM they've ever had.
Brands require CRM solutions to capture the entire customer data picture across both the internet and real-life experiences. In turn, they create a community-driven customer base, increase sales, and use their CRM for better connections, communication, and data.
Wallets are the new email addresses
It's no secret that brands are losing data through their traditional channels. Big Tech companies are reigning in how much data you have access to, like Apple limiting cookies, and how brands now get an incomplete picture of their customers.
Additionally, as customers interact with web3, your brand is in the dark until you establish web3 CRM capability.
Web3 wallet addresses are unique identifiers for users on the blockchain. Their address is recorded when they purchase an asset or trigger activity on the chain. With Mojito, onchain and real-life interactions join together in one familiar experience.
As your customers interact with your brand and create or log in with their wallets, you can associate that with their customer profile.
When a customer logs in on your profile manager, they can add their web3 address, resulting in a holistic view of your customer.
This is a huge opportunity for first-party data. Your brand can get direct analytics from your activities through a verified, authentic process supported by onchain and offchain interactions.
Wallet addresses offer a more reliable and extensive way to gather data on customer behavior, help drive engagement, and make better growth decisions.
Cookies are the new NFTs
While traditional solutions suffer from increasingly limited access to cookies, web3 offers brands a bright and better future.
NFTs are non-fungible tokens. A non-fungible token is a digital asset recorded on a public decentralized ledger called a blockchain. It can be verifiably owned and impossible to forge.
NFTs make it possible for someone to digitally own an asset, which has changed the future of technology. But it also provides a unique opportunity for web3 CRMs, engagement, and data.
"NFTs: your ticket into a brand's action." — Michael Litman
Dynamic NFTs utilize live metadata to gather customer information and drive engagement.
Before solutions like Mojito's Dynamic NFT, non-fungible tokens didn't change. And why should they? People wanted a unique digital asset that would last forever and retain or grow in long-term value.
But as web3 matured, so did the perspective on NFTs.
What if the value of an NFT was change?
For example, artists began to experiment as they created NFTs. They would explain that the NFT would change and evolve. This in itself made it valuable and rose in popularity.
Brands would learn how to use it for data and supercharge engagement only a short time later. Traditionally, metadata remained static, but now Dynamic NFTs update metadata based on consumer behavior.
Brands can leverage metadata in many use cases:
Loyalty programs: Customers can join membership communities when they purchase a digital pass with Mojito's traditional, familiar checkout experience. Every time they interact with your brand across any first-party or third-party platform, like redeeming rewards or visiting an event, their token metadata is updated and fed back into your CRM.
Exclusive access: Brands can implement token gating, limiting access to your brand's NFT or memberships. Gate websites, apps, events, games, and more. When customers check in, their activity becomes trackable.
Enhanced membership and subscriptions: Dynamic NFTs allow brands to sell time-access passes with expiration dates. While owners can always retain the NFT, their subscription must be maintained for full access to benefits. Brands use the metadata to identify subscription holders and analyze their activity (while adding a new revenue stream).
Customer interactions: Brands use NFC-enabled spaces to connect customers with their Dynamic NFTs and events, physical checkout experiences, and more, intertwining digital and physical customer engagement. When someone redeems a reward by scanning a code or object, your brand can track that activity.
Web3 solutions like Mojito use webhooks to send data from third parties back into your CRM. Every time a user takes an action, Mojito sends that data to your CRM and vital tools. Your data is collected, verified, and authenticated in one place, on or offchain.
Mojito offers a cohesive relationship management infrastructure. You can leverage a complete picture of your customers through thousands of interactions involving physical triggers, third-party apps, web2 tools, and web3 activity. Customer actions across the web or in real life can be configured to work with your CRM.
You’ll be able to understand your customers better than ever and reward them for their engagement at a level that was impossible before.
Benefits of using a web3 CRM
You don’t have to worry about a bumpy or complex ride when you adopt a true web3 CRM.
You’ll have all the tools, resources, and tech stack integrations needed to make an enterprise solution for your customers that meets the standards of your brand.
Below are several benefits you can expect when you connect your web2 CRM to a web3 solution.
1. Bring web2 and web3 data together
Mojito facilitates web2.5, meaning instead of "switching" web experiences, brands and customers can use web2 and web3 with no learning curve or friction at all. All is encompassed in one familiar internet experience.
Users can pay with a credit card or crypto and interact with the online apps they've used all these years (as well as easily using web3 apps).
Mojito enables brands to collect and pull necessary data to understand their customers through all web iterations and experiences—all in one CRM solution.
They can use the full power of this web2 and web3 data for events, NFT collections, token gating (exclusive access based on ownership), and other digital ownership experiences.
2. Actionable data for better customer relationships
Every brand wants to improve its customer relationships. Still, as the internet becomes more fragmented, especially with the introduction of web3, improving service and keeping up with expectations will be much more difficult.
Web2 CRMs are not capable of putting all these actions and platforms together.
However, web3 CRM platforms improve customer relationships by incorporating off and onchain activities through a centralized database.
If brands adopt an enterprise web3 CRM, they can meet changing consumer needs and stand out in the market with better and improved relationships thanks to the tools and possibilities web3 offers.
3. Improved sales and marketing strategies
Now, more than ever, your sales, marketing, and customer service teams will have access to the most accurate and transparent data within multiple channels and communities, all in one place. Your CRM can include customer history, preferences, community management details, and more data points within web3.
You can use accurate and more abundant data to analyze customer behavior for improved decision-making. A suitable CRM can also help sales and marketing teams provide personalized messages based on their data, increasing conversions and other KPIs.
4. Next-level customer service
Not only does better, more current information help improve customer relationships but so does the level of service you can provide.
Your team can proactively resolve issues with real-time data collection (for example, tracking customer engagement and pinpointing areas of opportunity), which increases customer satisfaction.
Brands can go beyond positive experiences and create the best problem-solving processes and community-building opportunities for your customers.
5. Greater ROI potential
Web3 CRMs connect your stack, improving overall sales, marketing, and customer service and building long-term loyalty.
These critical benefits offer bigger ROI potential and future growth. By analyzing blockchain activity, brands can track the popularity of certain products, use blockchain-verified data to track inventory and invest in the areas customers are most interested in.
Web3 CRMs also open new revenue streams, like selling digital assets with NFTs. Brands can even test the reception of new physical products by selling limited sample releases with “NFT digital twins” (when a physical good comes with an NFT representation at purchase).
6. Strategic positioning
You can better position your company for the economic shift to the decentralized web with a web3 CRM.
For example, Mojito's web3 CRM also includes "web2.5" features for the transition.
Some customers won’t know how to navigate web3—they’ll want simplicity. Others will want every tool available to them. Web2.5 serves everyone. New users can pay with a credit card and have a user-friendly experience. At the same time, web3 adopters can take full advantage of innovation and opportunities with cryptocurrency payments and more.
Brands will serve web2 and web3 users for the internet's evolution, and they'll have a robust CRM foundation for the new economy.
