Alternative revenue sources for NFT community creators

Transcript

GM GM Welcome Friends back to another episode of The web3 Academy podcast I am Kyle reedhead and today we are on part two of our three-part series of tokenizing communities with nfts if you have not listened to or watched the first episode uh of this three-part series then I highly recommend you do that first it's called R and a tease a sustainable business model for creators tokenizing communities you can find it on Spotify uh Apple podcast YouTube wherever you'd like check that out first because it is going to give you the foundational knowledge for what we're about to go into in this episode which is alternative Revenue sources for creators

so it's time for part two of our nft business model series you know guys tokenizing communities with nfts was really all the rage in 2020 and 2021 right communities raised millions of dollars and made headlines weekly the promise was to raise funds and build together as a community and share in the upside right that's really what we love here in web3 but now that the nft hype has settled most communities are realizing that much of their nft values were propped up by speculators and Traders Community Building doesn't seem to be as easy as we once thought either and many ft nft businesses realize that they don't really have any ongoing sources of revenue right some nft thought leaders have even gone

as far as to say that the nft business model is broken and I would completely agree with them and that's exactly why we're taking this time today to explore the sustainability of these business models now what's the goal from all this it's to find the model that creates the best experience and incentives for both the customer and the Creator and so what we want to do is write the playbook for future tokenized communities now in the first article or the first episode of the podcast here in the series we discussed how do we monetize communities in web 2 so talking about subscription models uh think of things like newsletters and that kind of style then we talked about you know we broke down the current playbook for tokenizing communities in web3 so what did we see

happen over in 2022 sorry in 2020 and 2021 um and then we explored the model of relying on nft royalties as a business model and this really is what most of these communities are doing that launched in 2020 and 2021 so if you haven't listened to that episode yet first go check that one out uh as it will be the foundational knowledge you need to explore these alternative business models we're going to talk and discuss today in this episode so let's get back into it but before we do a few things one right now just grab your phone or your you know laptop whatever you're listening on and just click follow or subscribe on Apple podcast on Spotify on YouTube um we would love that it helps us grow

it helps us share this information to others so please please please just give us a quick shout out there feel free to share us on Twitter wherever else too you can tag us at web3 Academy underscore we're trying to grow uh and we need you to help us do that so thank you so much all right before we get into this let's take a quick second to hear from our sponsors who make this show possible thank you lens protocol I'll see you friends in just a few seconds future of social media is here and that future lives in web 3 on top of lens protocol web 2 social platforms are broken and right for disruption you see the epicenter of social media is the creators and yet they are the most neglected web 2 platforms like Facebook Tick Tock and Instagram are all essentially robbing creators of their

worth creators are a new type of entrepreneur forming new types of businesses yet with web 2 platforms creators don't own their content or the profiles and that's their product in business instead they are tied to the platforms they choose to create on well just like how crypto is freeing us from Banks web3 is freeing us from these centralized platforms on lens protocol creators own their content own their profile and even their social graph and followers in the form of nfts this allows you to move freely from one social application to another with your content profile and followers moving along with you lens protocol enables self-soverty for your social graph and interoperability across the internet at web3 Academy we believe this is the future of Social and that's why we

partner with lens to ensure that the path of social media is heading in the right direction visit lens.xyz to learn more today okay welcome back alternative business models for creators with nft tokenized communities so in the first episode we established that it's not wise to rely solely on nft royalties as an ongoing Revenue stream they are okay and it can bring you Revenue but it's not something you want to rely on for a few reasons one because it's not enforceable on the blockchain and two it really is counterintuitive to what you're trying to build with your community so it doesn't really make sense now with that in mind it's important that we explore other models that could generate revenue for the Creator who's tokenizing their

community so the first is holding a percentage of the nft collection so one way for creators to generate additional Revenue through tokenized communities is by holding some of the nfts in a collection and selling them on an ongoing basis so long as your nfts hold value and there are more people wanting to join your community this can be a viable option to generate ongoing Revenue you could think of this as selling equity in your company as it rises in value which is a very common practice in traditional markets larva Labs the creators of crypto products me bits and auto glyphs is a really good example of this they held 10 of the crypto Punk Supply and launched with zero royalties as part of their kind of marketing strategy over time the price of crypto punks uh increased

exponentially I think their current floor places is around the 65 eth or something like that so you know it's raised a lot and larva Labs was able to sell some of their punks kind of along the way and that was their sort of Revenue stream in the end larva Labs ended up selling their entire business to yoga Labs which is the creators of board at Yacht Club uh and they had 500 crypto punks included in that multi-million dollar deal we don't know how much exactly it was but um we know it was in the Millions so again this business model relies heavily on the price of the nft is appreciating over time and it will exclude most people from joining your community because you're sort of relying on that price of your nft to be extremely high um it may also be a model which is sort

of frowned upon by the community as you end up increasing market supply which could cause the price entity to decrease but you can you can negate this by slowly selling your Holdings uh when the collection demand is high so it's not necessarily always going to impact the price and um You probably won't if you do it the right way now that said like any business as long as you continue to provide enough value to customers AKA your token holders there's no reason that this strategy should be a problem for your community keep in mind that this strategy is just essentially delaying revenues to a later date right you earn less at launch as you're selling fewer nfts in hopes that you can earn more later through price appreci appreciation in comparison nutritional world this

model is kind of like building a business and never really taking a salary instead you rely solely on selling shares to earn Revenue which isn't really ideal unless you have other Revenue sources of course I think this can definitely be a viable option to consider for Revenue but again I would incorporate it along with other revenue streams which we will discuss in this article so the next one number two is launching a second token one of the more common strategies of nft creators in 2020 and 2021 was to Simply launch a second token whether that's an nft or a fungible token uh it was quite common for example larva Labs launched crypto punks and then later launched me bits giving free first mint access to crypto punks and auto glyph holders as

well yoga Labs also did this uh you know with board up Yacht Club and then launching mutant Navy Yacht Club and then they followed these collections with with a fungible token apecoin and then even further launched metaverse land plots as nfts um many other businesses with NFC collections followed suit by launching a second collection however unfortunately other than the two above most of these didn't fare so well in terms of holding value not all of them some did do okay but many did not do so well here and the reason is that launching a second collection isn't as simple as selling an additional product to your community right it's best to think of each nft collection as a separate Community or depending on you know its purpose it's

really just a separate business and as we mentioned in the first episode in order for this endeavor to make Financial sense for the Creator and the token holders the Creator needs the nfts to appreciate meaning they need more buyers than sellers right now acquiring more buyers and sellers was fairly easy uh during the past speculative Mania all you really needed was some loud hype and you had so many speculators and Traders who was going to buy your stuff right but during a bear market right or just normal times not even necessarily A Bear Market but when we start to have less speculation and less Traders in this you know the Creator and his community they really need to build something of True Value to draw people into that community and enabling the collection of the nfts

to appreciate in price but here's where things get a bit tricky in my opinion managing and building a community or a business with you know online with 10 000 or however many token holders or strangers is an extremely difficult task I believe this isn't you know something that one Creator can successfully do on their own and really get to see it done in web3 there isn't really a precedent set here yet I know we all talk about building with community and it's going to be this amazing thing but there isn't really a lot of examples of showing that it actually works now I think it will work I'm just saying it's not as easy as most people are thinking yet many of these creators decided that their next best move was to launch another nft collection AKA another

Community or business right while this resulted in another large sum of money for some nft collections again I question how do they plan to generate sustainable Revenue here how do they expect to manage and build with two large communities of strangers at the exact same time to me this seems like nothing more than a pipe dream uh that's never really going to be realized and the problem with that is that so many projects launching a second token and failing is that people are going to end up losing money okay and this is going to take your community or your audience and piss them off and they're not going to want to be a part of your community anymore not only that but these failures mean that buyers will become smarter and no longer going to invest in communities that plan to launch a second token so

buyers tend to get smarter over time in any industry so this isn't to say that launching a second token isn't a good idea it's just that you should only launch a second token when you're ready to build a second business or Community right not be don't do it because your existing one needs more Revenue that's not a good way to do it think about if you started a business let's say it's an app or a SAS product or whatever and it wasn't doing so well you probably aren't going to go and launch another business to fund that one right that doesn't make a whole lot of sense that would be impossible you would now you just have two unsuccessful businesses that's what I'm seeing here with a lot of these uh second tokens now that being said there is one example in the web 3 space that stood out to me

we're launching a second token actually made sense in terms of a sustainable business model for the creators and their Community this is one of my big takeaways of this entire series after doing this deep dive and so this is number three here for alternative business models and this is nft gated memberships with tears okay and the the case study I've been talking about is actually something called Bakery Dow so the easiest way to explain the strategies to do so via an example so let's learn about one of my favorite web3 businesses business models to date so an anonymous content creator who goes by the name croissant on Twitter yes croissant he came up with a very interesting experiment with nft memberships again called Bakery Dao what croissant does is he shares great

content insights into the ethereum ecosystem which is how you know we've built a large following on Twitter he then decided to monetize their content via a newsletter and Discord with the attention of turning Their audience into more of a community and so they did this the web three-way rather than launching a web 2 paywall subscription which we covered in the first episode and how that works croissant decided to choose to launch an nft gated membership instead so in this scenario customers could choose between two nft tiers that provided different features and access so check this out tier two is sort of the entry level option okay so it's its own collection of nfts and what croissant did is included an ongoing 30-day subscription with basic access to

content in the newsletter and Discord community so you're purchasing an nft but attach that nft is actually a subscription that auto comes off of comes out of your wallet just like if you were to attach a credit card to you know your Netflix or Amazon Prime so this membership level similar to web 2 models has an unlimited Supply the benefit of using n of T rather than web 2 Commerce is that customers have the option to sell the remaining subscriptions rather than simply canceling and lose out on the rest of that month right plus the nft enables much better cross-platform interoperability which web 2 does not if someone was to purchase with their credit card my I don't know substack newsletter right now they can't I can't go and take that and give them certain

access into Discord as a result to that and then if they cancel I can't then remove them from the Discord same with Facebook groups Etc it's a big problem uh when we're trying to deal with communities cross-platform well that's one thing that nfts um fixes so nft memberships are going to be an amazing thing once the tech catches up to it so that's the first tier okay just your typical membership model as per usual web 2 it's just uh it's just done by an nft instead of you know the normal way now tier one in this premium option croissant gives holders VIP access across the newslettering community with no expiry okay so it's more of a you know VIP you get everything this time like a premium uh subscription kind of thing except it's

not a subscription this one is a one-time purchase now the really interesting part of tier one is it has a limited Supply and it has Revenue sharing which drives demand okay so basically the tier one holders okay they receive a percentage of revenue from all of the tier 2 purchases so now you have the typical you know I'm going to sell 10 000 or whatever nfts to my community to build with my community but what you've also done is launched another tier which is a subscription model so those who don't want to build they just want to consume they can buy this kind of lower cost tier two subscription model but then you have the tier ones with you where they can help

you build okay so what croissant has done here is sort of merge the web 2 and web3 business models okay this to me is super super cool should they succeed the tier one membership access May significantly in appreciate in value in any secondary sales you know if you want to attach royalties could go back to Croissant in the bakery dab so while the two-tier membership due to its Unlimited Supply will remain at a low monthly price and the great thing about that is you don't exclude your potential audience and Community they always have a product that they can purchase to be a part of your world okay if you only launch an nft that's 10 000 or some sort of limited Supply you really exclude a lot of people from being part of your

network being part of your world okay so that to me is really really cool this model combines the sort of scalability of web 2 membership model for both the Creator and the customer and also enables the Creator to use the magic of web 3 to tap into the two into the true potential of a community a very interesting business model one that I could see being very successful uh and sustainable for tokenized communities for those interested I will share more on this nft membership design in The Third Article of this series because I believe this is going to be a big big um uh business model in web 3 for creators now okay so those are the three alternative revenue streams and and there will be more in the future I'm sure but before we go any further I want

to talk about what does it really mean to tokenize and to build with your community we keep talking about this you know I've been bringing this up in the first series or sorry first episode now in the second one what does this really mean and why do we want to do this so providing ownership to your community is one of the great unlocks of web3 when humans own something our psychology around that thing changes significantly think about the way that you treat a car or a home that you own versus maybe one that you rent or even think about the way you treat uh you know your home versus a hotel or an Airbnb ownership brings responsibility and accountability probably you leave the lights on when you're in a hotel or in an Airbnb maybe you don't take your shoes off when you're in a hotel or

you're in an Airbnb right you kind of just you're not as clean you're not as careful right because you don't have that responsibility or accountability because you don't own it now take it a step further and include the potential for the item that you own to appreciate or earn Revenue right and now our psychology Alters even further again your home of course can appreciate Orchid earn Revenue if you want to rent it out right so now our psychology Alters even further and this really is the power of digital ownership this is why we want to tokenize communities we want our audience our community to feel part of the thing that we are building and that's really what happens here so building with your community unlocks the power that I just spoke about to thousands of passionate members who

would consume engage and would probably pay for your content even without the ownership or the incentive right it takes a passive Community or audience and turns them into active contributors now their contributions could be in the form of marketing could be sales could be strategy development feedback whatever it can be so many things the opportunities here are truly endless and this is the reason why creators are so excited to tokenize Their audience and Community for the first time we can now join forces with our community and customer base to further the mission of our business as I mentioned in the first episode once you tokenize your community you then have to decide what do you want to do with the funds that you would raise right you can either in the three

options that I gave is you can share a percentage of those funds with the community you can give it all to the community or you could take it off from yourself right so once you have that Community what do you want to do with them do you want to fund them to get going um do you just want to let them go on their own now and see what happens um or do you want to do some sort of share model that's probably the one that I would recommend but again it really depends so there are lots of decisions for a Creator to decide when tokenizing a community you know what's the proper percent above your nft what business models should you implement should you share your mint Revenue you know and so much more and so the final episode of this three-part series gonna dive deeper

into all those questions and look to answer them really what we're going to build here in the third episode is an ultimate guide for creators to tokenize communities with nfts so we're going to put everything we talked about number one and two here in this episode and we're going to combine and go what's the best way to do all of this and so this can really be the playbook for creators who either want to you know launch a dow with their Community they want to build up their Community or they want to continue to be a content creator and you know sell a membership or sell their products but then have some of their community help them do so so that's really we're gonna kind of break down that model in the final one but hopefully understanding some of these different Revenue stream models understanding the idea of you know why

you even want to tokenize with your community hopefully this helps you have a better idea of where where to go when launching nfts okay thank you Webster Academy community so much for listening to you know now the one and two episodes of this three-part series I will see you next week when we will dive into the final piece friends it's been so much fun it's so great to learn from all of you we've been interacting with many of you on Twitter and in our Discord and um and it helps us sort of come up with these ideas and you know be able to Think Through the thoughts and experiments that we're doing as well so thank you all for participating and engaging with web3 academy uh we

absolutely love all of you and it's so great to to engage with you so thank you and I will see you next week friends thank you for listening to web3 Academy we hope this helps you along your web 3 Journey if it does please share this episode And subscribe so you don't miss the next one nothing in this podcast was Financial advice crypto and web 3 can be risky you can literally lose it all in fact if you invest on account of what we say you probably will lose it all so don't do that in all honesty the point of this podcast is to remove the noise of markets and price and focus on utility and implementation anyway so you should not take any of this as Financial advice thank you friends and see you in the next one