Review of the Azuki rollover incident: time and patience are the most scarce resources of the brand

Author: RUBY WANG

Related interests: The author holds BEANZ and Azuki Elemental series NFTs, and many other small picture NFTs. This article attempts to neutrally discuss project operations and industry development, and does not constitute any investment advice, DYOR.

Brand is slow，but web3 is rushed

Time and patience are among the most important resources in building a brand.

Unfortunately, in web3, these two can be described as luxury goods among scarce resources.

If you don't experience it yourself, it's hard to imagine that in less than a week, everyone's emotions about a specific project can change from a hot summer to a cold winter.

Just last weekend, the timeline on Twitter was full of joyful sharing of Azuki’s trip to Las Vegas. I also posted my own thoughts. It is indeed the best NFT offline event that many people have participated in. (For more information, please see Darter's article). Immediately after June 27, the launch of the new Azuki Elemental series did not meet the expectations of the holders. With the addition of many eye-catching Fuds, the reviews took a 180-degree turn.

Azuki officials responded urgently within a day, but they still couldn’t stop the anticipation of destruction from spreading, and the floor prices of Azuki and BEANZ dropped a lot.

Summarize the main FUD reasons for the launch of the Elemental series:

• EXTREMELY HIGH EXPECTATIONS

In the past three quarters, Azuki was one of the very few pfp projects whose prices rose steadily in the bear market. The activity in Las Vegas brought everyone's emotions and hype to a high point again.

• Mismatch between official announcement and expectation

The 2-minute animated short film announced at the Follow The Rabbit event is of high quality, and the character's style of painting is somewhat different from the previous Azuki core series. Therefore, when Elemental was announced and the style was so close to the previous style, many holders were stunned. There was no sneak peak before the opening of the picture, and after the opening of the picture, the official did not explain the relationship between this series and the characters in the animated short film. The direction of the story also expanded the dissatisfaction to a certain extent.

• Dilution and total value reduction felt by OG azuki holder

This is actually the most critical question. The original Azuki with a total volume of 10K was positioned as a high-end product, and Elemental sold 20,000 at once, and the human category in the middle was difficult to distinguish from the previous Azuki OG series. This has lowered the threshold for new entry into Azuki to a certain extent. You can buy a previous 10+E avatar at a price of about 2E. There may be more traits and details, and many old red bean holders are sad; not to mention the OG series and BEANZ. Both fell after the release of the new series.

Wale, a researcher of Azuki, analyzed FUD in a tweet before. If the source of FUD is from the inside out, FUD starting from the core of the community is actually the most harmful to the project. Unfortunately, even if they got the airdrop, they still mint the new project. This time the turmoil has the biggest opinions, and many of the people who feel the most hurt are OG Azuki holders.

There are also a lot of meme pictures and joke posts:

• Technical Execution Gap

Azuki's past mints and big events have always had a high level of quality execution. This time, not only the sale time was short (only 10 minutes in the first two stages), but also there was a website traffic limitation problem, which caused some holders of Azuki and BEANZ to be unable to mint to Elemental in the first two stages. including myself. Waited for 15 minutes, watched as it was sold out and couldn't buy it🥺.

Then there was a new series. Due to source data problems, some pictures were found to be exactly the same, and later the official updated it.

Relatively large misjudgment and mechanism design

At 6:00 p.m. on 6.29 U.S. time, Azuki officially held a community voice dialogue on discord. Several main founders and core teams attended. A total of more than 1,800 people participated. The official communicated about the release and some future plans.

No project will suddenly want to lift a rock and shoot itself in the foot after working hard for a year and a half, especially in the bear market environment of the past year, and after the big event that has just been successfully held for half a year. Of course, this is my opinion.

If you insist that the team is here to cut leeks, it's all a scam or rug, you don't need to read any further.

If you are curious why a player who has always played steadily has an accident this time, the following only represents my judgment, and this article does not make any investment advice.

The problem this time, in addition to technical implementation, my understanding is mainly the deviation between the goal and the strategy, and a relatively large judgment error.

First, Azuki hopes to expand the product line and introduce more newcomers into the community, which is a relatively obvious intention.

As a web3 IP or brand, the (digital) product line it can provide is still weak. From Azuki-BEANZ-BOBU, the price gap in the middle is too wide.

Second, at this stage, they also see the high threshold of onboard mass, and choose more strategies to penetrate existing web3 users.

This could be a bigger problem. If pfp avatars are used as a product, the current audience is mainly in web3. I guess they think that there is a relatively large space between 2-3E because there are some people who like Azuki style, and they can expand their market share. Under the current bear market, it is a pity that not only are there no newcomers, but old people are also being lost. This move neither created value for the industry, nor gave hope to many tired players, so it was unacceptable from an emotional level.

In the past, Azuki's slogan was "dope shit only" (only do the coolest), which means always doing groundbreaking things and doing things in new ways. From ERC-721A to PBT, the community and the market have expectations. Occupy an existing market? It's a business, but it's really not cool.

Third, judging from the feedback received in the past, they believe that there are many people who love Azuki IP and have greater demand. At the same time, for the consistency of brand communication and confidence in the original art, I want to keep this style.

The consistency of the brand vision is understandable, but this time the original holder's dilution of scarcity and the reduction of the social level of conspicuousness are obviously unexpected to the team. They also mentioned in the community voice that everyone thought that the difference between Provenance and blockchain can be guaranteed from the contract level on the chain. At the level of the graph, it can be seen that they want more traits, clothing types and younger efforts, all of which are prepared for new user groups. However, it obviously underestimated the market, the feelings of the main OG holders, and missed the communication window in advance.

The Real Challenge: Scaling PFP from Project to Business to Brand

Returning to rationality, this Elemental launch mistake actually exposed a long-standing problem: How can PFP NFT surpass NFT projects to develop business?

If the project hopes to build a decentralized IP and brand in the long run (this time the community voice Azuki also mentioned this is their goal again), what kind of challenges and opportunities do they face?

In the wave of NFT projects that will appear from 2021 to 2022, they actually "enjoy" the dividends of web3. But at the same time, when the bear market is about to develop further, everyone will face the other side of this double-edged sword.

The following part of the content refers to the article "Crypto-Native NFT IP: A New Era For ConsumerBrands" by the organization 1KX (also an investor of Pudgy Penguins), and combined with my own thinking, I will talk about the opportunities and challenges of web3 for IP.

What needs to be explained is that the industry is indeed in a very early stage, and it is more about the ordering and sorting out of some ideas, hoping to discuss with those who want to build.

1. Advantages of web3 for building brand & IP

Content Development

You know, making content is very expensive, from animation, movies to games, if you understand the production cycle and cost, plus its very low success rate. So before the establishment of a high-quality IP, the first cold start of content production is very difficult, and the requirements for the team are very high.

NFT provides an equal opportunity to allow independent artists and independent teams to participate in and develop IP creation without the restrictions of large companies and studios, and build a global IP brand from scratch faster.

By issuing NFT first, testing the stickiness and audience of IP, and then iterating on a wider range of products and experiences, web3 IP is more efficient in capital utilization than web2 IP. Low initial head count, low capital cost, fast iteration, and low time cost.

Just like the supply chain of clothing, in the early years it was in the form of mass production of clothing, and now there are small order and quick return models like Zara and Shein, which have improved the production efficiency and product richness of the entire fashion category.

Content Distribution

If the NFT community is well established, it will be easier to obtain communicators than web2 IP. This point, many holders of web3 are relatively easy to feel. Both Frank and Kevin, the founders of Degods and Moonbirds, mentioned in an interview that NFT holders are more like brand advocates and communicators (affiliates). Including the emergence of de-id is also based on this kind of thinking.

1KX’s research report mentioned, “We believe that when consumers have ownership of their assets in a cooperative and mutually beneficial environment, they will be motivated to promote intellectual property rights, because this becomes a place where holders feel valued, and ultimately Leads to deep loyalty, commitment and drive to promote."

Daniel, the new CEO of Yuga Labs and a former Blizzard executive, also expressed the importance of low marketing cost promotion through close community tap water communication in the game industry:

"No matter how good your game is, if influencers don't give you a high evaluation on social media, your game will hardly have a future; from talking about you, to becoming your spokesperson, to 'want to participate in it', the degree of engagement Determine how far content can go”

Content production and benefit distribution

In the new era, the relationship between young people and brands is no longer like the previous one-way interaction from top to bottom. They are eager to participate in the IP and brand building they love, and look forward to a more equal and two-way content production form and become a part of the brand.

The potential benefit brought by web3 is that contributors who participate in content construction can enjoy the upside of the brand, and participate in the governance of important decisions through tokens and DAO. Brand fans who hold NFT can also obtain better product and service rights.

The typical beneficiaries of NFT IP distribution are now shifting from centralized companies to holders, community members and creators, which increases creativity, collaboration and distribution output.

For example, Azuki’s sub-community construction, rich secondary innovation communication, Yuga Labs’ Apecoin DAO, and Nouns’ DAO are all advanced in terms of decentralized brand co-creation and governance, and they continue to innovate in this part.

2. The dilemma of expanding NFT projects

Of course, what we have to talk about is that NFT is the blessing of these web3 native brands, and to a certain extent is also the bottleneck and curse at this stage.

The difficulties mainly come from:

Unmet High Expectations

Zeneca's recent opinion is something I agree with:

"About the PFP program, the expanding collection, the profit-driven company, and the holder community of thousands of unique human beings with different price points of entry and different goals and aspirations...

The problem is that it's completely impossible to please everyone all the time.

We are playing the unattainable game, with unattainable expectations.

Meeting expectations is one of the hardest things to do in this field, and in the world at large, because you can only do what you can to control what other people expect of you. "

Instant liquidity, uninterrupted price fluctuations, holders entering at different time points and price points, and a complete 24✖️7 uninterrupted open market are factors beyond the control of the project party. The current financial nature of NFTs has resulted in NFT IP projects essentially inheriting the shortcomings of publicly traded companies, including high expectations from day one.

When you can't meet everyone's expectations, it is critical to choose a core long-term user group that can keep the business alive.

PMF discovers dilemma

However, who are these users, and how to better screen them to avoid misjudgment? Product-market fit is very critical to startups, and the market, even our community, is always shrouded in a "veil of mystery".

Due to the financial nature, it is difficult for you to distinguish the motivation of users to buy, whether they love art itself, love the community, or bet on the benefits and potential of the project. Did he buy the IP for himself to create and do business based on it, or did he really think that this IP represented his identity? Maybe everyone has these motivations, but the weight of each part is different.

The industry used to think that everyone was willing to spend tens of thousands or hundreds of thousands of dollars to buy a small picture, which was a symbol of high-end users; but unfortunately, I think that a person who expects to use this asset to make money in an environment that does not create value, such a User value can be negative.

9gagceo of Memeland says "People want more value and don't want to pay royalties; when they say I finally bought my forever avatar, next week they'll sell it for 0.1 gain..."

Is there any truth in the world!

It is difficult for projects to truly assess product market fit due to the distraction of financial incentives for holders.

To create a product based on an NFT IP, whether it is a virtual or a physical product, should Ta's target audience be the original holder or a completely different group of people?

In this matter, Pudgy Penguins made a good start. Their toy products are aimed at a completely different group of people other than their own holders, more for children and teenagers, to be accepted by mass consumers in a friendly and affordable way, and to share this part of the value with the original owner in the form of authorization Participants do benefit distribution (interpretation of the fat penguin I wrote before).

There is no unified playbook at this stage

In the case of Azuki, BEANZ may be more popular and cute, but the development and product establishment of Azuki's character IP is not so simple.

If the brand itself is positioned as a luxury brand, more factors need to be considered in order to maintain the experience and expand the user group. To use an inappropriate metaphor, would people who buy Chanel and Hermès bags hope to see many people carrying them around? Scarcity itself is an attraction worth showing off.

But in any case, sustainable and scalable products and experiences should be pursued by the project for a long-term foothold, even if it is mainly aimed at the existing holder group. Trendy clothing, jewelry, clocks, fashion games or digital experience props?

The key to getting out of the predicament is to choose a category that matches the "real consumer group", create a good product line, provide practicality other than financial speculation, and establish category advantages.

write at the end

Everyone will have their own favorite brands in the process of growing up. Excellent products are one aspect, while emotional resonance and the expression of self-identity are another aspect that a brand bestows on consumers.

According to my own feelings, I am an iron fan of lululemon, the only clothing brand that has been buying every year in recent years. How many years did it take to establish such a high-end sports lifestyle brand? I looked it up and the answer was 25 years.

Just last month, Lululemon officially celebrated their 10th anniversary in mainland China.

Ten years from now, if we can start to see web3 brands reach more people, one thing is for sure:

PFP projects need to create good products that can be scaled.

Ten years later, how many current NFT holders are still fans, consumers, investors or builders of this content IP?

Frankly, I'm curious too. Hope to see their success and wait and see!