If you weren't taking the metaverse and the digital ownership of goods seriously, now might be a good time to start. The Bored Ape Yacht Club has formed a partnership with Adidas (ADDD.F 1.56%) (ADDYY 3.40%) and now Nike (NKE 3.07%) is acquiring RTFKT, a "developer of custom sneakers designed for video game enthusiasts."
Non-fungible tokens, or NFTs, are a new way to have digital ownership of a digital good in the world of cryptocurrency. In the case of Nike and RTFKT, their NFTs live on the Ethereum (ETH 5.66%) blockchain and can also give holders access to physical goods or digital goods for augmented reality or the "metaverse," depending on the project. The NFT itself is a record of ownership of a specific item, which can't be replaced like a real-world pair of shoes (which are fungible).
Image source: Nike.
Athletic shoe companies have always been at the forefront of culture, and they're seeing the culture moving online to digital goods. If Nike and Adidas have their way, maybe your next pair of sneakers will be wearable in the metaverse.
Nike's big splash
RTFKT is arguably one of the most forward-thinking companies in the non-fungible token, or NFT, and metaverse world right now. The company's Clone X project revealed itself this week, and trading of the NFT has already exceeded $100 million. And there were 20,000 avatars sold with the low end of prices exceeding $20,000.
There are other collections from RTFKT, but this is just the start of the digital sales for the company, which is "metaverse ready" and has digital wearables and some augmented reality filters already built. In time, the company aims to build digital goods and locations that people will value, and based on current prices the trends seem to be strong. Now, this digital development will live under the Nike brand.
Following Adidas' BAYC move
In early December, Adidas made a big splash by partnering with the Bored Ape Yacht Club on an unknown metaverse project. The project includes Punks Comic and Gmoney, although we don't know many details yet. Adidas announced:
Today we leap Into The Metaverse with @BoredApeYC, @gmoneyNFT & @punkscomic.
-- adidas Originals (@adidasoriginals) Dec. 2, 2021
It's time to enter a world of limitless possibilities.https://t.co/LmgtrRn20c pic.twitter.com/40kU8tayrS
Last week, that project came to fruition with the Into the Metaverse drop on Friday, which brought in $23.5 million in revenue for the project and $15.5 million for Adidas. Holders of the NFT will get access to exclusive Adidas gear (for an additional cost).
Clearly, shoe brands are trying to stay with the popular culture by getting into NFTs. For Adidas and Nike, Bored Ape Yacht Club and RTFKT were their respective bets on the industry.
More to come
Shoes and apparel brands have always been early movers in defining, or following, the culture. In the world of cryptocurrency and NFTs, projects like the Bored Ape Yacht Club and RTFKT are defining the culture, and partnerships like this could be beneficial to both parties.
For both companies, the financial impact may be small today but is likely to grow over time. Even successful NFT mints like Into the Metaverse or CloneX make tens of millions of dollars, which is still a relatively small amount of money for these companies. But it's the long-term growth trajectory of NFTs that these companies have in mind.
NKE Revenue (TTM) data by YCharts
I wouldn't be surprised to see more partnerships between NFT projects and brands. Every company is trying to get exposure and become part of a community, which is what NFTs are all about. Think of this as the Jordan sponsorship, except instead of paying Michael Jordan tens of millions of dollars each year Nike gets paid to sell NFTs that build brand loyalty.
For NFT communities and holders, brands can provide the funding that generate value for projects in the metaverse or gaming long-term. This is how they will build value over time.
We don't know the exact terms of Nike's acquisition of RTFKT, but this could be a pivotal moment in big brands taking NFTs and the metaverse seriously. We are seeing that buyers are valuing these digital assets. Now it's just a matter of building long-term value, which a company like Nike can spend millions of dollars doing.
