The News: Instagram started testing NFTs with select creators this week. The social network will initially support NFTs on Ethereum and Polygon, with plans to expand to Flow and Solana later in the year. Users will be able to connect their MetaMask, Rainbow, and Trust Wallet wallets at launch. Watch the announcement from Head of Instagram, Adam Mosseri, here.
Instagram Starts Testing NFTs, The Latest Big Platform to Do So
Analyst Take: Instagram is the latest among big platforms to start testing NFTs. It’s a harbinger of more to come.
Instagram is starting with a select number of creators who will be able to share their NFTs in Instagram’s main feed, Stories, and messages. Different than all the content natively posted on Instagram, NFT owners retain all the rights – including distribution. That’s a big shift for Instagram and Meta.
It’s a shift they’re tackling in good company. Twitter now allows users to use NFTs as their profile pictures, giving them a unique hexagonal shape to stand out from regular pictures. Substack allows users to embed NFTs in their letters. Shopify enables merchants to sell NFTs and use them to gate access to exclusive merchandise.
While interesting to see, it’s also important to note that all of this creates tension for large, centralized platforms.
NFTs Create Tension for Large, Centralized Platforms
NFTs and Web3 generally are about returning control and ownership back to the user. Centralized platforms, by their very design, centralize control with a single entity. The contrast between the two creates tension.
It’s a tension that Instagram head Adam Mosseri openly acknowledged in his announcement. That’s why they’re starting small, he explained, to learn from the first creators.
Art and profile pictures are the primary use cases for NFTs today. Profile pictures in particular dually create a fit in and a stand out opportunity – fit in alongside the other NFT holders and stand out because yours is a little different. It creates a powerful sense of self, where a user is part of an exclusive group, but can still retain his/her/their identity.
Loyalty is one application here, and the opportunity to engage fans in a whole new way. Ultimately, loyalty grows into commerce, which of course presents a much bigger opportunity.
NFTs Start with Creators and Expand to Commerce
U.S. e-Commerce sales were almost $900 billion in 2021, a 14% increase over the previous year. Everything sold online today is mostly accessible to anyone who has an internet connection and a card to swipe. While that’s powerful, there’s an almost untapped online market for goods that aren’t generally accessible.
This is a prime example of Veblen goods, which are goods for which demand increases as the price increases. We often recognize them as goods we use to signal success in life. Think designer handbags, expensive watches, and “Supreme” branded everything. The fact that we can have them – and someone else can’t – is precisely what makes them valuable.
Shopify has just begun to open the door to the possibilities on the NFT front with tokengated commerce, a restricted part of an online store only open to specified NFT holders. It’s a way of granting exclusivity in an otherwise generally accessible store, like a VIP section at a sporting event.
I expect the social networks to quickly follow with sub-communities gated by NFTs and embedded storefronts exclusive to NFT super-fan holders that allow creators to connect directly with the most enthusiastic fans.
Instagram is starting with NFTs in Stories and in user feeds, but this ultimately comes back to a deeply human desire – the urge to both fit in and stand out. NFTs appear to be a powerful tool to unlock this desire and the centralized platforms are well positioned to monetize it.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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Jared is an Analyst in Residence at Futurum Research, where he helps guide our practice in all things Web3, the Metaverse, and cryptocurrencies so as to help business leaders understand how they work, why they matter, and how they can not only get involved, but become market leaders along the way.
Jared previously co-founded and served as President and Board Member of Triple Point Liquidity, a blockchain-based fintech startup serving alternative asset managers, their investors, and fund administrators. Prior to Triple Point, he held multiple roles at IBM including leading Digital Assets at IBM Blockchain, leading corporate development for Industry Platforms, and founding Watson Risk & Compliance.
Jared is author and podcast co-host at Fat Tailed Thoughts and serves as a trustee for The Williams School.
Jared holds an AB from Dartmouth College.