Non-fungible tokens, or NFTs, are evolving and their usage among mainstream audiences is still being adopted. This presents some interesting challenges for NFT projects, as it isn’t always clear what metrics are valuable and support growth in the future. It’s easy for NFT projects to get distracted by hype metrics that don’t actually deliver valuable information. This is why we want to explore some NFT marketplace metrics that do offer strong insights.
NFT Marketplaces enable companies to assert more control over their business model, taking the power of commerce and social engagement into their own hands. This is why it’s essential to measure key marketplace metrics that determine the health of a business. Projects determine the specific metrics to focus on. For example, a utility driven project should be less focused on secondary market trading volume than new sales. PFP projects on the other hand, should be considering their secondary sales and the royalties gained throughout that process.
These two simple examples highlight the fact that not all NFT projects are the same, and the important metrics to focus on will vary. Let’s take a deeper look at some of the most applicable metrics based on specific NFT business models.
Is Trading Volume Important?
There are two considerations when exploring metrics for PFP collections to focus on, community and secondary market sales. Owning a PFP from an NFT collection of this nature represents membership in a community. For the strongest projects, collectors have little interest in reselling their asset as it is their pass to the community. For these projects, trading volume might not be significant because collectors see so much value that they don’t want to consider selling.
On the other hand, collectibility leads to profitability and secondary market sales can boom, making trading volume an essential metric. These collections involve buying and selling NFTs for a profit, with users striving to acquire rare and valuable assets. Consequently, trading volume can serve as an indicator of the collection’s popularity among collectors and the NFT’s demand.
In contrast, for utility-driven NFT collections that aim to enable users to purchase, hold and utilize NFTs, trading volume holds relatively less significance. The primary objective of such collections is not to flip the NFTs for profit, but rather to leverage their functionality for specific use cases. These collections include game items, Saas products, and other utility-driven NFTs that serve a specific purpose.
For these types of NFT collections, NFT marketplace metrics such as user engagement, active usage, and retention become more pertinent than trading volume. The collection’s success is contingent on the user’s engagement and satisfaction with the NFT’s functionality, as well as their frequency of usage.
All of these considerations inform whether trading volume is a good metric to look at. Some projects thrive off of trading volume and seem to be successful due to massive amounts of transactions. Meanwhile, equally strong or greater projects succeed by convincing their collectors to hold for the long term benefits. It isn’t as simple as strong volume equating to strong collection, and traders should evaluate projects based on these variables.
NFT Floor Price
For limited edition collections that rely on secondary market sales, floor price is an important metric. An indicator of the lowest price point at which an NFT can be bought on the secondary market is the floor price.. This metric is useful for understanding the value of the NFTs in the collection and predicting the potential profits of collectors who hold the NFTs. Similar to trading volume on PFP collections, this metric isn’t always an indicator of success.
For utility-driven NFT collections that aim to enable users to purchase, hold, and use NFTs, floor price is not as pertinent a metric. The primary objective of these collections is to provide a functional asset for specific use cases, and as such, the focus should be on encouraging usage rather than holding onto the NFTs for their perceived value. In these cases, having no floor price can be considered a positive indicator, as it signifies that users are more interested in utilizing the NFTs than selling them on the secondary market.
Customer Lifetime Value
LTV is a measure of the revenue that a user generates for a product over their lifetime as a customer. For NFT collections, these NFT marketplace metrics can be used to evaluate the collection’s ability to retain users and generate revenue over an extended period. By focusing on LTV metrics, NFT collections can prioritize user engagement and retention, which is crucial for the success of utility-driven projects.
Stripe, a payment processing company, is an excellent example of a product that focuses on LTV metrics to achieve success. Stripe’s focus on LTV has enabled the company to prioritize user retention and engagement, resulting in a loyal customer base that generates significant revenue over time. Stripe achieves this by providing users with an easy-to-use platform, exceptional customer service, and a range of features that incentivize them to continue using the product.
Similarly, NFT collections can focus on LTV metrics by prioritizing user engagement, retention, and providing users with a compelling reason to continue using the product. For utility-driven projects, this may involve providing unique features and functionality that encourage users to utilize their NFTs over an extended period.
Monthly Active Users (MAUs)
MAUs is a metric that measures the number of unique users who engage with a product within a month, and it is an essential indicator of user engagement and retention.
MAUs are crucial as a metric, as it is used to assess the collection’s ability to retain users over an extended period. By focusing on MAUs metrics, NFT collections can prioritize user engagement and provide them with a compelling reason to continue using the product.
Alien Worlds, a blockchain-based metaverse that blends elements of gaming and DeFi, has achieved impressive growth by prioritizing monthly active users (MAUs). The platform’s strategy has centered on building a highly engaging and immersive gaming experience that encourages users to explore the vast and mysterious world of Alien Worlds. Through a combination of unique gameplay mechanics, NFT rewards, and community-driven events, Alien Worlds has been able to attract and retain a dedicated user base. By fostering a sense of ownership and community, Alien Worlds has created a loyal following that has helped to drive sustained growth and establish itself as a leading player in the rapidly evolving metaverse landscape.
Similarly, NFT collections can focus on MAUs metrics by prioritizing user engagement and providing users with a compelling reason to continue using the product. For utility-driven projects, this may involve providing users with unique features and functionalities that incentivize them to continue using their NFTs.
Overall, NFT projects should focus on the metrics that align with their business model to achieve success. By understanding the significance of key marketplace metrics, NFT collections can prioritize user engagement and retention, resulting in a loyal and engaged user base that drives revenue and long-term success.
PFP NFT collections that rely on secondary market sales should focus on trading volume and floor price metrics. On the other hand, utility-driven NFT projects should prioritize metrics like lifetime value (LTV) and monthly active users (MAUs).
Liteflow is helping businesses increase the power of their NFTs through pressure-tested and future-proof infrastructure and tooling. Deepen your exploration of the Liteflow NFT marketplace solution by applying for a dedicated demo environment tailored to your project, free to access for 30 days! At Liteflow, we bring the flexibility of building web3 projects according to your needs, while helping you own your revenue model for the internet’s next era.