NFT Projects are Sacrificing Revenue & Customer Experience

Creators across the Web3 space are up in arms over the demise of creator royalties. However, we believe this challenge can be alleviated with some perspective. The marketplaces eliminating royalties were never the ideal ecosystems for NFT projects aiming to drive revenue and deliver an incredible customer experience. Every project should look at dedicated NFT marketplaces, enabling them to own their Web3 storefront and control business models in a much more meaningful way. 

NFT Marketplaces were some of the biggest beneficiaries of NFT sales and trading volume over the last few years. These platforms accumulate fees with each and every transaction and drive the experience for most users in the space. OpenSea alone has surpassed $33 billion in trading volume from nearly 2.5 million traders. That is $825 million in revenue generated from a 2.5% transaction fee. 

What if those fees were retained by the brands and communities that generated them? What if Web3 companies took customer experience into their own hands and built NFT marketplaces around their unique business model?

The Great NFT Marketplace Myth

Far too many NFT collections are satisfied with being listed on major marketplaces. This is no surprise, as currently, most of the users in the space flock to these ecosystems to research, engage, and trade. But why would Web3 companies stop there? There are opportunities to elevate your brand and collection by seizing control with a dedicated marketplace. 

There are many questions about this approach, including the simple question of how to create an NFT marketplace. Luckily, Web3 infrastructure exists to simplify this process and help projects become more self-sustainable. An analogous strategy can be found in Web2 ecommerce, in which creators develop their own dedicated web store outside of walled gardens like Amazon and Facebook. 

While the current norm is to list on one or more of the big marketplaces, this trend will change. Niche, branded marketplaces will rise in popularity, as projects begin to see the enormous power these platforms hold regarding revenue and customer experience. 

Projects can continue to list their collections across many marketplaces, but not limit themselves to one or two large platforms. Consider this your channel strategy, opening access to many potential customers across platforms. While these large platforms can still be utilized to your advantage, remember they do not help generate volume, this is only something that your project is doing. They can certainly help you generate revenue through partnerships or if your collection starts to “trend” on the platform, but ultimately this depends on your project, not the marketplace. 

Stop Losing NFT Revenue

The truth is simple… 3rd party NFT marketplaces are taking your revenue, and this is unnecessary. Many people are outspoken about platforms eliminating creator royalties, but few are taking measures into their own hands. Owning your marketplace means more control over revenue streams. This is true not only for the company itself, but the community as well, which can share in the profit thanks to community wallet functionality. 

Platform fees are one of the most direct ways for a project to capture revenue. While the major marketplaces eat up all of these fees for themselves, clever projects are deploying marketplaces that protect these fees for the creators while ensuring their community is considered. Let’s look at Doodles NFT as an example. With the 2.5% platform fee, Doodles sacrificed nearly $5 million in revenue to OpenSea. The collection’s total volume traded on OpenSea is 152,460 ETH, or just over $197,000 million to date (at ETH’s current value of $1,293). 

It was Doodles and collectors that built the brand, yet a centralized platform easily siphoned significant revenue from the creators and community. These external marketplaces have no reason to care for one community over another, delivering an identical process for all collections. If Doodles, or any other NFT collection deployed a dedicated NFT marketplace, they could not only increase revenue, but reward their community by facilitating a profit share. 

Dedicated NFT marketplaces empower projects to activate their community by sharing some of this profit. This can be achieved through a community wallet mechanism built into a project’s marketplace to reward active members for their contributions. The community wallet collects a percentage of platform fees, which are then paid out to members instead of solely rewarding founders. This tactic is great for marketing and user engagement, and can open access to revenue in the process. 

Improving Web3 Customer Experience

Why would a business prefer to send their customers away from their shop to engage with their products? This question is especially relevant for web-based businesses that rely on website traffic, engagement, and great user experiences to drive revenue. The global competition for users is intense, and sending your users to third-party platforms is a sure way to fall behind. 

Web3 companies should aim for engagement within their own ecosystem, delivering brand experiences that are honed to your audience. Otherwise, the user experience is out of your control. This leaves customers with no choice but to follow the path they are forced into with 3rd party applications. Not only does this reduce engagement, but it puts brand reputation and customer experience at risk. 

Web3 already has user experience challenges, limiting adoption and slowing user onboarding. Only 25% of adults in the US know what an NFT is, and less than 3% own one. While these statistics are bound to increase over the next few years, projects are in a position to help drive adoption by catering user experience to their community. Leaving user experience in the hands of a few big platforms exposes a missed opportunity for control over personalization and optimization. 

Running a dedicated NFT marketplace opens a world of potential for unique user experiences. From the branding, to the features, to the control of access, projects can cultivate platform experiences that speak to their audience and incentivize activity. This way, your team can follow that thread when platform data demonstrates where dropoff occurs or what features are generating high engagement. This is how projects can begin to hone experience as a key differentiator and address real market needs with a dedicated platform. 

At the end of the day every business wants control over their business model. No one wants to rely on unnecessary third-parties, especially when it means lost revenue and poor customer experience. When clarity forms around this topic, the path to a dedicated NFT marketplace becomes crystal clear. Marketplaces represent an underutilized opportunity for Web3 companies to open new revenue streams and deliver a memorable experience to users.  As we move deeper and deeper into Web3, long term success will be increasingly driven by these factors, putting marketplaces at the center of many business models. 
At Liteflow, we aim to empower NFT brands and creators to seize their business model with end-to-end and modular Web3 infrastructure. We bring the flexibility of building Web3 projects according to your specific needs. If you’d like to explore how to bring your ideas to life, reach out to us at Liteflow, and schedule a call with one of our experts.