Future or fad: will headless brands rewrite the book on branding?

Tyler Scharf
July 28, 2023
“Brands will increasingly need to allow their fans to help build them”— Rosalind Bull, brand strategist

The blockchain ecosystem is built on decentralisation, and a new form of brands are getting built on top. Tyler Scharf explores the emergence of decentralised ‘headless’ brands, how traditional brands like adidas and Nike are getting involved, and whether this new model of branding is future or fad.

Marketers will regularly compare a brand to a living organism. A brand is a voice, a brand is a promise, a brand is an identity. Brands are curious, elusive creatures that have evolved with humanity as each new technological primitive has transformed our value systems.

It then appears curious why so called ‘headless brands’ are emerging in the blockchain ecosystem. Headless brands remain driven by a clear narrative, but they are implemented by the community from below, rather than executives at the top. If brands are living organisms, why are we taking off their heads? Is this yet another novel crypto experiment that will inevitably fail? Can headless brands succeed where living organisms would fall?

The primary value proposition behind a headless brand is that brand assets can be decentralised for shared ownership of intellectual property (IP). In other words, 10,000 people could own a piece of IP to have the right to make content with Mickey Mouse, rather than just one organisation: Disney. This provides an opportunity for a mutual relationship between brands and the communities which follow them. Fans could leverage a brand’s IP to build their own initiatives, while brands gain increased distribution as more and more people see those assets. Think of a McDonald’s franchise, but you can put the Golden Arches on much more than just a restaurant.

Headless brands are emerging in the NFT ecosystem.

It could be argued that this is the logical next step for brands, whose recent decades have been characterised by an era of seamless supply chains. Seizing advantage, entrepreneurs segmented consumer needs into virtually every niche imaginable, imported products from around the world and imparted their own branding on top.

Meanwhile, fresh social media platforms (Instagram launched in 2010) augmented the twin instincts of individuality and creativity as rapidly-spreading smartphones brought news feeds into everyone’s pockets. Suddenly, there were a lot of niches to fill. Dropshipping became the internet’s favourite get-rich-quick scheme as the internet became bombarded with ads explaining how to make six-figures on Shopify, which had reduced opening your own ecommerce store to a matter of clicks.

Then came NFTs. Instead of having to monetise indirectly through endorsements and spinoff products, NFTs give brand creators the tools to transform their social value into economic value directly. This new paradigm gave rise to the de-collab model, in which NFT collections grant IP brand rights to their community members, letting them leverage the brand reputation of their broader communities in aid of their own creative initiatives.

“Brands will need to let their fans contribute.”

— Rosalind Bull, brand strategist

“This unlocks the next age: the age of the builder in the broadest sense,” says Rosalind Bull, who led brand strategy for leading blockchain companies like Coinbase and ConsenSys. “Customers are also contributors. Brands will increasingly need to let their fans contribute and help build them.”

On April 9th, 2022, Andy Nguyen launched his restaurant Bored & Hungry to a 1,500 strong crowd queuing up for a smashburger. With a brand built on the Board Ape Yacht Club, Nguyen catapulted himself into the hearts and minds of NFT enthusiasts, all for the cost of $268,000 on a Bored Ape.

Andy Nguyen launched his restaurant Bored & Hungry built on the Board Ape Yacht Club brand. (Image: Insider)

That said, the difference between a digital asset and a big marketing outlay is that the former is not a one-time spend. Unlike a billboard, Nguyen’s Ape will last forever. “At adidas,” explains Ben Mayor White, who led the German company’s iconic web3 activation, “we acquired Indigo Hertz, adidas’s Bored Ape, which was the first time the brand had acquired a digital asset.”

“The result could be seen as a net positive marketing spend, which never happens: the company acquired a digital asset that brought in revenue,” he emphasises, adding that the Ape is no less effective as a traditional brand figurehead either. “Adidas features Indigo Hertz on products, in adverts, and as a comms tool; normally that would be a cost to an athlete or celebrity. It was a one-time payment for a very agreeable star for the brand.”

The ‘headless’ aspect of the brand composition lies in the freedom to distribute the brand IP in ways their owners see fit. “Brands will need to be much more composable in the future, whilst being clear on what’s fixed about their brand, and what’s flexible for people to play with,” Rosalind emphasises, adding that the balance is a difficult one to strike. “It still has to look like a collection. Community ownership greater than the individual parts is what incentivises contribution.”

For now, NFT brands have largely kept a strong influence over the creative direction, driving the core narrative of what the brand represents. Meanwhile, creators and entrepreneurs have happily used a brand’s existing reputation to spring into cultural relevance; the Yacht Club comprises initiatives from consumer products and Nguyen’s restaurant to festivals and music. The brand is “the muscle behind the hive brain of the community” as Luca Netz, CEO of NFT brand Pudgy Penguins, noted at the NFT Paris conference earlier this year.

However, start unpacking the implications of this association between brand and community initiatives, and it’s not so simple beneath the surface. Brian L Frye, a copyright law professor at the University of Kentucky, warns that NFT brands risk diluting the brand value over time. “It’s possible to get the same brand being used for multiple businesses in the same space.”

On the other hand, Thomas Pan, an NFT marketing consultant, notes that this interplay could also underpin a positive marketing platform for brands that want to spread across the consumer ecosystem. “Early examples of this are already happening,” he says, noting that “Nike and adidas are providing broad IP and commercial rights for their collections whilst protecting the core brand (for example, you wouldn’t be allowed to work with Puma).”

adidas, like Nike, have pushed extensively into digital assets, whilst offering broad IP rights designed to augment their existing brand.

As for the risk of brand dilution, Ben suggests that those kinds of “brand rivalries” can actually attract attention to everyone involved, as is common in sports like UFC and Formula 1, where both individual figures and the sports themselves have risen in profile. He acknowledges that this wouldn’t necessarily compensate for longer term brand risks, particularly given how few restrictions are placed on IP owners by today’s NFT brands, but it indicates the opportunity for brands that play their cards right.

It begs the question, how much control can brands afford to lose over their IP? Consider Apple, known for its tightly-controlled brand image, which licences its hardware to filmmakers on the condition that the characters who use them on screen are unequivocally ‘the good guys’. A hard-earned brand image pays dividends, but NFTs could be a master stroke in the right context.

NFTs can grow a brand’s entire pie.

Perhaps though, we are looking at headless brands the wrong way. Rather than headless brands, the correct term could be octopus brands: many arms enabling one head. Jeremy Goldman, one of the creators of Yuga Labs' IP licence for their CryptoPunks collection, argues that NFT IP assets can inspire waves of creativity “to create new, expressive works” which are nonetheless tied more obviously to the original IP. He alluded to comic books, where at the conferences “in between the juggernauts of official franchises are aisles and aisles of fan fiction, none of which is licensed, but they are embraced because they drive ticket sales for the real collections.”

In a world where licensor and licensee are brought ever closer, it is possible to draw parallels with individual brands and influencer marketing, where the most successful figures ride to fame on the back of their partnerships as much as their own work. For example, YouTube’s biggest star, Jimmy Donaldson, known by his username MrBeast, deployed his brand through his MrBeast Burger virtual restaurant: he licensed his image rights and marketing support, whilst the restaurants cooked and delivered items from a specially-designed menu. Using NFTs to take those kinds of brand partnerships to a higher, and more flexible, level, feels like an obvious next step.

Indeed, Goldman’s suggestion is that by making it possible to licence unofficial upstarts with official licensors at scale, NFTs can grow a brand’s entire pie, as well as making it easy for revenue from that fan fiction to be shared with the original franchise. Whether this will result in a more fulfilling relationship between brands, communities and audiences, or more confusion on the part of the consumer, is yet to be seen. Headless brands are still early primitives, but their foundations already exist.

“It was a one-time payment for a very agreeable star for the brand.”

— Ben Mayor White, Web3 Strategist, adidas

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Tyler is a repeat entrepreneur across education, coaching, and tourism in Canada, Russia, India and Turkey, and today is focused on making crypto useful for more sustainable global adoption. He is a cofounder or core contributor for startups and DAOs with real world integrations across climate tech, the creator economy, and insurance.