With Facebook and Twitter Joining the Market, Why do Giants Favor NFT?

Business tycoons have acted more frequently in the NFT segment.

Facebook and Twitter experimented with NFTs

Recently, there have been two pieces of big news. The first one is Facebook’s announcement that it has changed its company name to Meta on Thursday, and its stock code will be changed to “MVRS” starting from December 1. The second news is Twitter’s new BTC tipping feature and its plan to introduce verification for NFT profile photos.

If users can verify their NFT profile photos directly on Twitter, then the social networking platform will naturally support the circulation and trade of NFTs. Compared with Twitter, which is still making plans for NFT, Facebook is much less patient. After telling the media that it may change the company name last Tuesday, Facebook officially announced its new name on Thursday. The company had attempted to march into the field of virtual reality and virtual assets much earlier.

In 2019, Facebook officially launched its cryptocurrency Libra. However, faced with many barriers, the company eventually had to change its name to Diem, hoping that it will become compliant and licensed as a stablecoin. Yet, this path also comes with its challenges. Since then, Facebook devoted great efforts to the NFT segment. In August, it was reported that the company has been considering the development of NFT products and a digital wallet that can store NFTs. By October, Facebook announced a project named EverLens, which is a cross-chain NFT social platform powered by content from Facebook’s Instagram platform. With detailed plans and clear goals, the platform allows any Instagram user to tokenize their content in the form of NFTs, which can be traded on EverLens.

Apart from Twitter and Facebook, many other international giants have indicated strong interests in virtual reality and virtual assets like NFT and Metaverse. 

In June 2021, Alibaba’s AntChain and the Dunhuang Fine Arts Research Institute jointly released two NFTs (“Flying Apsaras” and “King Dear”). Since then, AntChain has continued to introduce several NFT collections. Its latest “Treasury Plan” now covers releases of NFT collections from October to December, spanning themes such as the court culture of the Imperial Palace, cultural and creative NFTs about space flight, the intangible cultural heritage Suzhou embroidery, space art, etc. Following Alibaba, in August, Tencent released a digital collection called “Thirteen Invitations”, which features 300 NFTs, on its NFT trading platform Huanhe App (literally means phantom core application). In the same month, TikTok also introduced its first NFT series (TikTok Top Moments) and bought a full-page ad in The New York Times to promote its introduction of NFTs as rewards for content creation. Additionally, in September, Google announced that it will promote the NFT public chain project Flow together with Dapper Labs.

Plenty more companies like Louis Vuitton and Disney have issued NFT collection series based on their brands.

Why do the giants favor NFT so much?

1) NFTs benefit from loose regulation, as opposed to the strict oversight of cryptos

Business tycoons have long wanted to enter the crypto space, but tough regulations have blocked their way. However, the market oversight of NFTs is much looser. Even China, which is known for its strict crypto policies, has allowed companies like Alibaba and Tencent to issue and sell NFT collections on their respective platforms. Regulators have allowed the NFT market to grow because NFTs facilitate “ownership confirmation”.

2) NFT is the passport in the metaverse and virtual reality.

Any content, from skins designed for virtual characters to land and buildings, can be tokenized through NFTs. That is, if virtual reality comes true, then any virtual good and asset will need to be manifested through NFTs for the confirmation of identity and rights as well as trading. NFTs will be the tool that runs through the entire virtual reality, spanning consumption, economics, and finance. In other words, NFT is the passport to the online virtual society “metaverse”. What is the metaverse? It is regarded as the ultimate virtual reality mankind will develop and a brand-new world that giants like Facebook plan to go all in. Hence, the focus on NFTs, a major component of the metaverse, is completely justified

3) With a massive trading market, NFTs offer real opportunities for profit

As far as NFTs go, not all giants aim to build a metaverse like Facebook. Plus, the metaverse remains just a concept. Whether it will appear and when it will appear are both questions beyond our imagination. Despite this, businesses are looking at a great opportunity to make money: the development of NFT marketplaces. No one understands the enormous benefit of “developing platforms” better than these Internet giants. 

In the case of Alibaba, in addition to profits made from the rents paid by vendors to its e-commerce platform, Alipay (an eWallet app under Alibaba) alone is staggeringly profitable. The app boasts an annual turnover of over $15.63 trillion. Let us assume that 10% of all transactions (i.e. $1.563 trillion) charges transaction fees at 0.1%, and the app would be able to make a profit of $1.563 billion from payment charges alone, which is an extremely conservative estimate. Moreover, as a portal of massive user traffic, Alipay boasts a much wider business scope than payments.

Furthermore, the rise of the NFT marketplace Opensea has demonstrated the enormous power of NFT trading to the Internet giants. Since they have their own user traffic and SNS users, once these companies fully tap into the potential of content tokenization via NFTs and NFT trading, the profit they stand to make is unimaginable. 

As they enter the NFT segment, the Internet giants are not planning to build expensive and precious NFTs because the “trade” powered by NFTs constitutes a bigger market.

Conclusion

This is why Facebook and Twitter experimented with NFTs on their social networking platforms. It also explains why Alibaba and Tencent keep developing NFTs even though their NFTs cannot be traded for the second time under the harsh Chinese regulations — Once China decontrols the NFT market, they will win the upper hand.