How to Build a New NFT Marketplace and Launchpad for the Creator Economy

NFT Positioning for Creator-Fan Engagement

Summary:

Building an NFT marketplace and launchpad focused on utility for the creator economy is an ambitious project that would necessitate new strategies of execution. Some potential obstacles to this goal include:

• Traders that can drive revenues foremost seek volume rather than features

• Bespoke and novel platform features the platform creators introduce are unlikely to emerge as elegant enough to stand out in a crowded marketplace of marketplaces

• Power users may not initially want to come to a new platform or one on a smaller chain

• Web2 users will require education.

For these reasons, I recommend that any builders attempting such a project should first gain insight, validation, and traction by developing and Mechanical Turking minimal solutions to significant pain points of creators and influencers (primarily promotion and community management), before fleshing out a roadmap of features geared toward traders.

Attracting the first users:

There are many possible features of an NFT marketplace or launchpad which creators and traders likely would appreciate, such as an analytics dashboard, alerts, portfolio trackers, and elegant UX — all of which seem to be useful for increasing transaction volume and sales price, as well as Web3 community appreciation. But while all of these would take time to build (without a guarantee of doing them well), nothing immediately indicates that these features would kickstart migration to a new platform, or even increase loyalty to an existing one.

Rather, the recent success of Aptos and Cardano in stealing volume from Solana is not due to its technology but because of the self-perpetuating hype and network activity of the launch of new collections. The features traders would want — low transaction/gas fees, lower protocol fees, and a zero-royalty pricing model — do not seem to be a defensible moat. And as platforms with plenty of potential traders are still struggling for volume, perhaps it is real-world utility which could be a bulwark against negative NFT market sentiment. Thus, if one wants to build a platform focused on creator-fan engagement, rather than first building trader-centric tooling, they should aim to attract traders through getting attractive collections that could gain the desired market size and volatility. Large Web3 projects may not sign up initially even if the platform were to achieve superiority of features, but there is a vast and open sea of Web2 creators with large communities who have pain points of marketing, community management, or a lack of expertise in minting and launching a collection. This will mean selecting and attracting creators first with substantial followings and who engage with their fans online. To reach them, the platform team must do outreach and test pitches to

• Creators and influencers

• Influencer agencies

• Aggregators (DistroKid, CD Baby, The Orchard, etc.)

Pitching to the three markets: selling the benefits and addressing the pain points of creator-fan engagement

Of the three types of targets mentioned, the marketplace will need to satisfy (to varying degrees) their pain points of:

• Need new revenue stream to monetize the owned fan-creator interaction for creators (better than Patreon) and influencers (pipeline of artists to promote).

• Friction of creating NFTs and fan adoption. (Mobile minting/trading; burner wallet for minting, hot wallet for small trading, cold ledger wallet for bigger one; translating launchpad and wallet functionality and advantages into English; customer service headaches for aggregators.

• Challenge of promotion (hype) — the launchpad will help promote the creator and pair them with influencers.

• Headaches of community management — the launchpad will handle customer service, whiteglove Discord channel creation, moderation, whitelist management, and provide a way to provide creator updates to fans.

• Desire of creators to interact with fans through NFTs (expiring subscription-based experiences)

• Comfort that fairness aligns with creator values; fair drops.

• Fears of scams, theft, and new tax regulations have dampened enthusiasm, as have fears of future legal action, fears of wash trading, and slow rug pulls.

• Desire to participate in a radically fair creator-fan economy.

• Having a culture-native ethos.

Creating the MVP (Build, Partner, Mechanical Turk)

To decide what and when to build, the marketplace developers will first need to prototype, kludge, and test *components* of the offering to validate the following:

• Assumptions about their strengths in business development to onboard creators (and whether any even-unique features such as mobile web, analytics, automations, social will be either necessary or in and of themselves exciting enough to attract strong partners to a flagship product)

• Ability to service 100 clients

• Competence at solving the needs of the market

• Theories about product-market fit and the creator-fan interaction

• Clients’ willingness and desire to spend time creating ongoing frequent or quality content or interacting with fans

• Creators’ ability to sell the utility offering to their fans (and how much artist fame and prior engagement is necessary for them to be able to sell $30/month Discord channel gating, $5/month content subscription, and video chats)

• Fan interest in asynchronous vs. synchronous video experiences (like Idol, Cameo, Zoom), content subscriptions (video, picture, audio, text), gated Discord channels ($100 for 3 months); other social functionality which may be a solution in search of a problem (anonymous messages with configurable privacy, push notifications with gated channels, stakes for pay-to-message)

• Assumptions about users wanting to go to a new and unfamiliar platform (marketplace / launchpad) or component (bespoke community management or video chat tool)

• Projections on what segments could generate how much revenue with NFTs

• Creators’ ability to spark interest in trading on secondary markets.

Looking at the possibilities for developing out a creator-fan roadmap, it may be possible that a new platform would not at first seem cool enough, reputable enough, busy enough, or connected enough to attract Web3-savvy creators. If that is the case, then the project heads will need to attract large Web2 creators, and to help them launch. In either case, whatever tech they ultimately develop, they will need to in many ways become a services platform. If the draw for fans are the creators, then the draw for these creators (as stated in multiple conversations with larger creators) is an ethical place to interact with and monetize fans, with easy onboarding for all.

So the go-to-market strategy should be to build the prototype for a Minimum Viable Product that solves all of the above problems, with the gaps being filled by whitegloving, Mechanical Turking, and partnering. To spec out further development or build anything more before knowing which necessary features to make for which constituents would be doing it backwards. In this way, the project heads can test the thesis that a usable (mobile), trader-friendly (analytics) and potentially sticky (social) platform will be viable, with a minimum viable product, before focusing on building a defensible moat.

To test the above, as a first step they should put their resources into:

• Building a prototype, with a particularly lovely and simple front end design

• Business development

• Designing a deck showing off potential roadmap and features for traders, and emotional appeals and benefits to creators, and influencers

• Partnering with people and integrating other products that can handle customer service, community management, artist design, etc.

Vetting creators

Music is the fifth largest category on Patreon (video, podcasts, games, and adult games are even larger), with $1.18M paid out monthly as of October 2021. But the payout is top-heavy: for example, the music creator at position 500 on Patreon has 500 subscribers, and 96% of the other music creators have less than 100 patrons.

There are three things the platform’s creators will need to do: to reach fans, provide utility, and please investors.

1. Reaching fans:

Even with help driving secondary market from influencers, the platform will need creators willing to hustle to do whatever it takes to win and engage fans, and attract patrons. The top creators either have big platforms (100k Web2 followers) or fanatical followings (100 true fans, from Web2 or Web3) or both. A working assumption could be that 1% of people’s largest single following platform could be expected to become patrons on Patreon; Patreon estimates the conversion rate of a social media post to be 0.15–0.75%. Web2 stars include Amanda Palmer is one of the 697 creators on Patreon (0.33% of the total number) receiving sponsorship from more than 2,000 patrons, and, like Kurzgesagt — In a Nutshell, has a huge Web2 following of YouTube subscribers. Web3 hustlers include Daniel Allen, Sound.xyz’s top artist last month, who did 10ETH in primary sales and 25 ETH on secondary and has a strong Web3 following of influencers.

2. Providing utility:

The platform should vet artists who are willing to create a high-quality intro video, message patrons, consistently post, and make social media teasers. Since my first report on access and music NFTs, Ditto Music now highlights gated content, fan engagement and messaging, digital content, and physical products as being key features — and several artists are offering patrons some interesting benefits:

• Home Free $5 tier is also worth mentioning, unlocking karaoke versions of their music videos for patrons to sing along with.

• Subscription tiers include podcast access, shout-outs.

• Peter Hollens has tiers from $5 to $1500/month and offers 1–1 private messaging, daily chats with him, quarterly patron parties on Discord, fan’s name at the end of every YouTube release, personalized video message every 6 months, annual 1-on-1 call after 6 months of patronage, recording a song of fan’s choice once a year.

• Amanda Palmer offers random surprises, plus access to patron-only webchats in which she’ll chat/perform live, “art-in-the-mail” where fans can opt-in to receive a piece of beautiful physical art, and guestlist access.

3. Satisfying collectors and investors:

Collectors want to engage, but also to “sell off some an edition or two” on the secondary market for profit. So creators ideally would drop every week or two, and consistently deliver value to collectors with utility — while pricing drops “in a way where there’s a real shot for secondary market activity.”

A word about forecasting

There are no real Web3 platforms that have gained traction focusing on creator-fan engagement: for music NFTs, Sound focus on collecting/flexing, and Royal focuses on royalties. Since there are no obvious benchmarks for creator-fan utility NFTs, I can only point to a few data points:

- The top 50 artists on Sound did 120 ETH primary sales, 240 ETH total in last 30 days. (Note: since my first report on creator-fan engagement NFTs, Sound launched market.sound.xyz as a secondary marketplace, featuring 0% listing fees, and aggregated liquidity across Opensea, LooksRare, and X2Y2).

- Nataly Dawn has 488 patrons and is earning an average of $1,943 per song or music video. Interestingly, this is about what Coopahtroopa notes that artists can reasonably expect to make on Sound (1 ETH).

- Patreon estimates that a creator with 100k followers could expect to earn $1,050-$5,250 per month ($922.05-$4,610 after platform fees)

Because here I am only concerned with utility NFTs, while the volume comes from traders, speculating on the success of this new offering will only be conceivable once the platform has validated the points in the “Creating the MVP” section above. But my initial inclination is that

1. I think it is unlikely to sign up even 10 partners quickly who would each do a $10k NFT project, as that would imply 10 artists who are almost as successful as Daniel Allen, the top artist on Sound, and his NFT offering was not about creator-fan interaction. So I would halve any such expectation, as well as the goal of 100 creators doing 2 $100k mints.

2. Expectations of a $10k monthly spend from degens is implausible given a) the stats on sound.xyz, b) the decline of the NFT speculators market, c) the low prices commanded by NFT collections on newer marketplaces, and d) the observations of Coopahtroopa on setting realistic prices for secondary market activity.

3. Expectations of significant profits from creator royalties may be unlikely, given the trend to 0% as mentioned above.

Cost of user acquisition

While I have not interviewed influencer agencies for this report, there are many who employ different pricing models. Some charge per post (on Twitter, a $2 rate per 1k followers would cost $200, and if uptake were half of from the artist themselves, then they could hope for 15–75 conversions at $7/month, or $105-$525/month of NFT sales); some charge per campaign; some as a percentage of sales price, and some get paid by airdropping NFTs. Since as contemplated above, the initial appeal of a new NFT offering based on creator-fan utility likely will come from Web2 users, the marketplace creators should consider platforms to measure influencer analytics to best vet them for engagement rate, country rate of audiences, and age and gender breakdown. Still, for NFT collections revolving around the creator-fan interaction, musicians and YouTube stars, the primary promotional drivers are themselves, so an influencer agency would not necessarily pertain: you are either a fan of the artist or you aren’t, and an influencer agency driving speculative interest in a utility collection of an artist would likely turn to art projects instead, especially if the creative project was competitive or did not fit their brand.

Launchpad and future steps

Once the creators prove that they can attract and service artists who will be able to sell NFT collections to their own fans, they could grow out a launchpad made up of a community of NFT traders and investors. To do so, they would continue to vet NFT projects, who would submit their project for review and scrutiny by the community. Some features it could include:

• ICO of Native creator tokens, to help them raise finances and provide token staking bonuses to fans

• Providing funding for popular artists even before mint

• Providing a large pool of investors with preferential early prices to NFTs

• Protection to customers and creators in a pool of verified creations

• Fair NFT distribution during the initial token offering

• A native platform for promoting the product

• Investors would buy and stake the platform’s native token, and receive a lottery ticket to participate in the NFT sale.

• Sell Fee Distribution where fees could be used to airdrop tier holders and to pay stakers

• Trader-friendly features such as analytics, financial and token incentives, and fair drop features

Building this could be built in-house or outsourced. Some interesting launchpad examples to examine will include NFTLaunch, GuardianLink (which has anti-ripoff technology to protect against fake NFTs), NFTPad (which allows tokens to be exchanged on Pancakeswap and Uniswap), and NFTb (which integrates DeFi features like yield farming, the native token $NFTB, and different Initial NFT Offering models such as First Come, First Served and lottery style).