Nike doubles down on Metaverse with RTFKT acquisition


Nike Inc.’s acquisition of RTFKT, a virtual sneaker design company and non-fungible token (NFT) studio, is another sign that the sportswear giant is a big believer in crypto-tech and sees significant revenue opportunities in the metaverse and digital shoes.

The deal was announced on Monday and terms of the transaction were not disclosed.

In May, the London-based startup raised an $8 million seed round led by Andreessen Horowitz at a valuation of $33.3 million.

Last month, Nike became one of the first major brands to enter the metaverse, a world where virtual reality (VR) and augmented reality (AR) technologies turn people into avatars to play, socialize, shopping and working virtually with others. In such blockchain-based environments, users can purchase virtual land and other digital assets such as clothing for avatars in the form of crypto assets called non-fungible tokens (NFTs).
Shared virtual world environments have recently risen to prominence after Facebook rebranded itself as Meta Platforms.

Announcing the acquisition, Nike described RTFKT (pronounced “artifact”) as “a leading brand that leverages cutting-edge innovation to deliver next-gen collectibles that merge culture and play.”

Formed in 2020 by Benoit Pagotto, Chris Le and Steven Vasilev, RTFKT creates digital products like sneakers and uses blockchain technology to ensure authenticity. Launched in January 2020 and not monetizing the business until October 2020, RTFKT has raised millions of dollars selling virtual sneakers.

Some of his most prominent NFT releases include the February 2021 launch of a rainbow-hued virtual sneaker series featuring crypto artist Fewocious. The studio sold 621 pairs via cryptocurrency buys in seven minutes, bringing in a total of $3.1 million. The digital sneakers then doubled in price on the secondary market a few weeks later.

At the end of November, RTFKT dropped an avatar partnership with Japanese artist Takashi Murakami called CloneX. The CloneX project has earned nearly $69 million in trading volume at an average selling price of around $15,200 in over 4,500 trades.

In addition to developing its NFT drops, RTFKT had collaborated with other crypto creators to design items, including physical shoes that use images in other NFT projects, including CryptoPunks and Bored Apes. According to OpenSea, RTFKT has 561 NFTs in its collection and has created another 1,000.

RTFKT also held “forging” events where NFT holders have the opportunity to receive a hyper-engineered physical reciprocal product of their digital sneaker.

“This acquisition is another step that accelerates Nike’s digital transformation,” Nike CEO John Donahoe said in the statement. “We plan to invest in the RTFKT brand, serve and grow their innovative and creative community, and expand Nike’s digital footprint and capabilities.”

RTFKT wrote on its Twitter account: “We will continue to evolve our brand, our innovations, our products and our community with the resources and talents of NIKE. NIKE is the only brand in the world that we have always admired and inspired when launching RTFKT.

Nike first started thinking about NFTs in 2019 when it was granted a patent for blockchain-enabled sneakers known as “CryptoKicks”. Under the patent, once purchased by a registered seller, the buyer receives a matching NFT that uses blockchain technology to verify authenticity and ownership. If the shoes are then sold or traded, the digital token follows.

In recent months, the brand has accelerated its efforts in the virtual space. In October, Nike filed seven applications with the US Patent and Trademark Office at the end of October to protect its trademarks in “downloadable virtual goods” and related services. Reports came in November that Nike was posting applications for jobs in the NFT space, including Virtual Material Designer I, Footwear.

In mid-November, Nike created a virtual world on the Roblox online gaming platform, NIKELAND, which allows fans of the brand “to connect, create, share experiences and compete”.

Players dress up their avatars in Nike-branded shoes, clothes, and backpacks while competing in mini-games, such as “Tag,” “Dodgeball,” and “The Floor Is Lava.” The game includes a digital showroom that allows players to outfit their avatar with unique Nike products. At Nike’s House of Innovation (HOI) store in New York, a Snapchat lens turns the kids’ floor into an AR version of NIKELAND.

Virtual worlds such as Roblox are attracting more and more attention and investment from fashion and apparel brands, as the platforms allow companies to connect with younger users and raise awareness of their products.

On December 2, Adidas announced that it had purchased a Bored Ape Yacht Club NFT and is working with Bored Ape creators Yuga Labs and others in space to enter the metaverse.

Piper Sandler analyst Erinn Murphy believes the acquisition of RTFKT will allow Nike to further monetize its digital push.

Murphy said in a note, “We see a significant revenue (and margin) opportunity if Nike is able to somehow connect the digital and physical realms and successfully tie together their rarest sneakers. and rarer ones to NFTs, allowing royalty structures to provide recurring revenue. secondary market revenue, especially with the growth of sneakers as a social currency, highlighted by the immense and growing popularity of rare Jordan silhouettes on secondary market platforms.

Stifel analyst Jim Duffy said Nike’s acquisition and investment in the RTFKT brand would give Nike the opportunity to reach RTFKT’s rapidly growing fan base. He also predicts that the partnership could accelerate the long-awaited launch of CryptoKicks and unlock the potential of virtual sneakers and apparel.

“With growing momentum in big brand NFTs (Adidas announced partnerships with the Bored Ape Yacht Club and Coinbase in November 2021), the acquisition of RTFKT will give Nike a boost in the race to gain traction with NFT collectors and digital fashion enthusiasts,” Duffy wrote in a note. “We appreciate the strategic value of the acquisition to provide the platform, established brand, existing community of RTFKT NFT owners and talent to accelerate the expansion of potential Nike NFT offerings and capitalize on the opportunity. “

In a note published Dec. 4 exploring the fashion space’s themes for 2022, BTIG analyst Camilo Lyon predicted that the strength seen in 2021 of NFTs in the retail space would continue into 2022. He thinks luxury brands see NFTs helping to reduce counterfeits by creating a verifiable way to authenticate original purchases.

“When a consumer buys a Chanel handbag, for example, there is a paper certificate of authentication included inside the bag,” Lyon explained. “With an NFT, the authentication digital token can never be lost because the ownership information lives on the blockchain forever and, more importantly, can be traced back to its original maker. Apparently, this would create greater comfort among consumers looking to buy luxury goods in the secondary market.

He also predicted that more brands will explore the NFT opportunity in 2022 in the metaverse. He noted that in the active lifestyle space, Vans, owned by VF Corp., has also partnered with Roblox. In September, Roblox announced a partnership with Vans to create a virtual skatepark and provide users with the ability to purchase Vans gear.

“Ownership of fashion clothes or sneakers, as in the art world, would create the possibility of transferring this purchased good from one platform to another or on social networks with the aim of personalizing your style in the metaverse,” Lyon wrote. “Additionally, we believe brands are on the right path to marrying digital selling with physical selling of the same products, which would have the benefit of cementing an experiential connection between brand and consumer in a new and unique with property qualities. While this strategy is still in its infancy, we expect brands to talk more about it in the coming year. »

Nike is expected to further elaborate on the opportunity it sees in the Metaverse and the acquisition of RTFKT during its second quarter conference call, scheduled for December 20.

Photo courtesy of RTFTK


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