Lessons From NFTs With Product Market Fit
How DraftKings has quietly built a successful NFT fantasy franchise
Even as the NFT market has cooled, DraftKings has quietly built a successful NFT fantasy franchise with Reignmakers, its web3 fantasy sports product – on Polygon – that lets users purchase packs and players to participate in weekly fantasy contests for the potential to earn prize money. Initially launched with fantasy football in 2022, they’ve since expanded to include PGA (golf) and UFC (MMA).
According to VanEck data, Reignmakers has generated $52 million in revenue for DraftKings, with $72 million in secondary sales YTD. And DraftKings isn’t the only successful NFT fantasy game.
Some of the top NFT collections by secondary sales are in the same sports category:
Sorare
Mythos (NFL Rivals)
NFL All Day (Dapper Labs)
NBA Top Shot (Dapper Labs)
Fantasy sports contests have obvious product market fit in web2, but NFTs further expand the capabilities through digital ownership, allowing users to earn more money speculating on their passion for sports. Ownership is a zero-to-one innovation. Ownership creates new game dynamics, helps build psychological attachment for the product, and ultimately creates better outcomes for users.
Let's examine some core lessons from fantasy sports NFTs:
Create post-mint utility: NFT collectibles have value, but the unlock is in the nature of programmable assets—NFTs that can be used for new consumer experiences. Solve the post-mint problem and you’re one step closer to finding product-market fit.
Leverage freemium to whale tier pricing models: DraftKings onboards new users with free (non-transferable) NFTs. Fantasy sports apps also tier their leagues by pricing and prizes, similar to how casinos alter bet minimums at different blackjack tables—it’s all the same game, but users decide their risk/reward profile. This enables DraftKings to price consumers all the way from the lowest paying fan to the largest whale.
Abstract crypto: DraftKings is using NFTs (sorry: “digital collectibles”) and ERC-20 tokens (sorry: “crafting” tokens), but DraftKings abstracts all of the crypto complexity to focus on the user experience. Custodial wallets. Deposits via bank accounts. Gasless experiences but using Polygon for cheap fees on the backend. All these decisions compound to a better product experience.
Build “convenience-walled gardens”: users will always pay for convenience. In the context of NFTs, that means users will buy NFTs where they can consume them. DraftKings marketplace is a custodial platform and takes a hefty rake (10%) on secondary sales, but devoted users don’t seem to mind. Platforms have started using custodial wallets to provide “convenience-walled gardens” that remove crypto in exchange for added product stickiness.
Lean into the hobbification of finance: People are willing to invest time and capital into their passions. Crypto apps can be very successful when they combine deep seeded passions (e.g. culture) with financial elements. NFTs are one manifestation of bringing culture onchain so that people can speculate on it. Prediction markets are another example of a category that allows people to take advantage of knowledge they have about their interests (e.g. politics).
It’s no secret that NFTs have struggled during the bear market, but I’m still extremely excited that NFTs—or whatever companies choose to call them—will continue to be used to build new crypto consumer apps and improve existing experiences (i.e., fantasy sports, entertainment, commerce, etc.)
The future is non-fungible and collectible.
v smart -- nicely edited too