Apple's move into NFTs can further accelerate the Web3 evolution

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Non-fungible tokens (NFTs) have turned out to be a major revenue growth driver for brands such as Nike and Adidas. These brands have launched NFTs projects and generated millions of dollars in net sales, a strategy that is most likely to be adopted by many more brands in the fashion and sports category. With the future growth potential of the NFT industry, more and more firms are looking to get a piece of the pie for themselves, thereby targeting additional revenue for the core business. Apple, the leading tech conglomerate worldwide, is also seeking to generate additional revenue by leveraging its App Store and huge customer base.

• In September 2022, Apple announced its entry into the NFT space by allowing NFTs to be bought and sold through applications that are listed on the App Store. This announcement means that iOS app developers of the current apps can sell NFTs in-app, whereas new apps can install NFTs within them. However, Apple is charging the standard commission fee of 30%. Notably, the firm is utilizing a similar Web2 monetization feature, where it charges a 30% commission to developers who make more than US$1 million through App Store on an annual basis and a 15% commission for those making less than US$1 million.

When compared to other NFT marketplaces, such as OpenSea, the 30% commission fee charged by Apple for NFT transactions is very high. To put it into perspective, OpenSea only charges a 2.5% commission on NFT sales. This is the reason why several NFT startups started to shun App Store after the announcement from Apple. For instance,

• Magic Eden, an NFT startup, stopped trading on the Apple App store as soon as Apple came out with the announcement.

With most NFT marketplaces charging anywhere between 2% to 3% commission fee, Apple’s policies of charging 15% to 30% commission mean that NFT startups will lose out on a lot of revenue. For NFT startups to overcome the commission fees, there are two possible strategies.

• Either shun the Apple App store for charging high commissions and look at other affordable NFT marketplaces such as OpenSea, a strategy that Magic Eden opted for as soon as they learned about the commission fee charges from Apple. However, this could mean that NFT players will lose out on a huge distribution channel, which probably no other NFT marketplace has to offer currently.
• The second strategy that NFT startups can play out is to pass on the commission fees to buyers. However, paying 15% to 20% higher for the NFTs would not make much sense for the end customers, as they could buy the NFT elsewhere, on other marketplaces, for a much lesser price.

While the entry of Apple into the NFT space and the news of it charging 15% to 30% commission on the NFT sales might have not been well-received by NFT startups that have already gained substantial tractions, Apple's foray into the NFT segment might have created new hope for independent NFT creators.

Notably, NFT startups spent a huge sum of amount on advertisements to market their projects, and NFT drops. However, independent creators who do not have the budget to market their collection visible, lose out to big and well-funded startups. With Apple’s foray into the NFT segment, these independent NFT creators also get a chance to access the largest distribution channel for their NFTs. The more than 1.5 billion active devices of Apple means that independent creators would be happy to pay a commission of 15%, if Apple can generate sales and distribute their NFTs to the masses.

To put this into perspective, OpenSea just has less than 750,000 monthly active users. TechInsight360 believes that the foray of Apple into the NFT space can further accelerate the evolution of the Web3 ecosystem over the next three to four years, as it gives the chance to independent creators to launch and drop innovative NFT projects, which often get clouded by the big marketing spends of NFT firms. 

To know more and gain a deeper understanding of the NFT market in the United States, click here.