Pudgy Penguins: A Blueprint for Community-Led Brands
Pudgy Penguins: A Blueprint for Community-Led Brands
This is a comeback tale of an NFT project that wants to build the world's biggest character IP brand and go mainstream. Here's how they do it and the key learnings for your brand.
Hey, it’s Marc. ✌️
In the spring of 2022, Pudgy Penguins nearly collapsed.
Today, it stands as one of the most successful NFT collections, with the value of its NFTs increasing nearly fivefold to almost $40,000 in the last six months.
Its Instagram account boasts 1.4M follower, adding 100k+ every month.
Its toys were sold 1M+ times and are now in Walmart, Smyths Toys Superstores, Target, and on Amazon.
They raised a $9M seed round led by 1kx in May 2023 and were named Decrypt’s 2023 NFT project of the year.
And they just revealed big plans for gaming.
Why is this interesting?
Pudgy Penguins' story is a comeback tale of an NFT project that wants to build the world's biggest character IP brand and go mainstream.
Their strategic use of community, social media, IP licensing, and digital worlds is a blueprint for the community-led commercialization of a consumer brands.
Let’s unpack.
On the Brink of Collapse
Pudgy Penguins is a collection of 8,888 unique NFTs featuring cartoon penguins.
It was launched on 22 July 2021 by 4 college students.
The initial hype was short lived. Not delivering on their promises, the community voted them out in January 2022.
The project nearly collapsed.
In April 2022, the collection was acquired by Luca Netz – a once homeless, then self-made millionaire – for $2.5M.
And here’s where it gets interesting.
Luca had a clear vision:
to build Pudgy Penguins into a global media brand and monetize its IP
to let the community co-participate in its success
Today, they’re on track of achieving that. Let’s unpack how they’re doing this.
Zooming Out
Let’s zoom out to understand what Pudgy Penguin is trying to do here.
Blue chip NFT collections are struggling to stray relevant and make money by building IP brands, moving away from royalties and mints.
Two examples:
Yuga Labs is building a metaverse called Otherside for its Bored Ape Yacht Club and Mutant Ape Yacht Club NFT holders, while also launching ApeCoin as a governance token for the Ape ecosystem and licensing its IP for merchandise, collaborations, and a potential TV show.
Doodles is expanding its original collection with Doodles 2, focusing on customizable avatars and interactive experiences, while also venturing into the music and entertainment industry and emphasizing community-driven initiatives like Doodlebank.
As of now, Pudgy Penguins is one of the only NFT collections who’s successfully taking its brand mainstream.
Pudgy Toys: A Strategic Success
Making a brand mainstream means making it visible and accessible everywhere – particularly outside of typical Web3 channels.
Pudgy’s commercialization strategy rests on three pillars:
Building a global community on Web2 social
Connecting physical (toys) and virtual (virtual worlds & gaming)
Licensing platform open to third parties to reward their core community
Let’s unpack each of those.
1. Building a global community
This means:
Global IRL events & community building
IRL events are targeted at their core community and usually take place at every major crypto / Web3 conference.
Their Discord channel has over 46k members and is highly moderated. Luca Netz is part of the community, fostering a sense of camaraderie and shared purpose.
and aggressive growth on social media
On top of that, Pudgy Penguins dominate the NFT social media game and excel content creation:
GIPHY: They used community-created GIFs to spread the Pugy “Hudle” culture, which is all about good vibes. Pudgy’s GIFs and stickers on GIPHY have reached over 20B views (surpassing Disney’s 16.2 billion) as of June 2024.
Instagram: 1.4M followers with high engagement, adding 100k followers per month.
TikTok: 432,000 followers, 12.6M likes (as of June 2024).
Youtube: They have started a YouTube channel focusing on Youtube shorts.
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2. Connecting Virtual and Physical
This is a story about physical Pudgy toys and a virtual world, called “Pudgy World”. Let’s zoom in on both.
Pudgy Toys
In Sep 2023, the team launched Pudgy toys in Walmart and Smyths Toys Superstores.
In the 1st year, they sold over 1M toys.
A toy sells for around $25, that’s $25M in revenue.
Why it’s important: Physical toys serve as an onboarding vehicle into their virtual ecosystem. More on that below.
Be smart: Brand recognition online via social media pushes the narrative that Pudgies are the next great character brand.
Zooming in: They co-brand partnership announcements with retailers, incorporating their logos in social campaigns. For instance, Pudgy Penguins was featured on Walmart’s homepage for Cyber Monday. This visibility helps drive sales and brand awareness.
Success begets success: After their Amazon launch, it was easier to secure deals with Walmart and Target. They also attend conferences and trade shows to promote their brand, such as the Licensing Expo and New York Toy Fair 2023.
Pudgy Penguins has achieved significant milestones for their toy collection in major retailers.
Amazon (May 2023): Sold over $500,000 (20,000 toys) in days following the launch, holding the #1 spot in three different toy categories.
June 2023: Named Toy Insider’s Top Summer Toy of the Year.
Walmart (September 2023): Debuted 16 toys in 2,000 stores nationwide. After generating $10 million from 750,000 toy sales, Walmart increased distribution to 3,100 stores.
Target (May 2024): Announced 1 million toys sold in the past 12 months, marking it as the “biggest consumer product success ever” and expanded into Target.
Lotte Group (May 2024): Formed a strategic partnership with South Korean retail and entertainment conglomerate Lotte Group.
Other Retail Stores: Five Below, Smyths (UK), Hot Topic, GameStop.
“Pudgy World” Game
In December 2023, Pudgy Penguins announced the upcoming release of Pudgy World, a free-to-play 3D game designed to bridge the gap between physical Pudgy Penguin toys and the digital world through NFTs. This is significant.
Key Features of Pudgy World:
Connected toys: Each Pudgy Penguin toy includes a unique QR code that unlocks a corresponding non-transferable NFT (Non-Fungible Token). This NFT represents a digital version of the toy within the Pudgy World game.
Seamless onboarding: The QR code system allows new users to easily create a digital wallet and claim their NFT without needing prior knowledge of blockchain technology.
Digital customization: By scanning the QR code, users can mint additional digital traits or accessories for their Pudgy Penguin character in the game. This feature has seen a 20% conversion rate, indicating strong interest from toy buyers.
Pudgy World, currently in early access, is built on zkSync Layer 2 blockchain.
According to Luca Netz, they have a 20% conversion of buyers scanning QR codes to claim free NFT. Those 20% amount to 67k+ wallets. That’s a final conversion rate of about 6%.
This also means that around 330,000 Pudgy toys buyers scanned QR codes, which is roughly a third of 1M+ toys sold.
Be smart:
Accessibility: Pudgy Penguins is making NFTs accessible to a wider audience by avoiding technical jargon and using familiar tools like QR codes. A conversion rate of over 20% is very high.
Social media education: Pudgy Penguins make the tech accessible by using QR codes, avoiding complex Web3 jargon. They support this with simple social media campaigns showing how easy it is to claim NFTs.
Why it’s important: Physcial, widely accessible toys connected to a digital world world have become Pudgy’s most important onboarding channel.
Just last week, they teamed up with Mythical Games to launch an upcoming mobile game.
4. IP Licensing Platform Overpass
Earlier this year, Pudgy Pengunis introduced their licensing platform “Overpass”
Overpass front page.
What this means: OverpassIP is a platform currently in beta that enables NFT holders to earn royalties by licensing their intellectual property (IP) through on-chain agreements.
How OverpassIP works:
Connect: NFT holders connect their wallets to the OverpassIP platform.
Discover: They browse a curated list of royalty opportunities from various brands and projects.
Select & Submit: Holders choose a proposal and select the specific assets (e.g., their NFT's artwork) they want to license.
On-Chain Agreement: A simplified, blockchain-based agreement is signed to formalize the licensing terms.
Matching & Execution: The OverpassIP team matches the most suitable assets to each opportunity, ensuring optimal alignment between licensors and licensees.
Zooming in: Other NFT projects can add their collections to the licensing pool. On top of that, Web2 brands can offer licenses to Overpass and its collections.
Why it’s important: It allows the original NFT holders to earn money and profit from the commercialization of the brand.
The goal is to make it the go-to platform for NFT licensing.
It's early, but it's a sign of what's to come.