Unconsciously, "Pudgy Penguins" has risen to the 8th place in market value ranking in the head PFP.

As of July 23rd, the market capitalization ranking of top PFPs (source: @waleswoosh)

According to @waleswoosh's data, since last December, the market value of Pudgy Pengunis has almost maintained a continuous growth trend, and its current market value has doubled compared to the low point in December last year. In this year, the market value of Pudge Penguins has surpassed old blue chips such as BAKC, Doodles, Clone X, and Meebits. Currently, Azuki, which ranks first, has not yet emerged from the difficulties brought by Azuki Elemetals, and its market value is still in a downward trend. It is not impossible for Pudgy Pengunis to go further.

When Azuki lost "popularity" due to Azuki Elementals, Pudgy Penguins, on the other hand, gained more attention for "steadily creating IP". On May 19th, Pudgy Penguins officially announced the launch of their physical toy line "Pudgy Toys" on Amazon. Pudgy Toys quickly rose to the top of the new product sales chart, surpassing Barbie dolls, Lego, and Pokemon.

According to Pudgy Penguins CEO Luca Netz on Twitter Space, within two days of its release (although Pudgy Penguins only announced the launch of toys on Amazon on May 19th, they were already available for purchase on Amazon on May 17th), Pudgy Toyz sold over 20,000 units and generated sales of over $500,000. This is truly an incredible figure... because only US users could purchase it during these two days. On Twitter, I even found voices expressing disbelief in this data.

The user claimed that he obtained some data through the Amazon operation tool Helium10. Pudgy Toys ranks 233rd in the "Toy & Game" category, and products with similar rankings to Pudgy Toyz have monthly sales of approximately 13,000-15,000 units.

But no matter what, Pudgy Penguins are definitely a "legend" in the NFT industry. Because, unlike BAYC's "smooth sailing", we can't seem to find another "heroic comeback" story like Pudgy Penguins.

"Heroes Return"

Pudgy Penguins was launched at the end of July 2021, with a mint price of 0.03 ETH and a total supply of 8888. It sold out in less than 20 minutes. Although the price performance was mediocre in the days after the sell-out, Pudgy Penguins quickly joined the "zoo" trend led by BAYC and saw a hundredfold increase compared to the initial sale price.

Shortly after the price of Pudge Penguins skyrocketed, the famous on-chain detective @zachxbt pointed out in a post that the founder of Pudgy Penguins, @ColeThereum, had a "rug" experience in both real life and on the blockchain, and had engaged in unethical behavior such as accepting funds for "paid promotions".

However, despite the negative news surrounding its founder during the hot market at the time, the charm of Pudgy Penguins did not seem to be discounted much. Despite this, Pudgy Penguins still attracted celebrities such as NBA star Stephen Curry and Reddit co-founder Alexis Ohanian. Stephen Curry still holds the one Pudgy Penguin he purchased at the time, while Alexis Ohanian sold his Pudgy Penguins holdings a year ago.

Pudgy Penguins did not continue to "open high and go high" like BAYC after its glory, and its price began to decline. In December 2021, the original Mod @0xDarth of Pudgy Penguins was suddenly asked to take on the role of "community manager", but the Pudgy Penguins team and @0xDarth did not negotiate new compensation in advance. @0xDarth accused the founder of Pudgy Penguins of handling the matter extremely unprofessionally and claimed that @ColeThereum tried to give him 1 ETH to shut him up. Of course, screenshots of @0xDarth privately saying "Fud Pudgy Penguins to zero" were also exposed. The two sides parted ways, and only the "fat penguins" were left with a knee shot.

Next, in early January 2022, 9x9x9 accused the founding team of Pudgy Penguins of wanting to "run away with the money". 9x9x9 claimed that the Pudgy Penguins founding team wanted to sell the project to them for 888 ETH, but what they would be selling is just an "empty shell" and they would take all the revenue and leave. Prior to this, 9x9x9 had attempted to acquire 20% of Pudgy Penguins for 4000 ETH. After the Pudgy Penguins founding team received another sum of money from supporters through the issuance of a new series called Lil Pudgys, they actually came back to 9x9x9 and tried to "sell cheaply" at a much lower price than before, without fulfilling their promises of game development and recruitment of developers.

At that time, 9x9x9 owned 242 Pudgy Penguins and minted 540 Lil Pudgys, and everyone strongly believed in their accusations. After all, as a large holder, what reason would they have to Fud their own position?

The community's dissatisfaction with the founding team of Pudgy Penguins has reached its peak, and angry members even voted to "remove" founder @ColeThereum on Discord. Meanwhile, the floor price of Pudgy Penguins has dropped to a historic low of 0.519 ETH.

Angry community demands change (Image source: @Takeshi48878925)

Although 9x9x9 did not accept the offer of 888 ETH, there are still many "heroes" who want to save Pudgy Penguins. @beaniemaxi offered 500 ETH, claiming to bring a cool GameFi for Pudgy Penguins. However, shortly after he tweeted the offer, this "milk queen" of Wolf Game was exposed for his dark history. Founder of NFT market Mintable @ZachSpaded offered 750 ETH, claiming to use Mintable's resources to bring a cool P2E game for Pudgy Penguins, and to do IP authorization in the form of DAO to allow holders to earn profits.

In April 2022, "Fat Penguin Where" finally settled. Luca Netz, who offered 750 ETH, finally bought the project from the Pudgy Penguins founding team. Interestingly, Luca Netz had tried to sell his "Golden Skin" Pudgy Penguins #6445 three times between August 2021 and January 2022. Today, Pudgy Penguins with "Golden Skin" has a floor price of over 18 ETH on OpenSea, and Luca Netz has become the "savior" of Pudgy Penguins.

Pudgy Penguins #6445

Luca Netz's record of attempting to sell on OpenSea

Luca Netz is very young. At the age of 23, he was able to spend 750 ETH (about $2.5 million) to buy Pudgy Pengunis. However, his childhood was very difficult. After his mother moved from France to the United States, she did not have a legal work permit. For 8-9 years, they relied on the help of different kind-hearted people to have a place to live. At the age of 16, he dropped out of school to help his mother make ends meet. Before finding his first job after dropping out, he tried to develop in the direction of a rapper, but it didn't work out. So he turned to organizing underground rap shows. His underground rap shows were always stopped by the police, which was really annoying, so he found a job. In 2015, he joined Ring, a smart doorbell company. This company was later acquired by Amazon for $1 billion, but he left in 2016 and went to a company that makes solar panels. During this period, he accidentally came into contact with e-commerce and began to explore the "dropshipping" business. Simply put, "dropshipping" is to help the source attract orders by rectifying the flow.

God closes a door for you, in order to open a bigger one. Luca Netz, who didn't make it as a rapper, discovered his potential in electronic marketing and excelled in it. We won't go into details about his achievements, but at the age of 19, he became a millionaire.

Luca Netz's actions after taking over Pudgy Penguins were lightning fast. Starting in April 2022, Pudgy Penguins provided clear and detailed monthly reviews of everything they had done, rebuilding trust between the project and the community through a focus on transparency. In the April monthly review, the community saw that the project had established its brand positioning, had future development plans (detailed to include what would be done in the short term and what would be done in the long term), and had the talent needed for development (recruiting 8 people in 3 weeks and presenting a team of over 20 people in less than a month)...

In May and June, the team quickly began to take action according to the plan, with various community activities (both online and offline), various brand-related content production, and various multi-channel exposures... It was also in May that Pudgy Penguins had its own official information portal "Pudgy Media", which is definitely the best information portal I have ever seen for an NFT project. Even someone who has never heard of Pudgy Penguins can learn almost everything they want to know here. From the perspective of brand construction, this is definitely necessary and reflects the team's position and intentions. In June, Pudgy Penguins launched its first clothing series, which includes 8 items.

Next, there are too many detailed updates every month, so let me pick out the highlights. In each monthly report, Pudgy Penguins never forgets to mention the growth of their Instagram account and often mentions the growth of GIPHY (a GIF search engine) search volume. In April 2022, Pudgy Penguins had only 22,200 followers on Instagram, but today, their Instagram followers have exceeded 710,000. In July 2022, Pudgy Penguins decided to start making GIF emoticons, and currently, there are more than 4,000 emoticons on the official Pudge Penguins channel on GIPHY, which have been viewed 5.3 billion times in total. Whether it's pictures/videos on Instagram or emoticons on GIPHY, the content is very universal. Especially on Instagram, there are cute and relatable short videos, as well as simple pictures composed of penguins and inspirational text. These contents are easy for users to relate to their own situations and they are willing to like and express their feelings in the comments. Pudgy Penguins' image quietly emerged from the Web3 world and attracted a large number of Web2 enthusiasts.

This January, the floor price of Pudgy Penguins broke 6 ETH, and when converted to USD, it was not far from the peak floor price. A nearly abandoned "ship" was quickly repaired and staged a legendary "hero's return" script.

It can be said that the great success of Pudgy Toys mentioned at the beginning of this article is a conclusion to the "Hero Returns" story. But what I want to emphasize is that Pudgy Toys is actually the beginning of a new story called "Creating the Future" for Pudgy Penguins.

"Create the Future"

We cannot wait to be accepted, we must go create recognition

NFT is very cool, but there are still many people in the world who don't think NFT is cool, or even don't know what NFT is. If we just passively wait for NFT to be recognized by the world, it is no different from waiting for a rabbit under a tree. NFT is likely to disappear in such waiting.

If you can't create demand, you won't have business.

The success of content dissemination on platforms such as Instagram and GIPHY is the "entry point" of Luca Netz's "NFT value accumulation funnel".

First of all, it is necessary to make enough people aware of the existence of a brand like Pudgy Penguins. The more fans that can be obtained, the more likely it is to convert into more Pudgy Penguins NFT buyers. Assuming there are 3 million loyal fans out of the 8888 Pudgy Penguins, as long as there is a conversion rate of 0.3%, it can be digested completely.

1. PFP is a luxury item due to its high price and low quantity. However, this logic is still wishful thinking at this stage. Compared with luxury goods such as luxury cars, watches, and clothing, CryptoPunks and BAYC at their peak are 100% luxury goods in terms of price, but they have almost no other function except as avatars. Moreover, because NFT is too young, these PFPs not only lack consensus outside the circle (even not widely understood), but their actual content is actually very empty. It is impossible for them to spread a brand tone or culture through real content like old luxury goods. Only CryptoPunks may have the possibility of turning unique historical narratives into artistic consensus with the accumulation of time (blockchain is gradually recognized and enters all aspects of life), and other PFPs really need to find "non-Pareto efficiency".

2. "Non-Pareto Efficiency", PFP often likes to use "Disney" as an example. However, Disney does not need to consider how to increase the value of PFP, that is, it does not need to complete the conversion from "Collectors" to "NFT Buyers" in the above figure. The industry in reality can thrive, but how can the value be transmitted back to the PFP project itself? Everyone is willing to pay for tangible clothes, hats, toys, water bottles, etc., but how can they buy a virtual image that is hundreds of times more expensive than these tangible items and is difficult to use? If it is useless, can't I just save it as a profile picture to express my love?

"Trojan Horse"

The bridging between NFT and the traditional world should be two-way. It not only brings attention to NFT brands in the real world, but also brings fans from the real world into the world of NFT. For the former, it is not important to emphasize that they are NFT, because attracting fans outside the circle is not achieved by telling them "actually they are NFT", but by attracting them with solid content, such as games, peripherals, or even short videos on Douyin. For the latter, emphasizing that they are NFT is far from enough. It is not only necessary to let everyone know that they are NFT, but also to find ways to bring everyone in to play.

Pudgy Toys combines the "Pudgy World" experience. Each Pudgy Toy comes with a QR code "birth certificate". Buyers can scan it to receive a redemption code and be directed to the Pudgy World website. Once on the website, they only need to register an account via email, and Pudgy Penguins will generate a hosted wallet for the account.

By using redemption codes, players can obtain penguin decorations to dress up their penguins. The penguin that can be decorated through DIY is a non-tradable SBT, but various decorations are tradable NFTs. Players can sell unwanted decorations they have redeemed or buy decorations they like. Different decorations have different rarity levels and unique background stories.

The cleverness of this design lies in two aspects:

1. Penguins themselves are non-tradable SBTs, which will not dilute the value of Pudgy Penguins or even Lil Pudgys.

2. Provides consumer products that truly combine virtual and real experiences, so users no longer have to face the awkward situation of distinct virtual and real experiences. They no longer have to choose between buying NFT images worth thousands or millions of dollars or buying related physical product peripherals.

The decoration trading demand in Pudgy World not only requires continuous improvement of matching content (such as using stories to make users feel meaningful about certain accessories, not just for aesthetics), but also needs to constantly enhance the playability of Pudgy World beyond the DIY image. Pudgy Penguins have considered these two points clearly, and the ultimate positioning of Pudgy World is a "digital playground".

"Trojan horse" is alive, sneaking into the city unnoticed to launch an attack. "Bridging" is dead, only providing a "bridge" without actively promoting the charm of the NFT world to users, and the effect can only be left to chance. As the playability of Pudgy World becomes stronger and the demand for decorative NFT transactions continues to be driven, users will not only receive physical toys but also experience the excitement of opening toy blind boxes. Lucky users may even feel incredible - oh my god, the toy I bought for $20 actually opened up a decoration worth $1000? Such incredibility not only arouses users' curiosity about NFTs, but also generates widespread discussion, making more people aware of and actively interested in NFTs.

Get rid of P&G and let NFT holders make money

People who have fallen in love with PFP are willing to buy it, which is the ideal situation we assumed earlier. However, the reality is that the vast majority of holders in this market are here to make money. This is not necessarily a bad thing, as no one wants to see the things they bought at a high price decrease in value. Moreover, buying collectibles that one likes can also appreciate in value, which is a good thing for everyone, isn't it?

The problem lies in how to make NFT holders earn money. Luca Nets stated in an interview that Lil Pudgys and Pudgy Rods are already "enough", and issuing tokens will have to wait until "the market value provides enough rationality and guarantee". Without creating a monopoly, it is impossible to intervene in the market price. The only remaining option is to obtain IP licenses from NFT holders and distribute dividends to authorized holders at the end of each year based on the toy's income. In the future, Pudgy Penguins will purchase non-exclusive licenses from NFT holders, which means that holders can authorize their NFTs to other parties besides the Pudgy Penguins team. When purchasing non-exclusive licenses, Pudgy Penguins will directly deposit the prepayment into the holder's wallet based on the transaction value.

Traditional authorization process requires signing a bunch of legal documents that are too complicated to understand? Don't know who to authorize and don't know how to find the corresponding NFT holder, resulting in low matching efficiency? To solve these two major problems, Pudgy Penguins has launched a very powerful activity called Project Overpass. Simply put, it is an "IP authorization market". Individuals/companies who need to buy authorization can directly list their desired NFT series on the Project Overpass website, and the corresponding NFT series holders can submit their own NFTs and the desired rewards and other conditions, and confirm the authorization on the chain. In other words, completing an IP authorization transaction only requires a simple click of a button on Project Overpass.

Although currently only 16 "Pudgy Penguins" have been authorized by Pudgy Penguins to make toys, with the expansion of the IP, the product line will definitely not be limited to toys. Games, animations, children's picture books, storybooks, and more will bring more and more demand for licensing. However, meeting the demand as large as digesting all 8888 Pudgy Penguins and 30000 Lil Pudgys will not be easy or smooth, and the Pudgy Penguins team needs to continue to work on expanding their influence.

Seeing your favorite PFP that you hold in games, anime, children's picture books, storybooks, and other content creations become more and more vivid, while also earning money from its growth, is simply wonderful...

Conclusion

Pudgy Penguins makes me feel that the most valuable point is that they have a comprehensive and thorough understanding of how to build an NFT series into an IP, and they are down-to-earth in doing what they should have done long ago. They neither sit and talk about exploring the future of NFT IP with their mouths, nor completely break away from NFT and head north to do IP communities that are all profit-seeking. Instead, they honestly face what kind of project they are and carefully consider what they want to achieve, and finally execute some "small things" that have been ignored for a long time. For example, the careful use of Instagram and GIPHY to expand their social media presence. Without marketing, there is no demand, and without demand, there is no business. This kind of thing has long been something that project parties without money have to do or want to do well but have no resources, while project parties with money lie down and count money and disdain it. The contrast that Pudgy Penguins shows in this matter is actually just the two words "down-to-earth".

Pudgy Penguins are still far from their dream, but now they have a beginning that can illuminate the future.

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