Unknowingly, "Pudgy Penguins" has risen to 8th place in the market value ranking in the PFP (Profile Picture) section.

As of July 23rd, the market value ranking of the PFP section (source: @waleswoosh)

According to data from @waleswoosh, Pudgy Penguins' market value has been steadily growing since December last year and has now doubled compared to its low point in December last year. This year, Pudge Penguins' market value has surpassed old blue chips such as BAKC, Doodles, Clone X, and Meebits. Currently, Azuki, which is ahead, has not yet overcome the difficulties caused by Azuki Elemetals, and the market value is still declining. It is not impossible for Pudgy Penguins to go further.

While Azuki lost popularity due to Azuki Elemetals, Pudgy Penguins, on the other hand, gained more attention for "steadily building its IP". On May 19th, Pudgy Penguins officially announced the launch of its physical toys "Pudgy Toys" on the Amazon marketplace. Pudgy Toys quickly surpassed bestsellers such as Barbie, LEGO, and Pokémon on the new product sales chart and took the top spot.

According to Pudgy Penguins CEO Luca Netz, in a Twitter Space, within two days of its release (although Pudgy Penguins officially announced the toy's launch on Amazon on May 19th, it was already available for purchase on Amazon on May 17th), Pudgy Toyz sold over 20,000 units and generated sales exceeding $500,000. This is truly an astonishing figure... because during these two days, only U.S. users were able to make a purchase. On Twitter, I even found voices expressing disbelief in this data:

This user claimed to have gathered some data using the Amazon operation tool Helium 10, and Pudgy Toys ranked 233rd in the "Toy & Game" category, with monthly sales for products similar to Pudgy Toyz ranging from approximately 13,000 to 15,000 units.

But no matter what, Pudgy Penguins is undoubtedly a "legend" in the NFT community. Because they didn't have the same smooth sailing as Bored Ape Yacht Club (BAYC), we seemingly can't find another story like Pudgy Penguins' "hero's return."

"Hero's Return"

Pudgy Penguins was launched in late July 2021, with a mint price of 0.03 ETH and a total supply of 8,888 units, which sold out in less than 20 minutes. Although the price performance was mediocre in the days after the sell-out, Pudgy Penguins soon rode the wave of the "zoo" market led by BAYC, experiencing a price increase of hundreds of times compared to the launch price.

Shortly after Pudgy Penguins' price took off, the well-known on-chain detective @zachxbt pointed out in a post that Pudgy Penguins' founder @ColeThereum had a history of "rug" experiences in both real life and the blockchain, and engaged in undesirable behaviors such as accepting funds for "pump and dump" activities.

However, in the hot market at the time, the charm of Pudgy Penguins did not seem to discount much. Despite the negative news about the founder, Pudgy Penguins still attracted celebrities such as NBA star Stephen Curry and Reddit co-founder Alexis Ohanian to purchase. Stephen Curry still holds the one Pudgy Penguins he bought at that time, while Alexis Ohanian sold off his purchased Pudgy Penguins a year ago.

After its glory, Pudgy Penguins did not continue to rise like Bored Ape Yacht Club (BAYC), and its price started to decline. In December 2021, @0x Darth, a mod of the original Pudgy Penguins, was suddenly asked to take on the role of "community manager," but the Pudgy Penguins team and @0x Darth had not discussed new compensation terms beforehand. @0x Darth accused the Pudgy Penguins founder of handling this matter extremely unprofessionally and claimed that @ColeThereum tried to give him 1 ETH to keep him quiet. Of course, screenshots of @0x Darth privately saying "Fud Pudgy Penguins to zero" were also exposed. The two parties parted ways, leaving only the "pudgy penguins" taking a hit.

Then, in early January 2022, 9 x 9 x 9 publicly accused the founding team of Pudgy Penguins of wanting to "exit scam." 9 x 9 x 9 claimed that the Pudgy Penguins founding team wanted to sell the project to them for 888 ETH, but what they would be selling is only an "empty shell," as they would leave with all the proceeds. Previously, 9 x 9 x 9 had attempted to acquire Pudgy Penguins and received an offer of 4000 ETH in exchange for 20% ownership. After the Pudgy Penguins founding team received another sum of money from supporters through the issuance of the new series Lil Pudgys, they actually came back to 9 x 9 x 9 and tried to "undervalue" the project, offering a much lower price than before, while not delivering on their promises of game development and recruitment of developers.

At that time, 9 x 9 x 9 owned 242 Pudgy Penguins and minted 540 Lil Pudgys, so their accusations were highly credible. After all, why would a large holder have any reason to Fud their own holdings?

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

Angry community demands change (Image source: @Takeshi 48878925)

Although 9 x 9 x 9 did not accept the 888 ETH offer, there are still many "heroes" who want to save Pudgy Penguins. @beaniemaxi offered 500 ETH, stating that it will bring a fantastic GameFi experience to Pudgy Penguins. However, shortly after he tweeted the offer, this "Milk King" from Wolf Game was exposed with a controversial past. NFT marketplace Mintable founder @ZachSpaded offered 750 ETH, stating that Mintable's resources will be used to create a cool P2E game for Pudgy Penguins, and IP authorization will be done in the form of a DAO to allow holders to earn profits.

In April 2022, the fate of "Where the Fat Penguins Go" was finally settled. Luca Netz, who bid 750 ETH, ultimately bought the project from the Pudgy Penguins founding team. Interestingly, Luca Netz had previously attempted to sell his "Golden Skin" Pudgy Penguins #6445 three times between August 2021 and January 2022. Now, Pudgy Penguins with the "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 attempted sale on OpenSea

Luca Netz is young but had a difficult childhood. At the age of 23, he spent 750 ETH (approximately $2.5 million) to buy Pudgy Penguins. After his mother moved from France to the United States, she did not have a valid work permit. For 8-9 years, they relied on the help of kind-hearted people to find 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 pursue a career in rap but wasn't successful. He then transitioned to organizing underground rap shows. However, his underground rap shows were often shut down by the police, so he got tired of it and moved on. In 2015, he joined Ring, a smart doorbell company, which was later acquired by Amazon for $1 billion. However, he left in 2016 and went to a company that manufactures solar panels. During this time, he accidentally came into contact with e-commerce and started exploring the "dropshipping" business. In simple terms, "dropshipping" means generating orders for suppliers by attracting traffic.

God closes one door for you, to open a larger one. Luca Netz, who failed as a rapper, discovered and excelled in digital marketing. I won't go into the details of his accomplishments, but he became a millionaire at the age of 19.

Luca Netz's actions after taking over Pudgy Penguins were swift. Starting from April 2022, Pudgy Penguins provided clear and detailed monthly reviews of their activities, rebuilding trust between the project and the community through a focus on transparency. In the April monthly review, the community saw the project's brand positioning, future development plans (with specific short-term and long-term goals), and the recruitment of talented individuals (hiring 8 people in just 3 weeks and growing the team to over 20 people within a month)...

In May and June, the team swiftly implemented their plans, organizing various community activities (both online and offline), creating brand-related content, and expanding exposure through multiple channels... It was also in May that Pudgy Penguins launched their official information portal, "Pudgy Media." It is, without a doubt, the best information portal I have seen from an NFT project. Even someone who has never heard of Pudgy Penguins can learn almost everything they want to know here. From a brand perspective, this is absolutely necessary and showcases the team's positioning and dedication. In June, Pudgy Penguins released their first clothing collection, consisting of 8 items.

There are too many detailed updates in the following months, so let me highlight a few. In every monthly report, Pudgy Penguins never forgets to mention the growth of their Instagram account and the increase in search volume on GIPHY (the GIF search engine). In April 2022, Pudgy Penguins had only 22,200 followers on Instagram. Today, their Instagram following has exceeded 710,000. In July 2022, Pudgy Penguins decided to create GIF stickers, and there are now over 4,000 animated stickers on the official Pudge Penguins channel on GIPHY, with a total of 5.3 billion views. Whether it's the pictures/videos on Instagram or the stickers on GIPHY, the content is widely appealing. Instagram features cute and relatable short videos, as well as simple images of penguins with uplifting texts. These contents are easy for users to relate to their own experiences and they often like them or express their feelings in the comments. Pudgy Penguins quietly established its image in the Web3 world and attracted a large number of Web2 enthusiasts.

This January, the floor price of Pudgy Penguins surpassed 6 ETH, which is not far from the peak price when converted back to USD. A "ship" that was about to be abandoned was quickly repaired, creating a legendary "hero's return" storyline.

It can be said that the successful sale of Pudgy Toys mentioned at the beginning of this article is a conclusion to the "hero's return" story. But what I want to emphasize is that Pudgy Toys is actually the beginning of a new story for Pudgy Penguins, "Creating the Future".

"Creating the Future"

We can't wait to be accepted, we have to create recognition

NFTs are cool, but there are still many people in the world who don't think NFTs are cool, or even know what NFTs are. If we passively wait for NFTs to be recognized by the world, it's no different from waiting for a miracle, and NFTs may perish in such waiting.

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

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

The first step is to make enough people aware of the existence of Pudgy Penguins as a brand. The more fans we can get, the more likely we are to convert them into Pudgy Penguins NFT buyers. With 8888 Pudgy Penguins, assuming we can have 3 million loyal fans, we only need a conversion rate of 0.3% to absorb them all.

This theoretical foundation is absolutely sound. However, converting people who like PFP into actual buyers has always been a difficult task. Let's take Pudgy Penguins as an example. The current floor price is about 4 ETH, which is around $7400. It is too expensive for most people to afford. The previous approach usually includes:

1. With a small supply and high price, PFP is considered a luxury item. This logic is still wishful thinking at this stage. Compared to luxury items such as luxury cars, watches, and clothing, CryptoPunks and BAYC were considered luxury items based on their prices during their peak periods. However, besides being used as avatars, they do not have any other practical uses. Moreover, because NFTs are still relatively young, these PFPs not only lack consensus outside the crypto community (and are not widely known), but their actual content is also very hollow. They cannot effectively convey brand identity or culture like traditional luxury items. Only CryptoPunks may have the potential to transform their unique historical narrative into artistic consensus over time (as blockchain technology becomes more widely recognized and integrated into various aspects of life), while other PFPs need to find their own "non-panglossian utility".

2. "Non-panglossian utility" is often used as an example in relation to PFPs, using Disney as a reference. But Disney does not need to consider how to increase the value of PFPs, or in other words, it does not need to convert "Collectors" into "NFT Buyers" as illustrated in the graph above. The real-world industry can thrive, but how can the value be transmitted back to the PFP projects themselves? People are willing to spend money on tangible items such as clothes, hats, toys, and cups, but how can they be convinced to buy virtual images that are hundreds of times more expensive and intangible? If the NFT does not have any utility, wouldn't it be enough for me to express my appreciation by right-clicking and saving it as my avatar?

Let's first assume an ideal scenario where people who like PFPs are willing to buy them. Even in this case, these people still need to be made aware that the image is an NFT and have a general understanding of how NFTs work. This is where Pudgy Toys is remarkable.

"Trojan Horse"

The bridging between NFTs and the traditional world should be two-way. It should attract real-world attention to NFT brands and also bring real-world fans into the NFT world. For the former, it is not essential to emphasize that it is an NFT in order to attract fans outside the crypto community. Rather, it relies on solid content to attract attention, such as games, merchandise, and even viral videos on platforms like TikTok. For the latter, simply emphasizing that it is an NFT is not enough. It is necessary not only to make people aware that it is an NFT but also to find ways to get them involved and participate.

Pudgy Toys combines the "Pudgy World" experience. Each Pudgy Toys comes with a QR code "birth certificate". When people who buy the toy scan it, they will receive a redemption code and be guided to visit the Pudgy World website. Once inside the Pudgy World website, all you need to do is register an account with your email, and Pudgy Penguins will generate a hosted wallet for that account.

With the redemption code, players can obtain penguin decorations to dress up their own penguins. The penguins that can be decorated using DIY are non-tradeable SBT, but various decorations are tradeable NFTs. Players can sell the decorations they don't like or buy their favorite ones. Different decorations have different rarity levels and their own unique background stories.

The clever design has two advantages:

1. The penguins themselves are non-tradeable SBT, preserving the value of Pudgy Penguins and even Lil Pudgys.

2. It provides consumer goods that truly combine the virtual and physical worlds. Users are no longer stuck choosing between buying NFT images worth thousands or tens of thousands of dollars, or buying related physical merchandise.

In order to meet the demand for decoration trading within Pudgy World, continuous improvement is needed in terms of complementary content (such as using stories to make users feel a sense of meaning for certain accessories, not just for their appearance) and constantly adding gameplay elements to Pudgy World beyond the DIY character. Pudgy Penguins has carefully considered all these aspects, and the ultimate positioning of Pudgy World is a "digital playground".

"Trojan horse" is alive and sneaks into the city unnoticed, launching an attack. "Bridging" is dead, only providing a "bridge" without actively engaging users in experiencing the charm of the NFT world, its effectiveness depends on fate. As the playability of Pudgy World becomes stronger and the demand for decorative NFT transactions continues to drive, users will not only receive physical toys but also experience the excitement of opening toy blind boxes. Lucky users may even feel incredible—wow, a toy purchased for $20 actually opens up a decoration worth $1000? Such incredibility not only arouses the users' curiosity about NFT but also generates widespread discussions, allowing more people to become aware of and actively explore NFT.

Escape from Paraffin and Make Money as an NFT Holder

People who fall in love with PFP will be willing to buy PFP, as we assumed earlier. However, the reality is that the majority of holders in this market are here to make money. Actually, there's nothing wrong with it. No one wants to see the price of what they bought at a high value drop. Furthermore, for everyone, buying and collecting things they like that can appreciate in value, isn't that great?

The question is how to make money as an NFT holder. Luca Nets stated in an interview that there are already "enough" Lil Pudgys and Pudgy Rods, and issuing tokens will have to wait until there is "enough rationality and assurance in market value." Without creating paraffin, and without being able to intervene in the market price, the only remaining option is to obtain IP licenses from NFT holders and distribute dividends to authorized holders based on the toy's income at the end of each year. In the future, Pudgy Penguins will purchase non-exclusive licenses from NFT holders, meaning that holders can authorize the NFT not only to the Pudgy Penguins team but also to others. When purchasing a non-exclusive license, Pudgy Penguins will directly transfer the advance payment to the holder's wallet based on the transaction value.

Is the traditional authorization process cumbersome with a lot of legal documents that are difficult to understand? Are you unsure who to authorize and how to find the corresponding NFT holder, causing low matching efficiency? To solve these two major problems, Pudgy Penguins has implemented a very powerful activity—Project Overpass. In simple terms, it is an "IP authorization marketplace" where individuals/companies who want to buy authorization can directly list their desired NFT series on the Project Overpass website. The holders of the corresponding NFT series can submit their NFT and the desired reward conditions, and the authorization is confirmed on the blockchain. In other words, completing an IP authorization transaction only requires a simple click of a button on Project Overpass.

Although now 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 just toys. Games, animations, children's picture books, story books, and more will bring more and more demand for licensing. However, meeting the demand of processing 8888 Pudgy Penguins and 30000 Lil Pudgys will certainly not be quick and smooth. The Pudgy Penguins team needs to continue to expand their influence.

It is wonderful to see our favorite PFPs becoming more and more vibrant in games, animations, children's picture books, and story books, while also making money from their growth.

Conclusion

What I find most remarkable about Pudgy Penguins is that they have comprehensive and thorough thinking about how to turn an NFT series into an IP, and they are down-to-earth in doing what should have been done long ago. They neither just talk about the future of NFT IP with their mouths nor completely break away from NFT and head north to do an IP community solely for profit. Instead, they honestly face what kind of project they are, carefully consider what level they want to achieve, and then conscientiously execute some "neglected" "minor matters". For example, their earnestness in terms of Instagram and GIPHY for viral marketing. Without demand, how can there be business? Small projects without money have to do or want to do well but lack resources, while large projects lying down and counting money can afford to neglect such matters. The contrast that Pudgy Penguins shows in these matters is actually just being down-to-earth.

Pudgy Penguins still have a long way to go before they reach the dream, but now they have a start that can illuminate the future.