Author | Huo Huo
Produced by | Blockchain in Plain Language
As Bitcoin broke through the $100,000 mark, altcoins led by Ethereum began to rise, and the NFT track also seemed to be reviving.
On December 6, the NFT blue-chip project Pudgy Penguins saw its floor price rise over 20% within 24 hours, reaching a peak of 22.2 ETH (currently about 27 ETH), briefly surpassing BAYC (22.1 ETH). Moreover, Pudgy Penguins has largely maintained a position in the top three in NFT market value since the beginning of this year.
What led Pudgy Penguins to emerge from the lows, with floor prices dropping to 0.519 ETH due to 'team turmoil' in early 2022, to now seeing over a 50-fold increase? What did the team behind it do?
01. Surviving the Bull and Bear Markets
In fact, prior to November, the NFT market was in a very sluggish state. NFT sales in the second quarter of 2024 fell by 45% compared to over $4.1 billion in the first quarter, amounting to approximately $2.28 billion. In the third quarter of 2024, NFT market trading volume slumped again by 50% to $1.1 billion. However, after an overall recovery in the cryptocurrency market in November, the NFT market also warmed up, although it is insignificant compared to the increase caused by Pudgy Penguins announcing Token.
Moreover, as early as February 17 this year, according to Blur data, Pudgy Penguins' floor price briefly surpassed BAYC (Bored Ape Yacht Club) for the first time since 2021, indicating significant growth. Additionally, Pudgy Penguins maintained a strong upward trend in the first quarter of this year, achieving several-fold increases.
On May 12, Pudgy Penguins' Pudgy Toys series and newly licensed Lil Pudgys are now available in the collectibles section of Target, the second-largest retail store in the U.S. Pudgy Toys seamlessly merges digital collectible characters into a popular physical product line, blending the physical and digital worlds for consumers.
On July 10, Pudgy Penguins partnered with Web3 domain provider Unstoppable Domains, allowing users to access Pudgy World through their own .pudgy domain names. With this new integration, users will no longer need to submit Web2-based credentials (such as Google or Apple accounts) to log into the virtual world. Furthermore, this integration allows users to log into their accounts without traditional passwords.
On July 16, the mini-game Pixelverse announced that it would introduce the chubby penguin character 'Pudgy' into the game, incorporating popular elements from the Dogecoin community and other cryptocurrencies. This integration allows players to take on the role of characters in the Pixelverse game, and the Pudgy Penguins game is set to officially launch in 2025.
So how did Pudgy Penguins develop to where it is now?
02. Unfavorable Start
Pudgy Penguins was launched in July 2021 as a series of colorful penguin avatars, symbolizing 'love, compassion, and kindness.' The vision is for the chubby penguin image to become a beacon of good mood and positivity for everyone. A total of 8,888 were issued on Ethereum, with a mint price of 0.03 ETH, selling out in less than 20 minutes after release. Although the price performed flat in the days following the sellout, it quickly rose under the influence of the 'animal park' trend led by BAYC, achieving a hundredfold increase compared to the release price.
Subsequently, the holders of Pudgy Penguins referred to themselves as 'The Huddle' (team) and 'Pengus' (penguin friends), with early holders gaining exclusive experiences, related events, intellectual property (IP) licensing opportunities, and other benefits.
In the hot market at that time, Pudgy Penguins attracted celebrities like NBA star Stephen Curry and Reddit co-founder Alexis Ohanian to purchase.
However, due to issues with the original founding team, the project had a rocky start. Former founder Cole Villemain was accused of operating scams, misusing funds, and conflicts between the team and major project stakeholders, leading to internal strife and causing Pudgy Penguins to lose market heat shortly thereafter.
In December 2021, the operation manager of the original Pudgy Penguins and the team failed to reach an agreement on salary and responsibilities. Due to dissatisfaction with the boss, he threatened to 'Fud Pudgy Penguins to zero.'
Then, in early January 2022, community members wrote a long article accusing the Pudgy Penguins founding team of failing to deliver on promises related to game development and recruiting developers, raising suspicions of 'running away with the funds.'
This led to extreme dissatisfaction in the community with the Pudgy Penguins founding team, resulting in a vote in early 2022 on Discord to remove the founder. Meanwhile, the floor price for Pudgy Penguins also dropped to its historical low of 0.519 ETH.
Angry community members demand change, source: x.com
Subsequently, in April 2022, a new team led by Los Angeles entrepreneur Luca Schnetzler acquired the project for $2.5 million.
Pudgy Penguins experienced a turning point after Luca Netz’s acquisition.
After taking over the project, Luca quickly implemented new measures, including hiring a new COO, applying for verification badges from X and OpenSea, and launching official accounts on Instagram and other platforms. After the accounts were activated, the Luca team remained highly active on Twitter and Instagram, actively participating in various NFT activities, including establishing a Pudgy Penguins yacht party in Miami, producing community-exclusive Pudgy Penguins toys, releasing Soulbound Tokens, creating a dedicated secondary trading market for Pudgy Penguins, and selling exclusive merchandise to increase social media visibility.
It is evident that after the new team took over, Pudgy Penguins saw a spiral increase in price over the next year. In May 2023, Pudgy Penguins completed a $9 million financing round led by 1kx, and then soared in early 2024.
Besides media promotion, what actions has the Pudgy Penguins team taken to make Pudgy Penguins one of the leading NFT PFPs after Crypto Punks and BAYC?
03. Growth Path
From the time Luca took over in April 2022 until early 2024, Pudgy Penguins built a strong foundation for its remarkable performance through brand establishment, IP development, and online and offline collaborative marketing.
1) Focus on IP marketing to increase visibility.
In April 2021, Yuga Labs launched BAYC, attracting a large number of holders through the bull market and continuous Airdrops, enhancing community cohesion. However, with the lack of momentum in the later stages of development, Luca learned lessons from this, realizing that relying solely on Airdrops during a bear market is unsustainable for projects. For NFT projects to develop long-term, they must establish sustainable revenue sources.
Drawing from Web2 development experience, Luca realized the immense potential of intellectual property (IP). For example, from 1996 to 2020, Pokémon generated nearly $100 billion in revenue, and he adjusted his goal to make Pudgy Penguins a globally recognized Web3 brand.
Source: createandlearn.net
Before the acquisition, the original team had already enriched the Pudgy Penguins NFT series. Therefore, the ecosystem is relatively complete, and Luca believes that effective IP marketing is one of Pudgy Penguins' most important core competitive advantages moving forward.
Pudgy Penguins has adopted a series of targeted strategies to convey the brand concept and product information to the target audience through social media and offline physical product sales.
First, use social media channels to gain exposure and increase visibility. Pudgy Penguins has over 17,300 related GIFs on dynamic GIF image search engines, with a total of 24.3 billion views.
Pudgy Penguins has 1.6 million followers on Instagram, with each post receiving tens of thousands of likes. Pudgy Penguins has nearly 520,000 followers on the overseas version of TikTok, with a total of 16.6 million likes. Among them, the top pinned video has nearly 17.7 million views.
Pudgy Penguins TikTok account.
From May to July 2024, Pudgy Penguins initiated the '#SaveThePenguins Challenge' campaign, enhancing awareness of penguin protection through augmented reality (AR) filters on TikTok and Instagram while raising funds for environmental protection organizations.
Pudgy Penguins also participated in a series of online marketing and offline events, such as the Miami Basel Art Fair and collaborations with other industries.
In 2022, Pudgy Penguins collaborated with Green Kids Club to launch children's books; in 2023, it collaborated with Hologram Labs and Retail Monster to launch 3D models and penguin toys; in May of the same year, Luca released physical toys called Pudgy Toys based on its intellectual property.
On December 11, 2023, Pudgy Penguins announced the launch of the gaming platform Pudgy World, which will introduce brand-related hero characters such as Pudgy and Peaches to enhance player experience.
2) IP Licensing Enhances Community Cohesion.
To deliver value to the community, Luca has established closer ties and shared win-win values with Pudgy Penguins NFT holders by sharing its success and business value. He stated that Pudgy Penguins plans to become the first franchised IP in the Web3 field, and the company also launched the IP licensing platform OverpassIP to promote NFT licensing and physical realization.
Pudgy Penguins' licensing model has two forms: producing physical items through holders' image licenses and monetizing through brand exposure on social media.
3) Producing physical derivatives for revenue.
The main sources of income for IP include derivatives sales, gaming, and box office revenue, with derivatives and gaming being key to monetization.
In this aspect, Yuga Labs' IP development focuses on gaming and collaborates with physical brands for merchandise monetization. In 2023, Azuki launched the PBT protocol and collaborated with Ambush, also exploring monetization paths that combine physical goods with digital experiences.
Luca chose IP derivatives, and since taking over Pudgy Penguins, he has focused on IP licensing and product planning, such as the launch of physical dolls, plush toys, and decorative pins. Pudgy Penguins' physical toys sold over 750,000 units within seven months and are now available in 3,100 Walmart stores in the U.S.
On May 13, Luca stated that over the past 12 months, sales of Pudgy Penguin plush toys have exceeded one million units.
Moreover, the Pudgy Penguins brand has expanded beyond the NFT space, applying for trademarks in areas such as printed comic books, collectible trading cards, plush toys, seasonal goods, board games, hoodies, hats, virtual goods, and multimedia.
Reports suggest that the Pudgy Penguins team plans to launch two arcade games and the Pudgie World game, with Pudgie World supported by zkSync.
04. Controversies and Risks
The Pudgy Penguins project has also generated some controversies during its development. In addition to the previously mentioned unfulfilled promises by the early founders and team, which led to a decline in community trust, two additional points are noteworthy:
1) Centralization Controversy
Although NFT projects often promote decentralized governance, the process of changing management for Pudgy Penguins is seen as being driven by a few individuals, somewhat contradicting the original intent of decentralization. Additionally, some community members have raised concerns about the new leadership team's management style and the future development potential of the project.
2) Speculative Nature of NFTs
Like other NFTs, Pudgy Penguins' price fluctuations are extreme, with some believing the project relies more on market speculation rather than true value creation. The user audience for physical figurines and Web3 IP lacks compatibility, insufficient to drive further development of Pudgy Penguins in Web3. Additionally, some users have reported difficulty profiting in the secondary market after purchasing NFTs.
05. Summary
Pudgy Penguins aims to create the world's first great web3 IP company and become one of the first globally recognized brands and IPs in the NFT space. Currently, there is still a long way to go to achieve Pudgy Penguins' lofty ideals.
Due to various opportunities, Luce has enabled Pudgy Penguins to achieve relative success in this cryptocurrency winter through a similar dual-layer gaming and IP-centered model. However, as the NFT narrative appears somewhat 'outdated', whether Pudgy Penguins can revitalize the industry's tone and continue to grow remains to be seen.
What do you think about the future of Pudgy Penguins? Feel free to comment and discuss.
