The chubby penguin is making frequent moves after crossing the bull and bear markets. Is this a sign of NFT revival?

Author: Huo Huo, Baihua Blockchain

With Bitcoin breaking the $100,000 mark, altcoins led by Ethereum have begun to surge, and the NFT sector also seems to be experiencing a revival.

On December 6, the floor price of the NFT blue-chip project Pudgy Penguins rose 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 mostly maintained a position among the top three in NFT market capitalization since the beginning of this year.

From the "internal strife" of the team in early 2022 that caused the floor price to drop to 0.519 ETH, to now having increased by more than 50 times, what has allowed Pudgy Penguins to emerge from the low and stabilize in the NFT blue-chip ranks? What has the team behind it done?

Through Bull and Bear Markets

In fact, before November, the NFT market was in a very sluggish state. The sales of NFTs in the second quarter of 2024 fell by 45% to about $2.28 billion compared to over $4.1 billion in the first quarter, and the NFT market transaction volume dropped another 50% to $1.1 billion in the third quarter of 2024. However, after the overall cryptocurrency market warmed up in November, the NFT market also saw some improvement, but it was negligible compared to the surge caused by Pudgy Penguins announcing the launch of their Token.

Moreover, as early as February 17 of this year, according to Blur data, the floor price of Pudgy Penguins briefly surpassed BAYC. This marked the first time since 2021 that BAYC was overtaken by another project. Additionally, Pudgy Penguins maintained a strong upward trend in the first quarter of this year, achieving several times the increase.

On May 12, Pudgy Toys, a series under Pudgy Penguins, and the newly licensed Lil Pudgys were launched in the collectibles section of Target, the second-largest retailer in the U.S. Pudgy Toys transformed digital collectible characters into a popular line of physical products, seamlessly merging 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 no longer need to submit Web2-based credentials (such as Google or Apple accounts) to log into the virtual world. Additionally, this integration allows users to log into their accounts without traditional passwords.

Then on July 16, the mini-game Pixelverse announced that it would introduce the Pudgy character "Pudgy" into the game, incorporating popular elements from other cryptocurrencies like Dogecoin. This integration allows players to take on roles in the Pixelverse game, with the Pudgy Penguins game set to officially launch in 2025.

So how did Pudgy Penguins develop step by step to where it is now?

Unfavorable Start

Pudgy Penguins is a series of colorful penguin avatars launched in July 2021, symbolizing "love, compassion, and empathy," with the vision of the Pudgy penguin image becoming a beacon of good mood and positivity for everyone. With a total of 8,888 issued on Ethereum, the mint price was 0.03 ETH, and it sold out in less than 20 minutes after launch. Although the price performance was mediocre in the days following the sell-out, it quickly surged under the influence of the "zoo" market led by BAYC, with an increase of up to 100 times compared to the launch price.

Subsequently, holders of Pudgy Penguins referred to themselves as "The Huddle" (team) and "Pengus" (penguin friends), with early holders enjoying exclusive experiences, related events, intellectual property (IP) licensing opportunities, and other benefits.

In the hot market at that time, Pudgy Penguins attracted celebrities such as NBA star Stephen Curry and Reddit co-founder Alexis Ohanian to purchase.

However, due to issues with the initial founding team, the project faced a rocky start. The former founder Cole Villemain was accused of operating a scam, misusing funds, and conflicts between the team and major project holders, leading to a decline in the popularity of Pudgy Penguins.

In December 2021, the original Pudgy Penguins operational manager and the team failed to reach an agreement on salary and responsibilities, and due to dissatisfaction with the boss, he threatened to "Fud Pudgy Penguins to zero."

Then, in early January 2022, community members published a lengthy article accusing the Pudgy Penguins founding team of failing to deliver on promises regarding game development, recruiting developers, and other matters, raising suspicions of wanting to "run away with the funds."

This led to extreme dissatisfaction within the community towards the Pudgy Penguins founding team, resulting in a vote on Discord to remove the founder in early 2022. Meanwhile, the floor price of Pudgy Penguins also dropped to a historical low of 0.519 ETH.

Angry community demands change, image 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 saw 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 blue checks on X and OpenSea, and launching official accounts on Web2 and Web3 platforms. After the accounts were opened, Luca's team maintained a high level of activity on Twitter and Instagram, actively participating in various NFT events, including establishing a Pudgy Penguins yacht party in Miami, producing community-exclusive Pudgy Penguins toys, launching soulbound tokens, creating a dedicated secondary trading market for Pudgy Penguins, and selling exclusive Pudgy Penguins merchandise to increase social media exposure.

It is evident that after the new team took over, Pudgy Penguins experienced a spiral increase in price over the following year. In May 2023, Pudgy Penguins completed a $9 million financing led by 1kx, and then it skyrocketed in early 2024.

So besides media promotion, what actions did the Pudgy Penguins team take to make Pudgy Penguins one of the leading NFT PFPs after Crypto Punks and BAYC?

The Path of Growth

From the takeover in April 2022 to early 2024, Pudgy Penguins laid the foundation for its outstanding performance through brand building, IP development, and online and offline collaborative marketing, with the interconnection of various aspects.

1) Focus on IP Marketing to Increase Visibility

In April 2021, Yuga Labs launched BAYC, which attracted a large number of holders through the bull market and continuous airdrops, enhancing community cohesion. However, as development slowed in the later stages, Luca learned from this experience and realized that relying solely on airdrops in a bear market is not sustainable for projects. For NFT projects to develop long-term, they must establish sustainable revenue sources.

Drawing on Web2 development experience, Luca recognized the enormous potential of intellectual property (IP). For example, over the 24 years since 1996, Pokémon's revenue has approached $100 billion, leading him to adjust his goal to make Pudgy Penguins a globally recognized Web3 brand.

Source: createandlearn.net

Before the acquisition, the initial team had already enriched the Pudgy Penguins NFT series. Therefore, the ecosystem was relatively complete, and Luca believed that effective IP marketing would be one of Pudgy Penguins' most important core competitive advantages moving forward.

Pudgy Penguins adopted a series of targeted strategies to convey its brand philosophy and product information to the target audience through social media and sales of physical products.

First, leveraging 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 view count of 24.3 billion.

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 TikTok, with a total of 16.6 million likes, and the top pinned video has nearly 17.7 million views.

Pudgy Penguins TikTok account

From May to July 2024, Pudgy Penguins also launched the "#SaveThePenguins Challenge" campaign, using augmented reality (AR) filters on TikTok and Instagram to raise awareness for penguin protection and raise 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 partnered 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 like Pudgy and Peaches to enhance player experience.

2) IP Licensing to Enhance Community Cohesion

To deliver value to the community, Luca established a closer connection with Pudgy Penguins NFT holders by sharing its success and commercial value, promoting a shared and win-win value concept. He stated that Pudgy Penguins plans to become the first franchised IP in the Web3 space, and the company also launched the IP licensing platform OverpassIP to promote NFT licensing and physicalization.

Pudgy Penguins' licensing model has two approaches: producing physical goods through holders' image licensing and sharing profits, or enhancing brand awareness through social media exposure for monetization.

3) Producing Physical Derivatives for Revenue Generation

The main revenue sources for IP include derivative sales, gaming, and film box office, with derivatives and gaming being key to monetization.

In this regard, Yuga Labs focuses on game direction for IP development and collaborates with physical brands to achieve product monetization. In 2023, Azuki launched the PBT protocol and collaborated with Ambush, also exploring monetization paths that combine physical products with digital experiences.

Luca, on the other hand, chose IP derivatives, and since taking over Pudgy Penguins, he has been dedicated to IP licensing and product planning, such as launching physical dolls, plush toys, and decorative pins. According to reports, Pudgy Penguins' physical toys sold over 750,000 units within seven months and have been placed in 3,100 Walmart stores in the U.S.

On May 13, Luca stated that in the past 12 months, sales of Pudgy Penguin plush toys had exceeded one million units.

Additionally, the Pudgy Penguins brand has expanded beyond the NFT space, applying for trademarks in areas such as printed comic books, collectible trading cards, snacks, seasonal foods, board games, hoodies, hats, virtual goods, and multimedia.

Reports indicate that the Pudgy Penguins team also plans to launch two arcade games and the Pudgie World game, with Pudgie World supported by zkSync.

Controversies and Risks

The Pudgy Penguins project has also sparked some controversies during its development. In addition to the unfulfilled promises of the early founders and team, which led to a decline in community trust, there are two other noteworthy points:

1) Centralization Controversy

Although NFT projects typically promote decentralized governance, the process of changing management rights for Pudgy Penguins is seen as driven by a few individuals, which somewhat contradicts the original intention of decentralization. Additionally, some community members have questioned the management style of the new leadership team and expressed concerns about the project's future development potential.

2) Speculative Nature of NFTs

Like other NFTs, Pudgy Penguins' prices are highly volatile, and some believe the project relies more on market speculation rather than genuine value creation. The audience for physical dolls and Web3 IP lacks alignment, which is insufficient to drive Pudgy Penguins' further development in Web3. Some users have also reported difficulties in profiting from the secondary market after purchasing NFTs.

Conclusion

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, Luca has allowed Pudgy Penguins to achieve relative success during this cryptocurrency winter through a similar dual-layer game and IP-centric model. However, in the context of the NFT narrative appearing somewhat "outdated," whether Pudgy Penguins can revitalize the industry tone and continue to develop remains to be seen.