This article will take you through what first-party marketplaces are, how they’re different from  third-party marketplaces (i.e. OpenSea, Blur, LooksRare, etc.), and their future in the NFT space.

Article Outline

• What are First-Party NFT Marketplaces?

• Differences Between Third & First-Party Marketplaces

• Why are First-Party Marketplaces Good for Web3

• The Rise of First-Party Marketplaces

• Closing Remarks

What are First-Party NFT Marketplaces?

First-party NFT marketplaces, also commonly known as community-centric NFT marketplaces, are NFT trading platforms owned and managed by the NFT projects themselves.

These marketplaces allow users to mint, list, buy, and sell a project’s NFTs straight from their own marketplace without the use of third-party marketplaces like OpenSea and MagicEden.

Differences Between Third & First-Party Marketplaces

Third-Party Marketplaces

• Third party marketplaces, like OpenSea, allow users to search for, purchase, and sell any NFT they might be looking for, from any NFT collection currently listed on the platform.

• They often allow sellers to list their collectibles in a variety of cryptocurrencies.

• They’re owned by third-party companies and often mostly benefit the marketplace provider through global marketplace royalties.

First-Party Marketplaces

• First party marketplaces only allow users to search for, purchase, and sell NFTs from a single creator.

• They allow creators to enforce royalties on their collections and often help creators have more access and better control of any raised funds.

• They often have a more community-centered approach, allowing projects to tailor their marketplace to their brand and community-specific experience.

Why are First-Party Marketplaces Good for Web3

1/ Decentralization & Censorship Resistant

The NFT and cryptocurrency space loves to preach about decentralization, however, NFT trading is currently limited to, and reliant on a small number of marketplaces. If those failed, the entire NFT ecosystem would collapse.

Although it is highly unlikely that every single of them will vanish overnight (despite the recent escalade of events caused by FTX’s downfall proving otherwise), the market share of marketplaces is largely centralized and concentrated in a few hands.

If one of the major marketplaces decides to delist an NFT collection, its trading volume would cease almost everywhere. However, if the marketplace is in the NFT project’s hands, users would always maintain the ability to trade their NFTs.

2/ Unique Customer Experience

One of the best ways to conceptualize first-party marketplaces is to imagine their Web2 counterparts. Think of the analogy of an Apple Store and how different it is from big box retailers. Regardless of your stance on Apple’s store designs, you can’t deny that they are different and provide a completely unique customer experience. More importantly, you can’t deny they’re Apple.

In that sense, first-party NFT marketplaces allow brands to create a unique, on-brand trading experience for their users.

Take a look at rektguy or goblintown.wtf’s marketplaces and you’ll quickly notice how they fit into a different aesthetic altogether and enhance the projects’ user experience.

3/ An Additional Communication Channel & User Data

First-party marketplaces allow for brands to own an extra communication channel with their users and access to their users’ data. This enables brands to have a better understanding of their user base, meaning brands can enhance and tailor their user experiences according to their target audiences. This also allows brands to cut out the middleman and have direct access to their user base.

4/ Unique Features

Lastly, first-party owned marketplaces allow for brands to create unique features and experiences on their website optimized for their user base. Instead of having to conform to a standard, brands would be in charge of their own user experience.

Some collections target art collectors, and thus their website would be better optimized for viewing the artwork and getting to know the artist. While other collections could cater for traders and be better optimized for trading.

Additionally, Web3 brands being in-charge of their own marketplaces could mean limitless improvement and creation in the space. Games could allow users to trade their in-game collectibles using their native token. Limited-time events could reward active users with certain in-game perks. Brands could sell physical items backed by their NFTs. Projects could include player profiles rewarding activity on their marketplace, further driving engagement onto their native platform. The sky is truly the limit here.

5/ Control of Profit Margins & Royalties

First-party marketplaces also allow Web3 companies to have control over their profit margins by having control of their marketplace’s smart contract.

While most marketplaces have been making a shift to zero-royalties recently in the pursuit of gaining market share, many project creators have been losing out on royalty revenue.

For example, Art Gobblers’ team missed out on $1 million USD of royalties in its first 48 hours after mint due to Blur’s 0% royalty policy (although there are some hidden incentives behind the volume seen on Blur for Art Gobblers, as both are backed by Paradigm).

However, despite OpenSea’s trading volume for Art Gobblers being 60% less than Blur’s, the platform’s enforced royalty system allowed the project to collect almost twice as much from royalties than its counterpart.

The Rise of First-Party Marketplaces

First-party marketplaces aren’t anything new. In fact, the creators of CryptoPunks, Larva Labs, created their own royalty-free marketplace, which has seen a lifetime trading volume of $2.97 billion USD, placing it as the third largest marketplace in terms of volume, following the biggest first-party marketplace, Axie Infinity, with a total volume of $4.26 billion USD.

Looking further down the list, we can also see NBA Top Shot taking 6th place ($975 million USD lifetime volume), and Mobox taking 8th ($509 million USD lifetime volume). First-party marketplaces are nothing new, but they have a long established history and have been effectively tried and tested, showing promise in the face of the wider, more general marketplaces.

Why then, if first-party marketplaces are beneficial for brands, and have proven to work time and time again, do most Web3 brands not launch their own first-party marketplaces?

The answer might be that it is always more convenient to list a collection on a wider marketplace that has historically dominated the space, for free. OpenSea does, after all, control the largest market share in the NFT space. It also has a first mover advantage in the space, not to mention the many failed “vampire attacks” to take market share away from its platform - new platforms attempting to drain users out of existing platforms to increase user and trading volume, typically by offering a tokenized incentive or airdrop to new users.

However, the sentiment around third-party marketplaces has been recently shifting as more marketplaces have begun to deploy royalty-free trading, allowing traders to buy and sell NFTs without paying any royalties to creators. This might add an additional incentive for project founders to finally make the leap towards first-party marketplaces. For more information about the on-going royalty debate in the NFT space, check out our “NFTs: The Royalty Debate” article.

In an interview with DappRadar, Zach Heerwagen, the CEO of Snag Solutions - a company helping NFT brands build their first-party marketplaces - said:

“In every other Ecomm category, brands do better when they own the buying experience to drive brand interaction and increase loyalty and usage by improving the buying experience. Unlike in some other categories where goods are relatively replaceable, NFT’s are entirely brand based, and overtime we’ll see creators flex their ability to keep holders on their own site so they can regularly surprise and delight.” - Zach Heerwagen

Snag Solutions has already started building a first-party marketplace for one of the biggest brands in the NFT space, Yuga Labs.

“We’ve already seen aggregators like Gem prove that they can steal market share by showing users the deepest NFT liquidity for projects. We have an incredible opportunity to create the go-to destination for the ApeCoin and Yuga community by aggregating selection, offering the lowest fees, and customizing the experience to the rich BAYC & Otherside lore by pulling in metadata and building social features around the buying experience.” - Zach Heerwagen

It is clear that first-party marketplaces are just getting started in the space and we will soon be seeing more big names in the Web3 space join in as brands begin to realize the power of owning their own marketplaces.

Closing Remarks

TL;DR

Here are the summarized points made throughout this article:

• First-party NFT marketplaces are NFT trading platforms owned and managed by the NFT projects themselves. They allow users to trade a project’s NFTs straight from their own marketplace without the use of third-party marketplaces.

• The key differences between third and first-party marketplaces is that while third-party marketplaces allow users to trade any NFT they might be looking for, they often mostly benefit third-party, centralized entities. On the other hand, first-party marketplaces allow creators to enforce royalties on their collections and tailor their marketplace’s user experience to their brand.

• First-party marketplaces allow for decentralization and censorship resistance from the major third-party marketplaces. They also allow brands access to an additional communication channel and user data that can help them craft more user-specific experiences.

• First-party marketplaces aren’t anything new. Axie Infinity’s marketplace ranks 2nd in overall market volume, followed by Larva Labs’ Crypto Punks in 3rd place. In fact, first-party marketplaces have a long established history and have been effectively tried and tested, showing promise in the face of the wider, more general marketplaces.

• The sentiment around third-party marketplaces has recently been shifting as more marketplaces have begun to deploy royalty-free trading, allowing traders to buy and sell NFTs without paying any royalties to creators.

• More Web3 brands are likely to make the leap to first-party marketplaces as they begin to realize the power of owning their own marketplaces.

At OriginsNFT we leverage data-driven decision making, educational resources, and proprietary analytics to remain ahead of the curve with respect to blockchain tech and specifically NFTs. To find out more, please visit our website or Twitter.

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