Pudgy Penguins is a Web3 project that has successfully demonstrated the importance of communities in building a strong brand in the NFT space.

In this article, we will cover the Pudgy ecosystem, exploring how the strength of community, revived leadership and a new strategic direction can create a globally recognizable brand.

Article Outline

• Background

• The Pudgy Ethos

• Blue Chip Thought Leaders

• Upcoming Updates To Look Out For

• Project Runway Analysis

• Closing Remarks

Background

1) What are Pudgy Penguins?

Pudgy Penguins is more than just a genesis collection of 8,888 adorable penguin NFTs. This Web3 brand has effectively demonstrated how crucial a role communities play in rallying around new leadership to take the project to the next stage.

The new business model strives to give value back to its holder base to ensure a core nucleus of 5k die-hard fans. This focus enables strong foundations to grow the brand into a global behemoth.

Whether you are active on Twitter or casually log on from time to time, you’ll no doubt recognize these distinct Pengus from your Twitter feed.

There are three main collections within the project:

• Genesis Pudgys (July 2021).

• Pudgy Rods, AKA Rogs (Aug 2021).

• Lil Pudgys (Dec 2021).

These were all launched prior to the acquisition. It’s important to outline the project history for more context.

2) Project History

Pudgy Penguins have come a long way from its humble beginnings after minting in July 2021 during the peak of the NFT bull run.

One of the original founders of the Pudgy Penguins was ColeThereum, who made lofty promises regarding the project's future. From the development of their own token launch, a children’s book to a metaverse game. Many of these promises fell short leading to a downward spiral for the project.

Furthermore, Cole himself was outed for running paid promotions of NFT projects without disclosing that he’d received remuneration for them. He was also found to have siphoned off funds from the project's treasury.

In late 2021, the Pudgy community ousted the original founders of the project. A bidding war broke out in January 2022 for the collection. Main suitors included Luca Schnetzler a.k.a. Luca Netz of Netz Capital, Mintable founder Zach Burks, and NFT influencer, BeanieMaxi.

The Pudgy Penguin NFT group was sold in April 2022 to Los Angeles–based Netz Capital for 750 ETH ($2.5m USD spot value).

Since then they've set off on a journey to develop a globally recognized brand with a flourishing ecosystem that is now a prominent player in the NFT space.

3) Project Performance

To date, the genesis Pudgy Penguins collection has seen a total of 129.5k ETH (~$198m USD) in volume with a current floor price of 5.8 ETH (~$8.9k USD).

We saw some sizable Pudgy grail sales at the end of 2022 following the Sotheby’s auction and Art Basel Miami Pengu meetup.

Holder Analysis

The current holder ratio is 52% suggesting the average number of Genesis Pudgys each holder owns is two.

This is a reasonable ratio that tends to provide a healthy, sustainable floor price as it mitigates the number of wale holders that can dump a significant number of tokens.

Grail Sales

Fudrick Douglas acquired the 1/1 on August 23, 2022 for 400 ETH ($650K USD Spot value) marking the highest Pudgy sale on record. This took place in the depths of the bear market, thus demonstrating his conviction for the project.

High-End OTC Trades

We’ve also seen some incredible over-the-counter trades between BAYC for Pudgy grails. As the BAYC ecosystem matures, the Pengus show promise to expand at a greater rate if they execute on their ambitious roadmap of becoming a global IP brand. Investors are positioning themselves accordingly.

Notable Holders

Other notable holders include:

• The CEO of Nansen (Alex Svanevik).

• Steph Curry.

• Vincent Van Dough (heads up the 3AC offshoot Starry Night Capital).

• OpenDAO founder (9x9x9Eth).

The Pudgy Ethos

The Pudgy Penguins team and community culture are well-known for being one of the most inclusive, culturally-rich and forward-thinking groups in the NFT space. The Pudgys have a strong presence on social media, a capable team, and a supportive community.

1) Social Media

Their social media presence is noticeable and far-reaching. They are leveraging Netz’s past experience in sending content viral with social media.

Their reach on Giphy has been insane with 2 billion views to date. Certainly an interesting metric to keep an eye on as the brand scales.

2) Strong CEO Online Presence

Pudgy Penguins’ CEO, Luca Netz, is one of the most active leaders in Web3. Currently ranked 55th, Netz’ global reach constitutes 7% of the entire NFT space.

Netz has a track record for bootstrapping and scaling products using social media. He’s leveraging their web2 experience to apply a similar approach to web3 while also balancing the novel community-focused element.

Netz compares running an NFT project to launching a start-up in public, with intense scrutiny from the holder base. But they have a well-defined long-term strategy and an outstanding track record to draw experience from.

Strong Communication

It’s apparent they’re using their knowledge of successfully scaling prior ventures. Their communication is on point and without ambiguity. It’s important for the project leadership team to be seen by their community and it’s evident that they are out at conferences meeting with their core audience.

An attention economy can be brutal and if a project, or its leader, is silent for too long then holders get nervous without clear communication.

The public sentiment for the future prospects of the project is optimistic - demonstrated by the steady organic growth in the project market cap.

3) Team Excellence

The Pudgy Penguins team is also not short on talent, with every team member playing a vital role in the brand’s success, whether it be on the community, communication, or development front.

The leadership team includes six key individuals, each holding a pivotal role in driving the huddle forward.

Most work in person, helping to drive an efficient and effective rollout of their revised roadmap for the collection to become a global brand. Many see the benefits of remote working but working together in person enables collaborative activities to be more productive. We are social creatures after all.

4) Formidable Collaborations

Pudgys have established significant partnerships with both Web3 and non-Web3 brands, including:

• LayerZero for Lil Pudgys to waddle across chains to Polygon following DeGods to the huge network of brands on the Ethereum scalability solution.

• Hologram Labs to develop 3D avatars.

• Retail Monster to join colonies and launch ‘Toyline’ and leverage the extensive network and roll out further licensing arrangements for Pudgy holders.

• Sotheby’s to host their first digital auction.

• Doppel to prevent social media impersonations and reduce reputational damage.

5) Strong Community

The community of Pudgy Penguins is known for being highly supportive of each other, regardless of whether they are content creators, artists, or meme creators. They actively help one another grow their audience. Netz aims to deliver value to a core group of 5k holders to then sustainably grow the brand.

They are currently sitting at the third spot after Sappy Seals and Bored Apes for project rankings, based on several NFT Inspect social signals.

It’s difficult to remain at the top of the leaderboard, but the Pengus appear to maintain a steady top-five position, consistently. This is a testament to their organic growth since the Netz’ acquisition and continued holder focus strengthened through clear communication.

Blue Chip Thought Leaders

Pudgy Penguins has also established itself as a blue chip amongst NFT thought leaders.

1) Flight to Quality

As the bear market continues to dominate the wider economics of the NFT ecosystem, it becomes more difficult for new PFP projects to break into the space.

There is a phenomenon in traditional markets called “Flight to Quality”. This in essence means investors shift their funds to more reliable stocks or less risky assets, like bonds knowing they are more likely to weather the storm.

It’s the same rational behaviour that we see enter the NFT ecosystem with those wanting to retain some exposure to NFT upside they invest in the likes of BAYC, Punks, Azuki and now we can add Pudgy Penguins into this mix. People back founders they believe they can trust, and Netz is providing this level of comfort that they are here for the long term.

2) Holder Focus

Their team also intends to compensate and support community members involved in decentralized IP-building. Similar to Sappy Seals, Pudgy Penguins also provides a Meme Machine on their website to aid content production.

In addition, this helps to supercharge community content creation by enabling creators to increase their content output, as they can easily generate and utilize branded content using the meme platform.

3) Content Reach

According to TweetBinder, over the past week, the Pudgy Penguins community has generated over 21.5k tweets, which amounts to an average of 3.1k tweets per day.

In the past week, a total of 10,611 contributors have shared content related to Pudgy Penguins, with 9,081 retweets of Pudgy Penguins content, resulting in a potential reach of over 43 million unique users.

As the saying goes, “with great power comes great responsibility,” and in the case of Pudgy Penguins, it also means great exposure.

The community is currently a dominant force on NFT Twitter, with around 21% of all NFT Twitter users having seen a content creator with a Pengu profile picture in the past 24 hours.

This should come as no surprise, given that 6,357 Twitter users, or around 66% of all Pudgy members, currently have a Pudgy profile picture.

When comparing floor prices vs. the global reach of various collections, Pudgy Penguins rank reasonably well.

Until recently, the price was on par with Sappy Seals but the prospects of the IP being leveraged into a global brand have helped elevate this to align with Doodles and Moonbirds.

In fact, Pudgy Penguins hold a top-five position in terms of Pay Per Reach (PPR), with the lowest PPR cost of $398 for every 1% reach.

Upcoming Updates To Look Out For

From technological innovation to a culturally rich and forward-thinking community, Pudgy Penguins have made a name for themselves in the NFT space.

Ultimately they want to be pushing the project to become a global brand, for which they will need to infiltrate normies unwittingly. Perhaps this is taking place sooner than we think.

There are hints of imminent breakthroughs.

Strategic Direction and 2023 Roadmap

Things are far from complete as the team has set ambitious goals for the current year. The future of Pudgy Penguins looks promising.

1/ Physical Products

As part of their brand expansion, they intend to continue driving cute physical Pudgy Penguins products to create a wider appeal outside of the digital realm. These items are currently for sale at their online store, and include:

• Pudgy Toys - In August 2022, the Pudgy Toys lineup was introduced and can be licensed directly from the community.

• Children’s Books - Building upon its brand of positive vibes, the Pudgy Penguins team has partnered with Green Kids Club to publish a children’s book series. By featuring Pudgy Penguin and Lil Pudgy NFT characters, licensed with the community’s approval, the series acts as yet another marketing push to reach a broader audience and strengthen its brand.

• Merchandise and Apparel - Custom printed t-shirts, hoodies and hats.

They’ve already licensed 16 Pengus of which the holders of those NFTs will receive benefits accordingly. The licensable Pudgys are hence tending to trade at a 6x multiple against the floor.

2/ Digital Experiences

The Pudgy Penguins team aims to increase the brand's public visibility by expanding to digital experiences eventually. They want to amplify the reach of the pudgy brand by leveraging their social media prowess.

Imagine maximizing the IP potential of your core 8,888 genesis through a variety of media routes. Their Instagram images and captions are having meaningful impacts on people outside of web3.

Build a following on Instagram to then use as a business case for a movie on Netflix. The potential is huge.

3/ Short and Long-Form Content

We can see that the reach of the existing content on Twitter is large already, but to go global it needs to be consistent and broader.

Pudgy Penguins will expand beyond NFTs and be introduced to a wider audience through storytelling, bootstrapping Netz’ social media prowess and physical collectibles to corroborate the lore.

They will embark on imaginative journeys, showcasing their creativity and overcoming obstacles, with the help of friends from the web3 community. Together, they will collaborate on creating intellectual property.

4/ Scaled IP Licensing

The team is working on ways to enable Pudgy Penguins holders to monetize their personal brands, but they're being careful about it due to the sensitive nature of intellectual property licensing. They want to ensure that everything is properly secured and long-term safe before they implement any monetization plans.

Their recent partnerships are positioned to support the rollout of their IP licensing arrangements.

5/ Preparation for the Mass Market

Netz has broader ambitions for Pudgy Penguins as a global brand.

In this effort, collectibles are a crucial aspect, and the team plans to release new merchandise and physical items.

In addition to Twitter, Pudgy Penguins will expand to other social platforms. They plan to empower creators across different mediums and establish their presence on Instagram, TikTok, and other platforms.

They will deploy engaging GIFs and content on Twitter, use Instagram for world-building through comics, fables, and story-telling, animations, memes, and viral content on TikTok. This will be a gradual and iterative process.

The Pudgy Penguins team plans to continue to be a positive force in the Web3 space and contribute to its future, while expanding its reach and opening new doors, with plans to provide value for holders in the space.

Project Runway Analysis

To truly understand the funding required to establish a brand as extensive as Pudgy Penguins, it's essential to consider the resources available to the team.

Methodology

In this instance, runway analysis is a challenge. We would typically take the mint proceeds and then establish an estimate for the secondary sales royalties.

However, Pudgy went through acquisition so would need to work off from the project treasury as of the acquisition date, plus an estimate of royalties received since that date, plus any outside funding available.

Conservatively this is estimated to be in the region of $1.8m USD in funds plus any capital from the team’s own purse.

1) Treasury at Acquisition

While Netz paid 750 ETH ($2.5m spot USD) for the project, these proceeds went to the incumbent founders who left nothing in the treasury for the project. Therefore funds are ultimately provided by Netz and the secondary royalties earned since the acquisition date (April 2022).

2) Secondary Sales Royalties

Pudgy Penguins has produced a total of 3 collections and, over the past year, has raised an optimistic estimate of 4,641 ETH ($6.6m USD), assuming the full 5% royalties had been paid.

Realistically, many wouldn’t have paid full royalties as this trended to zero as a consequence of the marketplace wars.

We can see several spikes in volume prior to the launch of Blur (October 2022) but most of the royalties received from volume in December and early 2023 were likely to be trivial given a much lower percentage than the typical 5%.

If we just take the April to August 2022 royalties in full and assume all other royalties were nil then we would arrive at a more realistic estimate of $1.8m in revenue.

This is assuming they converted the ETH proceeds into USD at the spot rate on the day to preserve their project runway. This is something that Netz openly talks about and the team has produced a business model exclusive of royalty revenue reliance. Hence the push for productive assets in the form of toy sales and IP licensing arrangements.

3) Outside Capital

There have been rumours around a $10m VC raise at a $50m valuation. Although it was said to have been refuted by Netz.

It’s likely that the team are running on their own capital earned through previous successful ventures, of which there are several. We can see that other similar-sized projects have raised external funding:

• Doodles announced a $54 million round in September 2022.

• Moonbirds creator Proof Collective raised $50 million in August 2022.

• Yuga Labs, the firm behind Bored Ape Yacht Club, led the way with a $450 million round in March 2022.

• Chiru Labs, the outfit behind Azuki, was rumoured to be interested in a $30 million raise. However, Zagabond expresses no interest in funding at this point.

For context, Yuga Labs’ VC funding constitutes 23% of their war chest, and when combined with their $APE coin allocation, it amounts to over 90% of their entire treasury. Royalties are becoming less relevant to sustainable NFT projects.

Closing Remarks

The upside potential is huge for the Pudgys. They intend to leverage their wealth of social media success to bootstrap the project beyond the web3 realm.

While the project was acquired in the midst of a bear market, the runway received from secondary royalties was not insignificant and has helped somewhat to be able to develop the project sustainably.

The project collaborations are well thought out and complement the clear strategic direction outlined by the team. It’s a testament to the team for having such strong conviction in the direction of the brand. The team certainly has a solid track record to do so.

As for the next steps, it will depend on the continued success of bringing in the right partnerships, the level of runway remaining and the ability to use this sustainably. The alternative is to seek external funding, but the dynamic of the project may change as additional stakeholders enter the mix as potential conflicts of interest arise.

Every NFT project claims it will become the next BAYC, but few have the calibre to pull it off. Pudgy’s are one of those and arguably could have greater potential if the stars align. Certainly one to watch over the coming year.

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