The Business of Creativity: Finding Ways To Help Your Community Win with Peter Lobanov

26:47And so, you know, the big idea was, hey, instead of, you know, designing our own penguins, let's just go ahead and license these directly from some of the community members. The thing is, that was a very complicated process because there are no systems in place for that. We learned that this is actually, there are a lot of legal implications here, a lot of ramifications here, if you actually look at it through a legal lens. how are you guys going to accomplish this? So part of our acquisition, we had to bring in a legal team. So we actually brought in a CLO early on, like two months into the brand to help us navigate not only the web three sector, but the physical sector as well.

27:25Because one wrong move, we can get sued into oblivion. So we left the story, Walmart says no. And within a couple of days, you're like, we're going forward. We're going to make this happen. So then you go to the community, you have a wake up call in the community because what happens? When you say, hey, we're putting these on Amazon. Yes. And your community shows up big time. But what was the wake up call? The wake up call for me and for the entire team was the power of how many toys that we could sell in a very short, condensed period of time. Good. When we announced Amazon, this is one day in.

27:59Not only the entire Twitter timeline at that time was absolutely like they were ecstatic that we were actually selling physical toys. No other projects previously have done it at that scale. Yep. And everybody just went crazy. Not just the people who were active participants in the Pudgy Penguins community, but people who were in the NFT space in general. Because you guys become proof of concept. Proof of concept, exactly. You're like, they're doing it. Exactly, they're doing it. So let me buy into that. So imagine, I mean, this is thousands of people that all got a whiff of this and looked at it and said, oh my God, like I have to go get it.

28:33These penguins are cute too. So a lot of people have children, you know, It was a very easy no-brainer, spend$10. At scale, in 24 to 48 hours, we became Amazon's choice number one toy in the entire toy category. Shut up. Yeah. Whoa. So this is pointing the entire community to one destination, and it just, I mean, it exploded. And in my years of consuming product goods, I mean, you don't see that unless you get like a Kylie Jenner equivalent influencer to point that much traffic. The fact that we did this with the active community, not only the people who own those NFTs, who bought those toys, they also became active champions.

29:17They went to tell five of their friends, hey, I own this digital asset. Now it's a physical toy. Go buy it. And then those five friends told the other five friends, because they were so excited that their friends sold them this idea. You were so excited about this idea, you needed to tell this idea to somebody else. And then that idea spread. And so it just became a life of its own. It picked up, I mean, it just, it went so parabolic that we ended up getting that recognition. And we've never done that before, especially through Amazon. And for weeks, we were in the number one toy in a toy. And were you able to leverage that to go back to the Walmarts of the world?

29:55Man, it's really interesting talking to you because you're like already just pulling everything. You're getting to the right kind of conclusion. So we looked at it. This is freaking incredible, dude. Yes, yes. So one week after we took those stats and we were like, hey, we need a second call with Walmart. They were receptive, but they didn't buy in all the way. So week two, week three went in and took it a little bit more convincing. They looked at those stats and they were like, okay, there's something here. We have to pull the trigger. And so Walmart placed an order for the time it was about 2 ,300 stores nationwide.

30:31And we launched toys in 2 ,300 Walmart locations. nationwide. And after you get Walmart, do you land other stores? So when we got Walmart, that was another huge milestone for the NFT space in general. And this was like, this was 10 times bigger than Amazon because it was like, these guys got Walmart. Like Walmart bought into this idea. They bought into the concept and this is what made our toys awesome too. So the value proposition in our toys, besides being cute as hell, is for every toy sold, there was a QR code that came with that toy, which essentially allowed you to scan it and create your own digital penguin.

31:15And meanwhile, while you're going through this process, you're creating your penguin. We called it Forever Penguin because it was going to be your digital buddy at the time. and while you're going through this unboxing journey, you're unlocking these amazing traits to dress up your penguin, your digital version of it. What people don't know on the back end is we're creating wallets, Web3 wallets essentially for every single user that went in ahead and scanned this code. So now we've essentially connected Walmart to the Web3 space a step closer. Oh my God. So that was a value proposition that you pitched to Walmart is like we'll get you.

31:50We pitched it as not only cute toys but there was this digital upsell because Walmart wants to make sure that there's not only just skew variety, but there is something interesting behind it too. So the digital experience at the time, we didn't even have a game out. So we had to come up with something rapidly to kind of substitute for like, all right, what can we do in the digital space? And so we were like, oh my God, we're in the web three business. Like why not go ahead and start creating user wallets? Right. And how do we do that through gamification? And so part of our ethos as Pudgy Penguins is to onboard masses into Web3.

32:23And the only way to do that was to start getting people familiar with the idea of these Web3 wallets, these crypto wallets. So, okay. But we didn't use any of the jargon during this journey. So when you go in and unbox the toy, we're not saying create your crypto wallet. Just Gmail and password and that's it. What you don't know on the backend is you actually have a crypto wallet. Okay, so break this down for me. And okay, I'm sorry for the podcast listeners who are not interested in this. You could just skip forward by two minutes because I'm going to get super freaking nerdy right now in the Web3 crypto conversation.

32:55But don't go away because the business of the business and go-to-market strategies are yet to come. When I created my first digital wallet, it was on MetaMask and it was cumbersome and complicated. How is the average, you know, Susan from Minnesota who bought her 10-year-old this going through and creating a wallet without feeling that same friction that I did? And I feel like I'm not the sharpest crayon in the box, but I'm sharp enough to color. I was like, this is freaking cumbersome. How are you systematizing and streamlining it so easy for that user? I think a lot of it has to do with messaging, right?

33:28And where you go and find this information and how you go about it, right? Even though we went ahead and created wallets for every user that created an account. Mind you, they just created an account, but on the back end, they also created a wallet. So if we wanted to convert these users into active Web3 participants, we could with the flip of the switch. but it was more gamified. It was more like enter email, save your password. Got it. But on the back end, it was more so creating a wallet. So that's the exciting component under, it's like layers underneath Pudgy Penguins. And we know that we're not going to have a very compelling business model saying, hey, we're going to give everybody wallets.

34:01Like, what? What are you talking about? And why am I giving my kid a wallet, right? So it's baby steps, right? We have to flesh out this business model and make it not so cumbersome. Yes. Oh, so interesting. Okay. Okay, so now you have taken two disparate ideas and you're creating and have created a business. So now in order to sell more Pudgy Penguins, you're in the question mark, content game, social game. What is that strategy for a go-to-market? Because now you're playing in an entirely different field. You're going after consumers in a different way. Yes, so at a core, Pudgy Penguins is a character-driven IP brand that creates content, product, and experiences in the theme of penguins.

34:49And the first step was product, right? Traditionally, you won't go product first. You'll go content, some sort of media or game. We had to go product because there were a lot of people who were excited about taking something that was already digital and turning it into physical. But we've later uncovered that we have to go by these traditional IP routes and kind of this character building journey. And so immediately in tandem with launching these toys, we had to start thinking about content, which was a whole different beast. So we've had discussions with every production studio, every independent studio, Hollywood execs.

35:27I mean, everybody was pitching us, hey, we should make Pudgy Penguins a TV show. You should think about movie, a game. And we were like, okay, well, that's kind of like the obvious route for sure. We can do that. but I think putting all your eggs in that basket one it's a lot of time a lot of resources to produce something like this and you're not optimizing for a high hit rate you're putting you're just like hyper focus on this one thing so us growing up on social media I'm 27 years old Lucas you know 26 years old right like we're social media native people like we've been in the influencer space like we've seen these you know high high following accounts being stood up we kind of have a slight like inclination on how this is done.

36:06And so we ended up spinning up a Pudgy Penguins Instagram account and just focusing on short form viral content. Freaking love it. I was hoping you were going to say this because it's like the data will lead to the movie. Exactly. Without this big head of a besk of what you think the personalities are or the comedy, who are they? Yes, yes. And we didn't know any of this. And so first, I think the first couple of months were like the ugliest moments. because like I'm aesthetically oriented. And so I was like, I hated everything we produced. It was so raw. I was so, but that was kind of like part of the building journey.

36:41But the community members were like very receptive. They were like, this is awesome. Like you guys should keep leaning into it. And so we were trying a bunch of different things. We were having a penguin mascot run around New York saying like, you are loved, you know, and honk if you love penguins, right? Like doing viral, trying to optimize for virality. Then we started doing positive affirmation content. And that was one of the first things that popped off for us. So we started talking to me, but give me the visuals. Are we testing like the cartoon aspect of it? Cause you said there was a pudgy penguin running around New York, which is, so there was a math, we were doing IRL stuff, right.

37:14To bring more awareness to the pudgy penguins IP. So it was literally a big penguin in a mascot with a big pudgy penguins logo running around New York, like in your face. So that wasn't like the best thing, but it was, it was cool. But one of the things that we wanted to create was a feel good brand. and so penguins you know there's almost like no race tied to it there's no private agenda there's no gender right it's like so equal and so we were like hey let's just lean into maybe a positive affirmation category like let's just make somebody's day feel good okay so we took you know some you know positive affirmation quotes put a cute penguin on it started posting that on the feed and it just started growing because people would share that right it was like share this with somebody you love or you adore.

38:00And then because of that relatability, because of the call to action to share, the account started growing in a very natural way. And we made that a theme for quite some time, like for two, three months, and the account was growing. I mean, we're talking tens of thousands of followers a month, and we started hitting a cadence of hundreds of thousands of followers. Then we were like, we have to think animated. Let's bring life to these penguins. And so the huge challenge was there was 8 ,888 penguins in our ecosystem. How do you pick one? And here's where it gets interesting from a licensing aspect.

38:33You can't, if we were going to go and license a penguin from one of the holders to be our hero penguin, to drive the animations forward, what would happen a year from now when the licensing agreement expired? You're giving all the leverage to that person to say, give me three times the amount of the money to keep your star. Right. Well then, okay. could you license it for much longer? You could, right? But again, you were always going to arrive to this realization that there was going to be some sort of leverage down the road. And so we just have to think five steps ahead. It was nothing against the community.

39:07Unfortunately, there were some people who were not happy about the concept, but we had to explain it to them. Like, hey, just like I'm talking to you, it's going to get complicated down the road. so what do we do in the ecosystem of penguins who all wear traits hats shirts glasses mohawks you know afros whatever we created the penguin that has none of it so there's no traits it was just a pink and a blue penguin okay and the content that we were creating was not it was our first positive affirmation oriented so it was a penguin talking to you and we were like that and sit right because you have to talk think about voices and it's like i don't want to i don't want of put a voice behind the brand for now okay right and so we stripped of the voices it went straight into captioning the video and just you know you ever watch like charlie chaplin movement movies silent movies but the movements are really exciting yes so we we did that we kind of followed that principle of like making the content so exciting and engaging via movement right yes but the relatability aspect was something we wanted to hone in on so the content was very much riffing on internet culture stuff that was like very mimetic things that you've seen you've seen a meme like this before but has it ever been been turned into a video like has it ever been animated so we took these viral memes these concepts and turned them into animations in the theme of cute penguins got it and so that i mean it exploded our first our i'd say maybe our like our sixth animation it was a netflix video it was a binging at home you ever watch netflix you're like binging a series and it's like you look up it's like what the hell where did the time go so it was a cute penguin laying on the bed eating chips and it was like a time lapse of like the the netflix just playing over and over again and it's just like you're kind of living through this timeline that video got 10 million views in a day wow and that kick-started the whole momentum and now we're our our single highest grossing video is almost at 100 million on instagram we've generated you know close to half a billion of impressions last year alone we have 20 billion views on giphys we've surpassed you know very known ips and not not not that it's a bragging right but again we've just very much capitalized on being a close to you know just internet culture right like we wanted to be you know not only crypto's mascot but we wanted to be like the new meme cat but it's a penguin Got it.

41:27One of the things that I think immediately is when you had to tell your community, hey, we're creating like essentially our own intellectual property. We're going to create our own IP that's not licensed from the community. And there might have been pushback. But when the community sees that level of success, there's a halo effect of it. It's like the value if they decide to resell that Pudgy Penguin NFT, even though it's not exactly what's licensed, the value of it goes up as a result. It's the brand name now. Brand name. Now you're selling the brand name and you would think that like, oh, well, you're not using my penguin.

42:02No, it's the Pudgy Penguins. It's just there's a bunch of different iterations. Like our skits will sometimes include a hat now that is used from the Pudgy Penguins ecosystem. Nice. A shirt from the Pudgy Penguins ecosystem. So these assets, think of them as like iterative different designs of the same penguin, the same anatomy, the Pudgy Penguin. If you look at the ecosystem of all penguins, right, and all penguin brands, Happy Feet and Club Penguin and Penguins in Madagascar, our penguin, like, you know, it's the pudgy penguin, right? Yeah, exactly. It's got that pudgy factor to it. It's cute.

42:36There's something about it that is truly magical. And, you know, people instantly kind of recognize that and they're able to make that affiliation with that underlying asset. it. So I have to say that in a way I appreciate that very much because I am an NFT holder and I'm holding pudgy penguins. I am not. I am not. I am not. Now that I have, now that I have the hookup, now that I have the hookup, I'm being like, who in your community should I be introduced to? Oh, I know just the guy. Okay. So I, as an NFT holder invested in the friends. Nice. And one of the things that Gary had done, and I, if I was closer to the project, I might've been tipped off by which ones were going to be the ones, right?

43:16Black cat. You know, I think that it would have changed things for me a lot in regards to what I was investing in. And so for people who are black cat holders, it's just like, game over. Like you guys are hedged. And then there's other people in the community and I'm just like, oh, well, had I known, I bought a loyal lobster. And it's great. I love that I have it. And I love that I've been, I bought NFTs just to learn the game. So I didn't even know what I was getting into. And so when I see what you guys have done, and because I'm on an outsider, with Gary getting his toys as part of Toys R Us, and he's going that route, what is the distinction between the products and how are you coming in?

43:57I mean, this is so new. You guys are like beyond the forerunners. Like this is crazy to me when I'm watching what it is that you do. I'm so fascinated that you guys are literally creating something that has never been freaking done and doing it in your own way. That has a very different trajectory feel, pulse. And so I'm watching this and I have to ask, okay, you have these products. You're very in tune with culture. You don't have voices. What is the next step? Like, are you guys looking at Nickelodeon? Are you guys looking at this and saying, okay, we're ready to make a movie even though we've never had voices before?

44:31What is the next thing? The next thing for us is story. If you look at Pudgy Penguins, it's like, where do they come from? Who are the main characters? What is that? Where do they live? For us to be a physical-oriented brand, we have so many physical products out there. and 6 ,500 stores globally from Toys R Us, Target, GameStop, we just announced two days ago. Congrats, congrats. Thank you, thank you. The cute factor is one value proposition. The second has to be deeper emotional connection. Right. And so we were looking at it like, okay, how do we establish a deep emotional connection where you can start finding fans in what we're creating, right?

45:17How do you create these opportunities? And if you look at any story or any character IP or just any character brand ever, there's some sort of background of story. You have some information. You have the name. You have where they live. The hero's journey. The hero's journey. And so we realized that we didn't have that. We've been so focused on physical and building a strong community that we didn't really have time to do storytelling. So a big part of my focus is doing storytelling. So we're going to be at Comic-Con this year for second year in a row. Congrats. Thank you. And we are going to be unveiling our first comic.

45:55So we're going to go to Comic-Con. We're not in the comic business, but we wanted to give our audience a small piece of the official Pudgy Penguins lore. But it feels like such a freaking natural progression. It is. It feels like that. Yeah. Bravo. Thank you. I'm obsessed. I am obsessed with this. I'm plotting alongside you. Yes. Yes. Exciting. Congratulations, dude. Okay. So then bring me up to speed from like the business component of coming up with story. And so I'm going to pause here because you're like, I don't do cartoons. I'm not planning on being in Comic-Con. It's story. It is origin story, either of the brand and or you as the founder.

46:36And so now we have characters that is so important that their story resonates. Can I, can I guess what you're doing? Go for it. Okay. Cause we We've been, I mean, I'm going to see because I'm spinning a big game. Yeah. Everything that you've said, I was like, then this, then this. And in my head, I was like, dang. It's a natural progression. It is a natural progression. Second nature. Okay. So if I were in your position, I would start carefully testing short form two to three minute videos on YouTube. There you go. Shut up. Yes. But we're already doing this with 30 second animations, right? Okay.

47:09But was voice associated? No, voice was not associated. Okay. So are you going to introduce? I think the safest bet is to go some sort of physical copy first or some sort of digital place. So we're overhauling our website. I'm going to be very interested to see how that plays out on YouTube. I'm going to be very interested. So YouTube is a different audience too. Yeah. So I'll tell you this one thing as well. When you think like who's Pudgy Penguin's core audience, there's a huge question mark for us. Walmart's question mark. Anybody who's following Pudgy Penguin's for a while has always questioned like, oh, so this is for kids.

47:39and the thing about that is like it's always easy to age down it's not easy to age up so if we were ever going to pigeonhole ourselves like we didn't want to be pigeonholed into a children's category why because of our web3 community right it would have created a huge degree of separation and so what we have to do is lean into those existing strengths right okay some of that was creating content on platforms that had a little bit of an older audience instagram does not attract a younger audience below 16, 17. I mean, if you think about it, like they don't, you could be 11 years old and on Instagram, but children's category, the audience lives on YouTube kids.

48:19Yeah. So we could have launched on YouTube kids and been pigeonholed into a children's brand, but no, we decided to go with relationship, humor, relatable, social sharing content, right? That just at least gets you familiar with the Penguin IP and eventually, you know, dive into story. So it was really important for us to identify that core audience. And so our primary audience is young adults and collectors, right? Because the NFT ecosystem is full of collectors. Young adults live on Instagram. You know, we're all young adults here. And so, you know, for us, it was important for us to create something that somebody like myself would engage with, right?

48:54And then convince my younger sibling, like, hey, here's a cute penguin. When you grow up, you can get an NFT, right? When you grow up, you can, you know, consume X, Y, and Z content that we produce that maybe may not be for you because like, you're just not programmed to understand this, right? You're a young kid. You're not in a relationship, right? We're producing relationship humor. So the next step for us is to lean into our second, like our inherited IP that we also bought, which was just called little pudgies. So this is a little, little version. They're about half the size. And so we're going to start building that IP a little bit more aggressively now because it was an inherited part of the acquisition.

49:32And so now we're like, all right, how do we start attracting that younger demographic? And so part of that is creating a wider gap of a content style, right? So something that like an old man can watch and like a toddler and basically like engage with it, right? And where are we going to distribute this? We're first going to start off with YouTube kids. At least that's my strategy. Putting voices behind them, you know, I think kind of boxes us in a little bit. I'm worried that if we start putting voices behind it, but we've kind of already explored and we toyed with the official voices and the tone of the penguins.

50:06What level of raspiness does Pudgy have? How high of a pitch does Peaches have? Which are some of our characters in the ecosystem. So yes, we are moving into the voices do it. I think of my four-year-old daughter and when I think of her watching YouTube kids, words wouldn't hit. And I do think that she's fascinated with what I, here's the thing, what does a genderless voice sound like? How do we even describe it? But when I watch the characters who like a super resonant, it's like, it's not a boy, it's not a girl. It's like, it's a cute voice, the cute voice. And I'm like, you guys could totally lean into that.

50:43It's very, it's not easy to get this done. It's a lot of testing. But let me tell you, nothing that you have spoken about has been easy. And so I'm just like, yeah, it's not easy, but you don't do easy. So there you go. Like in alignment, I am so fascinated. I mean, look, we've been talking a full hour. I feel like I've been talking five minutes. I'm absolutely enamored. I freaking love your brain. I love the fact that you leverage creativity through an entrepreneur's perspective. That is a skillset that's really rare. I wanted the audience to know you, but more than anything, it's not you, it's the story.

51:19And so I'm gonna come back and I'm gonna talk about how I see all of this playing out for entrepreneurs. getting in to a business where people had said, I'm not sure it's a business and then proving it's possible. And it's not by your own sure will, but by leveraging the power and the insights of a community. When you have people who are speaking into the future iterations, you meet them where they are turning people from fans into evangelists. On the back of doing that, they take in a lot of consideration from an entrepreneurial perspective and saying, we need to get legal in order. We need to figure out how to do licensing.

51:52Then we need to leverage and ask ourselves, is licensing actually the best next move for where the project is? All the while consistently communicating back to the community, which ended up being the driving force. They went to Walmart. Walmart said no. They go to community, take it to Amazon, blows everybody's dang mind, which then they're able to leverage and take it into now well over thousands of stores nationwide. Next big opportunity. What do we do to create the extended IP. They take it to social and start testing ideas again and again. I am so excited, not just for what Pudgy Pendleons is going to do, but taking this exact pathology and you applying it to your business and saying, I'm going to do the seemingly impossible and I'm going to apply an entrepreneur's perspective.

52:39So where everybody says no, I see opportunity. I want to thank you, Peter, for being here. Where do they go to learn more about the project? Where do they go to watch these cute, adorable shorts. Where are we sending people? Yeah. So if you're on Instagram or on Twitter, you can find Pudgy Penguins at Pudgy Penguins. I highly encourage you to follow us on Instagram, Twitter, YouTube. Definitely go to your nearest Walmart and Target, pick up a cute Pudgy Penguin, go through the unboxing experience to see what the future of Pudgy World looks like. And if you're an entrepreneur following our entrepreneurship journey, we're very active on social media.

53:15We have always kind of voiced our story, our public story and who we are. But now we want to focus on the Pudgy Penguin story. But if you want to follow our journey, we actually do these amazing, super entertaining short episodes on YouTube. It's called Building in Public. And we basically document our entire journey of building Pudgy Penguins. So we've pretty much documented since we've acquired Pudgy Penguins and you'll see years full of content. We break them down into eight minute episodes, about 12 episodes that were live. We're green Lighting Season 2 now. And so you can look that up on Twitter or just follow at Luca Nets on YouTube to find that YouTube channel and you'll see us billing.

53:51That's amazing. Thank you. Thank you for having me on. Thank you. Thank you. Thank you. Thank you. I feel so lucky. I feel blessed that I get to enter in this juncture of an entrepreneur's journey. And very selfishly, when I get to map to the brilliance that is Peter, I'm like, hey girl, you got it in you. Let's go. So I want to say thank you for listening and watching the Jasmine Starr show. And wherever you are in your journey, may you take a no or will you take a seemingly impossible situation and turn it into a yes, because that is what you are made of as an entrepreneur. Thanks again.