This is a series of articles that will look at how Web3 founders and builders can use some of the Web2 Growth strategies to grow successful products.
2022 was a hard year for all the cryptocurrency and Web 3 companies. The overall amount invested by VC’s not at the same level as in 2021. However, according to data gathered by BuyShares.co.nz , global spending on blockchain solutions still increased by 59% from 2021 and reach $4.3bn in 2022.
Expectations will be high as investors pour large sums of money into the web3 development ecosystem, and Web3 companies will need to focus only on growth. We should anticipate a surge of businesses in the crypto sector rushing to hire for Growth roles (which is already happening) and scrambling to put together teams that can scale successful growth models, similar to what occurred in the Web2 market a decade ago.
I think Web3 provides a completely different approach to growth at all levels, from acquisition channels and strategies, user journeys, and onboarding experiences, to retention and engagement levers, so it will be interesting to see how it plays out. In a world where decentralization, anonymity, protocol ownership, and user-owned data are the new standards, Web3 also introduces a unique set of obstacles.
It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
Charles Darwin
As you’ve probably heard before, growth cannot be summed up by a particular collection of strategies, panaceas, or precise positions inside your organization. It is true that both Web2 and Web3 products fall under this category.
Between your organization’s goal, values, and business model, there is a mechanism called “growth” that helps you define:
1-How is the growth of your product?
- How do you acquire?
- How do you keep people?
- How can you make money?
- How will you defend?
2- The four necessities match
A well-structured growth model must uncover four key fits in addition to product-market fit: market product fit, product channel fit, channel model fit, and model market fit.
3- Your Growth Strategy
We can establish a sustainable and scalable go-to-market or growth strategy once we are aware of how our product develops and interacts with our community/market, channels, and business model.
4-Setting up a growth team
Winning at growth requires you to not only have the finest approach but the best team structure to implement this plan as quickly as possible. As more and more businesses build out their teams to push for distinctive go-to-market and growth strategies.
We could spend hours attempting to define growth precisely and how it applies to different kinds of teams, businesses, and products, but there is already fantastic literature available to delve deeper into this subject.
Let’s now break it down, especially for Web3 firms so that we have a firm idea of the questions that growth as a system is attempting to address for your product.
Growth for Web3 companies
How scalable is your Web3 product?
This problem statement can be divided into four key questions that must be addressed in order to establish the building blocks of our growth model:
How do you acquire?
The three pillars of Web3 growth strategies are partnerships, user ownership, and token-driven growth pools. The below graphics is an excellent example of breaking down the existing tested methods Web3 companies may begin defining their acquisition strategy.
However, the strategies mentioned above are not necessarily focused on how or who will help onboard the next billion users; instead, they assume that their target user is already familiar with or onboarded into the Web3 ecosystem.
In particular, given the inherent friction that a newcomer must experience when getting started in Web3, which includes joining a Discord, setting up Metamask, purchasing an NFT, sourcing open bounties, and much more, the current acquisition playbook for cryptocurrency companies is still very turbulent and full of unknowns. For normal people to simply enter and engage in the space, the system is still full of friction and barriers, and we are witnessing a rapidly growing level of rivalry amongst businesses to target the present crypto-educated consumer.
Web3 market winners will be those who can precisely define:
- Where will this product fall on the centralization vs. decentralization spectrum?
- Is this a business that is driven by the network effect?
- What does victory entail?
How do you keep people?
Every growth strategy must originate with retention. For Web2 businesses, retention serves as the benchmark for measuring Product-Market Fit, and a high retention percentage frequently contributes to increased customer acquisition and revenue.
User retention and how we approach it are two of the greatest issues I see between Web2 and Web3 growth. Why? In Web2, the capacity to engage and “resurrect” particular users through email, push, in-app, or more generally lifecycle marketing, is what drives user or customer retention. However, there is no such thing as a “user” on Web3, therefore we are unable to target them using conventional Lifecycle techniques.
For instance, you can only utilize wallet addresses as a distinctive “user” identity in place of emails. The problem is that a single user can access your dApp with multiple wallets, which may result in less accurate statistics.
One of the most difficult and intriguing issues for the space in the upcoming years is defining what “Identity” on Web3 entails. The future of loyalty and retention programs for Web3 enterprises will be shaped by a number of underlying mechanics, including user ownership and control, on-chain activities, and community participation.
I predict that this year will see the beginning of many of these questions being resolved. As macroeconomic factors may work against the current sentiment of the cryptocurrency markets, the rising verticals in the last two years, such as NFTs, DeFi, and DAOs, will need to quickly iterate and innovate on how they address churn and user retention in order to maintain their current “up-and-to-the-right” trajectory.
How can you make money?
When it comes to monetization, it’s not only about how much you charge, but it is also about when, where, and how you charge your customers.
When considering all the components of the monetization plan, we must keep in mind that, for both Web2 and Web3 businesses, our choices about each of these particular components affect how difficult it is for someone to convert to a paying customer or product user.
The “well known and extremely well understood” monetization tactics like trading fees or listing/selling fees have been used thus far by the large centralized Web3 firms like OpenSea or Coinbase, which has decreased the barrier to entry for new users to join and use their platforms.
But in terms of new revenue sources, Web3 offers a considerably wider range of options for decentralized organizations. It would be intriguing to witness, for instance, how “free-to-X” DAOs, Games, Web3 social networks, etc., will be able to monetize their treasury using DeFi techniques and disprove the maxim that “if you are not paying for the product, you are the product.”
How will you defend?
The graph below from Statista illustrates how many new crypto wallets have appeared over the past few years, and there is no indication that this trend will soon slow down.
As more people come to the space, the competition will increase and current distribution channels will become less effective. Who is not currently dealing with Discord fatigue or distrusting most Airdrops?
We are seeing some fascinating things happening with user ownership, network participation, token economics, etc. But defensible walls within the Web3 ecosystems will have a very similar foundation to what we saw drove growth for some of the most successful Web2 companies; network effects, strong communities, and organic growth loops or flywheels.