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Thoughts on Web3 user growth

康水跃

2023-01-19 20:00

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Original title: "Thoughts on Web3 User Growth"

Source: Shuiyue Kang, CEO of Fox Tech

Too often, we've seen Crypto and Web3 products grow well in a short period of time, but then lose users quickly, and the project goes into a "death spiral" and fails. In the traditional world, the stock market has less and less direct impact on entrepreneurs and products, but in the Web3 world, the currency market has a particularly strong impact: bull markets rise and bear markets kill more than 90 percent of projects. The common feature of these projects is that in the bear market, the Token price issued by the project side falls all the way, so that the Token incentive measures fail and even bite the interests of users, resulting in a serious loss of users.

User growth is the long-term goal of the product, the core of which is to build a system composed of products and users, constantly iterate the product, gradually gain market share, and realize the continuous growth of user scale and value. Collectibles, DeFi, GameFi, MarketPlaces and other header Dapps saw a sharp drop in active addresses from the beginning to the end of 2022, while Social& Media, on the other hand, is rising rapidly. My thoughts on Web3 user growth are recorded below.

Table 1: Changes in the number of active addresses of Web3 applications in 2022

Basic ideas for Web3 user growth

The bull and bear cycles in the currency market have a huge impact on user growth, but entrepreneurs should not be constrained by macro factors. In order to increase users, the first thing is to find the "Market" that matches the Product, that is, the "M" in PMF(Product Market Fit). Instead of blindly satisfying the whole "M" or "big M", you should combine your own product characteristics and resource endowment to locate the M that fits your own. Then it will go vertically deep first, and then consider horizontal expansion after it has achieved the first tier market share in the single market. For Chinese entrepreneurs, it is not wise to give up the Chinese community and Chinese users that they are good at dealing with, which is equivalent to giving up one third of the world's B and C terminal users and giving up their basic business.

A Minimum Viable Product (MVP) is a great idea when it comes to product design and development. It means that in the process of product launch, basic functions are first introduced to meet the minimum business closed-loop in the core scene, and then iteration, optimization and enhancement are done according to market feedback, and finally the product is iterated in line with the optimal solution of the market and users. Don't try to build a "whole" product with a perfect vision. Instead, simplify user usage and build PMF-compliant MVP products by identifying the biggest "one" problem that solves them. In this process, developers often have to say "no" to hundreds of good ideas.

If PMF can be understood as a state of the product when it matches the market, then MVP is an effective way to get the product to PMF. Bringing a PMF-compliant MVP To Market is GTM(Go To Market). The purpose of GTM is to acquire and retain users, and its acquisition rule usually follows the "funnel model" : from the top of the funnel to attract new users, user conversion and retention at the bottom of the funnel is a process of decreasing users.

Traditional Web2 project GTM includes pricing, marketing, sales and other links, and customer acquisition indicators include website click rate, average user revenue, closing time and so on. While the Web2 GTM framework provides a mature set of gameplay, Web3 GTM is much richer. "Community" belongs to the unique category of Web3 GTM, is the user growth of the traffic pool. Web3's GTM strategy will be accompanied by community incentives mediated by tokens and an Referral plan to referral new users by tokens.

Figure 1: Basic idea of user growth

PMF(Product Market Fit) : Find the right market and meet the real demand

Regarding product market fit PMF, the following questions should be considered:

Why are we doing this product/feature?

Does the product/feature respond to the needs of the market?

Why do this product/feature now instead of later?

CBInsights.com once conducted a survey on the reasons for the failure of entrepreneurial projects, and found that No Market Need ranked the first, accounting for 42%, which was higher than the second place and the third place was Not the Right Team. Because this issue is so important, developers should think about it during product planning, rather than waiting until the product is ready to go to market. It's easy to overlook the market research you should be doing because of your bias and paranoia.

Finding PMF is a cyclic and iterative process. Through continuous collection of feedback and completion of verification, the product can reach the degree of relative matching with the market. In the subsequent verification process, the feedback information can be returned to the specific steps for optimization and improvement, so as to improve the matching degree between the product and the market.

Figure 2: Product market fit PMF

Find the right market segment, lock the target user group, find the unmet needs

Find the right market segment, find the right target users, this will ultimately determine the extent to which the product can meet the needs of the target users. We segmented a large market to target the user group, so as to build the user portrait library and do demand analysis. After creating a profile of the target audience, the next step is to understand their needs. When trying to create value for users, you also need to identify good market opportunities for that need. If the user needs of a market are already well met, then don't enter the market again, you must find a new market. When you find a market where the needs of users are not being well met, you can jump in.

Develop product strategy, define value proposition, highlight differentiation and core competencies

Users are bound to compare various competing products with their own products at some point in the future, so user satisfaction largely depends on the highlights of their own products, and it is these highlights that constitute product differences. The value proposition is to highlight the Highlights of your product and let users experience that the product meets their needs better than competing products. Among the many needs that a product can fulfill, which one should we focus on? What unique features of the product will please users? How does the product outperform the competition? These are the three core issues of product strategy.

Select the minimum viable product MVP feature set and finally complete user requirements testing

Once the product strategy and value proposition are clear, you should begin to select the features that should be included in the smallest viable product MVP. When a developer spends a lot of time and energy working hard, only to find Out that the user doesn't like the product, it's pretty devastating. After a few iterations, it runs Out of Cash. The goal of an MVP is to determine if the development is going in the right direction and then create enough value at the point that the target audience finds valuable. Once you're done with the MVP model, you should test it with your audience to make sure you're gathering feedback from a sufficient number of people in your target market. Otherwise, there is a good chance that those user feedback will lead the product iteration in the wrong direction. Based on accurate user feedback, recalibrate the assumptions and go back to earlier process steps to iterate on the MVP until you design a product with a high market fit.

Minimum Viable Product (MVP) : iterates quickly and reduces overkill

Here are some questions to think about when it comes to minimum viable product MVP:

What does a product/feature consist of?

What kind of problems does it solve?

What are the future iterations for this feature?

What is the value of the product/feature?

The so-called MVP is to use the minimum development cost and the shortest development time to develop a usable product can express the project highlights and innovation. This product is minimalist, but it proves ideas quickly. We all have the mentality of pursuing perfection, thinking that it would be bad if we didn't have this function, but nothing will happen. With Non-MVP, you not only spend a lot of time on peripheral, ancillary, or enhanced features in the first release, but you also end up making mistakes in subsequent releases. When we started developing products with MVP thinking, we focused our attention on more important things.

The MVP is not the perfect product, the goal is to get it to market quickly so it can be tested. Through market demand verification, and then constantly adjust the direction of correction, iteration out a market space and agreement revenue products. In fact, the MVP doesn't even need to be a mainnet product, it just needs to be a well-designed test web product that gives users a clear experience. So you don't have to spend a lot of money to make a product that the market won't pay for.

The idea behind the first version of the product is to find the right niche and target audience by delivering the MVP to the target audience and getting feedback on their preferences and whether they feel the need for the product. If the idea is right, quickly increase the visibility of the product in the market and get these torre-users to actually use the product.

Have more internal product meetings to discuss which features are not needed at this stage. Cut them out and you're left with the MVP. Being an MVP requires an ability to simplify, define core functionality around fundamental needs, and work on branching and other ancillary features after the nodes in the critical path are in place. This ability to reduce complexity to simplicity is in fact a step on the rhythm, step on the rhythm of business and user development: at the right time to launch the corresponding product features, not to do more do complete, but to do it right.

Figure 3: Non-MVP vs. MVP

GTM(Go To Market) : Draw the new and keep the old, manage the community well

Regarding the GTM to the market, I mainly consider the following questions:

How does the product interact with the user?

Do you need to help users learn how to use the product?

How often do users use it?

Where will the product be released? Local, national, or international?

Which channels to cooperate with?

What are the limitations of cooperation channels?

In Web2, GTMS are often acquired through marketing. In Web3, GTMS are often marketing to gain users and run a richer "community". The community includes not only users, but also developers, investors, and partners who are stakeholders in the Web3 project. Every good Web3 project usually has a strong community. Some projects are "community first", some are "community led" in decision-making, and some are "community owned" directly. Only by continuously satisfying users' needs and maximizing users' subjective utility of products can we have a highly engaged and high-quality community.

In the traditional sense, GTM is to introduce the product to the market through advertising, product launch, channel training, etc. Web3 changes the whole funnel of traditional Web 2. Token rewards provide an alternative solution to the cold start problem. Instead of using traditional marketing to gain early adopters, the team uses token rewards to attract users at a time when network effects are not yet apparent. Rewarding users for their early contributions attracts more new users, who also want to be rewarded for their contributions. In terms of user loyalty, Web3 early users contribute more to the community than traditional Web2 BD staff.

Figure 4: User inflow and outflow factors

Acquire a new user

Airdrop with quest interaction is an important GTM initiative, in which a project hands out tokens to users who need to complete certain tasks in order to receive tokens, sometimes with other conditions attached, such as having to hold certain tokens. Interaction to motivate early users to complete tasks is a common cold start method for projects, which can gain the first batch of seed users at a low cost.

Publishing tasks on Web3 task interaction platform and guiding users to participate in product interaction is a win-win operation. For the project side, traffic is gained; For users, they can not only obtain proof of on-chain activities, but also obtain airdrop Token, and accumulate platform experience in the process of task interaction. Common task interaction platforms are as follows:

Table 2: Common Web3 task interaction platforms

Increase activity and retention

While the token incentive will attract users, it is not enough on its own to increase engagement. Since the currency market bear market in 2021, one of the challenges of operating projects is that "users come and go quickly". Inactivity and inability to retain users is a major problem in the current Web3 project. The project side should spend more efforts to convert first-time users into loyal users, constantly optimize the product and do community activities to provide users with better experience. Holding an AMA on Twitter Space, Discord, and Telegram is a common way to increase community activity and popularity.

Promotion and Self-propagation

"Self-referral" refers to selling products to more new customers by existing customers. If existing users like it and have a good experience, they can spontaneously share the product in their community or push it to their friends peer-to-peer, which is the lowest cost and most popular way. Then how to make users willing to share, it is the project side to design a set of incentive mechanism. Tokens can be awarded to the project side, as well as physical gifts, such as clothing, skateboards, skis, mugs, etc., to reward the Logo. In addition, the on-chain behavior data of new and existing users needs to be analyzed to increase conversion rates and adjust operational strategies.

Referral The original advertising cost used to pull new customers, decomposed into old user referral reward and new user registration reward, that is, advertising cost = old user referral reward + new user registration reward. Referral by Referral greatly reduces customer acquisition cost and is more efficient than direct keyword buying and information flow advertising. Although not innovative, but it can bring lasting, effective transformation effect for the project.

Acquiring new users is the gateway to traffic, and increasing retention depends on product value, referral and self-dissemination amplifying community power. All three steps are designed to generate revenue, because you can't scale until you have more users. Based on TokenTerminal's 2022 data, we can rank the profitability of Dapps.