Discussion on User Growth Strategies for Web3 Products

Web3 products often achieve a good rise in the short term, but the user churn rate is also very high, ultimately leading to project failure. Unlike traditional sectors, the cryptocurrency market has a huge impact on Web3 projects: during a bull market, there is a flourishing of projects, while a bear market sees many projects collapse. These failed projects often see their token prices continuously drop during a bear market, leading to the failure of incentive mechanisms and even harming user interests, resulting in a large loss of users.

User growth is a long-term goal of the product, focusing on building an ecosystem between the product and users, continuously iterating to gain market share, and achieving sustained rise in user scale and value. In 2022, the number of active users for various Web3 applications decreased to varying degrees, while social media applications showed a rapid growth trend.

Basic Ideas for Web3 User rise

Although the cryptocurrency market cycle has a significant impact on user growth, entrepreneurs should not be constrained by macro factors. User growth should first identify a niche market that matches the product, rather than seeking to satisfy the entire large market. One should first focus on a single market, and after gaining a leading position, consider horizontal expansion. For Chinese entrepreneurs, abandoning the Chinese-speaking community and users is unwise, as it is equivalent to giving up one-third of the potential users globally.

In product development, the Minimum Viable Product ( MVP ) is a great concept. It refers to launching a basic functionality that meets the core scenario first, and then continuously iterating and optimizing based on market feedback, ultimately developing a product that best fits market and user needs. Developers should not attempt to create a perfect "whole" product from the start, but rather focus on solving the biggest "one" problem for users, simplifying the usage process, and building an MVP that aligns with Product-Market Fit ( PMF ).

When the product has a high market fit, it can be considered for market launch ( GTM ). The purpose of GTM is to acquire and retain users, typically following the "funnel model": from the top of customer acquisition to the bottom of user conversion and retention, it is a process of decreasing user numbers.

The GTM strategy for Web3 projects is different from that of traditional Web2 projects. "Community" is a unique area of Web3 GTM and an important channel for user growth. The GTM strategy of Web3 typically comes with token-based community incentives and corresponding referral programs, achieving rise by incentivizing existing users to refer new users.

Product Market Fit ( PMF ): Identify the market and meet real needs

Regarding PMF, the main questions to consider are:

• Why develop this product/feature?
• Do the products/features meet market demand?
• Why develop this product/feature now instead of later?

According to research, the lack of market demand is the primary reason for the failure of entrepreneurial projects, accounting for as much as 42%. Therefore, developers should consider these issues during the product planning phase, rather than waiting until the product is about to launch to seek out the market. People can easily overlook the necessary market research due to their own biases.

Finding PMF is a cyclical iterative process that requires continuous feedback collection and validation, allowing the product to gradually achieve market fit. The specific steps include:

1. Identify the niche market, target the user group, and discover unmet needs.
2. Formulate product strategy, define value proposition, highlight differentiation and core competitiveness
3. Select MVP feature set and conduct thorough user demand testing

Minimum Viable Product ( MVP ): rapid iteration, reducing detours

Regarding MVP, we mainly need to consider the following questions:

• What components make up the product/function?
• What problem can it solve?
• What are the future iteration plans?
• Where is the value of the product/function?

The purpose of an MVP is to develop a usable product that highlights the project's key features and innovations with minimal cost and in the shortest time. Although this product is simple, it can quickly validate ideas. Adopting the MVP approach allows developers to focus on the most important aspects and avoid wasting too much time on peripheral functions.

An MVP does not need to be a perfect product; its purpose is to quickly launch to the market to test feasibility. By validating through market demand, the direction is continuously adjusted, ultimately iterating to create a product with market space and revenue. An MVP can even be a well-designed testnet product, which can avoid investing a large amount of capital to develop a product that the market does not accept.

Developers should deliver the MVP to the target user group, collect their feedback on the product, and validate whether they have identified the market and user group accurately. If the idea is correct, they should quickly increase the product's market exposure, allowing seed users to truly start using the product.

Developing an MVP requires the ability to simplify complexity, defining key features around core needs, focusing first on the nodes along the critical path, and then considering detail branches and auxiliary functions. This ability is essentially about grasping the rhythm of business and user development, launching corresponding product features at the right time, not seeking abundance but rather appropriateness.

Marketing ( GTM ): Attracting new users and retaining existing ones, managing the community.

Regarding GTM, the main questions to consider are:

• How do products interact with users?
• Do you need help learning to use the product?
• How often do users use it?
• Where is the product released? Locally, domestically, or internationally?
• Which channels to cooperate with?
• Are there any restrictions on cooperation channels?

In Web3, GTM is not only about acquiring users through marketing means, but also involves managing a richer "community". Community members include not only users, but also developers, investors, and partners, all of whom are stakeholders in Web3 projects. Excellent Web3 projects typically have a strong community. Only by continuously meeting user needs and maximizing users' subjective utility can a highly engaged and high-quality community be established.

Web3 has changed the traditional user acquisition model. Token rewards provide a new solution to the cold start problem. Development teams do not allocate funds for traditional marketing but use token rewards to attract users during the phase when network effects are not yet apparent. Rewarding early contributions from users can attract more new users, who also hope to receive rewards through their contributions. From the perspective of user loyalty, early users in Web3 contribute more to the community than traditional Web2 BD personnel.

1. Acquire new users

Airdrops with task interactions are an important GTM strategy, referring to the distribution of tokens to users who complete specific tasks in the project's direction, sometimes with additional conditions. This is a common method for cold-starting projects, allowing for the acquisition of initial seed users at a low cost.

Publishing tasks on the Web3 task interaction platform and guiding users to participate in product interactions is a win-win approach. The project side gains traffic, while users receive on-chain activity proofs, airdropped tokens, and accumulate platform usage experience.

2. Increase activity and retention rate

Relying solely on token incentives is not enough to increase user stickiness. Since the cryptocurrency market entered a bear market in 2021, "users come quickly and leave just as quickly" has become a major challenge for project management. Project teams should focus more on how to convert first-time users into loyal users, continuously optimize products, and consistently carry out community activities to provide users with a better experience. Holding AMAs on Twitter Space, Discord, and Telegram is a common method to enhance community engagement and excitement.

3. Recommendation and Self-Propagation

Self-propagation refers to promoting the product to more new users through existing users. If existing users have a good experience, they will spontaneously share the product in the community or recommend it to friends, which is the lowest cost and broadest way to acquire customers. To encourage users to share, project parties need to design incentive mechanisms, which can be token rewards or physical gifts. Additionally, it is necessary to analyze the on-chain behavior data of new and old users to improve conversion rates and adjust operational strategies.

The referral program breaks down the advertising expenses originally used for customer acquisition into rewards for existing users and rewards for new user registrations. This method greatly reduces customer acquisition costs and is more efficient than directly purchasing keywords or display ads. Although it is not a new practice, it can bring lasting and effective conversion results for the project.

Acquiring new users is the traffic entry point, improving retention rates depends on product value, and recommendations and self-propagation amplify the power of the community. These three steps are all aimed at generating revenue, as only with an increase in users can scalable profitability be achieved.