In-depth Discussion on Web3 User Growth Strategies

In the Web3 space, we often see some projects achieve good rise in a short period, but users quickly churn out, ultimately falling into a "death spiral" and failing. Compared to traditional fields, the impact of the cryptocurrency market on Web3 projects is more direct and significant: many projects thrive in bull markets, while bear markets eliminate most projects. These failing projects often share a common characteristic: against the backdrop of a bear market, the project token price continues to decline, leading to token incentive measures becoming ineffective or even harming user interests, ultimately resulting in severe user churn.

User growth is a long-term goal of the product, focusing on building a positive interaction system between the product and users. By continuously iterating, we gradually gain market share, achieving sustained rise in user scale and value. Throughout 2022, the number of active addresses for mainstream dApps such as NFT, DeFi, GameFi, and exchanges experienced varying degrees of decline, while social media applications showed a rapid upward trend. This article will share some thoughts on Web3 user growth.

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. The primary task for achieving user growth is to find the "market" that matches the product—namely the "M" in PMF(Product Market Fit). It is important to position oneself in a suitable niche market based on the characteristics of one's product and resource advantages, rather than greedily trying to satisfy the entire large market. It is recommended to first cultivate a single market deeply, and only consider horizontal expansion after gaining a leading position. For Chinese entrepreneurs, it is unwise to abandon the Chinese-speaking community and user base they are good at, as this is equivalent to giving up one-third of the potential user base globally.

At the product development level, the Minimum Viable Product ( MVP ) is a great concept. It refers to launching a basic version that has core functionalities, which can meet the most fundamental business loop, and then continuously iterating and optimizing based on market feedback to ultimately create a product that best fits market and user needs. Developers should not attempt to create a perfect "fully functional" product from the outset, but rather focus on solving the user's most critical "one" problem, simplifying the usage process, and building an MVP that meets PMF. In this process, developers often need to say "no" to many seemingly good ideas.

If PMF describes the state of product-market fit, then MVP is an effective way to achieve PMF. Bringing an MVP that meets PMF to the market is the GTM(Go To Market) strategy. The goal of GTM is to acquire and retain users, typically following the "funnel model": from user acquisition at the top of the funnel to user conversion and retention at the bottom, which is a process of gradually decreasing user volume.

The GTM of traditional Web2 projects includes aspects such as pricing, marketing, and sales, with metrics focusing on website click-through rates, average user revenue, and sales cycles. The connotation of Web3's GTM is much richer. "Community" is a unique domain of Web3 GTM and an important traffic pool for user growth. Web3's GTM strategies often combine token-based community incentive measures and corresponding referral programs, rewarding existing users with tokens for referring new users, who may also receive rewards as a result.

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

Regarding product market fit ( PMF ), the main questions to consider are:

• Why develop this product/feature?
• Can the product/function meet market demand?
• Why develop this product/feature now instead of later?

According to research by CBInsights, the lack of market demand is the primary reason for the failure of entrepreneurial projects, accounting for as much as 42%, surpassing factors such as running out of funds and unsuitable teams. Due to the critical nature of this issue, developers should fully consider it during the product planning stage, rather than waiting until the product is about to launch to seek out the market. People can easily overlook the necessary market research work in the early stages due to their own biases.

Finding PMF is a cyclical iterative process that gradually aligns the product with the market by continuously collecting feedback and validating it. In subsequent validations, specific steps are optimized and improved based on feedback information to enhance the product-market fit.

Specific approaches can be taken from the following aspects:

1. Identify the niche market, target the user group, and discover unmet needs.

Identify the target user group by segmenting the large market, establish user profiles, and analyze needs. Based on understanding user needs, also look for corresponding market opportunities. If the user needs in a certain market are already well met, do not enter that market; instead, seek new market opportunities that have not yet been well met.

2. Develop product strategy, clarify value proposition, highlight differentiation and core competitiveness.

Users inevitably compare different products, so the uniqueness of a product largely determines user satisfaction. The value proposition is to highlight the product's strengths, allowing users to feel that this product better meets their needs than competing products. The product strategy needs to answer three core questions: which need to focus on satisfying? What unique features does the product have? How to win in competition?

3. Selected MVP feature set, completed user demand testing

After clarifying the product strategy and value proposition, it's time to start selecting the features that the minimum viable product ( MVP ) should include. The goal of the MVP is to verify whether the development direction is correct and to create sufficient value at points that users find valuable. After completing the MVP, it should be thoroughly tested among the target user group to ensure adequate feedback from a sufficient number of target users. Otherwise, the product iteration may be misdirected due to inaccurate feedback. Based on precise user feedback, adjust the hypotheses and return to the early process steps to iterate the MVP until a product that fits the market well is designed.

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

Regarding the minimum viable product ( MVP ), the following questions need to be considered:

• What are the components of the product/function?
• What problems can it solve?
• What are the iteration plans for the future?
• What is the value of the product/function?

The core of an MVP is to develop a usable product that showcases the project's highlights and innovations with minimal development cost and in the shortest time. This product, while simple, can quickly validate ideas. People often pursue perfection and believe that lacking a certain feature would be terrible, but in reality, it often does not have a significant impact. If the MVP approach is not adopted, a lot of time may be spent on secondary features during the development of the first version, and later updates can easily go off track. By adopting the MVP mindset, attention can be focused on the most important areas.

An MVP is not the 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. In fact, an MVP does not even need to be a mainnet product; it only needs to be a well-designed testnet product that provides users with a clear experience. This can avoid the risk of investing a large amount of money to create a product that is not accepted by the market.

Developers should deliver the MVP to the target user group, collect their feedback on product preferences, and see if they believe the product is needed, in order to validate the initial assumptions about the target market and user group behind the product. If the assumptions are correct, the product's visibility in the market should be quickly increased, allowing seed users to truly start using the product.

Hold more internal product meetings to discuss which features are unnecessary at the current stage. After cutting these features, what remains is the MVP. Developing the MVP requires the ability to simplify complexity, defining core functions around fundamental needs, focusing first on key path nodes, and then refining detail branches and auxiliary functions. This ability to simplify complexity is essentially about grasping the rhythm, launching corresponding product features at the appropriate time, not seeking to be comprehensive, but rather precise.

GTM(Go To Market): Acquire new users and retain them, manage the community

Regarding the market entry (GTM), the main questions to consider are:

• How do products interact with users?
• Do you need help for users to learn how to use the product?
• How frequently do users use it?
• Where is the product launched? Locally, domestically, or internationally?
• What channels are you looking to collaborate with?
• Are there any restrictions on cooperation channels?

In Web2, GTM typically acquires users through marketing strategies. In Web3, GTM not only needs to acquire users but also to manage a more enriched "community". The community includes not just users, but also developers, investors, and partners, all of whom are stakeholders in Web3 projects. Every excellent Web3 project usually has a strong community. Some projects adhere to the "community-first" principle, some are "community-led" in decision-making, and others are directly "community-owned". Only by continuously meeting user needs and maximizing the subjective utility of the product for users can a high-engagement, high-quality community be achieved.

Web3 has changed the user acquisition funnel of traditional Web2. Token rewards provide a new approach to solving the cold start problem. Development teams are not investing funds in traditional marketing to acquire early users, but rather using token rewards to attract users when the network effects are not yet evident. Rewarding early users for their contributions will attract more new users, who also wish to receive rewards through their contributions. From the perspective of user loyalty, early users in Web3 contribute to the community more significantly than traditional BD personnel in Web2.

1. Acquire new users

Airdrops with task interactions are important GTM strategies, referring to the distribution of tokens to users who complete specific tasks directed by the project, sometimes with additional conditions such as holding specific tokens. Incentivizing early users to complete task interactions is a common cold start method for projects, allowing them to acquire the first batch of seed users at a low cost.

Publishing tasks on the Web3 task platform and guiding users to participate in product interactions is a win-win operation. The project side gains traffic; users receive on-chain activity proof and airdrop tokens, while accumulating usage experience.

2. Increase engagement and retention rate

Relying solely on token incentives is insufficient to increase user stickiness. Since the bear market in 2021, a major challenge has been that "users come quickly and leave just as fast." User inactivity and retention difficulties are chronic issues for current Web3 projects. Project teams should focus more on converting new users into loyal users, continuously optimizing products, conducting community activities, and providing better experiences. 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 ( Referral ) refers to promoting products to more new users through existing users. If existing users have a good experience, they will spontaneously share or recommend it to friends in the community, which is the lowest-cost and widest way to acquire customers. To encourage users to share, the project team needs to design incentive mechanisms, which can reward project tokens or use physical gifts such as Logo clothing, skateboards, mugs, etc. In addition, 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 costs originally used for attracting new users into rewards for existing users who refer others and rewards for new users who register. This greatly reduces customer acquisition costs and is more efficient than directly purchasing keywords, display ads, etc. Although it is not innovative, it...