The Rise of "Web3 Growth"
We're entering the next stage of maturity as an industry
When I think back to when I first got involved in crypto (17/18), Metamask was *just* usable as a consumer application. There were no EIP signing schemes that made it easy to understand what you were cryptographically signing off on. We were trying to get the bare basics of the technology to work and figure out any viable use case that made sense. Since then it’s been close to 6 years and the crypto industry has made huge strides. We’re transitioning from an era where engineering viability were the primary concerns to go-to-market and unit economic concerns. In a world where you are:
One of 10 layer 1s competing for developers
One of 20 lending protocols competing for borrowers
One of 100 DEXs competing for liquidity
Simply having technology that works doesn’t matter. That’s simply the bare minimum everyone expects in order for your product to compete.
What does become a challenge is how do you actually differentiate from all of your competition. Suddenly the questions that keep you up as a founder/investors are:
How do I get word out about my project without doing a obscene airdrop?
How do I know if the traction I have is real or inorganic?
What levers do I have and which ones do I need to focus on in order to grow my dApp?
Which metrics do investors care about and what do I tell my team to work on?
Who are the users who actually matter in my user base?
Unlike the engineering questions of how do you make system X satisfy Y constraint, these questions are far more ambiguous and require a different way of thinking and execution. The other challenging part here is that you can’t just get a growth marketer from Web2 and hope that they can “just figure it out”. They themselves need to be up-skilled in the history, technology and culture of crypto. The good news is that the industry is maturing beyond just engineers making things for other engineers to teams making things for real end users.
Anecdotally, the number of “growth” or “marketing” roles that people are hiring for in my immediate network has increased. This reflects this subtle new shift in creating higher quality products and a more scientific way of thinking and executing on go-to-market.
Growth Today
Let’s suppose you’re a team that’s raised your seed round, have built a product and are now looking to go to market. They hit the inevitable of “how do we get word out” about their product. In the current state of things, the organic options include but are mainly limited to:
Going to conferences
Content marketing
Community building/engagement/memes
Search engine optimisation
Referrals
Influencer marketing
When it comes to paid channels, you have:
Google/Twitter ads (although with low success rates as these platforms don’t like or allow crypto)
Airdrops (which are terribly broken as we’ve discussed previously)
Questing platforms (still an emerging market but don’t guarantee the kinds of users you want)
Liquidity mining/token distributions (similar to airdrops but just as worse economically)
Regardless of which option you choose, they’re all pretty bad. Paid is basically close to non-existent. Organic is an over-used strategy and has limited ROI because…
Most teams don’t even know the problems with their current strategy (education)
It’s hard to measure the effectiveness of it (data)
Requires deep knowledge of the market/audience (know thy user)
Limited effective tooling for paid (market maturity)
If you’re a team building a crypto product, it’s pretty grim. Your growth strategy involves basically just hoping and praying for your organic efforts to work. If you’re desperate and run out of ideas, you’ll probably resort to an ineffective paid acquisition method. However, if you don’t have a token and it’s a bear market (like now), it basically means you have very limited growth strategies. The teams that have done really well have had to invest enormous resources in their growth function to the point it’s basically become a second product that isn’t even fully relevant to their core business.
Out of all the reasons I mentioned, the data is the largest bottleneck I consistently see. Why is this? Unfortunately getting high quality, accurate data is really hard in this industry. Some common problems that this manifests:
Not being able to identify how many real users you actually have. Airdrop farming is a multi-hundred million dollar industry at the least. Fake numbers skew everything.
Not knowing what your actual target audience because there’s lots of noise in the data. If you don’t know which users actually bring value versus which ones extract value things get difficult.
Not understanding what’s actually working for you right now with growth and whether you should double down or cut back on certain efforts. Most teams argue internally whether Twitter is a good place to market when that’s where majority of their acquisition traffic is coming from!
That’s just the tip of the ice-berg that I’ve mentioned. Trying to grow a crypto project in the present day is extremely challenging and there’s an entire sub-industry forming to solve these problems. Shayon from Multicoin wrote a great piece on this a few months ago that highlights some of the sub-categories in this new category that I’d recommend checking out: https://multicoin.capital/2023/01/11/the-web3-growth-stack/.
“Growth Tomorrow” is going to look very different but there’s still a few challenges we need to solve before we get there. In the mean time, I’ll continue to highlight the things you can do today as a team or investor.
I’ve also recently created a Telegram group for all the readers of this newsletter. Feel free to join here: https://t.me/+T-XpBMSS1ylUz0ej