Web3 User Rise Strategies: Building a Sustainable Ecosystem

In the Web3 space, many projects experience a brief user rise followed by a rapid decline, ultimately falling into a "death spiral". Unlike traditional industries, the impact of the cryptocurrency market on Web3 projects is more direct and significant. During a bull market, there is a flourishing of projects, while a bear market eliminates most of them. These failed projects often see their token prices continuously decline in a bear market environment, leading to a failure of incentive mechanisms and even harming user interests, ultimately resulting in a significant loss of users.

User growth is a long-term goal of the product, focusing on building an ecosystem between the product and users, gaining market share through continuous iteration, and achieving steady rise in user scale and value. In 2022, apart from social media applications, the number of active users in most Web3 applications declined to varying degrees. Here are some thoughts on the user growth strategies for Web3.

Basic Approach to Web3 User Rise

Although the cycles of the cryptocurrency market have a huge impact on user growth, entrepreneurs should not be constrained by macro factors. The primary task of user growth is to find a market segment that matches the product, which is the "M" in product-market fit (PMF). Focus should be on specific markets rather than trying to satisfy the entire broad market. Combining product characteristics and resource advantages, position yourself in the market that suits you best. First, cultivate a single market and achieve a leading position before considering horizontal expansion. For Chinese entrepreneurs, giving up the familiar Chinese-speaking community and user base is unwise, as it amounts to giving up one-third of the potential customer base globally.

In product development, the minimum viable product ( MVP ) is a great concept. It refers to launching basic functions that meet the minimum business closed loop for core scenarios first, and then iterating and optimizing based on market feedback. Developers should not attempt to develop a perfect product all at once, but instead focus on solving the most urgent problems for users, simplifying the usage process, and building an MVP that aligns with PMF. In this process, developers often need to say "no" to many good ideas.

PMF can be understood as the state of product-market fit, while MVP is an effective method to achieve PMF. Bringing an MVP that meets PMF to market is the "go-to-market" ( GTM ) strategy. The goal of GTM is to acquire and retain users, usually following the "funnel model": from the top of customer acquisition to the bottom of user conversion and retention, it is a process where the number of users gradually decreases.

The GTM strategy of Web3 differs from traditional Web2 projects. "Community" is a unique area of Web3 GTM and an important channel for user growth. The GTM strategy of Web3 projects is often accompanied by token-based community incentive measures and corresponding referral programs, where old users are incentivized by tokens to refer new users, and new users may also receive rewards as a result.

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

Regarding PMF, several key questions need to be considered:

1. Why develop this product/feature?
2. Can the product/function meet market demand?
3. Why develop this product/feature now instead of later?

The lack of market demand is the primary reason for the failure of entrepreneurial projects. Therefore, developers should consider these issues during the product planning phase, rather than waiting until the product is about to launch to start looking for the market. People tend to overlook the necessary market research work due to personal biases and stubbornness.

Finding PMF is a cyclical iterative process. By continuously collecting feedback and validating, the product gradually reaches alignment with the market, and in subsequent validations, specific steps are optimized and improved based on feedback information to enhance the product's fit with the market.

1. Identify niche markets, target user groups, and discover unmet needs.

Accurately identifying niche markets and target user groups is key to determining whether a product can meet user needs. By segmenting the larger market to identify target user groups, a user persona library can be established and demand analysis can be conducted. Once the target user personas are established, the next step is to understand their needs. In the attempt to create value for users, corresponding market opportunities must also be identified. If user needs in a certain market have already been well met, it is advisable not to enter that market but to seek new market opportunities instead. When it is discovered that user needs in a certain market have not been well met, consideration can be given to entering that market.

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

Users will inevitably compare various competitors with your product, so user satisfaction largely depends on the uniqueness of the product. These features constitute the differentiation of the product. The value proposition is to highlight the product's strengths, allowing users to feel that this product can better meet their needs than competitors. Among the various needs that the product can meet, which one should we focus on? What unique features does the product have to attract users? How does the product stand out in competition? These are the three core questions that the product strategy needs to answer.

3. Selected MVP feature set to complete user requirement testing

Once the product strategy and value proposition are clear, the next step should be to select the core features that the MVP should include. It is a very frustrating experience for developers to spend a lot of time and effort only to find that users do not like the product; repeated failures may lead to running out of funds. The purpose of the MVP is to determine whether the development direction is correct, and then to create enough value in areas that users find valuable. After completing the MVP, it should be thoroughly tested within the target user group to ensure that the feedback collected comes from a sufficient number of target market users. Otherwise, user feedback may lead the product iterations in the wrong direction. Based on precise user feedback, readjust the hypotheses and return to the early process steps to iterate the MVP until a product that closely matches the market is designed.

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

Regarding MVP, we need to consider the following questions:

1. What components does the product/function consist of?
2. What problems can it solve?
3. What are the future iteration plans for this feature?
4. What is the value of the product/function?

MVP refers to a product that is developed with the minimum development cost and the shortest time, which is usable and can reflect the highlights and innovations of the project. Although this product is simple, it can quickly validate ideas. People have a psychological pursuit of perfection, believing that the lack of certain features would be terrible, but in reality, it may not have a significant impact. If the MVP approach is not adopted, a lot of time may be wasted on secondary features during the development of the first version, and many detours may also be taken in subsequent version updates. When we start to develop products with the MVP mindset, we can focus our attention on more important aspects.

An MVP is not the most perfect product; its purpose is to quickly launch to the market to test feasibility. By validating through market demand, the direction is continuously adjusted to iterate a product with market space and protocol revenue. In fact, an MVP does not even need to be a mainnet product; it can simply be a well-designed testnet product that provides users with a clear experience. This can help avoid the predicament of spending a large amount of money to create a product that the market does not recognize.

Developers should deliver the MVP to the target user group, collect their feedback on product preferences, and see if they believe this product is necessary, in order to validate the assumptions behind the initial product regarding market and user positioning. If the assumptions are correct, the product's exposure in the market can be quickly increased, allowing these seed users to start using the product.

Hold more internal product meetings to discuss which features are unnecessary at the current stage. After eliminating these features, what remains is the MVP. Developing the MVP requires the ability to simplify complexity, defining core functionalities around fundamental needs, first addressing the key nodes on the critical path, and then considering detailed branches and auxiliary functions. This ability to simplify complexity is essentially about grasping the rhythm, aligning with the pace of business and user development: launching corresponding product features at the right time, not seeking quantity but aiming for just the right fit.

Going to Market ( GTM ): Attracting New Users and Retaining Old Ones, Managing the Community

Regarding the GTM strategy, the following questions need to be considered:

1. How do products interact with users?
2. Do you need to help users learn how to use the product?
3. How often do users use it?
4. Where is the product released? Local, domestic, or international market?
5. Which channels to partner with?
6. What are the limitations of the cooperation channels?

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

Web3 has changed the user acquisition funnel model of traditional Web2. Token rewards provide an alternative solution to the cold start problem. Development teams do not invest funds in traditional marketing to acquire early users, but instead use token rewards to attract users in the stage where network effects are not yet obvious. Rewarding early contributions from users will attract more new users, who also hope to gain rewards through their contributions. From the perspective of user loyalty, early users of Web3 are more important to community contributions than traditional Web2 business developers.

1. Acquire new users

Airdrops with task interactions are an important GTM strategy, referring to the distribution of tokens to users based on project direction, where users must complete specific tasks to have a chance to receive tokens, and sometimes additional conditions apply, such as holding specific tokens. Incentivizing early users to complete task interactions is a common method for cold-starting projects, allowing for the acquisition of the first batch of seed users at a lower cost.

Publishing tasks on the Web3 task interaction platform and guiding users to participate in product interactions is a win-win operation. For the project party, it gains traffic; for users, they can obtain on-chain activity proof, receive airdrop tokens, and accumulate platform usage experience during the task interaction process.

2. Increase activity and retention rate

Although token incentives can attract users, relying solely on them is not enough to increase user stickiness. Since the cryptocurrency market entered a bear market in 2021, a major challenge for operating projects has been that "users come quickly but leave just as fast." User inactivity and retention difficulties are common issues faced by current Web3 projects. Project teams should invest more effort in converting first-time users into loyal users, continuously optimizing products, and carrying out community activities to provide a better experience for users. Holding AMAs on Twitter Space, Discord, and Telegram is a common method to enhance community activity and engagement.

3. Recommendation and Self-Propagation

Self-propagation refers to promoting products to more new users through existing users. If existing users like and have a good experience, they will spontaneously share the product in the community or recommend it to friends on a peer-to-peer basis, which is the lowest cost.