In the past few years, a wave of excitement about blockchain technologies and web3 applications drove what often felt like a mad dash to capitalize on a new and wide-open market. Since those earliest days, web3 has started to mature, the dust has settled, and the speculators and hype-driven projects have largely fallen to the wayside.
In their place, a steady drumbeat of players, including powerhouse brands and web3-native projects, are stepping into the space to attract users and generate meaningful, sustainable growth. In the process, though, many initiatives are coming to the realization that the tried-and-true growth tactics of web2 can’t deliver the same results in web3.
Web3 is a reimagining of how communities are built, and some of its fundamental characteristics, such as decentralized communities, pseudonymity, and token-based engagement, thwart classic web2 growth levers.
In web2, the traditional marketing stack works because the data layers for engagement — centralized social media platforms, email, digital ads, in-app activity — are the same data layers for targeting, conversions, automation, and measuring ROI.
In web3, though, targeting and conversions occur via digital wallets that function independently from web2 engagement platforms. While wallet activity is documented on-chain, it is disconnected from the web2 marketing stack, which proves inadequate for identifying, reaching, converting, and retaining customers in web3.
But what at first appears to be a challenge is actually an opportunity. Companies and projects that adapt and move beyond the web2 growth playbook can harness the characteristics of web3 to engage with users in dynamic ways. Recognizing the changing nature of community-building, engagement, and conversions is the first step toward understanding the shortcomings of web2 growth strategies and identifying more promising paths to building and scaling in web3.
Web3’s emphasis on decentralization erodes the dominant channels, platforms, and growth tactics that have been the driving forces of web2 marketing campaigns.
In web2, community interactions take place on centralized platforms like Twitter, Facebook, YouTube, and mobile apps. These platforms provide dedicated sites for building brand awareness, identifying target market segments, and placing ads to acquire new customers.
In web3, the settings and methods of customer contact are still nascent. No clear playing field has emerged for engaging potential users, which largely eliminates the value of familiar tools like SEO, digital ads, and push notifications. Without clearly defined channels, companies can find themselves at a loss about both how and where to serve ads.
In addition, the locus of conversions in web3, the digital wallet, is not inherently linked to the web2 platforms where user engagement occurs. For example, web2 ads don’t know if a user even has a wallet, much less if they end up moving through the funnel.
As the data layers for engagement and conversions become disconnected, web2 tools break down when trying to target and acquire new customers. The same problems arise for retention and marketing automation. Decentralized communities that interact across diverse platforms with independent digital wallets don’t fit neatly into web2 automation software that relies on having established customer touchpoints to promote both conversion and retention.
The infrastructure of web3 facilitates pseudonymity, which interferes with the identity resolution processes that power targeted campaigns and customer retention programs in web2.
For users concerned about privacy, pseudonymity is a significant selling point for web3. User interactions occur via digital wallets that do not have to be connected to email, user accounts, or other identifiers. Individuals can have multiple wallets without any known link between them. For communities, the digital wallets they interact with often cannot be connected to any IRL identity.
As a result, web2 tactics for identity resolution are ineffective in web3 for developing customer profiles, which are a common building block for creating campaigns, enabling automation, and measuring ROI for distinct market segments.
Ambiguous identity resolution also hinders attribution, which is the collection and analysis of a stream of data about customer interactions. In web2, cookies, location tracking, purchase history, and in-app clicks are just a few examples of attribution data that can be unified and linked to a particular account. In web3, companies can no longer rely on these same tools of attribution to build granular customer profiles.
The combination of decentralized platforms and pseudonymity makes a substantial percentage of web3 user activity either invisible or hard to quantify when relying on web2 marketing solutions. While this poses challenges at all levels of the funnel, it may be most impactful for customer retention. After all, it’s difficult to build a nurture campaign when little is known about user identity, activity, and motivation.
Web3 enables the creation of tokens and NFTs with different characteristics that can be distributed to members of a community. Ownership of these tokens is a major feature of web3 as it offers users potential benefits like token-gated access to discounts and events, an easy way to showcase community affiliations, and seamless interactions with community partners.
NFTs and token-based engagement open up exciting avenues for building communities, such as with smart airdrops. However, many users, especially in the early days of web3, have been drawn to token-driven campaigns solely by short-term, profit-driven motivations. Web2-style promotions with giveaways or raffles can attract bots or users without a legitimate commitment to the community. These users offer limited long-term value and may even crowd out more interested users. Kazm offers token-gated forms to enable giveaways and raffles while minimizing bot activity.
Decentralization and pseudonymity circumvent the web2 tools that can help identify and avoid short-term users. As a result, promotions need to be tailored to fit web3, such as by utilizing on-chain transaction data, in order to optimize their effectiveness and return on investment.
As web3 continues to evolve, new solutions are emerging to unlock scalable growth. While key characteristics of web3 limit the effectiveness of web2 growth tactics, these same characteristics create compelling approaches to drive user acquisition and retention.
Community-led Growth (CLG)
Web3 encourages more dynamic community participation by empowering users through token ownership, a voice in governance, and engagement incentives like rewards, referrals, and quests with public leaderboards. From this, CLG is emerging as a powerful channel with its own growth mechanisms to enable network effects and community loyalty that can form a viable moat against competitors.
Voluntary Identity Resolution
Web3 projects are learning that pseudonymity is more principle than practice. Choice is the essential part of this equation. Rather than capturing customers’ data without their knowledge, web3 projects often find that their members are happy to share who they are with communities they voluntarily belong to. In addition, web3 communities can learn more about their users by engaging them directly and incentivizing identity resolution with rewards like special memberships, whitelists, and access passes.
Both web3 projects and their users are discovering a world of value for tokens and NFTs that goes beyond their resale price. For example, utility NFTs can grant and manage membership, and token-gated access can be used to unlock perks and discounts. The interoperability of tokens also facilitates partnerships between projects that can generate new conversions. Leveraging the power of tokens can be both a growth and engagement lever while minimizing incentives for speculation.
Wallet activity is documented on blockchains, offering meaningful data about a user’s activity across different communities. Based on a user’s wallet history, a community can create personalized experiences that appear as soon as they log in that are tailored to increase conversions and retention.
Cross-platform Data Analysis
Transaction data from blockchains bring a new element to market segmentation. Unifying on-chain data with off-chain sources, including social media, can generate robust customer profiles for both acquisition and nurture campaigns.
As web3 expands and develops, these and other web3-native growth strategies will continue to be refined and optimized. While traditional web2 growth tactics face fundamental shortcomings in this environment, novel approaches to community building in web3 offer promising avenues for identity resolution, market segmentation, attribution, automation, and ultimately crafting successful campaigns for customer acquisition and loyalty.