Targeting Existing Users: The Key to Successful Consumer Token Distribution
Why Consumer Tokens Need to Take Cues from Web2 Incentive Programs
Happy Monday, MAJR Readers! This week we will post an article with an interesting take on Web3 space each day. I hope you will enjoy it.
In the future, consumer token airdrops may resemble web2 incentive programs, which are designed to engage and incentivize users who already have product-market fit and intrinsic interest to use a product, rather than to acquire new users. Token airdrops today are often retroactively distributed to past users, which may lead to churn and sell pressure when the token is not critical to the ongoing product experience.
To improve user retention and deepen engagement, consumer tokens should take inspiration from web2 incentive programs. For example, social media platforms have launched creator funds to pay creators on their platforms, but they reward those who drive meaningful views and engagement, indicating pre-existing PMF and retention. Similarly, Uber's driver guarantees are structured as guaranteed minimum earnings based on certain driver behaviors that are correlated with long-term retention.
What does that look like?
Various social media platforms have launched creator funds to pay creators on their platforms (e.g., TikTok paying $1bn over 3 years). Notably, these programs don’t pay everyone who creates, but reward those who drive meaningful views & engagement. Eligibility for the TikTok Creator Fund includes having 10K followers and 100K+ video views – criteria that indicate pre-existing PMF and retention. The monetary incentives are an added mechanism to boost retention.
Another example is Uber’s new driver guarantees. Instead of being an instant cash bonus for just signing up, it’s structured as guaranteed minimum earnings if drivers do a certain # of rides within 30 days (usually $500-$1.5K). It’s a safety net for earnings based on certain driver behaviors – those correlated with long-term retention. Beyond that, they’re targeted to balance marketplace dynamics on a micro level, varying by geography. - Li Jin
In the crypto space, tokens can be used in place of cash rewards and dripped out over time based on completion of certain tasks that indicate pre-existing PMF. The availability of data on-chain can make token incentives much more powerful, and teams can learn from web2 companies that effectively leverage rewards systems to level up user retention. Designing such programs requires an understanding of user lifetime value, drivers of activation, behaviors that drive long-term retention, and targeting segments of users that are already finding value from the product but could use an extra push.
To learn more about how the next generation of the internet will transform users into owners, visit the Variant Fund website.
Reminder: None of this is financial advice. Do your own research.
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