Web3 focused incentivised marketing 🪙

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Welcome to "note to self" #6 focused on marketing in web3 💻

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Today we're discussing incentivised marketing. Let's dig in 🍽

Incentivised marketing - an overview

Incentives are potential gains that are offered in return for particular behaviour with the goal of getting someone to do something. Incentivised marketing means users of a particular product are incentivised to use that product in return for an incentive like a reward. Growing to 120m users through this model, Sweat is one of my favourite examples of a platform utilising incentivisation in order to grow its user base exponentially.

This newsletter is focused on web3 so I will be primarily discussing tokenised incentives. These incentives can activate and grow network effects, bootstrap networks, and align network participants. For the last 10+ years, consumers have been giving away their data free of charge to third parties. Incentivising growth means consumers can get rewarded.

Ultimately this paradigm shift benefits the consumer. With this shift, we will more than likely see marketing budgets decrease their spending on paid ads and increase or start their incentivized growth campaigns. You know what you want people to do, you are used to paying third parties to try and get them to do it, but now you can pay people directly to do what you want them to do.

Incentivised marketing and its tokenomics

Incentivised growth models must be sustainable. An in-depth understanding of tokenomics becomes more important for marketers because, without the correct sustainable models in place and no long-term plan, the model can and will fail.

Of course, incentivised growth has existed previously. Incentive programmes and referral schemes are nice examples, but we now have the opportunity to implement tokenized marketing to grow. With these methods in mind, I will concentrate on more crypto-native methods that are being utilised today.

1. The and-earn model

Many of you may have heard of play-to-earn or learn-and-earn. These are forms of incentivised marketing where particular behaviour or activity is rewarded. Through play to earn games I can earn rewards that hold real-world value just by playing the game. I can learn more about DeFi or NFTs through platforms like RabbitHole and earn by doing so.

As mentioned Sweat is a fantastic platform where I can exercise and as a result of carrying out this activity I can earn. This in turn creates a healthier and more exercised-filled world which is obviously part of their overall vision. With the Brave browser, I can earn by viewing ads and consuming content and with PublishOx I can earn by writing and posting blog posts to their platform.

2. The tokenomics of incentivised marketing

I believe the token economics or tokenomics of incentived marketing is too important to leave out when discussing incentivised marketing. These models need to be sustainable. As mentioned I think tokenomics will become increasingly more important for marketers going forward.

Understanding tokenomics can be key for a successful product flywheel and economics can be your product-led growth model. The game economics around play-to-earn and NFTs supply and demand are just some good examples to gain a deeper understanding of.

The below is taken from the Sweat tokenomics model, serving as a great model for incentivised growth. A great reward to initially attract users to join the platform is likely needed. In Sweat's case, this reward is the ability to earn real-world value in return for steps or exercise. Here's a high-level overview:

Sweat must make rewards more difficult to obtain or reduce the number of rewards paid out to users. Increasing the marginal cost of production means users will be asked for more physical activity over time so that 1,000 steps per Sweat token remains ( until 2024 ) but the reward for the steps will decrease over time.

An optimal point between supply and demand must be identified where users will not decrease the value of the supply ( so users will continue to be motivated to supply their steps ). Identify the optimal market value of supply.

Token burning and staking are two mechanisms to maintain the stability of your token. If the token is more scarce and out of circulation, it stops inflationary behaviour and preserves value in the token, ensuring the token won’t equate to zero.

Token network effects ( at the start ): To provide financial utility via token incentives to make up for the low native utility of the token, early on during the bootstrapping phase of the business, when network effects don't exist. For example, Steemit is a decentralized Reddit-like token network that makes payments to users who post and upvote articles, helping the company obtain 1m Steemit users and the appreciation of Steemit tokens, which increased future payouts, leading to a virtuous cycle which leads to more users ( h/t Chris Dixon here ).

In other news: 📰

-> The Merge is complete. Happy Merge!

-> The Merge reduces global energy consumption by 0.2%

• Check out more on the Merge

-> Blog/Pod/Video of the week: What Basic Game Theory Teaches Us About Startups

Spotlight💡: RabbitHole

What: RabbitHole is a web3 user onboarding and education platform. Through tutorials, users can learn and get rewarded in crypto while giving protocols insights into their ecosystem behavior.

Why: The web3 ecosystem is vast and complex, and it's difficult for users to find signals in the noise. RabbitHole curates the highest quality crypto projects and helps match them to new users. We create a trusted space that values participation over speculation.

Who: Brian Flynn ( CEO and Co-Founder ).

Check them out!

Thank you to the RabbitHole team for their contribution this week.

Next time: ⏭️

Next week I will discuss community-led growth ⚡.

Have a great weekend!

Harry Arkwright