In Web3 — The Community is the Product-Led Growth enabler
PLG is a customer growth model that uses the product itself as the primary source of growth, rather than a marketing-first or sales-first approach.
PLG is the key to successful growth used famously by Web2 titans of today; companies like Atlassian, Dropbox, and Slack grew exponentially by putting their product and user base “to work” through PLG & virality.
PLG characteristics from Web 2 are still relevant in Web 3. In Web 3 however, The Community defines the success of Product-Led Growth.
In this article, I’ll first explain why PLG is important and share a few examples in Web 2. I’ll then discuss the significance of the community in Web 3 and share examples from my experience using different products/projects.
Why is Product-Led Growth important?
Product-Led Organizations are generally better than their competitors because of their synergy between product, marketing and sales. Product-Led Organizations often mitigate “the build trap” by focusing on customer outcomes and building real, lasting value.
Product-Led Products (generally) offer a low barrier to entry, high initial value and high level of convenience over and above what’s currently available. Furthermore, they’re easier to use and more efficient. I’ve seen products like Notion and Calendly attract use in organizations with strict protocols in place banning the very same products. In addition, Product-Led Organizations scale faster and are valued at a minimum 2X over their non-product-led counterparts. OpenView Venture Partners publish great work on Product-Led Growth, here’s a growth chart on the PLG evolution in public companies:
The major difference between PLG in Web2 and Web3 companies I’ll be focusing on in this article is the synergy between product and community. Web2 companies can be Sales-Led, Marketing-Led, Technology-Led, basically anything other than Product-Led; Web3 companies don’t have a choice — they must be product-led.
Firstly… How does Web2 do PLG?
Features & usage are primary drivers for customer acquisition, retention and expansion
1. The product markets itself and onboards new users
I always have a smile on my face when I see a product creatively using PLG.
Tyro’s a business banking platform in Australia, I recently received a receipt printed from a Tyro terminal with their branding and taglines printed on the back. Square takes this to the next level by offering email receipts and a big button “Get Started with Square”, sending the user to an easy 4 field sign-up.
Here we can see 2 examples of the product marketing itself organically.
Measuring PLG: Monitor customer growth metrics such as net new users, new paid users, and company market share.
2. Product teams synchronize with engineering, marketing and design
An example below of the product team working with the marketing teams is from Up Bank, an Australian “bank”. Up Bank interestingly defines itself as a software development company when searching on Google, Up positions their “Products & Promotions” on the home page of their app with items such as referrals and new product placement. Oftentimes I’ll open the app with offers and new feature promotions popping up, making it simple & easy to invite new users to the platform and discover new features.
PLG is accelerated when cross-discipline teams share common goals. Product teams responsible for customer acquisition and retention metrics are inherently driven to collaborate with engineering & design to fulfill an outcome.
Calendly is an example that came to mind, I’m impressed with their speed to deliver value. Less than 2 minutes after scheduling an appointment with someone using Calendly (screenshot above, right), I’d signed up, synced my Google calendar and scheduled through the app, for free.
In this model, it’s important that Product, Engineering, Marketing and Design need to work together to:
- Deliver value immediately
- Strip any non-critical functionality
- Make the product as sticky as possible
Measuring PLG: Customer growth metrics such as net new users, new paid users & growth efficiency metrics such as LTV/CAC/Free to paid conversion
3. The product over-delivers value for the price
Freemium models onboard customers & deliver value immediately. Time-To-Value (TTV) studies show that a faster TTV = better customer experience, better product sentiment & lower churn.
A “paywall” is the feature-barrier between a free tier and paid tier (or paid to premium), as the user progresses through the Customer Journey Map, the products key-value propositions should be demonstrated at each step with limitations & crumbs of desire for the customer to progress through higher subscription levels.
Measuring PLG: Monitor product engagement with MAU/DAU and feature engagement with feature analytics
4. Network effect
Skype is a typical example of a network effect. Skype provided Free VoIP calls/meetings/screen shares between registered Skype users at a time where the only international means of communication was by expensive, long-distance calls. The more Skype users, the more valuable the network became because Skype to Skype calls were free and as easy to make as phone calls. Skype’s network effect resided in the value it provided to users, as more users entereted the platform — fast & easy calls, internationally, for free. Skypes virality, not to be confused with network effect, came from users asking other users to sign-up so they can speak together for free. Virality increassed the (value) via network effects.
Measuring PLG: this is highly dependent on the type of business and hard to track. Some examples include paid vs organic growth or net-retention.
And…How does Web3 do PLG?
Community, usage & incentives are primary drivers for customer acquisition, retention and expansion
The community markets the product
Web3 products look to Twitter, Discord, and Telegram for community building. Twitter, also known as Crypto Twitter (CT), is where the most influential people in Web3 can be found and is a terrific form of Product-Led marketing.
Signing up for Web3 projects often use Twitter as a verification source. Recent examples that come to mind include sound.xyz, a platform enabling artists to create ownership over their music with NFT’s and mirror.xyz, a multi-faceted blogging platform we’ll discuss in more detail later — both products posting on Twitter to verify my account, whilst telling the world I’m using their product.
Early access to projects earned by community advertising on Twitter. Early access to Web3 projects is generally a privilege and can be earned by contributing to the project and by advertising AKA ‘shilling’ the project on Twitter. Sometimes these are time-bound & the first X number to post-receive access to an early-access whitelist. Whilst I’m not a fan of time-bound, X-number bound chores, the possible financial incentive and FOMO usually override my inhibitions to do so for projects I deem respectable. Caution! Many CT users shill projects without any knowledge of the project, or vested interest.
Community members align their identity with the project. When the project’s mission and values are in line with the user's beliefs, users can be compelled to share their involvement and market the product for free. Some recent examples I’ve seen include Shaq changing his Twitter name to Shaq.eth, Klima DAO members, an algorithmic carbon-backed currency represented by (🌳,🌳) and 🦇🔊 symbolises Ultrasound Money a reference to Ethereum.
The community helps with onboarding
One example I’ve seen is through Discord. New projects, deployed on newer chains like AVAX and Fantom may not yet have a smooth onboarding process. This is in contrast to a product like Calendly, and without the project's community, coupled with the customer’s incentive for possible economic benefit, new users may not make it onto the project.
I recently needed to bridge coins on the Fantom DEX SpookySwap, I didn’t know I needed a small amount of Fantom prior to transacting to pay for the transaction itself. Searching through the project's Discord, I could find users from the general public, who have changed their names and included DM for Faucet, (example below) to identify they’re available to be messaged and will send you free Fantom ‘Faucet’ to assist your onboarding to the project. I found these users very helpful and responsive — they were community members helping out.
Looking into subreddits, discords, telegrams, and YouTube for a project, you’ll find plenty of resources created by the public to help you onboard to a project.
The community prioritizes the roadmap
Web2 companies offer community involvement for feature suggestions — products like AHA provide portals for the public to sign-up and suggest/vote on features.
Snapshot.org is a decentralized voting system Web3 platforms use to elicit feedback on their direction and decisions. DAO’s use Snapshot as a governance mechanism to vote on all aspects and decisions needing to be made.
Snapshot Proposals can be created by the project owner, or by token holders of the Web3 project. Token-holders login to Snapshot with their crypto wallet which holds the projects tokens or NFT’s. Many platforms choose to weigh Snapshot votes based on the number of tokens each member has.
Having a vote in the direction of the product facilitates the IKEA effect, where members place a higher value on the platforms they’ve contributed towards.
The benefits Snapshot offers over Web2 alternatives is community members can be involved in the direction and outcome of the project based on the size of their stake in the project, verified against their wallet. Thus, incentivising token holders to retain and expand their token holding in projects they believe in.
The community is incentivized to build for the product
Community grants incentivize members to build solutions on top of the platform to benefit the wider community in exchange for platform tokens. Grants are usually funded by the platform from a trove of tokens allocated for future endeavours at the token launch.
Immutable, a Layer-2 NFT scaling solution experiencing massive growth released their first community grant theme — Developer Tools.
Web2 companies experiencing similar growth hire new teams to build platform resources like Developer Tools, our outsource their development. Here in Web3, Immutable incentivizes the community to build tools to benefit the platform and community. Good improvements positively impact the token price which is a win-win for both the platform and the token holders and another way Web3 companies accelerate PLG.
Furthermore, Developer Tools makes developing (on Immutable) easier. Community builders have fresh eyes, industry perspective, and being part of the community, have an idea on what product gaps need to be filled.
The community builds the core product
Ethereum’s the largest smart contract blockchain today. The Ethereum community and any public member can propose updates in the form of Ethereum Improvement Proposals (EIP). 2 notable proposals to their smart contract standards are ERC-20, the ability to create custom tokens and ERC-721, the ability to create NFTs.
Having direct input from the community not only to suggest but to help build out the platform, ensures the product’s innovating for the market need, saving time and effort with product and engineering teams on customer discovery & prototyping.
EIP and similar initiatives by other Web3 platforms give the end-users power to innovate their own product. Developers flock to Ethereum for their constant technological developments fuelled by the community and are likely to stay around because of it.
The product enables the community
A thriving Web3 community = Product-Led Growth
Ethereums ERC20 created a standard for “Fungible Tokens”. A fungible token is used to represent value; by using the ERC20 standard, I can create my own token with its own name e.g. SAM, assign a value, and total amount in circulation. All SAM tokens are created by the same ERC20 contract deployed to the Ethereum blockchain. Each time a SAM token is traded, users are interacting with Ethereum. There are over 440,000 ERC20 tokens on Ethereums main network today.
In doing so, Ethereum enables anyone to create their own tokens, inheriting the functionality, security, scalability, and decentralized benefits of the Ethereum network, increasing the core platforms value and stickiness.
ERC20 is just 1 Ethereum Improvement Proposal, another notable ERC is ERC721, defining the standard for the creation of Non-Fungible Tokens (NFT’s) which are used so widely today.
Here we see Ethereum building a strong platform to support and enable community development, which in turn enhances its own value and accelerates its own growth.
Opulous.org is a decentralized music platform that gives creators the ability to earn royalties and copyrights from their music-NFTs. NFTs earn artists and their owners monthly passive income.
the industry has a financing problem. Artists have real difficulty in obtaining loans from traditional banking because their greatest assets — the copyrights they own or share — are not accepted as collateral.
Opulous incorporates a publishing service, NFT exchange, and DeFi loaning service for artists to manage their work & finances together in a self-custodial environment.
Mirror.xyz is a decentralized blogging and publishing platform revolutionizing the way users publish, share, and monetize text based media.
The website offers comparable text-driven features to Medium for publishing. Mirror.xyz differentiates itself by offering a multitude of Web3 services for writers to monetize their works through new business models. New business models such as:
- NFT Editions: Your blog posts can be turned into NFT’s and sold through the platform. Buyers hold on to something significant which represents the value now and potential value in the future. Think of the first blog posts by famous writers and entrepreneurs
- Crowdfund: Mirror empowers writers and, really anyone, to crowdfund an idea through the platform in exchange for ETH. Making an expose about a niche industry? Here’s where you can raise the capital before writing
- Split: Let’s say a project I’m working on publishes a paper through Medium — a split let’s Medium writers split the proceeds between the project team
- Token Race: Mirror.xyz created a unique system to minimize the number of new entrants on the platform and prioritize the popular and interesting ideas. Similar to a stack overflow thread, users propose ideas and receive upvotes by other members, the top 10 users after each period receive a $WRITE token, gaining access to the Mirror platform. They now offer this as a service.
Similarly to the Ethereum ERC-20 ethos, Opulous & Mirror.xyz build strong and extendable platforms to enable the community with technology to thrive. When communities thrive, the underlying platforms thrive and experience network effects.
The network effect
Network effects work on the construct of new users add value.
Using the Skype example in Web2, unless a new project offered vast improvements in functionality and usability, the network will continue to use Skype. Established cryptocurrency networks like Bitcoin and Ethereum have similar network effects which are important to Web3 tokenomics and a projects long-term success.
Bitcoin is the most well-known cryptocurrency, a miner earning Bitcoins for their work will almost always be able to trade their coins, this is called high liquidity and supports the projects user and member retention. These same miners may be able to earn more with new cryptocurrencies, but they’ll question the liquidity in trading new coins.
For many cases in Web3, strong network effect = high liquidity
Products building on trust sustained technologies can ride the underlying network effect of the chain. Products and services built on top of new cryptocurrencies or technology in decline will suffer the negative network effects of the underlying chain.
Products building on trust sustained technologies can ride the underlying network effect of the chain. Products and services built on top of new cryptocurrencies or technology in decline will suffer the negative network effects of the underlying chain.
Negative network effect
Most of the crypto world experience this with Ethereum gas prices. Because the chain has so many users competing for its use, including ERC20 tokens, NFT’s and DeFi services — the networks are congested. New users to Ethereum = higher fees. Many technologies including Ethereum are working on improvements to the core network and scaling solutions, such as Immutable’s mentioned above.
Each transaction on Ethereum costs user gas fees. Gas is sent to the chain to process the transaction, miners will process the highest gas fees first to earn the best wages. A satirical website, fees.wtf calculates the gas you’ve used on your address to date.
Measuring community effect on PLG
I’m working on a framework to help me analyze Web3 community metrics and which metrics produce outcomes and deliver value. Here are my initial thoughts:
Social Media (followers, posts)
- Discord
- Blog
Sentiment
- Live & Breathe the social channels
Use
- General: Number of Addresses, Active Addresses per day/month
- Economy: 24 hr trading volume,
- Governance: Number of Proposals, % of tokens voted per proposal, % wallets voted
Closing thoughts
The consistent traits in both Web2 and Web3 PLG is the customer focus on creating highly usable and valuable products solving problems for end-users. Web3 synchronizes product development with the community to accelerate innovation, growth, and value creation beyond what was possible in Web2. This is evident in the speed and scale Web3 projects can achieve in such a short time.
I’d be interested to see if Web2 companies can learn the PLG tactics Web3 companies are using, or if they’ll change their company to be inline with a Web3 model, or continue on as they are now.
Note: I’ve generalized Web2 and Web3 companies to help demonstrate the overarching differences. Reddit is just 1 company that comes to mind as a mix of Web2 and Web3 in a complementary way, I enjoy seeing the token rewards as community points and NFT’s as avatars.
Please comment on items you find untrue and what you think can be improved.
