CoinMarketCap's VP of growth weighs in with his thoughts on how to get the next millions into the crypto space.
With research and reporting by co-author Andrey Sergeenkov.
Although we have seen the likes of Axie Infinity and Bored Ape Yacht Club bring more and more of the mainstream to the crypto space, we are still only 1% there — that’s right, less than 1% of the world’s population owns crypto assets of any form.
How will the next wave of users get access to crypto? Will they join via better on-ramp solutions? Will play-to-earn games emerge as the game changer? Or is it something else entirely?
I would argue that airdrops to Web 2.0 platforms will be the natural next step in crypto adoption.
Instead of re-engineering the wheel and building new platforms to onboard new users, why not leverage existing infrastructures and create synergies?
While improving the UI/UX of Web 3.0, creating optimized on-ramp systems and implementing appealing Web 3.0 applications are all important factors, the fact remains that the average Joe needs a more compelling reason to leave his comfort zone and take that leap of faith. And from what I have learned so far, the promise of freebies (or what we have come to call airdrops in the crypto realm) is as compelling as they come.
Rather than fixate only on the infrastructural make-up of their products alone, entrepreneurs and developers alike also have to be intentional about the marketing strategies they employ. It is not enough to conduct airdrops. Instead, it is also critical to understand how we can capitalize on the existing platform (Web 2.0) where our target audience is currently housed.
To better understand the importance of this strategy, let us take a leaf out of WeChat’s historical route to dominance in the payment sector.
WeChat Pioneered Airdrops on a Global Scale
In 2014, WeChat strategically introduced a new business model that helped launch and establish its payment solution. In what is now considered a genius move, WeChat took advantage of an existing tradition in China and inadvertently pioneered airdrops on a large scale.
Named WeChat Red Envelope or WeChat Red Packets, the application allows users to send cash gifts to friends and relatives during the Chinese new year to mark the hongbao (or Lucky Money) tradition.
This is a tradition that can be traced to the Ming Dynasty, and it involves the giving of cash in red envelopes to wish the recipients good fortune. WeChat strategically brought this tradition to the digital realm, thanks to its in-house payment solution.
To kick off this project, WeChat did the previously unthinkable. As part of its marketing campaign in 2015, WeChat gave out $83 million worth of red envelopes to users across 185 countries. This literal free money promotion was a complete triumph, as it not only introduced the product to millions of users, but also set the platform up for global success.
The first time that red packets, or hongbao, were given out via WeChat was during the Chinese New Year of 2014. This number grew from 16 million packets in 2014 to 1 billion in 2015. In 2016, 8.08 billion (800%) more packets were distributed, while 2017 saw the total number of packets rise to 46 billion (a 570% increase from the previous year). In just four years, WeChat changed the way people give out red packets.
Just like how Apple’s iPod helped shape Apple’s future, WeChat red packets established WeChat as a market leader in China’s social messaging and e-payment space. The year when people started to use WeChat Pay to send real-valued digital red packets marked the start of WeChat’s gradual journey to becoming one of the most important apps used in most people’s daily lives.
A typical example of how WeChat permeated mindshare even beyond Chinese new year would look like this — whenever employees were not actively engaging with a project, the employer would send a red envelope to the group (at any time of the year), and everyone would go crazy.
Sounds familiar? A similar model is now widely being used in the crypto industry.
Airdrops Are Vital to the Next Phase of Crypto Adoption
On Dec. 1, 2021, crypto rewards application Lolli announced a partnership with Grubhub, one of the largest food delivery platforms in the United States, allowing users to earn free Bitcoin back on every Grubhub order they place.
On Dec. 8, 2021, VC firm Sequoia on Twitter changed its description to “We help the daring build legendary DAOs from idea to token airdrops. LFG.” Probably nothing.
But actually, this simple description gave us some insights into how one of the top investors in the Web2 world is thinking about the Web3 world — and the role that airdrops might play in the next phase of crypto adoption.
In the world of crypto, airdrops are one of the small incentives of holding a crypto wallet. It’s a way to test drive cryptocurrencies newly introduced to the crypto market. Simply put, airdrops are marketing promotions employed by startups in the cryptocurrency space.
Airdrops aim to introduce new projects to the crypto community by distributing native tokens to interested individuals. They involve delivering digital assets to these existing wallets, either for free or in exchange for a small promotional service (like sharing a post on Twitter, joining a Discord channel, etc.).
Beyond just marketing gimmicks, airdrops sometimes decentralize the ownership of projects. Web 3.0, as Chris Dixon puts it, is “the internet owned by the builders and users, orchestrated with tokens.”
While some see airdrops as an avenue for illicit individuals to fuel pump and dump schemes, the fact remains that airdrops are perhaps the most effective way of getting tokens in the hands of millions of users. Think of it as a variant of the freemium model that social media networks like Twitter and Instagram have mastered over the years. In the case of crypto companies, however, the idea is to distribute free coins as a catalyst for community engagement.
Moreover, the entirety of the crypto movement is basically centered around an incentive-based economy. Unlike traditional industries, the crypto industry has its foundation rooted in a reward-driven culture. More often than not, users are incentivized to promote the wellbeing of protocols or contribute to processes required to keep crypto applications working. Enjoying the benefits of airdrops can be likened to having the first taste of crypto and blockchain’s highly rewarding ventures.
That said, it is not enough to allocate free coins to potential users and hope for the best. There is a need to be strategic about the entire process — this is why I initially mentioned that leveraging existing platforms on web 2.0 is paramount to the effectiveness of airdrop-based promotions.
Integrating Airdrops on Existing Web 2.0 Infrastructure
Partnerships and engagement are key factors to consider when initiating an airdrop campaign. The promotion should be designed in such a way that prospective recipients are encouraged to take the time to explore the crypto solution in question before or after they receive the airdropped tokens. The template commonly adopted is that interested participants are asked to complete specific tasks to become eligible to receive free coins.
For instance, platforms like CoinMarketCap Earn and Coinbase Earn have been able to promote crypto through airdrops, thanks to a learn-to-earn model. These platforms allow users to earn crypto by learning to use the latest decentralized apps, watching videos or reading short lessons. The ultimate goal here is to build gateways for the next millions of people destined to use crypto.
Alternatively, users might need to register an account on the project’s platform, follow the project’s social accounts or even promote the project online to stand a chance of claiming a portion of the airdropped tokens.
Whichever way of earning might be the case, the end goal is to expose internet users to crypto or, more specifically, a crypto platform, albeit via a web 2.0 channel.
Millions of people use Facebook, Twitter and Telegram every day. There is a market for an on-ramp that can introduce crypto to all these people. Imagine the millions of users who will be exposed to crypto via these campaigns — that is the type of exposure that could bring crypto to the next level. With this in mind, you can expect that airdrops should be targeted at existing users of social networks and even established financial products.
One thing Web 2.0 applications are known for is their expertise in customer retention strategies. More often than not, these platforms have perfected the act of retaining new users. In most cases, it all boils down to the availability of engagement-inducing implementations and user experience.
Knowing full well that the attention span of internet users is quite low, Web 2.0 platforms usually focus on factors that promise engagement, including personalization. This — coupled with the apparent advancements of Web 2.0’s UX/UI — makes it a lot more difficult for Web 3.0-based applications to appeal to the mainstream audience. And so, it makes sense to integrate or partner with Web 2.0 platforms in order to market cryptocurrencies to existing user bases.
Final Thoughts
The combination of the operational excellence acquired from Web 2 and the creativity and innovation found in Web 3 will be a winning combination to bring in the next wave of crypto users.
And when these internet users decide to transition to the decentralized side of the web, they will need to get the same high-quality experience they have become accustomed to in the Web 2.0 realm. In other words, if airdrops are the mechanism that brings new users into the crypto world, seamless user experience will, to an extent, determine whether they will be staying for good.
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