Author: Alex Topchishvili, Marketing Director of CoinList; Translation: Jinse Finance xiaozou

The crypto space is extremely fragmented and underdeveloped when it comes to user acquisition. Most projects have no clear idea of ​​how to acquire users, how users interact with the application, or even where users come from. Ask a crypto project what their LTV (customer lifetime value) or CAC (customer acquisition cost) is and you’ll likely get blank stares and unrealistic answers.

The reason is simple. The purpose of marketing is to understand your audience, but since crypto wallets are anonymous by design (on-chain and off-chain user identities are different), it is difficult for crypto marketers to identify and communicate with potential customers.

Even anonymous users who are already your customers will have a hard time communicating with you because projects can be hard to identify with large followings on Discord, Twitter, or Telegram.

Fortunately for marketers, the on-chain identity and attribution space has made tremendous progress over the past few years. On-chain activity represents a new data set that can be used to build user profiles and segment cohorts. Minting an NFT, participating in a governance vote, using a dApp on a specific chain, or participating in a testnet are behaviors that indicate high interest and intent.

In this article, I will summarize 5 user acquisition strategies that crypto projects can consider deploying and their respective advantages and disadvantages.

1. Airdrops — Large-scale distribution, but easy to exploit

Airdrops are a user acquisition and community building mechanism by which crypto projects send free tokens to their community members to incentivize adoption. In most cases, airdrops are issued to users in exchange for completing specific tasks related to the product service or adoption process, such as linking a wallet, following a social media account, sending or receiving transactions, or minting NFTs.

Thanks to the transparency of the blockchain, on-chain activity can also be used to curate the selection of airdrop recipients. Most commonly, on-chain activity is recorded within a specific time frame, and a snapshot is taken afterwards to determine airdrop eligibility.

Airdrop eligibility can be determined retrospectively (such as Arbitrum), proactively (such as Blur), or in some combination (such as Optimism).

There are two challenges with using airdrops as a customer acquisition model. Similar to the “blitzscaling” period of companies like Uber and Netflix, it’s hard to tell whether users are interested in your product because your price is always low. Are users interested in your product, or are they just interested in free and low-priced things?

Additionally, airdrops are easily exploitable. Since airdrops are conducted on-chain, there is little reliable way for projects to assess the off-chain reputation or identity of the recipient. This creates two problems:

(1) Airdrop farmers and Sybil attackers exploit the system to obtain extremely large airdrop allocations;

(2) Non-committed users may not be well educated on the utility of the token or will not be committed to the development of the protocol.

Without adequate governance over token recipients, airdropped tokens are often immediately sold, causing a price crash that harms the ecosystem and results in little to no real user acquisition. For example, many Optimism token airdrop recipients immediately sold their newly claimed tokens, driving the OP token price down by more than 70%, an example of a botched airdrop.

2. On-chain advertising networks — good for targeting users, but limited in scale

Another interesting user acquisition channel this year is the use of crypto-native ad networks, which use on-chain data to provide personalized, relevant content to crypto-native users on dApps. In other words, it’s like a crypto-native version of Google AdSense.

Instead of using cookies, these platforms use wallet and on-chain data to target, segment, and build cohorts. Ad networks enable projects to monetize their dApps through ad impressions and enable advertisers to reach active crypto users.

The challenge of working with crypto native ad networks like Slise, HypeLab, pr3ence, BlockchainAds, etc. is that the publishers you work with have limited reach. High-quality crypto traffic is hard to come by, and there are few ways to reach interested user groups at scale, outside of media platforms like CoinDesk, CoinMarketCap, Coingecko, CoinTelegraph, etc.

The scarcity of crypto publishers is known as the “publisher problem”, and the fact that the most popular dApps like Uniswap, OpenSea or Magic Eden have no ads makes this problem even more difficult. The entire dApp market is still small and unprofessional, and it will take time for projects to open up advertising and traffic to grow.

3. Finding Crypto Users in Web2 — Huge Potential, but Unproven

One way to solve the “issuer problem” described above is to target crypto users on traditional Web2 social networks like Facebook and Twitter. This is a complex new channel, but given the scale of Web2 social networks, it is also a channel with wide coverage and distribution.

Addressable is a leading crypto marketing company in this field, which enables marketers to link on-chain blockchain data with off-chain social media accounts.

By leveraging machine learning and big data analysis, Addressable discovered the relationship between anonymous wallets and social media accounts, creating a channel for marketers to target crypto users in Web2. Once they have a tailored audience, marketers can launch targeted advertising campaigns on mainstream social media platforms such as Twitter, TikTok, Instagram, and Reddit.

Addressable is running pilots with brands like Bancor and Immutable X, and I’m excited to see how these pan out.

4. Quest platform - low cost, but low traffic quality

Given the lack of effectiveness in other channels, Quests have evolved into the de facto native ad unit in the crypto space. Quests are reward activities on platforms such as Layer 3, Rabbithole, and Galxe, where users are rewarded with cryptocurrency after completing specific on-chain value-added actions (i.e. trading, staking, redeeming, lending, following Twitter, joining Discord, etc.).

Given the huge user friction of crypto applications, users have a set of tasks and rewards at each stage of onboarding. For new users, it is a way to earn crypto while learning and building credentials to become contributors to emerging projects. For crypto projects, it is a way to identify and acquire high-quality contributors based on credentials and value-added activities.

By encouraging users to experience the product for the first time, developers hope to attract long-term user retention. Task platforms usually charge for activities based on each activity or each completed task. Regardless of the payment model, you will eventually generate CAC for advertising campaigns and therefore be able to quantify the return on advertising spend (ROAS) to evaluate the performance of advertising campaigns.

One of the big issues facing task platforms is the low quality of the traffic they attract. Given that many tasks follow the same airdrop model of earning tokens, tasks often attract bots (or real users) chasing the freebies. Once they pass the task challenge and get their reward, they leave and you have little retention.

Nevertheless, this model of acquiring and retaining users seems to have achieved some results. The question is how you can further target potential real users while removing robots to improve the ROI of the activity. When choosing a task platform, be sure to use case studies and user segmentation to ensure that the platform matches your real target users.

5. Partnerships and integration – high-quality distribution, but difficult to achieve

Traditional tech companies have achieved massive growth through large-scale collaborations and integrations, and the crypto world has successfully adopted this strategy.

In the DeFi decentralized finance space, integration with other projects is a huge growth channel. DeFi protocols are composable, which means they can be programmed to interact and stack with each other like building blocks.

This lets developers bootstrap their own communities without having to build everything from scratch. When MakerDAO launched their algorithmic stablecoin Dai, their go-to-market strategy included:

(1) Partner with the largest crypto exchanges for retail and institutional trading;

(2) Integrate with as many wallets and applications as possible. They push for as many integrations as possible through a relatively traditional business development team, just like Polygon does today.

Similarly, in the crypto gaming world, a major growth channel is working with associations. Gaming associations are essentially groups of players who play games together, share data and in-game assets, and provide support to other players. Associations like Yield Guild Games and Good Games Guild lend game assets to new players to get them started. They also help crypto games acquire users through scholarships, joint marketing, and other direct contributions.

The challenge with crypto partnerships is that, because many projects are decentralized, negotiations take place in governance forums rather than in face-to-face closed-door meetings. The transition from founder-led to community-led forms of governance is complex and raises difficult questions about ongoing development, voter engagement, and incentive alignment among stakeholders. It is critical that whatever partnership or integration is voted on actually benefits the protocol and all of its participants.