Understanding Web3 Challenges: The Importance of Product-Market Fit and User Retention
Summary:
The future phase of the internet, Web3, defined by decentralization and fair value distribution, is yet to achieve a strong product-market fit due to its attraction of speculators rather than actual users. Founders wrongly believe that building an application is enough to corner a market. Frequent product usage and long-term user retention are crucial for success. Tokens, while essential, can mislead one into thinking they've achieved success in the market. Instead, products must have inherent value and utility. Relying on tokens alone can lead to short-term engagement and a failure to ensure product sustainability.
Web3, the forthcoming phase of the internet distinguished by decentralization, exclusive user ownership, and fair value distribution, must successfully address market demands and comprehend user difficulties to thrive. Nevertheless, numerous Web3 initiatives have fallen short of achieving a fit between their product and the market - often due to the belief that if they build it, users will automatically follow. This assumption has proven damaging, notably during market slumps. Even though the core concepts of product-market fit (PMF) have stayed constant, their application within the Web3 realm has evolved and grown more complex. Most Web3 protocols have yet to demonstrate an ability to span the gap of a product-market fit, largely because they attract speculators instead of true users. A functional PMF is achieved when customers or developers extensively use a product over an extended period. Web3 also contains a set of unique challenges due to its nature of decentralization and shared community ownership. Despite the growing acceptance of revolutionary blockchain technologies, few Web3 platforms have scaled with successful product-market fit. Tokens are critical to Web3’s market strategy, but over-emphasis can lead to mistaken belief in achieving PMF. In reality, PMF is based on a product's intrinsic value and utility, not just token use. Products like dydx, Uniswap, and Arbitrum succeeded in PMF before introducing tokens. The process to achieve PMF is often a long one, involving many tests, errors, and iterations before finally manifesting solid demand and usage. Key to this process is frequent product usage and consistent user retention. Users aren't likely to remain on platforms without these key factors. Useful and functional products create dedicated communities, whilst mere token incentives often lead to only short-term engagement and fail to ensure long-term product-market fit. Nitin Kumar, a co-founder at zblocks, suggests designing viral features into products and platforms to drive both frequent usage and higher user retention, rather than relying on pure token incentives. This article was initially shared through Cointelegraph Innovation Circle - a collective of accomplished executives and experts in blockchain technology striving to build the future through the power of networks, cooperation, and thought leadership. However, the expressed viewpoints do not necessarily align with those of Cointelegraph.
Published At
10/19/2023 1:00:00 PM
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