The Hidden Danger of Incentive Programs in Web3

In the world of web3 and gamified apps, growth hacking often feels like a necessary evil. Incentive programs, referral bonuses, and free trials are tempting tactics to attract users and boost adoption. However, a critical reality often gets overlooked: **these programs often attract users with inferior LTV (lifetime value) who ultimately harm your long-term success.** This article delves into the reasons why incentive programs can backfire, especially in the context of web3 and gamified apps.

• Negative Selection: When you incentivize users, you create a biased selection process. You're not attracting users who are genuinely interested in your product; you're attracting those who are primarily motivated by the reward. This leads to a "negative selection" where the users acquired through incentives have lower engagement, shorter lifespans, and contribute less to your overall business goals.
• The Illusion of Growth: While incentivized user acquisition may show impressive numbers, it often creates a false sense of success. While your user count may skyrocket, your true engagement and retention metrics may plummet.
• Cannibalization of Organic Growth: Incentives can disrupt the organic growth of your user base. You might be attracting users who would have discovered and engaged with your product naturally, but you end up spending money to accelerate their arrival.

Why Web3 Apps Need to be Cautious

Web3 applications are particularly susceptible to the pitfalls of incentive programs. The hype surrounding crypto and blockchain technology often attracts speculators and early adopters who prioritize short-term gains over long-term value. This makes web3 apps more prone to the dangers of incentivized user acquisition.

• The Speculator Trap: Offering large rewards in the form of tokens or NFTs might attract speculators who are primarily interested in arbitrage or quick profits. They may not be truly invested in the long-term value proposition of your web3 application.
• Game Mechanics vs. True Value: While gamified experiences can be engaging, they can also create a false sense of value. If the underlying product or service lacks intrinsic value, even the most elaborate game mechanics won't sustain user engagement.
• Tokenized Incentives and Inflation: The use of tokens as incentives can lead to token inflation and dilute the value proposition of your platform. Over-reliance on token incentives can also undermine the intrinsic value of your platform.

The Law of Shitty Clickthroughs - It Applies to Web3 too

The "Law of Shitty Clickthroughs" suggests that marketing channels tend to degrade over time. This principle applies to web3 apps as well. As you add more incentives to attract users, your later channels often perform worse than your initial channels. You may end up spending more for less qualified users.

Key Takeaways

• Focus on intrinsic value: Build a product or service that offers genuine value and engagement.
• Develop a sound growth strategy: Don't rely solely on incentivized user acquisition. Invest in organic growth strategies such as content marketing, community building, and word-of-mouth marketing.
• Embrace quality over quantity: Acquire high-quality users who are genuinely interested in your platform. Don't be tempted by quick wins that lead to long-term harm.

A Word of Caution

While incentivized user acquisition can be a tempting tool for quick growth, it's essential to be aware of its pitfalls, especially in the dynamic and evolving landscape of web3. Prioritize building a product that delivers true value and focuses on fostering a loyal and engaged user base. Remember, sustainable growth comes from building a strong foundation and offering a compelling product or service, not just from short-term incentives.