Pontem Network recently hosted a panel discussion with top SocialFi experts, who identified difficult onboarding, excessive focus on rewards, and lack of retention strategies among the things that kill Web3 social apps.
About the SocialFi expert panel
The term “SocialFi” refers to social apps built on blockchain technology that usually offer tokenized incentives or built-in Web3 financial tools. SocialFi was the subject of the most recent expert panel held by Pontem Network – a blockchain studio on the Aptos blockchain, whose Pontem Wallet is about to add support for EVM chains like Ethereum, Avalanche, and Fantom.
The event featured seasoned experts in the SocialFi space:
- Alejo Pinto, co-founder and Chief Growth Officer at Pontem Network, the studio behind the popular Pontem Wallet with 300,000 downloads,Liquidswap AMM, ByteBabel code transpiler for Move, and more;
- Akeem Ojuko, co-founder and CEO at Script Network, an L1 video delivery network and open-source streaming protocol;
- JC Zhang, founder and CEO of Towne Square, a “social everything” app on Aptos that supports widgets from other dApps, with over 37,000 in waitlist signups so far.
- Jayson Tan, co-founder and CMO at Torum,a social platform that unites 230,000+ crypto enthusiasts.
How can blockchain benefit social media?
Alejo Pinto launched the discussion with a crucial question: what advantages and innovations can crypto and blockchain really bring to social media? Pinto himself believes that Web3 eliminates social silos – the situation where users are siloed across apps, be it X, Facebook, or TikTok,
Akeem Ojuko, whose Script Network platform currently has over 165,000 users, agreed that Web3 creates a new way to consume social content and get connected. You don’t need to silo social and financial activity any longer, and you don’t have to choose between platforms, either. Or, in Jayson Tan’s words:“Web3 allows you to transform social interactions into financial activities.”
In Web2, platforms like YouTube and Instagram are separate entities. But crypto makes it easy to be on different platforms and connect to each other at the same time. For example, you could be playing a blockchain game and earning money – all the while using the game’s tokens in a different SocialFi app to participate in an engagement campaign, for example.
The demand for SocialFi is substantial. For example, Towne Square received 40,000 waitlist applications for its app beta in a month – a massive number for the young Aptos ecosystem. Even more impressively, friend.tech’s inflows have reached $300 million. Still, there are important challenges that SocialFi projects need to overcome if they are to compete with Web2 social networks.
Mistake 1: not having a “wedge feature”
A wedge feature, in the words of JC Zhang, is another term for your unique selling proposition (USP) – an innovation that allows a new project to “wedge” itself between existing apps.
Web2 and Web3 projects alike commit this error; Threads is a telling example. Meta’s Twitter-like app gained 10 million users in a few hours and 100 million in just 5 days, but traffic dropped 80% in just a month. According to Towne Square’s JC Zhang, that’s partly because Threads didn’t offer anything special compared to X. Twitter has quality thought-provoking content, which you find less on TikTok or Facebook, for example.
Jayson Tan added that Threads does innovate at the technical level: it leverages the social graph of Instagram. It’s a unique bootstrapping move, as social apps normally have to build their own social graphs – networks of relationships between users. Yet, this powerful advantage didn’t seem to add any value for the end user.
The solution is to ideate a wedge feature early on, together with the product-market fit strategy (see below). For example, Pontem Wallet will soon become the first Aptos-native wallet to support EVM blockchains, while Pontem’s Liquidswap DEX will be the only one in the Aptos ecosystem to introduce concentrated liquidity pools based on the concept of discrete bins.
JC Zhang concluded:“Don’t compete – find a niche market and a product-market fit outside of what Web2 social apps do.”
Mistake 2: focusing on onboarding and neglecting retention
The problem of retention is linked to the wedge feature issue, as having a good USP helps social apps retain users. Once again, the speakers cited Threads as an example: it clearly invested a lot of resources in the initial user acquisition, only to fail massively with retention.
Projects need to consider both short-term and long-term retention. A SocialFi app needs a longer-term retaining strategy ready to kick in after the first wave of onboarding. That strategy, noted JC Zhang, should focus on tokenomics and on protecting the “inner circle of friends.”
Zhang added: “SocialFi apps have to race against time, because a dump can happen suddenly. In this case, if the inner circle, the early supporters, bleed, the app will die. But with quality tokenomics, you can mitigate the inner circle’s losses and retain the core audience.”
Mistake 3: trying to scale by replicating
When a SocialFi project can’t readily find a wedge feature or design a retention strategy, there is a temptation to position a dApp as “decentralized Twitter” or “Web3 Tik Tok”. However, as Jayson Tan stressed, you can’t replicate success by replicating interactions.
“You can scale fast by replicating networks, but there will be no authentic engagement,” Tan said. “Such a network can’t be strong even if it’s big, like Thread. Replicating a social graph is not a way to achieve a product-market fit”.
A potential solution is to focus on the difference of purpose. Web3 social networks will necessarily coexist with X and other mainstream platforms, but they target a separate user base. The peculiarities of the Web3 audience will dictate the differences between SocialFi and traditional apps, at least for now.
Mistake 4: poor UX and UI
Pontem CGO Alejo Pinto often stresses the importance of frictionless user experience, especially at the onboarding stage. He said,“It’s hard to know where the responsibility falls in SocialFi – with big foundations or dApp developers. But it will be difficult to onboard Web2 folks as long as there are so many friction points, such as having to sign in using a private key.”
Script Network’s Akeem Ojuko believes that “the end game is to go way beyond the 200,000-300,000 people who are using crypto and are on Twitter. It’s important not to present it as an alternative to X or to Instagram, because the moment you do, people will start comparing instead of looking at the benefits, and they will notice that your SocialFi app doesn’t have as many users or features. Rather, you have to build a SocialFi experience so seamless that users won’t even realize they are accessing a SocialFi app.”
On the practical side, the guests agreed that Web2 offers a superior onboarding experience, and SocialFi should follow its lead. Web3 apps can’t require a Web2 user to create a crypto wallet or deal with private keys. They have to provide traditional sign-up options as well, like an email address and password. Ojuko continued:
“If it takes more than 15-20 seconds to become a user, you’ve lost a huge share of the potential audience. You have to let people start using your platform right away, without making them read twenty popups about things they don’t understand. By the time the person finally has to use a real Web3 tool (like MetaMask to convert reward points into tokens), they should already be ‘sticky’ – used to the app.”
Meanwhile, JC Zhang stressed the importance of mobile-readiness:
“You have to make sure that the dApp and wallet infrastructure is mobile-ready. For example, Aptos is now building its own deep linking tech for this purpose. Users shouldn’t have to hop between mobile and desktop views.”
Mistake 5: turning attention away from socializing and to rewards
SocialFi’s greatest strength is also a source of weakness. When people come for the token, they don’t authentically connect to each other. Misalignment between financial incentive and social interaction leads many SocialFi apps to crumble, according to Jayson Tan.
Alejo Pinto added:“In traditional tech there are incentives, too. For example, Uber gave out lots of free rides at the start. So it’s more of a question of the value a product is bringing. You have to provide a useful function. The issue with many SocialFi and GameFi apps is that the product itself isn’t enticing enough for users to stay after they’ve claimed the airdrop or reward.”
Is there a solution? Tan is doubtful:
“In SocialFi, we need a distinct value proposition. It took Web2 Social ten years to progress from text-based to image-based and finally video-based interaction. Unless Web3 Social comes up with a new way for people to connect to each other and for creators to interact with their followers, there will be no advantage to Web3 social apps over Web2. There will be no mass migration to SocialFi because there isn’t enough value. This should be the focus of Web3 Social to move forward.”
What made friend.tech so successful?
The discussion naturally touched on friend.tech, the most viral SocialFi app of 2023. Alejo Pinto said, “Friend.tech has generated $13 million in protocol fees and $300 million in inflows. Does it really offer so much value, and is its business model sustainable?”
The speakers agreed that friend.tech did a lot of things right, avoiding most of the errors that we’ve listed:
1) Wedge feature: friend.tech innovated on the business level, offering the Web3 audience a new way to monetize influence in Twitter. Friend.tech leveraged Twitter’s social graph, just as Meta did with Instagram.
2) Retention:Two months after launch, the “inner circle” of friends is still there and a big dump hasn’t happened. Friend.tech managed to retain users because it complements Twitter instead of competing with it and leveraged personal connections between crypto personalities.
3) UI/UX: Script Network’s JC Zhang pointed out friend.tech’s frictionless onboarding experience and that the app “isn’t just for crypto natives. They made it simple to use it outside of Web3. At the same time, they managed to empower the current crypto audience in the bear market”.
Key takeaways
Alejo Pinto wrapped up the discussion by summarizing three key tips for SocialFi apps:
- Use existing apps and sign-up methods to onboard users.
- Plug into existing social graphs.
- View crypto as something that can tie it all together – not as something that people have to understand to use your app.
The full recording of our SocialFi panel can be found on Pontem Network’s X page.
About Pontem Network
Pontem Network is a blockchain product studio building for Aptos, the L1 blockchain known for its sub-second finality and security. Pontem products include:
- Pontem Wallet: the only triple-audited wallet for Aptos with 300,000 installs;
- PontemAI: an AI-powered crypto chatbot (coming soon);
- Liquidswap DEX: one of the most popular DEX on Aptos
- Move Code Playground: the first browser code editor for the Move language.
Pontem is currently preparing to release PontemAI, a crypto chatbot powered by best-available market data.. Pontem also sponsored the AI track at Aptos’s recent Hack Holland event.