"Why Web3 Matters: Unlocking the Potential of Decentralized Internet and Social Apps"

"Why Web3 Matters: Unlocking the Potential of Decentralized Internet and Social Apps"

We are currently witnessing the rise of web3, a new era that combines the decentralized nature of web1 with the advanced functionality of web2. Web3 is characterized by internet services that are owned and controlled by the builders and users themselves, facilitated by the use of tokens.

In web3, ownership and control are decentralized, meaning that users and builders can actually own a stake in internet services through tokens. These tokens can be non-fungible (NFTs) or fungible, and they grant users property rights and the ability to own a piece of the internet. This is a significant departure from the centralized networks of web2, where the value is concentrated in a single company that often ends up in conflict with its users and partners.

The shift to web3 has profound implications for social apps as well. While success in the consumer social space has often seemed random, there are key data points that can help assess the performance and potential of a social app. One of the core metrics to track is daily active users (DAUs), as this indicates the level of engagement and usage of the app. Ideally, the trend of DAUs should be consistently increasing over time.

Additionally, monthly user growth is another important metric to consider. A growth rate of 20% can be considered okay, 35% is good, and 50% or more is great. It is crucial to aim for organic growth rather than relying heavily on paid acquisition strategies, as social apps should inherently be viral and encourage users to invite their friends.

Engagement ratios, such as DAU / MAU (daily active users divided by monthly active users), provide insights into how frequently users are using the app. A ratio of 25% is considered okay, 40% is good, and 50% or more is great. The distribution of users by the number of days they are active, known as the L-ness curve, is another metric to assess user behavior. Ideally, the curve should have a "smile" or a "crooked smile" shape, indicating that users are integrating the app into their daily lives.

Retention is a critical factor for the long-term success of a social app. N-day retention, which measures the percentage of users retained after a certain number of days, is a valuable metric to track. A retention rate of 50% on day 1, 35% on day 7, and 20% on day 30 is considered okay. Good retention is achieved when the rates are 60% on day 1, 40% on day 7, and 25% on day 30. Great retention is achieved when the rates are 70% on day 1, 50% on day 7, and 30% on day 30.

It is also important to consider the flattening of the retention curve. Typically, the slope of the line starts to flatten between day 7 and day 14, and reaches a plateau by day 20. If there is a significant degradation of retention between day 7 and day 30, and the cohorts haven't flattened out by day 30, it may raise concerns about the app's long-term retention.

When benchmarking retention, it is valuable to have a high number of users (n count) and a longer time frame. Early users are often the most engaged and have higher retention rates. Similarly, a longer time frame allows for a more accurate assessment of retention as social apps often require iterations to achieve sustainable engagement.

In conclusion, the rise of web3 and the decentralized nature of internet services have significant implications for social apps. By tracking key metrics such as daily active users, monthly user growth, engagement ratios, and retention rates, app developers can assess the performance and potential of their products. The ultimate goal is to create social apps that not only attract a large user base but also foster organic growth, viral adoption, and long-term user retention.

Actionable Advice:

1. Prioritize organic growth: Instead of relying heavily on paid acquisition strategies, focus on creating a product that encourages users to invite their friends and spread the word organically.
2. Continuously iterate and improve: Social apps often require iterations to achieve sustainable engagement. Monitor user behavior and feedback closely, and make necessary improvements to enhance the user experience.
3. Foster community ownership: Embrace the decentralized nature of web3 by allowing users to have a stake in the app through tokens. This creates a sense of ownership and alignment of incentives, ultimately driving the growth and success of the network.