Part 1: How solo creators and builders can use tokens
The promise of using tokens to jumpstart businesses, communities and creators has been a huge area of opportunity. In theory tokens can help bootstrap growth, get a community of fans engaged in helping build a product or diversify and increase offerings to fans and users.
In this article I’d like to explore this thesis and a framework for thinking about what solo creators need, what they have to offer and how tokens can and can’t help. I’ll break this down into four parts, and in each one I’ll provide sample playbooks.
- Part 1: What kinds of growth solo creators need and what incentive mechanisms they have to offer.
- Part 2: Analyzing new user growth-incentive fit for tokens
- Part 3: Using tokens to increase ARPU and engagement
- Part 4: Token template for how to grow
While for the rest of this article I’ll use terms like ‘users’ which denotes more of a product, you could easily replace it with ‘fans’ and reach the same conclusions.
Part 1: The Promise of tokens for solo creators and builders
The main question I’ve heard from creators is: how can tokens help me sustain myself as a creator? The question reverberates no matter whom I speak with: artists, writers, SaaS indie hackers and solo builders.
It’s unsurprising. Building a business is hard. Finding customers, users, listeners, readers, engaging with them deeply — it’s not easy. The hope is that tokens, can streamline or even better, turbocharge, a creators growth and make a solo creators life just a little easier.
What is growth
Growth can be measured in many ways: Average revenue per user (ARPU), number of users and the engagement of those users (not monetary, rather effort, time, fandom or work). Not all of these categories are the same.
Growing the number of users is all about getting your value proposition in front of more people, getting it in front of the right people and helping them to convert into users. In classic worlds this includes promotions such as brand and direct marketing and affiliate marketing.
Growing ARPU is all about getting your fans to spend more on your offering. This can be turning music streamers into NFT or album collectors, freemium users into premium users or other kinds of tiered fandom. Growing ARPU is most akin to airliners frequent flyers programs. It’s all about getting you to stick around and spend more on upgrades.
Growing engagement includes getting your users to engage with you, your community and product in non monetary ways. This can include providing user feedback, social media engagement or helping new community members. It’s very versatile and depends heavily on what you’re offering. Engagement is usually the precursor to monetization, but even without the transactional aspect, can do wonders to a businesses through loyalty, brand advertising, word of mouth or just getting the right feedback at the right time.
All three of these growth vectors can greatly impact your product, value offering and success as a creator. Increasing ARPU can help monetize. Growing the number of users and fans can not only increase monetization but also impact and opportunities. Growing engagement is often the core of both, so even though it’s a ‘softer’ metric as opposed to money, it should definitely not be neglected. In fact it’s often the most accurate predictor of future income.
Can tokens help grow these vectors?
What can creators offer?
Before figuring out what you can get out of your fans, we need to focus on what we can offer them. As builders we have a few tools and offerings at our disposal. We can offer users equity, money, goods or services in lieu of money, social capital (access, bragging rights) and last but definitely not least experiences.
- Equity: Offering ownership in you or your product. This means creating a structure to share future income and/or governance. When someone partakes in equity in you or your product they’re committing to joint ownership — with all that implies.
- Money: Separate from equity, this falls into the profit sharing or affiliate marketing bucket. As a creator you can offer monetary rewards and kickbacks to users who do specific things. This can be similar to giving a commission or affiliate marketing fee or a more structured partnership program.
- Goods & product perks: If cash is hard to come by so why not give a service? This can include giving out free access to a product, a premium offering instead of a freemium, free tickets to a concert or any other service that costs you little that someone else values highly.
- Social capital: Being able to social signal that you’re in the ‘in’ crowd matters a lot to some people. This can be granting access to shared groups, chats, events or awarding special social badges that someone can share.
- Experiences: For some things there’s no price tag. Well, maybe there is, but the point remains the same. Offering experiences that are unique to you or your product is something that only you can uniquely offer. This can be access to you, your time and expertise, or an experience you can facilitate, for example a meetup, concert or exhibition or social gathering.
These five factors make up the real world value that you can tokenize in some form or another and use to reward and incentivize your fanbase to help you achieve your goals. If you compare to traditional loyalty programs, it’s these five factors that get utilized.
Part 2: Can tokens be used to grow users and fans?
Now that we know what you need and what a creator or brand has to offer we can start thinking about how tokenomics, whether in the form of fungible tokens or NFTs, can help solo builders.
Growing users requires getting your value proposition in front of new audiences. How many new people depends on the conversion rate between impressions and users. One targeted reach out is often better than 100 social media impressions.
Can tokens be used to incentivize your community to help you grow your users? Let’s explore each case and determine if it makes sense. Similar to traditional growth models, the customer acquisition cost (CAC) you can afford to pay and the value of a customer over time (LTV) matter a lot.
Equity isn’t the best fit for this. The feedback loop between ownership and the daily need for promotion isn’t synced, and usually the amount you’re giving away in equity will need to be too large to incentivize active promotion for you. While the right influencers might be able to get you the new audiences you’re looking for, in most cases this won’t make sense. Equity lends itself to a more passive mentality, unless you own a very significant amount which makes the question of CAC unaffordable.
Ask yourself what amount of future earnings or governance rights would you need in some product, project or creator to shill it to your friends and promote it on social media? In this sense, tokens, as an equity replacement, aren’t the best use case. It’s a costly expense in terms of future earnings, and while bureaucratically easier than equity, its probably not quite legal in many jurisdictions.
Money can be a good fit to grow users. It should be thought about like traditional affiliate marketing programs that already exist. The key question becomes what is the amount you can afford to pay per converted user and is that enough to incentivize your community to promote you and your product?
Affiliate marketing of this kind doesn’t work for every product, nor for every person. If you can get it to work, this can be very meaningful, but be aware that 9/10 affiliate programs don’t make any impact on a business. The best example of this kind of program in traditional marketing is Paypal, where users were given money to bring new users to the network. However, Paypal was venture capital backed and had the cash to pay users, and even then, they miscalculated the amount needed to pay new users to get them onboard vs the value those users added to the product.
How would this look like using tokens? You could either pay in your token or in a stable coin per successful conversion. If you wanted to gamify it you could create a pool of funds dedicated to affiliate marketing rewards and add a competition element to it. Be aware that unless your token has some reason to be held, people who are paid this way, will most likely sell your token for a more stable form of money → causing your token price to slump, and increasing the affiliate marketing cost (if paid in your token)!
3. Goods and services
Offering in kind goods or services is the most popular method for growing users and Dropbox is the iconic case of this. Dropbox offered free storage for users who invited new users to Dropbox (for a good description of the early days of this, this podcast episode is great). This can also work well with tokens and for solo creators however it only works well with products where scaling user growth goes well with product usage. As in this worked well for Dropbox because growing storage space over time is valuable and can scale with the number of users invited.
Would this work with every kind of SaaS business? Probably not. It almost definitely doesn’t work with non scalable products — like a creators time. Make sure the product or service you’re offering is enough to incentivize the work being done to bring users and that it can scale to the number of invites and new users you’re aiming for.
For some protocols, tokens can be exchanged or used in lieu of a good or service and this can make them a good proxy for this use case: ‘promote X usage and receive Y free swaps’ or alternatively ‘hold X tokens in your wallet to receive Y service at Z discount’.
Tokens do shine here in one use case, which is interoperability. While one offering might not be quite enough, using token gated experiences make creating a bundle with several other builders and creators a much easier experience on the backend. Instead of syncing up different databases and payment providers, all you need is check someone’s wallet, verify they have enough tokens, or a unique NFT and that’s enough to offer a collaborative bundle. Imagine 5 indie hackers, each building a niche SaaS offering a 50% discount as long as you have a unique NFT in your wallet. No need to develop bulky cross product APIs, just verify the NFT and offer your discount.
4. Social Capital
Social capital is one of the most powerful, yet tricky offerings. It varies greatly on the industry and who you are as a builder or creator. Based on that you might be able to leverage this for a great growth driver, or it might be best left alone.
People will often go to great lengths to prove they’re ‘worthy’ or in the ‘in crowd’ for the right cause. That can definitely include getting friends to join a platform, or see a new musician. During Covid companies like Clubhouse leveraged social capital extremely well to get users to promote growth — by having invites to an exclusive app they showed they were part of the ‘in crowd’.
Unfortunately, it can be incredibly hard to generate interest and social capital in anything, so this is a very unreliable growth lever, especially when promoting growth, because you need to tie the social capital into promoting you — like a club promoter who gains social capital the more the club he promotes is hot.
Social capital with tokens isn’t the easiest, however there are definitely new ways of signaling in the web3 community that have been used well: rare NFTs, NFTs that can be used as entry tickets into real world events, or even simply holding a certain amount of tokens can enable specific social capital based experiences. Using tokens as a reward is definitely viable, but it depends on what you can tie the token to in terms of a real world social capital experience.
Experiences, because they don’t scale, are usually hard to use to promote growth for individual creators and builders. That is, unless you go big with them — think raffles you see to win tickets to some exotic location or join an artist backstage. The larger and more exciting the experience, the more noise it will generate and probably the more promotion it will garner. Unfortunately, that’s exactly what makes it a challenge for a single creator to offer something worthwhile. It’s also likely that users that come in through this funnel are low quality and higher churn. Tokens here could be very interesting, both as a vetting mechanism — i.e ‘whoever has more than XX tokens (or own a specific NFT) is eligible’, as well as a very convenient way to collaborate with other artists and builders on cross promotion. The blockchain is a single database that everyone can use conveniently for a token gated experience, that otherwise would have required a lot of personal data synchronization. Imagine collaborating with 5 other musicians, anyone who has bought one of your music NFTs receives a backstage pass to any of the 5 concerts. All of a sudden the value proposition you can offer your fans increases.
How to use tokens to grow your users and fans
Can tokens be used to grow your users and fans? Let’s summarize what we’ve analyzed so far. Growing your user base is hard, and there’s no avoiding the CAC/LTV calculation that all businesses have to make. Tokens don’t help us get around that traditional aspect of marketing. However, for solo builders and creators, the ease of interoperability makes collaborating and forming large groups with more compelling offers much easier. This means that offering affiliate fees for product marketing, experiences or services a much more compelling offer to your audience to get on board with than if you went alone, and tokens power that collaboration.
Sample playbook for how to use tokens in your growth playbook:
- Find 5 builders and creators with a synergetic offering to you (products, concerts etc)
- Create a shared NFT collection that users receive when purchasing from you that gives a bundle of benefits from everyone (for example: a free ticket, 3 months of a free trial). Be sure to market the offering to each others customers.
- Create an affiliate marketing program — now that you have a larger bundle to offer, you can afford to pay out more in affiliate marketing fees.
- Create a unique set of NFTs for elite affiliate marketers that lets them offer rare, unique experiences to their friends and colleagues — socially enhancing their position.
Tokens as growth levers for musicians, creators and builders
Using tokens to increase growth is one of the biggest questions in the industry, especially for solo builders and creators. However, like all business decisions, it’s not so simple. Creators have to have a good analysis of what they’re looking for and what they have to offer before creating a token.
Leveraging interoperability of tokens and the simplicity of use is by far the best use cases that tokens bring. Mechanisms that leverage these two traits are where tokens shine for solo creators and builders, for example creating a bundle between creators that you can then use to grow your fans.
In part 3 I’ll cover whether and how tokens can be used to grow engagement and the average revenue per user of your fans.
I design tokenomics for crypto protocols (all still in launch phase) and am putting everything I’m learning into a super in depth course on Tokenomics. If you’re interested in my free email course on tokenomics, sign up here!
Designing Tokenomics by Yosh Zlotogorski