SocialFi projects were the center of attention, even during the bear market. Now, with the Bitcoin (BTC) halving around the corner, which can trigger the new bull market, can it also kick-start the adoption of SocialFi?
Traditional social media platforms revolutionized the internet and communication as we know it today. However, it has some disadvantages due to the centralized control.
Social media finance (SocialFi) projects run on blockchain technology, bringing in decentralization and better monetization opportunities for the users. The advent of the popular project Friend.tech in 2023 added to the hype of the SocialFi sector.
How User Retention is Primary Hindrance to SocialFi Adoption
The screenshot below shows that in 2023, there are approximately 4.89 billion social media users worldwide. Moreover, the users’ growth is forecasted to hit around 5.85 billion by 2027.
This proves that the SocialFi projects have a large market to capture.
Arash Ghaemi, the growth marketing lead at the SocialFi platform DeSo, believes that the next wave of crypto adoption will come from the consumer-facing apps such as SocialFi projects that people use daily. However, user acquisition and user retention are primary hindrances.
He told BeInCrypto:
“Part of the issue with SocialFi apps today is they are being built on blockchains that weren’t designed for SocialFi. For example, Ethereum was built for decentralized finance, not social media.
“They are what is called a finite-state blockchain, where the state isn’t always changing, and you really only need the starting and ending balance of a transaction to make it work.”
While many believe that Layer 2 can solve high costs, Ghaemi says that it is the wrong direction when it comes to user experience (UX). He explains:
“Layer 2 adds another step, which is the wrong direction when it comes to UX. With UX improvements, you need as few steps as possible to attract more users.”
He also cited the example of Friend.tech, and how the active users drastically declined. Friend.tech, which is built on the Layer 2 project Base Network, was the center of the hype recently but failed to maintain strong user retention.
Read more: What is Friend.Tech? A Deep Dive Into The Web3 Social Media App
As a result, DeSo claims to be focused on improving the user experience. Ghaemi elaborated:
“For the last two years, we have relentlessly focused on improving retention and UX so everyday users can use the apps. Also, DeSo was custom-built for social media and is an infinite-state blockchain with lower costs and higher speeds. It’s designed to offer better UX.”
$30 Billion in Fully Diluted Valuation?
Renowned on-chain analyst Hitesh Malviya believes that SocialFi has huge potential, but its hype is driven by airdrop hunters as of now.
Read more: Best Upcoming Airdrops in 2023
According to Malviya, for user acquisition, projects need aggressive marketing campaigns, similar to how the now-defunct crypto exchange FTX used to market its offering. He explained:
“SocialFi failed to garner any appeal outside the Web3 echo chamber.
“I believe marketing campaigns like FTX and other exchanges from the last cycle will be required to bring masses on these platforms where they can potentially give some tokens as a signup bonus.”
Read more: A Deep Dive Into the 7 Best SocialFi Art Marketplaces
Malviya added:
“That was also the strategy used by the Brave browser to reach 100 million users. They used to give five Basic Attention Token (BAT) tokens per sign-up in the last bull cycle.”
Moreover, Malviya also has some suggestions for a better user experience. He explained:
“Product should be Web2 friendly, account abstraction is needed, which I think is implemented by some products like Lens and Cyber Connect. Transaction fees should be lowest, and performance should be fast.”
That being said, Malviya believes that with the new bull cycle, the SocialFi hype can push some of the projects between $20 billion to $30 billion in Fully Diluted Valuation (FDV). He said:
“On the token side, it’s a new narrative with its first bull cycle in play. The hype-driven thesis will work more than anything else in Web3 social, and you can’t even throw numbers on peak valuation, as it’s uncharted territory.”
FDV is the theoretical market capitalization of a project if its entire supply is in circulation.
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