1.Current business model of SocialFi products
Looking at the path that SocialFi is currently on, we may easily believe that it’s an advancement in the industry. In addition, SocialFi has the potential to have a big influence on cryptocurrencies, blockchain, and NFT. It may also influence how we interact with one another on a global scale. SocialFi has the potential to play a significant role in metaverse’s future. Many platforms are now striving to create metaverse communities and elements.
Some of the key features of SocialFi is that cryptocurrency will be used as a way to allow users to earn money in exchange for creating content and interacting with others on the platform. User data is encrypted, stored in individual wallets and never shared with third parties. Data isn’t censored and rewards system ensures users are rewarded for good content. However, behind this narrative, all SocialFi products still need to face the challenge of sustainable monetization.
Even though SocialFi seems to be full of possibilities and potential in the current Web3 space, its business model has not broken away from the previous business model of GameFi and DeFi projects. As far as the project itself is concerned, no matter how sexy the narrative is, the income source is nothing more than the sale of tokens allocated to team and the service fee charged. The discussion of the monetization, especially the design of tokenomics will inevitably lead to the discussion of the Ponzi scheme, which has been fully clarified in the first half of 2022 when P2E was still at its prime time. As long as “x to earn” paradigm is applied, the life cycle of any SocialFi product would be inevitably short and face collapse.
2. Challenges of SocialFi products’ business model
The above conclusions and brief review are based on the assumption that SocialFi is equivalent to “social to earn”. However, if SocialFi is considered as social media in the Web3 era, it is no more different from the traditional social media in the Web2 era except for the underlying decentralized technology and protocol income distribution. Therefore, there are not many options in product monetization. For mature Web2 social products, the largest source of platform revenue is still coming from the advertisements by third parties.
The advertising value of any platform is based on the assumption that its platform user base is large enough, and the advertising will bring enough brand exposure to the third party. However, the user base of Web3 space is still very limited, the number small and scattered, and the users have no brand loyalty due to one reason or another. In other words, if the user experience provided by product A and product B is not that different, it is unlikely to discuss the topic of brand loyalty for current users. In particular, if SocialFi pays more attention to the part of “Fi(nance)”, most users will be the same as those of DeFi farmers. After early exploitation of the protocol, they will leave for good without even thinking.
Therefore, at this point of discussion, we will inevitably analyze the difficulties in monetization of SocialFi products. First of all, from a broader perspective, the challenge is that the Web3 population that can be used for user transformation of SocialFi products is limited. In addition, for various “x to earn” products represented by GameFi, most of them have been influenced largely by the market performance of token price. Violent delights have violent ends. As for the setting of the tokenomics, the widely existing difficulty is that based on the limited user base of Web3, the project faces great pressure to attract new users. Therefore, it is difficult to avoid the huge rewards level in the early stage, which also foreshadows the unsustainable development and market performance of tokens in the later stage.
3. Suggestions for onboarding next generateon SocialFi users
Some of the biggest challenges SocialFi needs to face is creating a good user experience and making sure its technology is easy for users to interact with each other. It also needs to overcome its current lack of mass adoption and usage. Lack of mass adoption means there is no user base, which makes for a nonexistent network effect. The reason this happens is because when people don’t have access to an active and growing community, they don’t see the value in using whatever platform you’ve created. Despite this, waves are being made in the Web3 space to increase education and awareness on the benefits and opportunities that exists and in time we will see an increase and hopefully transition to this decentralised applications. The blockchain space is growing rapidly. People are starting to trust the technology, and more and more people are joining the community every day. Web3 will be a new paradigm that is built on personal data ownership and privacy.
Even though infrastructure and the business model are problems, SocialFi platforms have a lot of potentials. It is a big step toward creator economy models. In order to see mass adoption, platforms will need to develop sustainable economic models and a scalable infrastructure in order to be successful. The Web3 space as a whole will also need to address its security challenge. Despite blockchain being pretty secure on the whole, the rise of news about scams and hack is not helping in onboarding the next generation on Web3 users.
About BOOM
BOOM is a SocialFi platform connecting Web2.0 and Web3.0. Since it was launched in January, the early users have surpassed 100,000 and Boom has now become the most popular decentralized Crypto Lovers community in 2022.
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