Is Freemium viable for Web 3.0 companies?
The recent announcement of meetup.com charging $2 to event participants has enraged their users (even though they later scaled down to apply to small group of test users).
In my opinion, meetup.com had an excellent Web 2.0 style business model for years. The company has been around for over 10 years and they have been charging a fixed amount from event organisers as a subscription. In addition , they have a unique way to sell personal data among their users rather than a third party or showing ads.
From the surface, it looks like a noble way to continue the existing meet-up (and probably it is in certain cases). From the new organisers point of view, it is a cheap way to acquire a communication channel which someone else has built over a long period. Let’s not forget the fact that these organisers do not have to step down if they afford to keep paying for the service. Even though I hate to give away my members to a random stranger, I think that this is one of the few incentive models on Web2.0 era that actually made sense to keep each meetup active and committed.
It came as a bit of surprise that meetup.com was bought by WeWork a few years ago and making a radical change such as charging participants.
After the announcement, some people urged mass exodus from the platform searching alternative event platforms. Other people even declared building alternatives.
Some people even suggested using Facebook events as alternatives which are built on top of another Web 2.0 business model, selling the data of users.
Others (in Web3.0 space) kindly suggested Kickback as one of these alternatives.
However, some people quickly pointed out that we are no different from meetup.com due to our pricing policy.
The two tweets come from slightly different viewpoints I am guessing. The first viewpoint seems to suggest that it is evil to charge an end-user on Web3.0 . If you charge, we should fork (or build alternatives which was literally suggested in the tweet).
The second viewpoint is the extension of the web2.0 freemium model, open it free for the basic usage (for the purpose of marketing) and only charge for the usage limit, private feature (eg: GitHub), or some value-added features.
One thing people may not have realised is that it is a lot harder to do that in Web3 than in Web2 (by design). First of all, there is no “privacy” on the public chain hence you cannot just hide it.
Kickback has a “private” feature not to list on the event list page, but it will be relatively easy to guess the page from the on-chain trail. We also occasionally see people who bypass our web frontend and try to RSVP by directly interacting with a smart contract.
In terms of limiting usage on-chain, that will be a bit similar for having “useless token”. If the token is added purely to profit the creator rather than an essential protocol feature, you are always in fear of being forked with such feature removed.
At Kickback, it is still doable as we have some Web 2.0 components, namely the closed sourced server-side component which handles admin check-in , private user data, and email notification off-chain.
Before falling back to the Web 2.0 status quo, I explored the existing Ethereum services which offer some/complete free services and see how it applies to Kickback.
1. Vanish (eg; EF and most nonprofit crypto foundations)
Aya Miyaguchi , the executive director of Ethereum Foundation, is known for “Beauty in Subtraction” aiming the role of EF to shrink as our Ethereum ecosystem matures. This is a reasonable thing for any nonprofit foundation which raised funds through ICO and there is no other revenue beyond. Unless it has near-infinite runway like EOS, the money will eventually run out but I guess it’s okay, as long as the software matures enough to run on its own without much maintenance before the money runs out. However, this is a bit of a difficult approach if you are trying to build a sustainable for-profit company like Kickback.
2. Mint NFT (eg; Games, ENS)
This is a very appealing model for any company that sells digital goods, especially game companies. It is free to play the game (mostly built off-chain) but you need to pay if you want to buy digital items.
ENS also has some sort of freemium model. You can own certain ENS names for free (such as subdomains or DNSSEC domains such as .xyz) but you have to pay $5 to ENS if you want to own .eth second-level domain. It is a rare occasion that the protocol can justify charging to prevent squatting.
Chainbreakers, one of crypto gaming studios, is also known for doing crowd sales by selling digital assets as NFT.
Unlike ERC20 based crowd sale, it does not have to be one-off. You can keep minting NFT if you like as each token has unique value whereas ERC20 would dilute the value if they do so. The downside will be the “long tail effect”. Only a handful of top assets are valued highly and the rest of “tails” will have not many values.
Minting tickets as NFT are often suggested for Kickback but it is a different story whether we can charge for that (if we charge to attendees of free events, then we are no different to meetup.com). We can certainly take cuts once we support paid events but Kickback shines the best for free events.
3. Earn interests via Defi from the staked asset on smart contract
I explored this idea before.
To quantify what we are suggesting, I tried a bit of math to figure out how many users we need to make $1 million annual revenue (which is just enough to maintain a small team).
Assuming commitment is always 10 DAI and interest rate stays 10 % / year, we need at least 1 million users constantly committing on Kickback.
The current active Ethereum addresses are about 33 million but I assume not all are human addresses.
And there are about 1.2 million users in Ethereum meetup groups worldwide (but I assume it includes lots of duplicate members). This means that we have to capture more than 80% of market from meetup.com
We just finished a hectic week of Devcon5, and only managed to have less than 400 participants. Can I hit 1 million users within one year? Certainly not.
In five years? Maybe, but still sounds like a bit of moonshot. Also, only making $1 million in revenue in five years does not sound like an attractive business either.
4. Do not charge for using Kickback, but build service business around it.
By observing and attending many events during Devcon5, I noticed that b2b event spaces, in general, have lots of inefficiency and wastes. Some events are too packed and sending people away while other events have empty venues. People were also screaming for help at our telegram channel in need for various goods and services. We could potentially build service business (consultancy, media, recruiting, etc) around it which is not the “moonshot” business model but may turn our cashflow into a sustainable level in the realistic timeline. All on-chain data are public so other people can offer competing services though we have an advantage in knowing how our platform works inside out.
Is there a hope for Web 3.0 companies?
In this blog post, I described how web3.0 Dapps are inherently in the difficult positions in building web2.0 like business model, such as freemium.
Freemium business model is enabled by the core idea of the Web 2.0 “The data is the new oil”. Whoever controls the access of the data can build various revenue streams on top of it.
In comparison, many of web3.0 companies are built on top of open source smart contract and use blockchain as a public dataset where data is no longer your competitive advantage. This sounds all good to the end users of the system but not so good for creators of web 3.0 Dapps who want to make a living out of it.
When I showed this blog post to Yaniv Tal from The Graph (who broke the original news of Meetup.com price change to me), he pointed out the following to shed some light of hope.
- The internet already has billions of users. These markets are big. Even small fees multiplied by a large number of people can add up. The current Web3 market is small but we should have faith that over 5–10 years, it will grow to much of the existing Web2 market.
- Web3 is more competitive by design. You earn your fees not by locking people in but by providing services that add value to customers
- Smart contracts can include governance. Things like fees can be decided via governance rather than unilaterally being set by a single economic entity like Meetup just did.
The last point on the governance is an interesting one. ICOs and token economics were supposed to take the role. Now that ICO is pretty much dead, can something like DAOs take that spot?
This is one of the reasons I summoned Orochi DAO, an event focused DAO during DevCon5 (you can read more detail of how it went here ).
The primary purpose of the DAO was to sponsor side events and we had some awesome events such as “The year of DAOs: Moloch rises” and “The Orochi DAO whisky tasting party”.
Devcon5 is now over but we are planning to relaunch the new version for other big blockchain events and we have a few ideas to tackle this Web3 business model and governance issues. If you are interested in joining it, please contact our Orochi DAO members or just myself (@makoto_inoue).
