Referral marketing is a proven growth strategy, but in Web3, it comes with unique challenges. Traditional referral programs often fail because of inaccurate attribution and the difficulty of connecting offchain user activity (like a click on social media) with onchain actions (like a token swap). This disconnect makes it hard to measure real crypto growth.
The solution lies in leveraging onchain analytics. This post will cover the challenges of traditional referral programs in Web3 and show how a data-driven approach using tools like Formo can help you build effective campaigns that drive real results.
Why Traditional Referral Programs Fail in Web3
Web3 teams often face several key problems when trying to implement referral marketing. These issues prevent them from accurately measuring campaign performance and optimizing for growth.
Attribution Issues
Tracking a user's journey from an offchain referral link on a platform like Twitter to an onchain action is difficult. As noted in discovery calls with Web3 teams, it's a major challenge to track conversions from social platforms and attribute them correctly. The user journey is split between the offchain and onchain worlds, creating blind spots.
Data Silos
Web2 data (user clicks, site visits) and Web3 data (wallet transactions) exist in separate silos. This separation creates an incomplete picture of the user journey. Without a unified view, it’s nearly impossible to understand which marketing efforts are truly driving valuable onchain activity.
Privacy Concerns
Web3 users are often privacy-conscious, using browsers and tools that block traditional tracking methods. This focus on privacy, while beneficial for users, adds another layer of complexity for marketers trying to measure the effectiveness of their referral campaigns.
Driving Growth with Onchain Analytics
Formo provides the tools needed to overcome these challenges and build successful Web3 referral marketing campaigns. By connecting offchain and onchain data, Formo gives you a complete view of the user journey.
Onchain Attribution
Formo connects user behaviors from socials, your app, and onchain activities into a single, seamless view. It tracks referrers and UTMs, allowing you to attribute onchain actions back to the specific campaigns and channels that drove them. You can use first-touch or last-touch attribution models to understand what's working and measure your ROI accurately.
Unified Wallet Profiles
Formo turns anonymous wallet addresses into detailed user profiles by combining onchain and offchain data. This includes information like token holdings, transaction history, and social profiles from platforms like Farcaster. This allows you to identify and segment valuable users, such as "whales" or "DeFi Traders," and understand their behavior.
Real-Time Analytics
With Formo, you can see what users are doing in real-time. This helps you quickly understand which referral campaigns are driving valuable onchain actions. You can measure key metrics like Customer Acquisition Cost (CAC), Lifetime Value (LTV), and retention to optimize your growth strategy.
Use Case: Building a Referral Campaign with Formo
Here’s a practical example of how a DeFi protocol could use Formo to launch and measure a referral program.
Scenario: A DeFi protocol wants to launch a referral program to increase its Total Value Locked (TVL).
Execution with Formo:
The protocol shares unique referral links with its community members.
Formo tracks which users click these links and connect their wallets to the protocol's dApp.
The platform then monitors their onchain activity, measuring how much TVL each referred user contributes.
The team can view all this data on a dashboard to identify the top referrers and see the direct ROI of the campaign, allowing for continuous optimization.
Measure to Improve
Effective Web3 referral marketing requires moving beyond traditional methods and embracing onchain analytics. Platforms like Formo provide the necessary tools to track the full user journey, measure ROI, and drive sustainable crypto growth.
You can't improve what you don't measure. Start tracking your growth with Formo today.
FAQs
How do you track referral attribution onchain?
Tracking Web3 referral marketing effectively requires a system that connects offchain promotion with onchain actions. The best approach is to generate unique referral links or codes for each participant. When a new user clicks a link, a cookie can associate their browser session with the referrer. As the new user connects their wallet to your dApp, you can link their wallet address to the referrer's code.
This creates a clear connection between the initial click and the onchain activity. All subsequent transactions and interactions from that wallet can then be credited to the original referrer. This method of onchain attribution allows you to accurately measure campaign performance, reward successful referrers, and understand which channels drive the most valuable users for sustained crypto growth.
What are the best practices for structuring Web3 referral incentives?
To build a successful and sustainable referral program, your incentives must motivate participation while preventing abuse. Instead of offering immediate, one-time rewards upon signup, tie incentives to meaningful onchain actions. For example, reward referrers only after the new user completes a specific action, like making a trade, providing liquidity, or reaching a certain transaction volume. This discourages bots and Sybil attacks.
Another best practice is to tier your referral program incentives. You can offer a base reward for the referral and additional bonuses as the new user becomes more active. This encourages referrers to bring in high-quality users, not just signups. Using this model protects your program’s integrity and aligns rewards with real value creation for your protocol.
How do you measure user LTV and retention in a referral funnel?
Integrating wallet analytics with your referral funnel is key to measuring long-term value (LTV) and retention. Once a new user is attributed to a referrer via their wallet address, you can track their entire onchain journey. This includes every transaction, interaction with smart contracts, and engagement with your dApp over time.
By analyzing this data, you can build a complete picture of user behavior. You can see how long users acquired through referrals remain active and how much value they generate compared to users from other channels. This allows you to calculate the LTV of referred users and identify which referrers or campaigns bring in the most loyal community members. This insight is essential for optimizing your crypto growth efforts and maximizing ROI.
