Product growth is about creating a holistic user experience that involves acquisition, engagement, and retention. Unlike Web2, Web3 metrics go beyond traditional indicators such as conversion rates, incorporating wallet data and onchain activity. These metrics provide you with a comprehensive view of your app's success.
In this article, we explore the importance of Web3 product growth metrics, examine key metrics across the acquisition, engagement, and retention spectrum, and illustrate their impact through real-world case studies.
Web3 product growth metrics measure onchain activity, wallet balances, and ecosystem mindshare
Why are Web3 product metrics important?
As product builders, it’s critical to understand what drives user engagement, keeps them coming back, and generates revenue. Product teams in web2 are familiar with conversion rates, user engagement, customer acquisition costs (CAC), and customer lifetime value (CLTV). Web3 introduces a new set of metrics. Web3 product growth metrics measure user engagement and growth based on onchain activity, wallet balances, and ecosystem mindshare, providing a comprehensive view of your product’s overall health. By monitoring the right metrics early on, you iterate faster, optimize acquisition, and ensure you’re building a Web3 app that users truly want.
Differences: Web2 and Web3 Product Growth Metrics
Product growth metrics such as daily active users (DAUs), retention rates, and click-through rates are critical performance indicators. In Web3 product development, you need to monitor who is using your app and how they interact with similar protocols. Instead of focusing solely on sign-up numbers, you’ll look at Web3 product growth metrics such as wallet connections and onchain activity. Indicators such as Total Value Locked (TVL) and active wallets provide a better picture of user engagement than page views and visitor numbers.
Web3 development often tracks onchain activity, token distribution, and community engagement
While Web2 emphasizes user acquisition, Web3 development often tracks onchain activity, token distribution, and community engagement. These distinctions make Web3 metrics more holistic, helping you to assess not only the success of your product but also the health of your ecosystem.
What are important Web3 product growth metrics to track?
Here are the key metrics to analyze Web3 product growth:
The basic Web3 product growth metrics
Acquisition Metrics:
The basic acquisition metrics
Wallet Connections: This is the first sign of user interest. Tracking wallet connections helps you gauge how many users are exploring your dApp. Optimize onboarding and support multiple wallet types to improve conversion.
Cost Per Wallet (CPW): It’s crucial to measure how much you're spending to acquire each wallet connection. You can assess the efficiency of different acquisition channels (e.g., ads, content marketing, referrals) with this information.
Conversion Rate: Measures how many users connect their wallets or sign up for your service. A high conversion rate typically means an easy, smooth onboarding experience. Focus on reducing friction in the process to improve conversions.
Activation Metrics:
The basic activation metrics
Activated Wallets: Tracks wallets that perform significant actions such as staking or minting NFTs. This is an important indicator of user engagement and helps understand which features encourage deeper interactions.
Activation Rate: The percentage of new wallets performing meaningful actions after onboarding. Low activation rates suggest issues in UI/UX or onboarding complexity, and data tools such as Formo help measure and optimize this.
Time-to-First Transaction: The time it takes for users to make their first transaction after onboarding. Reducing this time enhances early engagement and shows users value quickly.
Engagement Metrics:
The basic engagement metrics
Active Wallets (DAW/WAW/MAW): Tracking daily, weekly, or monthly active wallets gives insight into how many users use your product. Offering incentives and regular communication boosts these numbers.
Unique Active Users (DAU/WAU/MAU): These metrics help avoid misleading data from a small group of wallets performing many actions. This metric provides clarity on the diversity of your user base and helps ensure that engagement is widespread, not just dominated by a few "whales."
Transaction Frequency: Measures how often users engage with your platform. A high frequency indicates that users are finding value in regular interactions. Incentives such as rewards or challenges to refine these results.
Intensity of Use: Tracking activities such as staking large amounts or frequent governance participation show whether users are deeply engaged with your platform’s functionalities.
Customer Engagement Score (CES): A comprehensive metric that assigns points to specific actions to track overall user engagement. It helps identify which activities most engage users, which are used to refine product offerings and improve retention.
Retention Metrics:
The basic retention metrics
Retention Rate: Measures the percentage of active wallets that continue engaging with your platform over time (daily, weekly, or monthly). High retention is a sign of a valuable dapp. If retention is decreasing, consider implementing loyalty programs or regularly updating your product based on user feedback to reignite interest.
At-Risk Users: Identifies users who have been inactive for a specified period (e.g., 30-60 days). Monitoring this helps you proactively address potential churn. If many users stop engaging, it may signal a need for feature improvements or better user experience (UX).
Saved Users: Tracks users who were once at risk but have returned to active status. This reveals the impact of recent product updates or feature releases. By understanding what drives re-engagement, you can optimize retention strategies.
Transaction Metrics:
The basic transaction metrics
Transaction Value per User: This metric measures the average value of transactions per user. It helps assess the spending behavior of your user base. High transaction values indicate trust in your platform, but if not correlated with retention, it suggests acquiring high spenders who don't stick around.
Total Value Locked (TVL): TVL is a key metric, especially in DeFi platforms. It represents the total assets locked in a protocol's smart contracts. Higher TVL indicates greater user trust and confidence. Tracking TVL fluctuations helps assess the health and growth potential of your project.
Average Revenue per User (ARPU): ARPU measures the average revenue generated per active user. It's important to evaluate the success of your monetization strategy. If ARPU is lower than expected, it suggests that your pricing or in-app offerings need adjustment. Tracking ARPU by user segments helps you target valuable demographics.
Customer Lifetime Value (CLV): CLV estimates the total revenue a user generates over their entire engagement with your platform. This metric helps you gauge whether your acquisition costs are justified and assess long-term growth potential.
User Fee Contribution: This metric measures how much revenue users generate through protocol fees. It's critical for projects relying on transaction-based income. Understanding which users contribute the most fees helps make strategic decisions about features and fee structures, ensuring they're balanced to maximize engagement and revenue.
Web3 product growth metrics aren’t meant to replace all your old measurements of success. The right metrics to track depend on your project's model and specific goals. What product growth metrics are meant to do is provide common, quantifiable goals that help every brand understand and optimize the user journey as a driver of growth.
Formo provides critical Web3 metrics that empower you turbocharge your dapp. Formo Analytics helps you track, analyze, and visualize Web3 product growth metrics in real time, transforming data-driven strategies into actionable insights.
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