Today I want to talk about some understanding of "X to Earn" in the Web3 field, which I believe has deeply penetrated all aspects of the blockchain field. (Original article mirror link: https://mirror.xyz/arthurwu.eth/k_PRE_5npEz85caUonTBUsfn4543SdYf-XCSUOVL4u4)
Qu Toutiao#
Qu Toutiao can be considered as the predecessor of many "X to Earn" projects to some extent, because I personally have experienced the entire life cycle of Qu Toutiao products (from small to large, from peak to decline). Therefore, before discussing "X to Earn", I would like to talk about its pioneer - Qu Toutiao.
3 Stages#
In general, the life cycle of Qu Toutiao can be divided into three stages:
- First stage: Pure transaction product. Through "Task" -> "User consumes time and energy" -> "Earn corresponding rewards", Qu Toutiao's initial rapid growth was achieved by this set of "receive, transform, and send" process, taking a few pieces of meat from the mouth of today's headlines.
- Second stage: Transaction + Content. On the basis of pure transactions, some content attributes were added, hoping that users would stay on the platform more and generate more additional value.
- Third stage: Decline after the collapse of the business model. After going public as the "number one content company", the collapse of the entire user chain due to problems with the underlying business model directly led to the decline of Qu Toutiao.
I joined Qu Toutiao in the middle and late stages of the first stage, so I have experienced all three stages. Qu Toutiao is essentially a centralized bank + gaming platform, which is the premise for its rapid growth, but also the direct cause of its ultimate collapse.
The first stage was undoubtedly very successful for Qu Toutiao. It not only pioneered a new business model, but also brought tremendous growth in terms of data. In this stage, after finding an effective strategy to occupy the market, the injection of capital further accelerated the process of expanding the territory.
As a result, the product began to enter the second stage, adding "content" attributes on the basis of pure transactions, with the aim of reducing costs and increasing user retention. However, this stage was a failure in terms of results because it only achieved "transaction + content" instead of "content + transaction". The injection of "content" only solved the problem of growth in some metrics, but did not change the underlying business model.
Therefore, it eventually reached the third stage, and the entire business model began to collapse. After exerting too much effort in the first stage, users' perception of the product has changed. Therefore, without being able to solve the user's perception problem, the faster the platform's DAU grows and the higher the platform's expenses, the less efficient the business model becomes. After both short-term and long-term ROI failed to meet expectations, it eventually shifted from being a "platform" to being a "channel" and declined.
The relationship between users, Qu Toutiao, and VC investment can be roughly illustrated in the diagram above, forming two business chains:
- User & Qu Toutiao: "Task"/"Read content" -> "User consumes time and energy" -> "Earn corresponding rewards", and then Qu Toutiao monetizes user data (a standard Web2 platform business model).
- Qu Toutiao & VC investment: VC funds are injected to help Qu Toutiao increase its C-end product's DAU, expand market share, and eventually exit after the project goes public.
From the user's perspective, you will find that the chain between "User & Qu Toutiao" is very similar to the way many Web3 projects operate today. This is why Qu Toutiao can still make a breakthrough in the Web2 wave, while other Web2 applications have a basic one-way relationship with users (users are harvested, and data is monetized). In this chain, users actually receive real profits.
Gains and Losses of Qu Toutiao#
After 18 months, Qu Toutiao successfully went public, which also made other companies see the charm of this model and try it in various Internet fields.
Looking at it from today's perspective, Qu Toutiao has indeed failed. However, it still has its proud points that are worth our attention.
Gains#
- Qu Toutiao's layout in the sinking market has indeed brought more content knowledge to Chinese users in the sinking market.
- Users actually receive real profits (Earn).
- The model of "Task + User consumes time + Profit" created by Qu Toutiao has been tried and learned from in various fields, including Web3.
Losses#
- Being too profit-driven makes it difficult to change course when a crisis occurs, laying the groundwork for ultimate failure.
- Being too data-driven and not treating users as "users", but more as cold data indicators.
X to Earn#
The two game products, StepN and Axie, which have gained popularity in the Web3 field in recent years, naturally make users self-propagate because they include "X to Earn".
Some people believe that the economic models of these two are Ponzi schemes, which is why they ultimately failed.
So, for a Web3 project, should "X to Earn" be done? If so, how can it be done to delay its collapse?
First of all, I believe that "X to Earn" should be done for any Web3 project, but the focus should not be on X or Earn. X is a means, and Earn is a result. The key point should be "What to Earn". If users only gain monetary value like Qu Toutiao, then this model is doomed to be unsustainable. Only when users can capture the value of the product itself, can this model be sustainable and successful.
- Why did Qu Toutiao shift to "content" in the second stage? It is because it hopes to convey to users that the product is not just a money-making tool, but also a "content platform". However, due to excessive effort in the early stage of the first stage, it became difficult to change course, and as a result, the second stage also lost the opportunity for success.
- To some extent, Bitcoin mining is also a form of "X to Earn". Most miners came to profit after seeing the rise in BTC prices. But the reason why the value of BTC can continue to be stable, and why miners continue to come even after the price collapses, is because everyone believes in the decentralized value of BTC, which is the core selling point of BTC as a product.
Conveying value to users is relatively difficult. Because logically, "value" should not rely on the platform to convey it. The platform can only guide, and users need to participate more actively to understand the value of the product.
This is also why Earn is needed. To some extent, it increases user engagement through this "means". For the platform, this approach has a relatively higher ROI.
There is also a challenge of "balance" here. As mentioned earlier, the failure of the second stage of Qu Toutiao was mainly due to the excessive effort in the first stage. The reason is that when it exerts effort, the results of data indicators look good (DAU, user retention time, task completion rate, etc., all increase rapidly). However, these are all vanity metrics, and the faster they increase, the faster the product will die in the later stage. Therefore, it is quite difficult to grasp the balance point in between.
In summary, I personally believe that "X to Earn" is a must-have for the majority of products, and the key is to focus on "What to Earn". When conveying value to users, there should be a constraint of "balance" and not be completely driven by data.