Focusing on financial aspects while neglecting social aspects, SocialFi projects have a long way to go.

Written by: Wenser, Odaily Planet Daily

Whether the SocialFi sector can break free from the "growth dilemma" may depend on the verification of the "Fi" segment's ability to generate revenue. In a previous article titled "SocialFi 'Narrative Failure': Does Crypto Social Have a Future?", we briefly analyzed the main issues facing current SocialFi projects. To address these problems, SocialFi projects may need to partially draw on the development strategies of successful traditional mobile internet applications, considering the main characteristics and advantages of crypto projects.

Odaily Planet Daily will break down the "Fi" segment of traditional social products and SocialFi projects in this article, and analyze the development history of "Lemon 8," a popular application known as the "overseas version of Xiaohongshu," which has recently performed well, for reference by players in the SocialFi sector.

The "Fi" Chain of Traditional Social Products: From Free Products to Paid Subscriptions to Value-Added Services

Apart from the distinct account management models and login methods that differ from SocialFi products, the operation of the "Fi" chain involving monetary payments in traditional social products is meticulously designed, with each step having its unique purpose and functional consideration. Below is a step-by-step breakdown of the "Fi" chain in traditional social products:

Paid Products / Subscription-Based Usage - Niche Social Applications

In traditional social applications, the "paywall" is the first step in generating cash flow.

Generally speaking, for some niche social applications, the limited user base means that the threshold for paid entry or the cost of subscription becomes the main boundary separating real users from fake accounts.

These social applications typically serve specific groups or interest communities, such as music socializing, LGBTQ+ socializing, entertainment socializing, and so on.

Free Products + Value-Added Services - Game-Based Social Applications

For most social application products, "free products + value-added services" is a more common "revenue generation choice."

For many social applications, a closed beta + free product is often a common setup for initial cold starts; after accumulating a certain user base, developers often increase application revenue through in-app value-added services—such as more matching opportunities, diverse social decorations, advanced audience targeting, and more "socially oriented" props.

These social applications usually have certain gaming attributes, increasing user choice and engagement through mechanisms like "swiping left or right" or "affinity mechanisms."

Free Products + Points Incentives - Crowdsourced Social Applications

In addition to value-added services, another type of social product chooses to increase user interaction frequency through "points incentives" and earns revenue through cooperation with B-end enterprises and merchants.

To some extent, current crowdsourced rating applications can also be seen as a type of social product, with the main operating model being: users earn corresponding points incentives by checking in at a location or performing other actions; during subsequent consumption, points incentives can be used as discounts for physical purchases or as vouchers for surrounding exchanges.

These social applications heavily rely on offline behavioral interactions, achieving social goals and market marketing through a mechanism that "crowdsources evaluation behavior."

Free Products + Advertising Media - Entertainment-Based Social Applications

For many social application products, entertainment content is an important component, as entertainment often means attention resources, which is precisely what advertising media needs.

Many so-called influencers, KOLs, and internet celebrities broadly belong to the category of entertainment bloggers; through advertising, both individuals and social application products can obtain corresponding rewards.

These social applications are usually more inclusive, and after a certain period of development, the user base often grows rapidly, laying a solid foundation for "monetizing attention."

Free Products + E-commerce - Consumption-Based Social Applications

As the saying goes: "The end of all commercial products is e-commerce, and the end of e-commerce is live-streaming sales."

For many consumption-based social applications, e-commerce is also the most efficient, shortest link, highest profit, and most stable revenue generation model. Platforms can charge corresponding fees from various links such as advertising marketing, product transactions, traffic promotion, and platform review, truly embodying the concept of "one fish, multiple meals."

These social applications are usually closely linked to the supply chain and have a loyal consumer base, with social attributes often reflected in shopping reviews and shopping experiences.

The Path for SocialFi Projects to Break Through: From Niche to Mainstream, from Marginal to Popular

Looking back at past phenomenon-level social applications like Twitter, Facebook, Instagram, WeChat, and Douyin (TikTok), they all underwent a process of "from niche to mainstream, from marginal to popular," which is also an inevitable and necessary challenge currently faced by SocialFi products.

The key is that the starting point of current SocialFi projects often emphasizes "Fi" too much while neglecting "Social"—when a project's ultimate goal is not to serve real social interactions and the establishment of social relationships between people, but rather to achieve rapid "social monetization," "quantifying social relationships in monetary terms," and "commission airdrops based on social graphs," then such a product is essentially a "financial tool" and has nothing to do with socializing.

Specifically, if SocialFi products and projects want to see a future, they may need to make changes and attempts in the following areas:

Targeting the Core User Group: Crypto Community or Niche Groups?

All social products, including SocialFi applications, center around people, who are the core and the only source of value.

Therefore, the primary question that SocialFi projects need to answer is: which type of user group does the product most want to serve? Is it the crypto community or other niche groups?

As we mentioned in our previous article "SocialFi 'Narrative Failure': Does Crypto Social Have a Future?", if you choose "everyone" as your target group, it is equivalent to not having a clear understanding of who your "target audience" is. This is a "strategic issue," not just a simple tactical execution problem.

If it is the crypto community, then the content that the crypto community needs to discuss is the crypto market; if starting from other niche groups, like how Facebook gradually became popular among Harvard alumni or how Douyin expanded from various playful, daring, and skilled artists, dancers, and niche enthusiasts, then it is necessary to find these people and tell them—"Here is a product suitable for you, would you like to give it a try?"

Give Users an Irresistible Reason to Use: Money or Something Else?

After determining the positioning of the project and product, the question that SocialFi projects may need to consider is: what distinguishes us from traditional social applications, and why should users come here for social activities? What can we offer them as an "irresistible reason to use"?

If in the past, SocialFi applications could attract some users through "token airdrops," "user decision-making," and "niche interests," in the current environment where cryptocurrency liquidity is tightening and wealth creation effects are diminishing, using an application to obtain an "airdrop check" is far less appealing than playing with meme coins or engaging in intense PVP.

Therefore, in addition to monetary incentives, SocialFi projects also need to attract users through other aspects for usage, joining, and viral spreading: is it because of interesting content? Or fresh information? Or quirky new trends and unique social gameplay?

This is also one of the reasons why popular social applications like Lemon 8 initially focus on influencers with a certain level of recognition—because they are the creators and producers of content, capable of attracting followers and generating further viral spreading from one person to more.

Building an In-App Role Ecosystem: Who Creates Output vs. Who Consumes and Pays?

Currently, in most SocialFi projects, the roles of users are akin to "product locusts," producing "garbage information and low-quality content," while lacking consumers who are willing to pay for "high-quality content and information."

Generally speaking, relationships in social products can be divided into three types: one is high-level producers and low-level producers; another is producers and consumers; and the third is low-level producers and a broad base of consumers. High-level producers typically produce content that is understood to have a higher consumption threshold, requiring low-level producers to "simplify" it. Consumers can choose to consume high-level content or low-level content, thus constructing an "in-app role ecosystem" for social product content.

Therefore, SocialFi products either need to have more direct and simpler low-level producers produce more easily understandable content, or they need more excellent high-level producers to produce more complex content that low-level producers can "reprocess," ultimately targeting consumers for their consumption.

Projects with strong financial backing often choose to "invite high-priced entries" to attract users, adopting a "high-profile operation strategy"; while projects with limited resources need to "play together" and "understand users" to gain more attention and a larger user base during the initial cold start.

Summary: SocialFi is Still Far from Success, and the "Web3 Version of Facebook" Has Yet to Appear

Currently, the SocialFi sector has yet to see a breakout project like Axie or STEPN in the GameFi space; nor has it seen NFT projects that attract celebrities from traditional Web2 fields such as culture, sports, and entertainment.

Most SocialFi projects always set their goals as "smaller and smaller," further segmenting the already limited active user base of the crypto community, making the real user group even more niche. There is neither a "campus version of social applications" like Facebook nor a "niche enthusiast gathering place" like interest-based applications. It must be said that we are still far from the step of "successfully validating" the SocialFi sector.

Perhaps more SocialFi projects need to consider whether to first build a social application with a Web2 account system, and then integrate a Web3 wallet login system and corresponding data management methods, taking a "Web 2.5 path for SocialFi breakthroughs."

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