Paradigm of Web3 Consumer Applications and Theoretical Considerations for Investment

Recently, Alliance DAO has gained attention for successfully incubating Web3 consumer applications such as Pump.fun and Moonshot. This article will summarize Alliance DAO's investment philosophy in the Web3 consumer sector, analyze the mainstream paradigms of current Web3 consumer applications, the challenges and opportunities they face, and finally discuss investment strategies for Web3 consumer applications.

Alliance DAO's Incubation of Web3 Consumer Track

Alliance DAO Accelerator has co-incubated or invested in 28 Web3 consumer applications, which can be roughly divided into 7 categories:

1. Lifestyle category: 3 projects, such as StepN, Sleepagotchi, etc.

2. Game category: 10 projects, including Axie Infinity, Genopets, Nine Chronicles, etc.

3. Crypto Speculative: 3 projects, such as Pump Fun, Moonshot, etc.

4. SocialFi category: 6 projects, such as fantasy.top, 0xPPL, etc.

5. Creator Economy: 2 projects, including Koop and CreatorDAO.

6. Financial category: 3 projects, such as Hana Network, P2P.me, etc.

7. Tool category: 1 project, namely proto.

Alliance DAO's investment focus shifted from gaming and creator economy in the first half of 2021-2023 to crypto speculation, SocialFi, and financial projects from the second half of 2023 to present.

Investment Philosophy of Alliance DAO in the Web3 Consumer Sector

1. It is believed that the ecological infrastructure tools are already完善, and more application layers are needed to create value.

2. The founding team should focus on product-market fit ( PMF ) to avoid introducing tokens too early that could affect validation.

3. Target users can be divided by Web3 acceptance; on the left side, ordinary users mainly reduce customer acquisition costs through "advertising tokens," while on the right side, Web3 native users bring investment demand around new assetization targets.

4. The Solana ecosystem is more suitable for the success of consumer applications, for reasons including:

   • A more active community
   • Stronger ecological resource support
   • Faster and lower-cost infrastructure
   • Higher product competitive barriers

Three Main Paradigms of Web3 Consumer Applications

1. Optimize traditional application issues by utilizing the characteristics of Web3 infrastructure technology:

   • Ultimate privacy protection and data sovereignty
   • Low-cost global 24/7 trusted execution environment

2. Design new marketing strategies, user loyalty programs, or business models using encrypted assets:

   • Reduce customer acquisition costs through token-based marketing activities such as Airdrop
   • User loyalty program based on X to Earn
   • Directly monetize through the financial attributes of tokens

3. Fully serve Web3 native users, addressing unique pain points:

   • Construct new narratives and design monetization around untapped value elements.
   • Provide new tools to serve the unmet needs of Web3 native users.

Theoretical Considerations on Investment in Web3 Consumer Applications

1. How to surpass the speculative cycle is the primary consideration.

2. Assessing Web3 consumer applications should focus on:

   • User Data: Active Users, Growth Rate, Retention Rate, etc.
   • Transform data: AUM, user spending, etc.
   • Team Strength: Technical Capability, Market Sensitivity, Resource Reserve

3. Definition of successful Web3 consumer applications: short-term focus on token prices, long-term emphasis on revenue sustainability.

4. "Applying the Factory Pattern" may be a more deterministic business strategy.

5. The next successful Web3 consumer application may possess the following characteristics:

   • Complete cold start through KOL influence
   • Directly win the market relying on product strength
   • Business model innovation, such as "sharing economy" thinking

6. The Web3 consumer application categories where PMF is easiest to find:

   • Web3 social applications
   • On-chain trading tool applications
   • Payment applications
   • DeFi applications