Hype is not a Strategy

The Marketing Funnel & NFTs

In 2022 I analyzed the marketing strategies of NFT projects. All failed projects had one thing in common: they only focused on top-of-funnel or “hype” strategies. 

‍

A quick refresher on marketing funnels: a marketing funnel is the customer journey with your business, typically starting with a customer discovering your brand and ending with a conversion. The audience is largest during the awareness phase and smallest for the loyalty phase.

Top-of-Funnel Strategies

Top-of-funnel strategies in Web3 drive hype. Hype marketing is a strategy that generates excitement to attract attention and drive sales or engagement. In the NFT space, hype is primarily driven through:

• Influencers
• Celebrity endorsements
• Engagement farming: a strategy that leads to inauthentic engagement - “tag three friends below.”
• Allowlist grinding: Allocating allowlist spots for an upcoming NFT mint to people that hit pre-defined engagement goals like being active in Discord for 4 hours a day, having notifications on, etc. 
• Twitter raids: large groups of people collectively liking and sharing tweets simultaneously before an NFT mint to increase visibility and demand
  

These hype strategies promote virality and discovery. Although awareness strategies help people discover new projects, they don’t ensure people stick around. Mid-funnel strategies, however, play a significant role in retaining attention.

Middle-Funnel Strategies

Mid-funnel strategies around consideration and conversion are crucial for creating a desire to buy. Strategies include:

• Discord: an active Discord community where people can meet and form connections
• Events: Virtual or IRL events that help community members bond with each other or the team
• Town halls: events where the team provides updates and answers community questions
• Team visibility: relevant information about team members, credentials, funding, etc. 
• NFT Utility: Privileges granted to owners of NFTs like early access to events, special merch, etc. 
• Culture & Reputation: The intangible benefits someone can gain, like a strong reputation, friendships, etc.  
  

These strategies are crucial for retaining the attention curated at the top of the funnel.

Low-Funnel Strategies

Loyalty strategies make people stick around after a purchase. In the NFT space, loyalty strategies depend on time, engagement, or rarity. Some examples include:

• Staking: “Staking” an NFT is similar to earning dividends on a stock, meaning you lock up your NFT for a certain period and, in return, can earn money or rewards.
• Engagement: Primarily for games, your game NFT can have engagement-based benefits, like being at a higher level or having collected more resources as a result of playing the game.
• Rarity: Holder perks are dependent on an NFTs rarity. 
  

In these examples, NFT owners are incentivized to hold their assets. If owners stop staking their assets, they can miss future rewards. If players sell their game NFT, they either need to build up a new NFT or invest more money in buying another NFT with similar benefits. If landowners sell their premium piece of land, they can’t expect the same traffic levels on other land parcels. Essentially, collections with extreme degrees of rarity, and ultimately rarity rewards, have the strongest loyalty. 

Full-Funnel Analysis on Listing Rates

NFT listing rates are directionally reflective of an NFTs marketing strategy. A list rate is the number of NFTs listed for sale out of the entire NFT collection. So if 100 of 10,000 total NFTs are listed for sale within a collection, the list rate is 100/10,000 = 1%. 

‍

Naturally, the list rate is high when the intention to sell is high. When the intent to sell is low, the list rate is low.

‍

Let’s look at the list rates for projects in 2022:

The projects that exclusively rely on top-of-funnel marketing or hype have the highest listing rates. These projects are usually all the knock-off projects like ape derivatives or meme projects. They tend to mint well, selling out quickly but struggle to keep a sustainable level of demand, even among holders.

‍

The mid-funnel projects are all of our beloved blue chips. They do a great job of incentivizing joining the community through compelling holder-only benefits but don’t do a great job of incentivizing long-term retention or engagement.

‍

The projects that have low funnel strategies have the lowest list rates. They can retain their consumers over extended periods by offering time, engagement, or rarity-based rewards. 

Full Funnel Marketing in Practice

Full Funnel Fails

When projects only prioritize top-of-funnel strategies and don’t supplement their marketing with mid-funnel strategies, they tend to have successful mints, but low demand, high list rates, and a tanking floor price.

‍

Invisible Friends

Invisible Friends grew their Twitter to over 500,000 followers through engagement farming and FOMO strategies (top-of-funnel) but failed to curate a strong community or keep a steady social presence after the mint (mid-funnel and low-funnel). They had ok trading volume after the mint due to having such a large top-of-funnel audience, but have experienced a slow yet steady decline.

‍
Bagner

Bagner grew their Twitter 30,000 followers in 2 days by tapping into influencer and meme marketing (top-of-funnel). However, they never invested time into developing a true community - they didn’t have utility, didn’t disclose team information, didn’t have a Discord, and generally didn’t have a single mid-funnel marketing strategy. They sold out quickly, but the floor price immediately fell post-mint.

Full Funnel Wins

Bored Ape Yacht Club

Although BAYC doesn’t have hard-coded loyalty strategies, they did a great job balancing their funnel. They were not hyped pre-mint but had a slow and steady build. However, the magic trick they pulled off was growing the top of the funnel so dramatically through celebrity endorsements, events, exclusive merch, and a strong community that, given their limited supply of NFTs, the floor price had no option but to skyrocket. 

Moonbirds

Take the first three months after the Moonbirds mint: Pre-mint, Moonbirds deployed top-of-funnel strategies like utility speculation (consumers speculate about the value and benefits of the NFTs), FOMO, and a high mint price that led to word-of-mouth. After the mint, they sustained demand with exclusive access to events, regular visibility to the founders, and a regular stream of rewards with staking mechanics (mid/low funnel strategies). The floor price skyrocketed after the mint and generally sustained. 

If you have a full-funnel strategy, you end up with a successful project and a steady or increasing floor price. Most new interest in the project remains, leading to a growing demand for a locked and limited supply of NFTs.

Conclusion

Hype marketing is here to stay. But supplement your hype with lower funnel strategies for long-lasting success. 

‍