The Wolves DAO Files #31: SocialFi Campaigns

A detailed breakdown of the SocialFi phenomenon, where we take a look at examples, risks, learnings from builders, and more.

SocialFi - The Meta Evolves

“SocialFi,” short for social finance, is a model designed to incentivize social engagement by offering financial rewards. More recently, the controversial Portal platform gave this trend new life, leaving many in disbelief after its incredibly successful token sale. Thus, the era of SocialFi was born.

After observing the meteoric rise and now saturation point of SocialFi campaigns in Web3 gaming over the past months, the Wolves decided to critically examine its current state, identify shortcomings, and discuss areas for innovation. After all, a meta thrives only if it has a high success rate, right?

---

Why use SocialFi?

There are several reasons why SocialFi campaigns are so popular, but currently, their primary focus appears to be on token distribution.

1. Exchanges often have specific social criteria on platforms like Twitter that need to be met for a studio’s token to be listed. These criteria include the number of likes, retweets, followers, and engagement rates.

2. Naturally, a higher follower count leads to increased visibility and brand awareness. More users being aware of a product means more potential buyers, thus serving as an effective distribution tactic (attention = liquidity).

3. Additionally, the impact of a large social following and strong engagement metrics can open avenues for raising capital. Both venture capitalists and angel investors, as well as key opinion leaders (KOLs), evaluate these numbers.

SocialFi campaigns have become a crucial component in gaining momentum for larger token launch events. However, as their application reaches a high level of saturation, their effectiveness seems to be rapidly diminishing.

Other Benefits

Beyond token distribution, SocialFi campaigns offer other tangible benefits.

1. These campaigns provide a low-effort solution for partnering with other IPs within the industry to creatively capture user attention. For instance, creating cross-game quests can reward players for exploring another gaming IP. Another example is the MON Protocol, which partnered with over 100 Web3 gaming companies. When others partner with MON, they create a template to announce the partnership and design quests to follow and retweet the new partner’s tweets.

2. SocialFi campaigns also allow studios to test different products, expose users to new offerings, and quickly test market hypotheses. For example, Web3 projects often launch minigames combined with targeted growth campaigns, attracting a significant number of users while providing value to them. This data can then be used to better understand customers, enhance future marketing efforts, and make iterations on existing products.

---

Noteworthy SocialFi campaigns

Some SocialFi campaigns have managed to stand out by smartly innovating instead of becoming mere carbon copies. Here are a few notable campaigns and their distinctive mechanics:

• Pacmoon:

  • The Pacmoon campaign is frequently mentioned by the community. Unlike the usual spam of token tickers and non-value-adding content, this project took a curated approach to reward original, unique, and creative contributions, fostering a sense of meaningful community involvement and engagement. Other factors, such as the use of Pacman IP, launching on Blast, and Lamboland’s credibility, also contributed to its success. Its innovative approach has influenced the SocialFi meta, with other projects beginning to emulate its system.

• NEOZEN:

  • This company employs an “Engage 2 EARN” system, rewarding users for engaging with posts that add value to the network. While this initiative has been effective in engaging existing community members, providing value, and increasing loyalty, it has not been as successful in attracting new users.

• Spellborne:

  • Spellborne’s campaign spans multiple periods, starting with a pre-season and recently beginning Season 1 (S1). During the pre-season, players completed simple tasks like daily claims and social connects to accrue in-game items. The campaign also includes an element that grants airdrop points based on curated social contributions (inspired by Pacmoon’s design).

  • In S1, access to the game is limited to NFT holders who can accumulate airdrop points this way. Notably, Spellborne’s distribution method, similar to Tatsumeeko’s “The Uncharted Dream,” hands out in-game items instead of just points. This “invitation” to use these items later in the campaign is designed to improve conversion and retention, appealing to different user cohorts.

• MANTLE:

  • Mantle rewards users based on the age of their accounts, encouraging the use of primary accounts and reducing the effectiveness of burner or bot account spam.

• Pirate Nation:

  • Pirate Nation’s SocialFi/P2A campaign began with a pre-season where existing holders and players were rewarded based on the NFTs they held and their on-chain actions. Season 1 of the Jolly Roger campaign introduced social quests, starting with simple Twitter quests and later expanding to Discord with activities like “Talk like a pirate.” While this resulted in a lot of “nonsense” pirate talk in Discord, it was more engaging than token ticker spam on Twitter.

  • Additionally, Pirate Nation’s slow rollout of game access through creators and partner communities has successfully generated more demand and attention. Cross-community events and engagement with curated communities have also increased brand association and awareness.

• DEGEN:

  • Degen implemented a system where users could tip others with currency within Warpcast, the Web3 version of Twitter. This success led to the creation of a sub-meta, with others developing Chrome extensions to enable this functionality outside Warpcast.

• Redstone:

  • Redstone uses a system that unlocks more social tasks based on account progression. New users start with basic engagement tasks like liking and retweeting, but as they level up, they can be rewarded for content creation.

• Fantasy Top (FT):

  • FT is a successful example of how SocialFi can become the game itself. Users buy “Hero Cards” based on the personas of well-known Web3 creators and influencers, building a deck of five. Cards have different rarities that influence scoring. During tournaments, players enter with their decks, and points are accumulated based on the social performance of the creators represented by their hero cards. Higher rankings lead to higher rewards. Creators are incentivized to participate because their engagement improves their card’s value, increasing attention and trading activity. FT pays out royalties to creators, creating a beneficial cycle where creators promote FT, attracting more players and growing the ecosystem.

  • For Web3 games, FT’s design offers valuable insights into social game design. The game involves identifying undervalued “Heroes,” with card values determined by external social performance. Similar mechanics could be applied to other games, creating interesting meta-layers of play.

---

The Risks of SocialFi

As outlined above, while there are tangible benefits to running a SocialFi campaign, there are also significant risks involved.

• Spam:

  • The inundation of token tickers and project-related hashtags, such as "I am blocking $PORTAL" or "I am blocking BLOCK," can annoy genuine users. This spam can also create a negative perception among more valuable users, who may choose not to follow or join the community. This leads to negative downstream effects.

• Underserved Social Following:

  • A massive social following can be a valuable distribution channel for marketing products like games, tokens, and NFTs. However, many SocialFi campaigns have created large but underserved audiences by incentivizing low-quality behavior. Having 100,000 followers becomes a vanity metric if less than 5% are genuinely interested in the project's development. Poor engagement ratios can deter valuable users, as engagement rates are crucial in Web3 for deciding to join a Discord community or invest in tokens/NFTs.

• Mismanaging Expectations:

  • Airdrop design must be carefully considered and tested, particularly regarding the expected versus actual value of the airdrop. A prime example is Block Games (BG), which successfully replicated Portalcoin's social velocity. However, the unfavorable terms of BG's airdrop led to significant FUD and loss of momentum. More details can be found in Sam's thread.

• Meta Saturation:

  • The concept of a meta shift, discussed in Wolves DAO Files #30: A Critical Look at Token Launches, highlights how saturation and success influence the effectiveness of strategies. A failed SocialFi campaign can negatively impact social sentiment around this strategy. The saturation of SocialFi has reached a boiling point, leading to highly diluted attention.

  • This doesn't mean there's no future for SocialFi; products like Fantasy Top show potential. However, only projects with substantiated campaigns and strong products are likely to succeed long-term. Product-led campaigns will make the difference.

• Market Sentiment

  • A studio can kick off a SocialFi campaign when the market is hot, but the large volatility in market sentiment poses a risk in finding the right timing. Typically, a campaign rapidly gains users in the first weeks, peaks, and then the user count slowly diminishes as holding attention proves difficult. The longer the campaign lasts, the more “fatigued” users become. When the campaign ends, studios need to move quickly to convert attention into token buyers. However, if market sentiment isn’t optimal, conducting a TGE carries major launch risks. This creates a conundrum for projects, as predicting when the market cycle will end or start is challenging.

• No Retention Post-Incentives:

  • Incentivizing low-quality behavior leads to an underserved audience that doesn't care about the project's products. This user base tends to leave once rewards are extracted, shifting attention to the next opportunity. Airdrop rewards often lack cliffs or vesting periods, allowing immediate selling. Building a campaign to accumulate attention over months, only to lose 90%+ the day after the TGE, is a waste of resources. Studios should focus on converting attention into longer-term interest or actual product use.

• Production Resources:

  • The time, money, and personnel dedicated to creating and maintaining a SocialFi campaign are significant considerations for smaller teams. Resources spent on a campaign might be better allocated to developing the actual product. Smaller teams need to assess whether their SocialFi efforts are a separate growth campaign or a larger part of their go-to-market (GTM) strategy.

---

Improving SocialFi Campaigns

As mentioned, there are multiple risks associated with the current design of SocialFi campaigns. The model itself is still in its early stages with plenty of room for improvement and ways to mitigate the aforementioned problems. Below are outlined strategies for improving the typical design of SocialFi campaigns:

• Create Product Interaction

  • One major shortcoming of many campaigns is the lack of interaction with the product (game) or touchpoints that help users learn more about it. SocialFi should be an extension of a P2A campaign, leveraging the power of social growth and in-game incentives to funnel as many players into the game as possible. Even if a studio doesn't have a playable product for a P2A campaign, SocialFi can still be used as a separate social growth campaign. However, it should facilitate some form of interaction with the IP to foster greater attachment and move users down the engagement funnel.

• Bottom-up vs. Top-down

  • Most SocialFi campaigns attract a broad but non-targeted audience, a top-down approach that creates a large inflow into the funnel but mostly attracts users who care only about incentives. Instead, a bottom-up approach rewards existing community members and leverages their evangelism to grow. While this approach may result in more limited funnel growth, it can lead to higher-quality engagement driven by word-of-mouth marketing from the existing community. A careful mix of both approaches might yield the best results, balancing wide reach with targeted engagement.

• Reputation Weighing

  • Low-quality behavior (spam) is often rewarded in most SocialFi campaigns, leading users to use alt-accounts for pushing messages. This creates an echo chamber where only burner accounts without a following or presence are promoting the project. A campaign that values or weighs reputation—either on-chain, socially (on Twitter), or both—creates a scenario where users are incentivized to put their name and reputation behind the product. For instance, Pacmoon incentivized existing creators to push higher-quality content from their main accounts. Additionally, reputation weighing can be promoted by rewarding on-chain behavior with similar dApps/games with bonuses (e.g., multipliers), creating a more targeted way of rewarding users likely to move along the engagement funnel.

• Alter Reward Distribution

  • To address the high churn rate post-incentives, studios need to design reward distribution carefully. This can be achieved by spreading the campaign over longer periods and creating multiple phases that start rewarding behavior deeper in the funnel. For instance, S1 could reward low-quality actions like social engagement with smaller (in-game) rewards, while S2 could transition to a P2A campaign, rewarding points for token allocation.

  • It's also important to split rewards between low-quality and high-quality behavior. Spellborne’s campaign, for example, rewards value-adding behavior with greater rewards than low-quality actions like daily logins and connecting social accounts.

  • Additionally, obfuscating the reward system can prevent users from directly calculating their rewards. This can be done by introducing multiple types of currencies, such as “Shards” that allow users to open a Gacha, or an XP-leveling system (like Zentry’s Nexus), which encourages players to progress without knowing the exact nature of upcoming rewards.

By implementing these strategies, SocialFi campaigns can improve engagement quality, reduce churn rates, and create a more sustainable and effective growth model.

---

Learnings from Builders

Lastly, the community, specifically the builders of these types of campaigns, shared their learnings. This led to a collection of interesting insights that might be overlooked without direct experience.

• Engagement Drop-offs:

  • Web3 is an attention-driven industry, and one project can only hold user interest for a limited period, given the numerous campaigns offering incentives. It’s crucial not to run campaigns longer than users can handle. While spreading the campaign over longer timeframes is viable, the actual “earn windows” should be limited.

• Resourcing and Management:

  • Successful campaigns can grow beyond expectations, resulting in significant operational overhead (customer service and tech costs). Building a robust backend, and having CRM and BD resources ready to manage the campaign, is essential. Especially when players need to connect their accounts to different platforms like Discord and Twitter, problems with APIs can arise.

• Start Simple:

  • Avoid being overambitious; start small with one or two features, launch them, and then expand. Simplicity allows studios to gauge their campaign’s potential with minimal resources spent.

• Using Existing Tooling:

  • Many studios build their own SocialFi platforms, but often it’s more beneficial to use existing infrastructure. Web3 gaming has a relatively limited attention pool, especially for “meaningful” interest, and it has become much more crowded. Using a white-label solution and focusing on retaining and converting users, while keeping resource expenditure low, is often a better strategy. However, building a custom platform might be justified if SocialFi becomes an inherent part of the product (e.g., Fantasy Top), requiring tailored features.

• Flexibility and Taking Inspiration:

  • Many novel ideas are being developed in the SocialFi space by various studios (e.g., Pacmoon, Fantasy Top, DEGEN). Using these concepts as building blocks for one’s campaign is crucial to creating a competitive product. Staying on top of market trends and community feedback helps studios understand how the meta might be shifting. An iterative design approach can create new opportunities to capture attention and enhance the campaign's success.

• Think of Multiple Personas:

  • Building a platform with multiple personas (new followers, community members, players, etc.) in mind helps involve different users along the funnel. Ideally, users deeper in the funnel are rewarded more or differently, engaging closer with the product than new followers. Features appealing to these different cohorts aid in funnel conversion and retention.

• Goal Setting:

  • Different studios have different goals for their SocialFi campaigns. For some, it might be achieving specific engagement metrics; for others, it’s bootstrapping a player base or achieving distribution for a token. Designing a campaign with a clear set of goals in mind is essential. Knowing what type of behavior to incentivize plays an important role in achieving these goals.

---

---

The Future of SocialFi

SocialFi isn’t new to this space, with (social) questing platforms like Galxe existing since 2018. The current trend is its application as a GTM strategy for launching tokens. However, the proliferation of these incentive programs has led to a saturation point where only the best projects can foster "meaningful" loyalty through points. This forces projects to innovate across various campaign verticals. Successful campaigns typically serve as precursors to or run in tandem with, P2A events, where users interact with the product and are more likely to be retained.

Additionally, the future of SocialFi will likely be inspired by social incentive mechanics pioneered by FT, where social engagement becomes an integral part of the game’s design. We can expect more low-cost social game experiments to emerge on platforms like Blast and Base (e.g., World PvP). The successes of these experiments can inspire the creation of meta-layers for more developed games.

Overall SocialFi is likely here to stay, evolving and adapting to new trends and innovations.

---

Special Thanks To

Payton, IcoBeast, Thare, Blitz, Marklar, NF_Tcaff, Savage Studios, iandao, Slayer, Dante, NicoThePico, whexon, Steps, TheSmarmyBum, Cavalorn, Maddox, Jryann, Greyolisa, Derek, and Hyper for actively contributing to the discussion and providing valuable insights.

---

Disclaimer

None of this is financial or legal advice.