Token Return On Investment – A New Paradigm
October 30, 2018
Since the industrial revolution, every decade brought about novel revenue models based on upcoming business fundamentals and trends. These include door to door strategies, mailing, followed by TV, email marketing, influencer marketing, automated funnel-based inbound marketing, and lately programmatic buying and AI-based marketing applications. At each inflection point, the businesses that were fast enough to follow the trends remained strong, while others that stuck with their past processes and USPs slowly dwindled into bankruptcy, moving from the present to the past tense.
We are currently at an inflection point. The latest and most important shift in recent history is occurring, as a new business fundamental comes into play. With the burgeoning possibilities of token economies, we are now in a position to build community-powered marketing and adoption campaigns. This is made possible by using allocated pools of tokens to fuel community-based initiatives.
This is one of many signs eluding to a growing trend around community-based economies. As these continue to gain importance and value, a new ROI methodology will become possible: Token Return On Investment (TROI).
This was originally published by the author on his LinkedIn Pulse.
Introducing Token Return On Investment
“Token Return On Investment [TROI] – The measure of direct and indirect value derived from an allocated amount of tokens used to achieve a specific goal.”
One of the most important factors in the first years of a blockchain project is to continuously engage a growing amount of community members. Your project is only as valuable as the network effects created by the community that utilizes and believes in the project. This marks one of the first global instances of community-based economies.
How To Use Your Tokens To Power Adoption & Growth Strategies
As token-based marketing efforts are becoming a measurable reality, the following section will soon deserve an entire chapter in marketing university textbooks. Here are the first uses we’ve seen that involve and underline the need for TROI measurement and analysis.
Enabling Local Events Across The Globe – In your existing social communities, there will often times be multiple members in your community that live and breathe your project. These are your brand ambassadors, they are your super fans. However the bond is unlike anything we’ve seen in history, since often times these brand ambassadors will also own a stake in your project, in the form of tokens. You can empower these ambassadors by giving them ways to set up events in their local areas, and give out airdrops to those who show interest.
Getting On Exchanges – We believe this is not a fair or authentic method of skipping the line to get on exchanges. Nevertheless it is something we have seen done multiple times over the past two years, and has proved to be a highly effective liquidity strategy.
Disclaimer: All exchange investors must go through a compliant KYC/AML process to ensure only those in legally compliant jurisdictions can participate.
Increase Market Volume On Select Exchanges – If your tokens are already listed on the majority of exchanges, you can chose to airdrop to all the investors on a certain exchange that fit certain criterias. This allows them to learn about and interact with the token by finding some in their wallets.
Disclaimer: All exchange investors must be KYC’ed to ensure only those in legally compliant jurisdictions can participate.
Directly Increase Conversion Rates – The conversion rates we’ve seen from digital marketing campaigns that have a call to action involving tokens is on average 8 to 15 times higher than those who don’t. That’s the difference between a 25 cent CTA and a $2.50 CTA!
Disclaimer: Unless if it’s a pure and legally proven utility token, this can only be done in select jurisdictions that do not have securities laws that prevent distribution to public investors. For example, marketing and distributing securities directly to the public is illegal in the USA & Canada, and therefore airdrops are often times not recommended as the legal risk always outweighs the rewards.
Smartdrops – Platforms such as airdropX.com and trmlabs.com offer individuals the ability to create and distribute their own tokens, in return for people doing specific tasks. You can see this as another method of payment that at the same time makes ambassadors even more apt to recommend the project.
Disclaimer: You have to ensure you aren’t basing your tokenomics on value-add through these types of campaigns. If this is the case you would essentially be ‘shilling’ coins that have 0 value (ie. Bitconnect scandal).
Bounty Campaigns – Companies like BountyHive and BountyGuru have specialized in an entirely new field of brand ambassador marketing. Bounty campaigns are run to get between 1000-5000 virtual ambassadors (aka ‘Bounty Hunters’) around the world that will do specific actions in exchange for stakes (ie. a percentage of a total pool of tokens allocated for bounties). The amount of stakes you can get varies depending on the difficulty of a task, and the length of time during which it will take place.
Disclaimer: This type of campaign implies a lot of legal risk in established countries with strong securities laws. Unless you have a proven utility token please seek advice from lawyers before engaging this service, and make KYC/AML a prerequisite.
Advisor & Influencer Payments – Rather than paying advisors and influencers with fiat dollars, paying them in tokens and locking these until certain KPIs are met ensures that incentives are aligned between the network and the ambassadors of the network.
Disclaimer: Make sure with your legal counsel that you are setting up these agreements in legally compliant manners in your jurisdictions.
Hackathon Prizes – One of the best ways to discover young developer talent and to have them interact with your platform is to run hackathons. These can happen in partnership with world leading universities, or with prominent associations. This is one of the better ways of proactively attracting new talent in our day and age.
Activation Events –You can set up events to have people interact with your brand in all sorts of manners and in all sorts of places. Festivals, conferences, meetups, you name it. Experiential marketing just added another tool to its ever-growing arsenal. Geon is a great upcoming example of future marketing tools to add in the 2020 toolkit.
Disclaimer: MLG is in partnership with Geon as service provider. This feature was not paid or endorsed, solely reflecting the author’s personal opinions on the product.
Loyalty Programs – They same way you can use Airmiles, Banking Credit Points, Canadian Tire money, or BarterPay dollars to redeem value from previous actions taken, you can also do the same with a token network. You can offer discounts on your platform if people pay using your utility token, or create partnerships with existing businesses to speed up the adoption of your platform.
Bond-equivalents – This is one of the most interesting methods of generating highly positive TROI. Any network that utilizes proof-of-stake requires token-hodlers to stake tokens in what we call nodes and supernodes. These are also the base voting mechanisms within the network. By incentivizing users to lock tokens in for a specified amount of time in return for an increased percentage of tokens, you are essentially offering your super fans the opportunity to buy bonds in your cryptocurrency. Very interesting concept that will receive severe regulatory scrutiny in the upcoming years.
This is not an exhaustive list as the amount of applications only continues to grow month by month. If you are interested in learning more feel free to subscribe at MLG Blockchain.
A Traditional Case Study
There are only a few public case studies of companies that have used cash-based marketing campaigns to fuel growth. Here is one worth mentioning.
Paypal was one of the first companies to ever give away hard cash for free, and make a positive MROI by doing so. For the first few years, Paypal gave away $10 to anyone joining the service, and an additional sum for every referral. This was the only way to ensure enough people would join the platform, creating the necessary network effects for a global online payment platform.
Novel Case Studies
As one of the top 20 currencies, over the span of 3 months in late 2017 TRON experienced a growth curve similar to that of Ethereum in 2016-2017. This goes to show that TROI can be massively positive when done correctly.
The Loopring foundation utilized LRC token airdrops to teach its current user base about upcoming additions to the network, and also utilized loyalty strategies to incentive token hodlers to keep their tokens longterm.
And Many More
Most of the decentralized applications that are the highest ranked by market cap utilized token-based growth strategies to help grow the adoption of their networks.
We Are At The Inflection Point for TROI
Due to the fact that all these strategies are so new, none have ever been measured using established token return on investment models. Nevertheless, they are the first use cases that prove the validity and importance of making token distribution an integral part of your blockchain growth strategies.
Over the course of the next few months, we plan to create models to measure TROI and compare between previous use cases to find out which strategies bring out the highest TROI. If you would like to be involved please reach out directly to me via LinkedIn.
To learn more about this concept and brainstorm ideas to help develop the field of blockchain marketing, you can reach out and follow Joaquim Miro on twitter here.
About The Author
Joaquim Miro is the CMO & Founding Partner at MLG Blockchain, an expert blockchain consultancy and development firm based in Toronto and New York. Over the past year he has appeared as a thought leader on multiple platforms such as BNN, and sits on the MarTech Council of the Canadian Marketing Association.