Dec 2023#Opinion

How effective arecrypto airdrops?

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Authors

Ales Kavalevich

Managing Partner, CEO

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3 min

 

I came across a DuneCon conference video.

Pretty sure you will open it, though I doubt you’ll watch the entire thing. So here’s my summary for you:

1. CAC / CLV is the most important metric in growth marketing.

CAC – user acquisition cost

CLV – the amount of revenue the user brings over the entire period.

CAC / CLV - user cost per $1 of revenue.

For context purposes: investors want to see <$1 in the ratio of this metric. Ideally, <$0.33 CAC/CLV.

2. Examples of projects and their drops.

LooksRare

  • $268 million – the airdrop’s cost in tokens
  • $203 million – commissions earned by the platform
  • $2,151 – CAC
  • $1.631 – CLV
  • CAC/CLV = 1.32

X2Y2

  • $48 million – the airdrop’s cost
  • $1.7 million – platform commissions
  • $1,140 – CAC
  • $40 – CLV
  • CAC/CLV = 28.5

Blur

Blur doesn't have commissions, so it's impossible to calculate their return on investment. However, we can calculate what commission they would have had to charge to achieve payback. It’s 6%. OpenSea, for example, charges 2.5%.

  • $342 million – the airdrop’s cost
  • $2,750 – CAC
  • $5 billion – trading volume
  • CAC/CLV = ∞

If Blur did charge fees, then:

  • 1% commission –> CAC/CLV = 6.13
  • 2.5% commission –> CAC/CLV = 2.45

Ape Coin (the most expensive airdrop)

  • $8.596 billion - the airdrop’s cost 
  • $570k – CAC
  • $6,331 – CLV
  • $95 million – royalties earned by YugaLabs
  • CAC/CLV = 90.1

Basically, they reimbursed the purchase price of the Bored Ape NFTs to their owners.

3. After 30 days, user retention from airdrops averages 10% lower.

Then it can drop almost to zero.

4. Can the airdrop show less than $1 CAC/CLV?

Yes, if you plan to lure the users away from rivals and eventually force them into bankruptcy (Uber's strategy).

Then you raise prices like a monopoly, recouping your costs.

This worked in a world with zero interest rates, when there was a lot of money. Now it works worse.

5. Multi-accounts and farms.

Based on programs developed by projects to detect multi-accounts, it is possible to approximate the statistics of fake accounts:

  • Hop Protocol – 33% fake
  • Safe – 22% fake
  • Connect – 9% fake. They used very conservative filtration methods.

6.  Celestia is an example of a more targeted drop.

They made an airdrop for developers, building apps on their protocol.


My comment: 

As we can see, the results can vary greatly depending on the monetization model.

At the same time, the given product metrics do not consider the brand’s value on the company's balance sheet (as an intangible asset) and the power of voice that the project receives from the start.

Airdrops, in my opinion, also serve an important social function: millions of people figured out how Web3 products work.

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