Understanding Reach, Retention, and Revenue
The RRR Framework
The web3 space currently lacks a pair of lenses to analyze project traction, which often results in the use of arbitrary and bespoke metrics that are prone to going up and to the right. However, such metrics cannot be considered reliable business intelligence.
Without a uniform set of metrics and definitions, it becomes impossible to accurately evaluate the success or failure of various projects. To overcome this challenge, we need a standardized analytics framework that can empower web3 development teams, investors, and analysts to understand the metrics that matter.
This is where the Reach, Retention, and Revenue (RRR) framework comes in. By encompassing the three main focuses of any business, the RRR framework provides a comprehensive and reliable approach for measuring health in the web3 space.
Reach – Growing a User Base
The first pillar of a healthy web3 project is Reach, which involves growing a user base. This requires a comprehensive understanding of where growth comes from and how to create it, such as customer acquisition numbers, potential target markets, and the market impact of new product releases. Without this knowledge, a product is unlikely to succeed.
Retention – Retaining a User Base
The second pillar of a healthy web3 project is Retention, which involves retaining a user base. Retention rates of monthly cohorts are a function of how effective a product team is at creating valuable products and exciting user experiences that keep users engaged and coming back for more. Without insights into retention, a high growth rate in new users can mask high churn rates in older cohorts, leading to a misguided perception of product-market fit. Unfortunately, this leaky bucket only becomes apparent when growth slows down, which is often too late to address effectively. By prioritizing user retention, web3 development teams can achieve sustainable growth and avoid the pitfalls of unsustainable user acquisition tactics.
Revenue – Monetizing a User Base
The third pillar of a healthy web3 project is Revenue, which involves monetizing a user base. Revenue growth is the ultimate indicator of product-market fit, and metrics that show revenue growth – or a lack thereof – provide valuable insights that drive informed decisions about resource allocation and pricing. Teams need to gain a deeper understanding of where revenue is concentrated, whether it is on a particular product, a specific user group, or a particular cohort. This understanding can provide significant benefits when making strategic decisions and can enable teams to optimize their monetization strategy for maximum impact.
A Framework For Results
In conclusion, assessing a web3 project’s traction requires a comprehensive understanding of three key areas: Reach, Retention, and Revenue.
The RRR framework offers a standardized approach for web3 development teams to analyze these areas, providing actionable business insights, enabling data-driven workflows, and facilitating improved decision-making. The framework also offers significant benefits for web3 investors, allowing them to compare the traction and health of different projects and standardize their portfolio reporting. For web3 analysts, the RRR framework offers a clear and organized way to gain insight into a project's growth drivers and effectively communicate these insights.
By leveraging the RRR framework, web3 projects can bring data points into context, build more compelling products, and make better data-driven decisions, ultimately achieving sustainable growth and long-term success in a rapidly evolving market.