[Dive #167] Community Is the New Channel for Growth with Jonathan Goodwin

🏘 A take on community growth by someone that manages them

TPan here! I’m traveling this week, so I won’t be writing my usual pieces. However, I do have some great content for you from others in the space.

Today, we have Jonathan Goodwin with a dive on Community Growth. I’ve been friends with Jonathan since my early days diving into web3 full-time, connecting with him on our web3 philosophies as well as our writing. We were also roommates at Consensus last year!

If you’ve been reading my work for a little while, you’ll know that I am big fan of Community as a growth channel, lever, and extension of a team. Jonathan has held roles leading Marketing and Community efforts at web3 companies over the past few years, so he knows what he’s writing about as someone from the front lines. 

If you want to check out more of Jonathan’s work, check out his Mirror and follow him on Twitter.

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When I was a younger man starting out in marketing, I learned about the classic marketing funnel we all know by heart.

Thanks to Wikipedia for sharing this hideous thing

I’ve also seen some versions that include retention and evangelism, but those parts reeeaaally get glossed over even though they’re arguably the most complicated parts of the process. Modern marketing really optimized the early parts of attracting attention with digital ads and site/app optimization tools tackled the conversion pieces, but no one publicly systematized retention and evangelism to nearly the same degree.

Today, I know that this gap is filled by community, rife with tweets and probably a Discord server with a moderation team. However, my understanding of community has evolved to the point that I think the old marketing funnel is largely dead, outmoded, at least, for most brands and consumer-facing (and some B2B) companies out there.

Instead, I believe that community can fully replace the marketing funnel when fed enough care and resources.

That Funnel’s Looking Awful Rusty

In my experience, the marketing funnel is an endless machine sucking cash out of your business and the costs are not going down over time.

We’ve all seen the rise of targeted advertising, but it’s in decline these days, especially since Apple killed the IDFA and browser cookies are going extinct. Ads are becoming more expensive for CPMs and the conversion performance is getting worse.

Under today’s market, the trad marketing funnel requires an unending cash flow to stay alive, while parameters like cost and reach and efficacy are completely dependent on third parties’ determinations.

What do they put in that sauce?

At the peak, some startups claimed to spend 40-50% of their investments on Facebook and Google ads, which is probably erroneous and certainly doesn’t apply across the startup economy. Regardless of the veracity of those claims, the funnel is an endlessly hungry machine whose whims are mercurial and borderline unknowable.

Advertising Is Tough

My first web3 job was running marketing and community for a social community platform that never quite figured it out and is now bankrupt. During my tenure, though, I found really affordable results with my ad campaigns:

• $0.25 per platform signup

• $1.20 per wallet sign-in, which was our proof-of-humanity check

I used a combination of Facebook and Google ads with landing pages built on KickoffLabs and referral incentives.

My second web3 job was at a digital sports fashion startup, again running community and marketing. I experimented with a free mint to support our public launch as a company (wellllllll before the free meta took over in summer 2022) and threw a thousand bucks at ads on Twitter, Google, and Instagram to test the waters. Needless to say, we got nothing for the trouble.

Later, my marketing team got creative and we put together an offer for VIP seats at our first partner’s football (née soccer) matches. We spent nearly $5,000 on Facebook, Instagram, and Google and contestants needed only to buy an NFT-backed digital jersey. Again, all to no avail.

Another company I worked with has a partnership with a major sports organization. In pursuit of selling an obscene amount of overpriced NFTs, we dropped a low seven-figure sum in trad advertising across a variety of outlets and FB/IG and Google, failing to return even six figures in revenue.

Big yikes.

No one ever listens to me

Sure, a fair criticism is that my teams were trying to advertise NFTs, a strategy that was doomed to fail (which I loudly warned them about). But I think this still shows the diminishing returns of relying on the marketing funnel that was optimized for the previous decade of business.

I worked at this series A DTC startup that was burning anywhere from $20,000 to $50,000 every day on digital ads — and that was before branching out to YouTube and well before TikTok was a thing.

At the same time, a community of our customers sprang up and reached roughly 20K members, totally organically! We drove so much brand awareness and referral sales without even trying! I wonder how growth costs would’ve stacked up if we had prioritized referral codes and network effects in that community over the giant ad platforms.

The Unvarnished Potential of Community

When fed appropriately, community can do so much more than serve as an afterthought for supporting retention.

What if we tied a working marketing funnel to a working community?

Using elements of hype and fun inside the conversion machine so people want to stick around is a surefire way to kickstart the social dynamics you need. When they’re getting value and having a good time, customers will want to share their high spirits with each other and lay the foundation for a real community. Soon, they’ll be interacting even without prompting from the team because that interaction has its own intrinsic value.

To get there, the community must be fed consistently and substantially from three key food groups: content, giveaways, and collaborations, all of which must be valuable and cannot be found anywhere else.

The DNA of Community

My boy TPan did an amazing job running back how to measure community KPIs for growth marketers, using stats on engagement and membership growth as stand-ins for clickthrough and conversion rates.

What I’ve been trying to convince my colleagues of is that community, alas, does not grow via standard marketing funnels. Community grows by word-of-mouth (WoM), which must feel uncomfortable for people trained to run increasingly on data for the last several years, but this place of vagueness and muddy waters is exactly where brands have been when they choose to advertise on billboards and bus stop benches.

It’s about starting immeasurable conversations and winning hearts and minds. Ironically, the technical revolution of web3 has led many of us into the murkiness of more human-focused variables like sentiment and passion.

Yet that’s not all!

[Fair warning: I’ve been reading a trilogy of novels about settling on and terraforming Mars, so I’m going to mix up a few metaphors but firmly settle on a celestial one.]

A good community strategy is squarely hooked up to a strong marketing funnel like a bike pump, funneling attention earned with cash into an environment encased in vulcanized rubber so there is no escape for the valuable oxygen.

Over time, the bike tire swells with numbers and activity until it’s now a world of its own, dwarfing the funnel in terms of value.

Now, the community flywheel has an established orbit, driven by the gravity of the value it contains, with members conducting rituals on a cycle like day and night and, with enough momentum, the community develops its own gravity well, drawing in attention and growth on its own merits.

That’s right: the community itself evolves from a single-purpose engine for retention into a full-spectrum machine encompassing growth and conversion on top of retention and loyalty — not to mention the memes.

Not only does WoM draw in folks, but data-hungry marketers can also run referral campaigns with hip incentives to get straight-up costs for recruitment and activation by tracking redemptions and custom link utilization.

A beautiful thing that will prove difficult to measure is the inevitable mitosis that comes for any human organization. Large and vibrant communities will naturally slough off some portion of members who will gravitate toward niche versions of the community’s purpose, whether an alpha-seeking group or some hybrid focus with another community. However, they will always maintain some attention on the source community, circling it like moons.

As these sub-communities grow and move on their own, they’ll even serve as secondary funnels back to the home planet.

Continuing the metaphor of celestial bodies: if the main community is worth its salt, it’ll naturally draw the attention of other communities, which will pass through orbit and exchange some value in the form of a collaboration, be it mutual merch or perhaps a technical integration.

Marketing Teams of the Future

If you like Guardians of the Galaxy, I promise you (most of) the comics are way way way better

In 3 to 5 years’ time, marketing teams at many consumer brands and even some B2B companies will look much different than they do now. Instead of performance marketers, CMOs should staff up with people who know how to design community structures and incentives, how to spark a wheel of organic interactions and build sustainable culture: the community designer (h/t Greg Isenberg for this term of art).

CMOs will also need roles they already have, but focused on the good of the community: content producers to wow and dazzle the community, analysts to measure and track inputs and outputs for community KPIs, and partnership hacks who know how to get in the door and cut some dang deals that benefit — wait for it — the community.

The final ingredient are the moderators tasked not only with filtering out the ugliness, but also to propound the value and serve as amplifiers for what good the community can offer.

Ultimately, I expect community will be cheaper than traditional marketing as we know it today. Using giveaways and referral contests instead of ads will likely cost much less because those mechanisms simultaneously create competitions that people want to win and hero narratives they want to celebrate, hoping they too will win one day.

Let us do nature’s work and retire the marketing funnel from the days of yore. Let’s venture out into the wilds and forge a new method of doing business with all the fun and vigor that thriving communities deserve.

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If you enjoyed this piece from Jonathan Goodwin, check out his Mirror and follow him on Twitter.

See you next week!