Airdrop Marketing: How to Use It to Market Your Web3 Product?

From a user’s perspective, airdrops are one of the best things about web3. They’re much like getting free money; who doesn’t want some?

As a web3 project, though, if you’re treating your airdrop as just free money distribution, you need to rethink your airdrop strategy. 

Over time, crypto airdrops have evolved from what looked like free token giveaways to a highly sophisticated web3 marketing strategy that could dictate the early success of your web3 project.

The commonly perceived rationale behind crypto airdrops is simple: distribute crypto tokens to users to potentially kickstart a viral network effect and build more demand for a product or service.

However, airdrops rarely give the intended results. Most crypto projects conducting airdrops see a 300% increase in price performance right after it and a 74% price drop over time.

To top that, most projects only see a 1% customer retention rate after an airdrop.

This goes to show that most airdrops in their current form are loss-leaders and are an ineffective strategy to growth hack a project's user base. 

So, how can you get it right for your web3 brand?

In this blog, we start from the basics of what crypto airdrop marketing is and share examples of how to set up an airdrop campaign that brings sustainable growth.

What is crypto airdrop marketing?

Crypto airdrop marketing is a marketing tactic where web3 projects distribute tokens to cryptocurrency wallets to attract new users, reward existing ones, and build loyalty. Projects airdrop tokens to users based on predetermined criteria or as a reward for completing specific tasks.

However, most brands get airdrops wrong. They create short-term hype and attract users who are more interested in the “free money” than the project’s utility. 

The hype surely boosts user activity and inflates token prices in the short term. But due to the lack of genuine engagement, the airdrop fails to build a loyal user base or sustain the increased user activity in the long term. 

A majority of airdrops, starting from the Auroracoin drop in 2014 (a clone of Bitcoin hardfork, Litecoin) to Uniswap’s UNI drop in 2020, fell victim to this trap. The airdrop campaigns were perceived as free money giveaways and failed to build sustainable traction.

Despite this, airdrops are not dead.

Why web3 brands need an airdrop marketing strategy

The success of an airdrop strategy is defined by how well you were able to understand your users’ data and execute upon it. A data-driven airdrop strategy can help you do three major things: 

- Improve user engagement: Airdrops are an effective way to reach and potentially engage almost any user on the blockchain. This opens a door for you to introduce your project to any web3 user and offer them something that would make them stick around.

- Build loyalty: Well-crafted airdrops can create a behavioral loop such that a platform’s new and existing users keep coming back, initially for the airdrop incentives, then for the improved user experience they get compared to competitor platforms.

- Distribute ownership: Projects can use airdrops to distribute ownership to a wide range of users. This helps build a decentralized community and governance structure, which is a key web3 tenet.

The recent airdrop by the decentralized NFT marketplace Blur is one of the most effective examples of data-driven airdrops. 

Blur focused on achieving three aspects and was received well by the web3 community members. But before we deconstruct its success and show you how you can do something similar, let’s look at the types of airdrops you can execute.

Types of crypto airdrops

There are several types of crypto airdrops that companies may use to promote projects, incentivize users, and drive adoption. 

There are five broad airdrop categories, but not all airdrops have to be limited to one category:

1. Standard airdrops

2. Bounty airdrops

3. Holder airdrops

4. Exclusive airdrops

5. Vampire attack airdrops

Let’s dive into the details and understand what each of them means and how they’re different.

Standard airdrop

A standard airdrop is an open-for-all airdrop. Any user can receive the drop by signing up on the respective platform and sharing their wallet address. 

The Auroracoin airdrop from 2014 is one of the best examples of a standard airdrop. This cryptocurrency is a variation of Litecoin and was launched as an alternative to Bitcoin and Iceland’s currency krona. 

Icelandic residents could claim 31.8 AUR by simply entering their permanent resident ID on the project’s website during the project’s first phase.

Although standard airdrops are popular due to their simplicity, they have a major downside: users may easily cheat the system by creating multiple wallets to receive more tokens.

So, some standard airdrops also use a lucky draw system to distribute the tokens fairly among participants.

Bounty airdrop

Bounty airdrops require users to perform certain tasks to earn free crypto tokens. These tasks could include promoting the project on social media by retweeting its content, referring the platform to other users, signing up for the project's newsletter, joining the project's Discord channel, and so on.

For example, Ontology airdropped 1000 ONT to users who signed up for their newsletter. 

Some projects also reward users through a point-based system, meaning the more points a user collects by completing tasks, the higher the reward they earn.

Many crypto projects resort to using bounty airdrops as they require active participation from the users, which somewhat helps eliminate airdrop hunters. 

But this still doesn’t guarantee that the user may actively engage with the platform itself — a user may sign up for a newsletter to claim a reward but may completely forget about the platform in a few weeks. 

Holder airdrop

Holder airdrops reward users for holding a certain number of NFTs or crypto tokens. The airdrop amount users receive depends on a snapshot of their crypto wallet at a fixed date or during a certain period.

The APE coin airdrop, which rewarded holders of Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), and the Kennel Club is an example of a holder airdrop. 

The number of coins each NFT holder received depended on the number of NFTs they possessed from each collection.   

The APE coin airdrop is a great example of a holder airdrop campaign.

Exclusive airdrop

An exclusive airdrop rewards users based on factors like time spent on the platform, number of transactions, and contributions to the project’s community. 

The 1-INCH and UNI airdrops gave away tokens to all users who had performed transactions on the dapp before a specified date. 

Vampire attack airdrops

Some newly launched web3 projects airdrop tokens to users of their competitor platforms to persuade them to try out their product. This is called a vampire attack airdrop.  

For instance, LooksRare airdropped LOOKS tokens to all user wallets that had traded NFTs worth three Ethereum (ETH) on OpenSea to incentivize users to join their platform.

Despite the airdrop incentive combined with low commissions, LooksRare failed to attract OpenSea users as the airdrop did not build a behavioral loop. So, users came in for the airdrop and went back to trading on OpenSea. 

On the contrary, Blur’s airdrop, which was divided into three phases, beat OpenSea at its own game by ensuring that users stuck around and saw more value in Blur than they did in OpenSea. 

What type of crypto airdrop marketing does your project need?

Currently, most crypto projects use the “spray and pray” strategy. They distribute a large amount of tokens to users and hope that a small percentage of them will magically convert into long-term users.

Or they resort to rewarding users based on certain criteria to stop users from gaming the system. 

While both approaches work in the short term, our analysis of Uniswap’s token drop shows that humans are not as simple to win over. They need better persuasion to stick around. 

Let’s look at Uniswap’s airdrop criteria and user activity data from Dune analytics to clarify why a UNI-style airdrop is not an effective approach.

Uniswap announced its airdrop in 2020 to fend off SushiSwap’s vampire attack and get liquidity providers back to their platform. 

It distributed $UNI tokens to 220,000 users who had utilized the platform before September 1st, 2020. Each eligible user received 400 UNI tokens, which were worth approximately $1200 during that time.

At the time of the airdrop, UNI holders made up around 40% of weekly volume and 60% of active traders.

A year later, this figure dropped to 5% and has stayed in that region since. That means the UNI airdrop campaign wasn’t effective in attracting long-term users to the platform. 

The Uniswap airdrop was innovative, but didn't create long term, repeat users.

Besides, the number of airdrop receivers actively trading on the platform went from 62,000 to 10,000 just a year later. In September 2022, this number was down to 4,000. In other words, Uniswap managed to convert only 6% of airdrop receivers into long-term users as of 2022. 

The market value of trading fees collected from these users was only $208 million in 2 years but the campaign cost amounted to $351 million.

The Uniswap airdrop didn't drive meaningful long term trading activity from users.

What’s worse, 26% of users who bought UNI from the secondary market held on to them, while only 7% of airdrop receivers did the same. 

When it came to governance, 98% of airdrop receivers didn’t take part in the process — more than 93% of users dumped their tokens and only 1% of airdrop receivers are still active today. 

All in all, the UNI airdrop neither succeeded in garnering active traders to the platform nor did it retain its airdrop receivers and encourage them to participate in governance. 

Their Customer Acquisition Cost (CAC) far exceeded their Customer Lifetime Value (CLV). But for airdrops to be more effective, the CAC must be much less than the CLV. 

To ensure that your airdrop campaign incentivizes users to use your platform regularly, here are a few things you should do:

1. Create a behavioral loop

A behavioral loop is a psychological pattern consisting of a trigger, action, investment, and reward, and helps form habits. 

Most social media platforms like Twitter and Telegram leverage these loops to hook users and keep them coming back to their apps every day.  

Here’s how they work — a user gets a notification from the platform which triggers them to open the app and make a post or reply to the comment. 

As a result of this investment, they get a reward i.e. more users and engagement, and the cycle continues. 

Behavioral loops drive habit formation and long turn growth. Reward users in your airdrop for doing the things that matter!

Airdrops can use the same loop to hook users and acquire new ones without running the risk of churn.

Take Phase 1 of the Blur airdrop campaign, for instance. It launched during the peak of the bear market, where no one expected to receive free money, and the reward criteria were simple: 

Every NFT trader who bought or sold NFTs six months before Blur’s launch was eligible for Care Packages. 

Eligible users only had to list one of their NFTs for sale on Blur within 14 days of the announcement to receive the package. This easy task acted as a trigger, built short-term hype, and instantly improved Blur’s brand awareness among NFT traders.

2. Set up reputation-based airdrop criteria 

As we saw earlier, rewarding airdrops based on general criteria only attracts users that dump tokens in the long run.

To identify users invested in your project’s progress and incentivize them to use your products regularly, you need to reward users based on reputation criteria.

Phase 2 and Phase 3 of Blur’s NFT airdrop do this well.

Blur’s Phase 2 required NFT owners to list their NFTs through their platform. The number of Care Packages users received depended on the number of NFTs they listed. 

And listing NFTs of highly active or blue-chip collections maximized the airdrop potential. 

This created a huge supply of NFTs for sale on Blur. Phase 3 brought enough demand to match it. To win care packages in this phase, NFT traders had to place bids on NFTs listed for sale on Blur.

Combined together, Blur’s airdrop created the perfect loop for users, eventually creating a great supply and demand mechanism.

3. Conduct airdrops in “waves”

Scheduling airdrops in waves instead of conducting them as a massive one-time event helps you create more effective airdrops for two reasons:

- It encourages users to engage with your product multiple times and fully experience why your platform could be a better option than its competitors.

- It allows you to acquire data and test your reputation criteria to see if it helps you improve important metrics like retention rates and customer lifetime value (CLV). You can then use this data to improve the next airdrop. 

The Blur airdrop does this well. It started with simple criteria and added complex filters in later stages. 

This enabled the platform to acquire new users and filter out airdrop hunters. It also helped them refine their criteria over time to only offer bigger rewards to users who’re really interested in the platform.

4. Offer benefits that incentivize loyalty

Looking at the numbers from Uniswap’s Dune analysis again, it’s apparent that benefits like governance and staking aren’t the most effective at retaining users. 

Web3 projects must look for new ways to create loyalty. If we look at some of the most successful web2 and web3 brands, they create loyalty through:

- Tailoring the experiences to their users, showing they understand them.

- Designing good tokenomics and NFT design.

- Giving their users a reason to come back.

- Giving users a way to feel like they’re a part of the brand.

- Offering redemptive rewards.

How to set up a crypto airdrop marketing campaign

Now that we’ve broken down what makes an airdrop successful and well-received, let’s define an example airdrop and look at how you can execute it.

As we largely referred to the Blur airdrop throughout this blog, let’s try and set up something similar to that. Once you know how to do that, you can easily set up other simpler airdrops. 

Defining the Airdrop

Let’s say you’ve built an NFT marketplace. Now, you want to attract users from a competitor marketplace, say OpenSea, and retain them once they’re there. To do this, we’ll divide the airdrop into three phases:

Phase 1: Reward all users who’ve traded NFTs worth $1,000 on any NFT marketplace in the 6 months prior to April 30, 2023.

Phase 2: Reward users based on the number of NFTs they list for sale, and the average floor price of all listed NFTs.

Phase 3: Reward users based on the total bid amount. The higher their bids from the floor price, the bigger their potential for a reward.

To execute these phases, you need to be able to filter out users that meet the respective criteria. But how do you get the data of users of competitor platforms?

Well, blockchains record all user activity on a public ledger. That means the trading activity of users from all NFT marketplaces gets registered publicly on-chain. 

However, it’s nearly impossible to sort and filter these users manually using a blockchain scanner like Etherscan. That’s where a no-code web3 marketing and analytics platform like Raleon can help.

So, let’s see how you can find your perfect audience and execute this airdrop with the help of Raleon.

Phase 1

To filter out users for Phase 1, you can go to Audiences of Raleon and choose specific  filters to find the kind of wallets you’re looking for.

Target your best users with a simple, no-code segmentation tool, like Raleon's Audience Builder to power your airdrop

In our case, you’d need to filter for users who’ve traded NFTs worth at least $1,000 in the last 180 days. Here’s how your audience filter phage would look like:

Targeting should be easy, no-code, and capable of segmenting users exactly as required for the airdrop.

If you want, you can also add more filters by clicking Add wallets who and further narrow down the audience that receives the airdrop.

Once done, you can now head over to the Campaign Builder on Raleon and set up and execute the airdrop. Again, without any coding.

Phase 2

In the second phase, you’re going to reward users based on the number of NFTs they list for sale and their average floor prices. 

Earlier, this was difficult to achieve as listing NFTs took place off-chain and you had to attribute them to on-chain wallets. 

But now, with Raleon, you can set up this filter in just a few clicks as it sees users as a combination of their web2 and web3 data. So, it’s simple to track off-chain app-specific actions and connect them to on-chain actions.

To set up this phase, you can use Raleon’s off-chain event API, which automatically runs all events through its identity resolver and ties web2 and web3 behavioral activity together while protecting users’ privacy.

Once that’s done, you can come back to the Audience Builder and specify the conditions you’re filtering your audience for. 

In this case, you’ll need to find user wallets that have participated in an Off-Chain Event, which is specifically listing an NFT (listed-nft option as seen in the image below). 

Then, you’ll need to set the duration as the month or days within which listing NFTs was eligible for an airdrop. The setup would look something like this:

The ability to segment based on on-chain AND off-chain data is key for proper segmentation in your airdop.

To go more granular with your audience, click Add wallets who and add additional filters to the same audience, such as the average floor price of NFTs. You can do this by following the same steps as above.

Phase 3

The last phase rewards users based on the total bid amount. And the simplest way to set this up is to look at the activity on the contract. 

The below image shows that we're defining conditions to create a list of all crypto wallets that have transacted with the bidding contract in the last 30 days. 

Consider even targeting specific contract address to understand specific token ownership for your community segmentations.

If you don’t have a contract, you can use our off-chain event API like you did during Phase 2. 

You can also drill down on the kinds of wallets you want to airdrop tokens to based on different parameters like the total number of bids, bid value, bid values above or below floor price, etc. Or you can build separate audiences for this phase and take a more refined approach to decide how many tokens each kind of audience gets.

Airdrops: The best web3 growth hack?

Airdrops are a popular crypto marketing strategy but most brands get them wrong. They incentivize the wrong behavior, causing users to dump tokens and only see a short-time activity spike. 

However, by creating a behavioral loop, rewarding users based on reputation criteria, and offering benefits like redemptive rewards that encourage users to come back, you can make your airdrops more efficient. 

While this was difficult earlier, you can build audiences, collect data on on-chain and off-chain activities, and target very specific user personas using Raleon. 

Once you’ve set up your audiences, Raleon will automatically keep them up to date by tracking all wallets that meet the defined criteria.

Furthermore, if you’re running our attribution, you could even see what marketing efforts bring them to your website.

That said, there’s a wide variety of possibilities that you can explore when you use Raleon to study on-chain and off-chain data. And you can then implement the most accurate data to drive a range of digital marketing campaigns across web3 and web2.

Set up an airdrop to bring sustainable growth. Get in touch

If you need help with building your audiences, using the dashboard, connecting your off-chain activities with on-chain transactions, or simply want to talk about best practices in Web3 marketing, we’d love to have a chat with you. Click here to connect with an expert at Raleon and get your queries resolved.