Community is the Next BM Thrust

Community is the next major Business Model Thrust in the next few years, similar to how social networks were about a decade ago.

The difference is that most of the early-stage social networks incentivized industrialized Followers and Likes, whereas a real community can start with just a few Ambassadors in an online chat.

A lot of the Network Effects related to successful companies start with a few hyper-engaged Ambassadors who help diffuse certain narratives and ideals into the broader conversation. Instead of a ‘Like’ or a ‘Share’ it is a wave of momentum, enthusiasm and energy that drives customers, would-be investors, and talent towards an idea or brand.

New Tech - Community Networks

Major shifts driving this relate to Customer Acquisition on digital advertising platforms:

The following threads are discussed in this post as it relates to ‘community:’

Digital Advertising

Losing some of the hyper-targeting ability on digital advertising platforms means that finding new customers is becoming much more difficult (and expensive!) for the average brand.

Customer Analytics – eCommerce CAC

Furthermore, the extent of the economic crisis is pushing more and more people into desperation mode for new ideas that can unlock income streams and/or capital. They say ‘necessity is the mother of invention‘ so here are a few layers to the Business Model ‘thrust’ behind community building.

An array of potential ‘signals’ can come from a community, all of which could be used to help raise capital to fund what is needed.

Customer Acquisition

A lot of retail companies are dabbling into community building by driving values-based conversations around their brand in certain group.

Anecdotal data suggests that these brands are investing a lot of resources into these initiatives with minimal results up to this point in time.

The reason?

It is hard to convert organic conversations around values-based issues into Customer Acquisition in the short-term. In the medium term, however, these conversations will help build Ambassadors who will in turn become ‘nodes’ in the network that bring new, hyper-loyal customers to the brand(s). That is the theory anyways, as diffusion of brand values into the broader communities takes time and requires a significant investment upfront in both infrastructure and moderation.

Mid-term, the goal is Customer Acquisition, and ideally at a much lower cost and a much higher retention rate relative to industry peers.

Business Model - Community Customer Acquisition Cost - Retail
Business Modelling – Community CAC – Retail

Crowdfunding – Donations vs. Equity

The link between community and crowdfunding – whether for donation-based social causes or equity-based small business – could not be more obvious.

What has perhaps changed is that the infrastructure/regulations related to crowdfunding in the equity space has matured significantly in the last several years, and so becomes much more accessible to any entity that can engage a community of potential customers and investors.

Rather than building a website and Facebook/Slack/Telegram group, the ideals can be aligned much more concisely at the earliest stages of conversation between founders/entrepreneurs and would-be customers or investors.

Validated customers are a requirement for potential investment in many cases. Even having potential customers in an early-stage community is a plus. An array of potential ‘signals’ can come from a community, all of which could be used to help raise capital to fund what is needed.

Experiments in Web3

Now that the market has crashed and the hype cycle is dying down, it is probably safe to speak about ‘Web3’ in a rational way as it pertains to business models.

There has always been a ‘crypto use case‘ for communities because incentives can be used to drive behaviors and reward power users who help take communities to the next level. Somewhere in the cobwebs of the Web3 infrastructure still exist mechanisms to achieve this without tying into a lot of the ponzi schemes around pyramid marketing and/or insane interest-rate promises. So-called ‘tokenomics’ should favor community builders instead of speculators.

Community chat app Geneva provides one interesting example of this. As they themselves are building ‘Homes’ for group chats around various subjects, they use ‘Token-Gated Rooms‘ to unlock additional features within the rooms. That means users would need to have a wallet with certain tokens in it to level-up certain features; yet, it is not a requirement to use Geneva.

New Tech - Community Networks

The flipside business model for something like this – without Web3 – would be a sponsorships/advertising model á la Clubhouse, a model that is likely doomed to fail. And that seems to be where we are at with Web3. Where trust is a necessary element for the business, advertising/corporate sponsorship is detrimental to the core model.

Web3 – while very imperfect – has the base building blocks for new models in social communities. There are many traps due to the tie-in to a “cryptocurrency” industry synonymous with a casino, but there is still potential there.

The Anchor – Lifetime Value (LTV)

ARPU, CAC. LTV (Lifetime Value) Modelling
LTV (Lifetime Value Modelling)

If any or all of the above fail in some way shape or form to catalyze into meaningful dimensions for any business, there will be always be LTV to fall back on.

An engaged community is one that is, at its core:

These customer attributes are incredibly important for any company or cause. They drive LTV, which in turn helps to drive profitability and sustainability of the business model.

Overall, in whatever way this new wave of energy around community moves startups, SMEs, and brands in the market, in all likelihood it is the next major Business Model Thrust that will likely affect all players across all major verticals in the next several years.

Top 3 – Learn More

Business Model Toolkit

New Tech – Community Networks

Business Modelling – Community CAC