Community, but why?
By Adam Ryan
In the last few years, the word community has been thrown around… a lot.
Nike claims they have a community of athletes. OnDeck raised some serious cash by claiming they’re building a community of builders. Even I dropped “Working at the intersection of content, commerce, and community” into my LinkedIn bio.
Thing is, most of us say we’re building a community, but can’t tell anyone how we’re actually doing it. Part of the problem is that definitions of community and audience are often misinterpreted.
This is how I think about the two terms…
Community has three parts:
- When your audience connects with each other
- When your audience shares a similar intention
- When your audience has a high level of trust or attachment for the overarching brand
Audience has one part:
- A collective of people who opt-in to receive information from your brand
Reasons why it’s special
When you ask an investor about community, the first thing out of their mouth is that it extends LTV and increases ARPU (Annual Revenue per User) with a cohort.
They’re not wrong, but growing ARPU shouldn’t be the sole focus of a community. If it is, the vibe of the community will be off and the flywheel of the community will be short-lived.
If a community does have a great vibe, with organic engagement and high pride in what the community represents, then there are some massive benefits.
Referral programs are slowly becoming outdated and saturated. Do they work? Sure. But the best marketing is FOMO — always has been, always will be.
How do you create community FOMO? You create buzz outside of the walled garden about what’s happening on the inside. Then, as your members start to feel like they’re “in the room where it happens”, the status of being “in the room” becomes a referral mechanism.
If you can pull this off, your growth ratio can be 1:many with a viral loop built off of UGC.
PMF with higher velocity
This might be the biggest value prop of a community. Product-Market Fit (PMF) is a term that isn’t thrown around in media as often as it is in SaaS, mostly because it’s harder to measure in media.
While there are some quantitative metrics, the best way to determine media PMF is by speaking with your audience. Ask them about the problems they’re experiencing via surveys, interviews, and panels.
As a startup, building a community first may seem like a loss leader — but if you do it correctly, your community should enable you to build a product with a much higher chance of adoption on a much faster timeline.
If you’re an exec wondering how to 10X your business, having a strong community will provide that unlock.
Extension of products & RD
Every media company should be thinking about creating revenue-driving opportunities that come directly from their audience. When a group of like-minded people is talking about their own problems, it naturally introduces solutions.
Community gives you a sneak peek into what you should be building.
Food52 has shown how to use a community to launch new SKUs. I’ve seen communities host gatherings in certain cities where there was enough traction to throw a large conference. There are many more examples of big products introduced from the comment section of a community.
R&D can be the most expensive piece of expanding products, but if your community is begging you for something? Make it.
Potential of communities with web3
Web3 is opening the door for building a brand new type of company — one that is truly built with the community.
Historically, companies have been 80/20 owned by Founders & Team. Then, investors come in and dilute 20% for each round. After 3 rounds, the Founding team probably has ~40% ownership. Statistically, 84% of startups who raise 3 rounds still fail to exit or have a liquidity event.
That means most founders give up a huge portion of their ownership… and still have a huge chance of not making any money.
Web3 changes this.
Founders launch the company with (these are estimates) ~40% for the community, 25% for investors, and 35% for the team. It may seem crazy to immediately dilute yourself as a Founder, but what you’re doing is building a community that is bought into your mission from Day 1.
Hypothetically, this also replaces the cycle of diluting yourself for VC money that is directly transferred to Facebook and Google for advertising. Your community replaces your advertising budget.
This is the value of dilution for a community-driven DAO.
On top of that, liquidation is easier. Instead of having an 84% chance of failure and living on 10-year time horizons with a possibility of no exit, you have a possibility of many, smaller exits earlier.
The lower-barrier to liquidation also forces you as an operator (or in this case, a moderator) to continuously ask yourself if the community is retaining the value it creates. If you don’t, you fail — and fail fast.
There are a lot of possibilities with community and media, and DAOs are setting themselves up to be the structure to bring them to life.
The playbook is there
Is building a community total BS? Not at all, but it’s not as simple as saying “Oh look, people responded to my newsletter I have a community!”.
Community takes investment. As a brand, you need to create the rails for your community to meet with each other, work your ass off to ensure engagement stays consistent, and have a strategic vision on how to maximize the impact of your community members.
Universities have nailed this. They get you to fall in love with their brand for 4+ years, they host football tailgates, they have the band lead you in song — and they have the fundraising team call you the day after you graduate.
The playbook has been made. As media operators, we often just can’t see the forest through the trees.