You can also read this piece on SteemIt.
Like other nascent social networks, SteemIt has the non-trivial burden of competing with network effect giants like Medium, Facebook, and Reddit. The central problem: how do I tear away users who are so entrenched in the established groups and flows of these highly magnetic platforms?
As other players like Ello or ZapChain, each new contestant in the social media game has the dual problem of customer acquisition and customer retention. With enough savvy, acquisition may be relatively easy: users tired of the same old interface are likely to check out a new application and respond to promotions and low-barrier entry. Customer retention is much trickier, however, as the Ello case demonstrates. Networks can easily work up highly exuberant critical mass and then simply fail to retain users, eventually settling into a thankless coasting that even promises of privacy and security are unable to remedy.
I see customer acquisition cost (CAC) in a social network environment as the abstract cost required to convert and retain users. Unlike other nascent networks, SteemIt has the interesting proporty of being able to pay CAC directly to users through a unique economics, and this has lead to very compelling user conversion rates on SteemIt so far. As its platform statistics show, active accounts have approximately doubled since the commencement of regular payouts, and new accounts are being added at a healthy pace. Moreover, the STEEM asset is trading above $0.40, almost a 100% increase since a week ago, accompanied by a 2–3x increase in volume across venues.
All these metrics are great for the Steem platform, but there is a long road ahead. Some areas to watch:
Capitalization. The platform has to work toward good capitalization: exchange volume should be continuously improving and long-term investors need to have good reasons to purchase STEEM. As long as the network keeps growing, there is a compelling case for based on expected growth; eventually, a critical mass of users will create good incentives for publishers and advertisers to aggregate STEEM demand as well.
Customer Acquisition Costs. SteemIt platform payouts are currently highly inefficient; as a sanity check, note that most introduceyourself pieces are trading “well above par” as early adopters are able to take advantage of a small, inefficient market at the moment. As more users join and the market becomes more efficient, payouts are likely to decrease, thus increasing over all CAC. It is important that SteemIt achieves a critical mass of users before CAC falls below the level needed to outbid the network effects of other platforms.
Alternative Applications. A Steem-based Wikipedia, Yelp, or Craigslist are compelling applications that can be attempted on the Steem platform. It would be interesting to ascertain whether early diversification into these applications could constitute a compelling hedge by the Steem team against the risks of playing in the highly competitive social market.
Overall, we love what we see on SteemIt so far! It’s beautiful to watch a social network form in real time.