In 2017, a pioneering Web3 communication platform caught the world's attention. Their whitepaper outlined an ambitious goal to change the user-as-product business model, which suffers from systemic issues such as media manipulation using social bots and data privacy concerns.

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They raised a staggering $107M in just days during their ICO, making it the [6th largest](https://www.insider.com/the-10-biggest-ico-fundraises-of-2017-2017-12) ICO raised in 2017. The hype around the project was surreal. An [on-chain analyst](/blockchannel/a-look-at-the-status-im-ico-token-distribution-d0f8a905cb2c) claimed the smart contract refunded more ETH than it raised, specifically refunding 11,161 attempts for 347,154 ETH across all attempted transactions.

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This project was [Status](https://status.im/), an open-source messaging platform and mobile interface to interact with decentralised applications.

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With the hype surrounding it, we might have expected Status to achieve a meteoric rise similar to popular Web2 communication platforms such as Telegram, WhatsApp, or WeChat.

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 ![Data adapted from: https://www.businessofapps.com/data/ & https://backlinko.com/whatsapp-users](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-01b3th8.png)

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Within the first year of launch, Telegram achieved over 35 million monthly active users (MAU), WhatsApp gained over 10 million MAU, and WeChat achieved over 50 million MAU. However, Status only acquired an estimated 140,000+ MAU.

# **Reasons For Its Limited Success — Status**

## Macro — Limited Worldwide Adoption Of Web3 Technology

 ![](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-vxc3tgx.png)

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As of 2021, approximately a year after the launch of Status on the Google App Store and Apple Store, there were only an estimated [106 million](https://crypto.com/research/2021-crypto-market-sizing-report-2022-forecast) cryptocurrency users worldwide.

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However, compared to the number of internet users worldwide during Telegram's formative first year in 2014, there were over [3 billion](https://www.internetworldstats.com/emarketing.htm) internet users worldwide. In 2010, a year after Whatsapp launched, it was close to 2 billion. When WeChat launched after a year in 2012, it was close to 2.5 billion. Evidently, Telegram, Whatsapp and WeChat had a bigger pie to capture their market share from and grow their MAUs much faster than Status could.

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To begin with, Status launched in a nascent market with limited user adoption.

## Macro — Nascency Of Web3 Technology

Additionally, the limited growth of Status can be attributed to the nascency of Ethereum. When Status launched in 2020, Ethereum was only five years old, and many elements of the technological stack, even today, still need to be matured or added to provide the value-add expected of average users.

## Micro — Poor User Experience

Furthermore, micro-environmental factors, i.e. the organisation itself, contributed to its limited growth.

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Comparing their monthly active users (MAU) to users worldwide in their respective years, Status grew slower than Telegram, WhatsApp, and WeChat. After their first year of launch, Status only achieved 0.13% of cryptocurrency users worldwide, while Telegram achieved 1.14% of internet users worldwide, WhatsApp 0.51%, and WeChat 2.00%.

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After reviewing feedback about the Status app on [Google Play Store](https://play.google.com/store/apps/details?id=im.status.ethereum&hl=en&gl=US), it is evident that the user experience of the Status app could be improved. The most commonly highlighted issues include problems with usability, a lack of features, confusing settings, and high transaction fees. Additionally, several users requested specific features such as encrypted calls, search functionality within chats, and the ability to send different file types. Overall, the reviews suggest that while the app has potential, several areas need improvement to make it more user-friendly and appealing to a broader audience.

# Signs Of Growing Interest In Web3 Communications

Following the limited success seen in Status, there is growing interest among VCs in Web3 communications and returning confidence that this technology is the future.

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 ![](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-ige3t4p.png)

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After the surreal episode of Status' ICO in 2017, interest in Web3 communications dwindled drastically to $0 in 2019, based on publicly available information. In addition to the novelty of the idea itself, this was largely influenced by the macro bear market that followed the initial coin offering (ICO) boom in 2017.

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However, starting in 2021, it is evident that interest towards Web3 communications returned. Furthermore, despite the challenging market conditions in 2022 and Q1 2023, fundraising for Web3 communication projects continues to grow. In just the first two months of 2023, a total of $43.3M has been raised, equivalent to \~80% of the amount raised in 2022. This was contributed by [Here Not There Labs](https://decrypt.co/121984/web3-social-startup-towns-raises-25-5m-led-by-andreessen-horowitz) (Series A — $25.5M), [Sending Labs](https://www.businesswire.com/news/home/20230221005181/en/Sending-Labs-Secures-12.5M-to-Launch-the-Web3-Communications-Stack) (Seed Round — $12.5M), [Salsa](https://www.coindesk.com/business/2023/02/16/web3-messaging-platform-salsa-raises-2m/) (Pre-Seed Round — $2M), and [Tribes](https://www.coindesk.com/business/2023/01/23/web3-social-wallet-tribes-launches-with-33m-in-funding/) (Pre-Seed — $3.3M).

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Based on this pattern, I anticipate an increase in the number of projects launched in this field in the upcoming years. However, obtaining funding may become difficult due to heightened competition in the market. According to publicly available information (special thanks to the landscape map published by [Safar](https://twitter.com/Safaryclub/status/1623343396361482245?s=20)y and [Messari](https://twitter.com/MessariCrypto/status/1628590504542871554?s=20)), about 30 existing projects are competing in this space.

# Looking Ahead — Why Invest In Web3 Communications

The growing interest of venture capitalists in the sector raises the question, "Why?" Why are they willing to invest in this area despite the poor market conditions? And what future do they envision?

## Enabling The Metaverse With Web3

 ![Source: Value Creation In The Metaverse Report by McKinsey&Company](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-1lf3tc2.png)

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It is the metaverse narrative and the conviction that Web3 plays a crucial role in enabling that future. According to McKinsey's research (see above), the metaverse comprises ten layers categorised into four groups. At the base layer, the "Enablers" will consist of L1/L2 protocols that address various aspects such as security, privacy, governance, identity, payments, and monetisation. And built on top of the "Enablers" layer, we have the "Platforms" layer, where Web3 communication platforms are built to provide end-users access and discovery to the activities and services offered within the metaverse. These platforms will be vital in providing an immersive and engaging experience that encourages users to participate in the ecosystem. Those who can successfully create such platforms stand to gain substantial economic benefits.

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 ![Source: Value Creation In The Metaverse Report by McKinsey&Company](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-5sg3tvo.png)

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According to McKinsey, the metaverse is expected to generate up to $5 trillion. Also, when consumers were asked what they hoped to be doing in the metaverse within the next five years, many answered socialising and communicating with family and friends. While Web3 technology is not the metaverse, it will play a significant role in the technology stack of the metaverse, and "Telecommunications" as an enterprise use case is expected to benefit significantly too.

## Web2 Communications Are Inadequate For The Metaverse

The problem with existing Web2 communication platforms is they are disconnected from the L1/L2 protocols that will be the enablers of the metaverse. Today, users looking to explore and connect with communities within the DApps and NFT ecosystem are facing trouble clicking through many permissions when trying to get into token-gated groups on Web2 communication platforms, such as Discord and Telegram.

[https://youtu.be/6-EHhA3w2dc?embedable=true](https://youtu.be/6-EHhA3w2dc?embedable=true)

For example, we follow the user flow of an NFT owner in the NounsPunk community who wishes to verify their NFT using Collab.Land. This verification is necessary to access token-gated channels on the NounsPunk Discord server. However, the process is convoluted and requires the user to navigate through five different screens: 1) the NounsPunk Discord link on a website, 2) the Discord app, 3) the Collab.Land verification browser, 4) the wallet extension for signing, and 5) back to Discord.

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 ![CollabLand's verification process](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-l1h3t5j.png)

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Furthermore, the user may experience several instances of stress, anxiety, and uncertainty throughout the verification process. For instance, being directed to an unfamiliar site can be alarming, as there is a risk of encountering scams or phishing sites. Additionally, pop-ups with "Are you sure…?" statements may make the user doubt their actions, and a requirement for users to screen switch manually can cause disorientation.

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As a result, the user experience is not optimised for the average user, and many users may likely drop out of the verification process (I'm curious to know the actual stats on this).

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 ![Walletchat's verification process](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-5zi3t9b.png)

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However, if communication platforms are built on the blockchain infrastructure, authentication procedures can be conducted back-of-house with assurance and credibility. This results in a streamlined user flow requiring only a 3-step process without screen transitions (see above). Users only need to verify their wallet address to log in and automatically gain entry to all relevant communities. Eventually, with just one sign-in, users can access all aspects of the metaverse.

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Looking ahead into the metaverse, the demands for and use cases of communication platforms are expected to grow. However, with the clunky processes and being fundamentally disconnected from the blockchain infrastructure, it will be difficult for Web2 communication platforms to keep up in the long term.

## A Peek Into The Metaverse With WeChat

 ![Source: https://www.thevalueengineers.nl/the-wechat-business-models/](https://cdn.hackernoon.com/images/jOwICI2WoOgpqQlnawvbnu99cab2-v2j3tn9.png)

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If we look at the ecosystem of WeChat, the famous Chinese messaging app, it resembles an alpha version of the metaverse. WeChat evolved beyond its origins as a messaging app and now offers a wide range of features and capabilities. The platform allows users to perform various functions such as social networking, playing games, shopping, banking, and even hiring an on-demand housekeeper through 3rd-party service providers that are accessible within the app. WeChat's mini-programs serve as virtual spaces where users can interact with each other and engage in different activities. Additionally, the app's social aspect allows users to create their digital identities and connect with others in a virtual environment, much like the metaverse concept. With its constantly evolving features, WeChat has become an all-encompassing platform that reflects the characteristics of a metaverse-like space.

# Interim Thoughts

There are good reasons to believe that the metaverse is the future, and Web3 communication platforms will be a valuable asset in the ecosystem. Despite the limited success of Status, there is renewed interest among VCs and prominent players in the space, and the reasons to be excited about the revolutionary metaverse are justified.

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Moreover, we can reference the significant success of the WeChat ecosystem within China and build upon its success. Imagine extending the WeChat ecosystem beyond the Great Wall and crossing physical boundaries between nations; the compounded network effect will be highly rewarding.

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In the following piece, I will delve deeper into the existing players that are shaping our future Web3 communication platforms. I will provide a competitive analysis of the players in this space by surfacing their competitive advantage, examining their features and, most importantly, their monetisation strategies. My initial thought about their monetisation strategy is to adopt a SaaS model similar to WhatsApp for Business and WeChat for Business, with a twist incorporating tokenomics.

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Finally, if you want to discuss my deep dive or chat about Web3, let's talk on-chain! Drop me a message at dicksonlts.eth!

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Telegram, WhatsApp, & WeChat Succeeded So Status Could Fail, But Web3 Communications Isn't Dead Yet

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