Web3 could seize the decades-old software-as-a-service business model


In the age of services like Netflix, Dropbox, or Amazon Prime, it’s easy enough to forget the days when customers lined up to acquire boxed digital goods, like software or entertainment media, with purchases. unique. The era of annual fees began when consumer products turned into subscription-based services.

The same transformation happened about a decade ago in the corporate world when companies reinvented age-old solutions such as enterprise resource planning or customer relationship management as ongoing monetized services. through recurring billing. Thus, the business-to-business (B2B) software-as-a-service (SaaS) model originated in the 2000s and has disrupted the way enterprise technologies work over the past two decades.

B2B SaaS was largely untouched by the thriving blockchain and crypto ecosystem until last year, but a long-running bear market made early Web3 startups realize they should leave no stone unturned to survive difficult market conditions and face increasing competition. .

From providing enterprise-level Ethereum infrastructure to blockchain-based document storage systems, Web3 SaaS (or SaaS3) companies offer decades-old business services reinvented in the Web3 environment, and new data shows that the business world is open to trying new ways of doing old things.

An attempt by venture capitalist Tomasz Tunguz to gauge the total addressable SaaS3 B2B market calculated that 57 Web3 SaaS projects generated revenues ranging from $500,000 to over $100 million in the second half of 2022. Web3 startups, largely dominated by Ethereum, indicate a total addressable market of $231 million in 2022.

The Total Addressable Market, or TAM, is an admittedly optimistic graph that multiplies the potential number of customers for a project by the budget reserved for the service. It does not imply any real life concurrency or limitation, hence the probability that the “addressable” part implies. TAM is the potential market opportunity for a product or service, and the SaaS3 B2B space had at least a quarter billion of that opportunity last year.

Cashless society goals work in favor of Web3

Mark Smargon, CEO of blockchain-based payment platform Fuse, believes B2B SaaS in the web3 industry can benefit from a number of factors, including the growing adoption of mobile devices, internet and e-commerce platforms, as well as a shift to cashless societies in many countries.

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Inherent issues such as high costs, privacy issues, and geographic restrictions make traditional payment systems expensive and difficult for merchants. That’s why Smargon noted that Web3 startups would see the most significant growth opportunity by providing services to Web2 businesses and making it easier to integrate and use Web3’s solutions, apps, and payment rails. the blockchain. He told Cointelegraph:

“It’s up to Web3 startups to give businesses a way to provide their customers with experiences that match what they’re used to in Web2 while improving efficiency, value proposition, and stickiness.”

According to the CEO of Fuse, Web3 startups need to start introducing the blockchain-based way of doing business to traditional companies with small steps. “Salesforce users view non-fungible tokens (NFTs) less as collectibles or art and more as the next generation of loyalty programs for their best customers,” Smargon said. “NFTs can be changed on the fly to adjust terms and unlock physical and digital rewards as customers become more engaged with a business.”

Web3 adoption starts with disconnecting from Web2

The real tipping point can come when companies use blockchain solutions to manage day-to-day business activities, such as accounting, purchasing and invoicing, Smargon said.

When it comes to payment services, developing countries where a significant portion of the population is unbanked or underbanked add unique opportunities, he explained. In these countries, companies are not entrenched in legacy systems or locked into a vendor, making them “free to innovate and engage with Web3 solutions from the start rather than having to modernize them” .

Integrating businesses with Web3 presents another challenge for startups, Smargon noted: “They must first [from Web2] then integrate them with Web3-based systems. The key to making companies realize that there are viable alternatives is to provide them with compelling business and efficiency benefits, Smargon said:

“To do this, [Web3 startups] need to produce solutions that allow companies to build secure products without the burden of custody, reach customers without incurring compliance and licensing costs, and deliver exceptional customer experiences without creating wallets from zero.

But it doesn’t stop there: Smargon added that Web3 users also need to be able to transfer value in and out of their business without facing high fees and barriers. “Changing consumer demand is driving change at the local level, which means businesses must adapt or die,” he said.

Web3 still needs its “pickaxes and shovels”

On the surface, the SaaS movement and the Web3 movement are quite misaligned in their interests, according to Nils Pihl, the CEO of decentralized protocol developer Auki Labs:

“While Web3 encourages people to take ownership and responsibility for their own digital presence, the fundamental philosophical tenet of the SaaS movement is to manage the complexities of the digital realm for you.”

From the opposite perspective, however, SaaS has already won the Web3 space, Pihl said: “Platforms like Infura and Alchemy run huge chunks of the Web3 ecosystem because so few can, or even want, run their own nodes.”

As such, many companies that reliably generate revenue in Web3 actually provide tools (as a service, usually) for other Web3 projects, Pihl explained, adding:

“In a world where apps that kill have yet to be found, it’s a safe bet to sell pickaxes and shovels to those who dig.”

He went on to say that many Web3 companies are so passionate about Web3 that they design by ideology instead of looking for product-market fit. Pihl thinks that if startups start out by saying “we’re a Web3 company,” they’re limiting their perspective or ability to listen and understand the business needs of their potential customers early on.

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Although the B2B SaaS market is huge, people shouldn’t assume that “product X but on the blockchain” is a winning idea. The creator could raise money for it, but if the new on-chain “product X” doesn’t solve the problem better than the one already in use, there’s no reason to switch to the new product, according to Pihl.

According to Pihl, assuming that customers will be happy to adopt a Web3 product because its developer finds it philosophically, ethically, or aesthetically superior is not a good approach:

“You need to solve an urgent problem for the client, otherwise they won’t engage.”