/Reach Research Report

/Reach Research Report | December 11, 2023

Thesis Statement

/Reach is a new web3 marketing platform and protocol for social media platforms that uses a system of aligned incentives to drive quality, organic engagement to social posts, greatly boosting social reach.

This solution taps into the existing demand for paid advertising, an industry that generates hundreds of billions of dollars annually. The /Reach token has the potential for a high valuation if the platform finds product market fit outside of the native web3 landscape.

/Reach Overview

/Reach is a software platform that allows content creators and brands to set monetary bounty rewards to incentivize users to engage with their social posts, boosting their reach in a few easy steps:

Creators (Advertisers)

1. Select a piece of content and create a mission.
2. Select a category for the content to target the correct audience.
3. Add an ETH bounty to the mission to increase engagement.
4. Track your content’s performance in the analytics dashboard.

Contributors (Users)

1. Complete missions by engaging with content (like, retweet, comment) and earn points.
2. Earn REACH tokens by climbing the points leaderboard.
3. Engage with premium missions to earn REACH tokens AND a chance to win the ETH mission bounty.

REACH Holders

1. Passively earn more REACH tokens from holding REACH. A portion of each premium mission goes towards buying REACH which is then distributed to holders.

Missions can be created and completed from the web app, the official /Reach discord, or any number of partner discord groups that have integrated the /Reach discord bot.

In summary, rather than paying a social media platform like Facebook or Twitter to show content directly to a target demographic, /Reach allows creators to directly pay the target demographic to engage with a piece of content which organically increases the reach of that content.

Ensuring Quality Engagement

/Reach has developed two proprietary algorithms to ensure quality engagement and defend against bots and point farmers:

Reach Score System (RSS): Quantifies the quality of a person’s profile based on 10 dynamic inputs which results in a multiplier on your points for contributing which increases chances of winning raffle and making it to weekly leaderboard.

Relevancy-Based Rewarding: /Reach has created an AI powered tool with machine learning to measure and score replies and contributions based on relevancy, value-add, and effort.

These two algorithms reward quality replies/engagements from high quality profiles (real people) and penalizes low effort replies from bots, ensuring that the engagement received on posts is high quality and actually accelerates the post’s reach.

REACH Tokenomics

There are 100,000,000 REACH tokens.

37% of the token supply was sold in the pre-sale at a $3M valuation.

The team gets 25%.

Advisors get 7%.

The Uniswap LP gets 6%.

10% is reserved for marketing and 15% is reserved to help with exchange listings.

While the team, advisors, and marketing efforts are getting a lot of tokens, thus far /Reach has excelled in those areas:

• The team has built a fully functional product before the token has even launched.
• The advisors that have been brought on have massive social reach.
• The product is seeing fast growth with over 1,300 daily active users, >300 daily missions launched, and over 30 ETH spent on paid missions.

Walking through an example will help us better understand how /Reach works and how the REACH token properly incentivizes quality engagement.

A creator wants to promote a post on X (twitter), so they create a premium mission with a 1 ETH bounty.

80%, or 0.8 ETH in this example, goes to the mission raffle reward where one lucky user who engages with the post will win the whole 0.8 ETH.

20%, or 0.2 ETH in this example will go to the /Reach Treasury which will then be used to market buy $REACH tokens. These /Reach tokens are then distributed to users on the weekly leaderboard who have accumulated points by engaging with missions as well as existing $REACH token holders.

The pre-sales were done at a token valuation of $3M, enabling the /Reach team to raise $1M. The pre-sales have linear vesting at 1 month, 3 months, and 6 months, meaning pre-sale investors will not be able to dump all their tokens at once, but the unlock process also won’t be long and drawn out over multiple years.

The pre-sale valuation of $3M is reasonably low considering what the team has already accomplished. This is ideal as when initial round valuations are too high, it can be difficult for price action to move quickly as many investors get scared and dump tokens for small profits.

Note: The team has emphasized that they have modeled and simulated the whole internal economy to ensure balance and longevity and that the percentage allocations of revenue outlined above may be changed over time to maximize growth and ensure a balanced and sustainable system long-term.

REACH Token Utility

The REACH token has several different incentives built in.

• There is a small REACH token fee to set up regular (non-premium) missions. This fee is added to the REACH treasury pool which is distributed to the weekly leaderboard.
• A minimum amount of REACH tokens must be held in order for users to earn weekly REACH leaderboard distributions.
• Platform fees are distributed to REACH token holders, giving REACH token holders a dividend for holding.
• Holder tier system: there will be a minimum requirement of REACH tokens held to in order to qualify for REACH token distribution and higher tier REACH token holders will get higher REACH distributions based on a multiplier.
• Tiered platform fee structures for token holders who wish to deploy the /Reach bot to their discord servers (incentivizes growth via discord bot)
• Unconfirmed: the team may introduce additional multipliers that increase your odds of winning the premium mission raffles based on how many REACH tokens you hold.

Addressable Market

Is there demand for this product and if so, how much? Are large token valuations realistically achievable based on demand?

The market for a social reach acceleration solution is potentially massive and extends well past the crypto and web3 industry and into brand and performance advertising, an industry that does >$200B in revenue per year.

There are a few key differences between traditional paid native advertising and a social reach acceleration solutions:

• /Reach accelerates organic posts without flagging them as an ad.
• /Reach does not currently have advanced analytics tracking or customizable campaigns that allow advertisers to pay per impression, click, or view. Because they are a 3rd party platform they do not necessarily have the native control or deep insights that the actual social platforms like Facebook and Twitter enjoy. /Reach is developing a media buying interface that is more in-line with traditional web2 ad buying experiences to fill these gaps.

Assuming a 10% revenue distribution to REACH token holders, we can project a few different token valuation scenarios.

Tokens with rev share distributions easilytrade around a 10x revenue, but keep in mind this can vary greatly depending on a variety of factors including growth rate, niche, addressable market, and market conditions.

While not necessarily a direct rev share comparison, $RLB (Rollbit) currently trades around a 10x fully diluted valuation in comparison to its annual token burn.

At the time of writing this, REACH has done ~10 ETH or $22,000 in revenue generated from premium mission in the past 5 days, which equates to an annualized run rate of $1.6M revenue per year.

This would conservatively translate to a fully diluted token valuation of $1.6M.

However, this does not take into account the very rapid growth /Reach is seeing in user acquisition, the fact that the platform has only recently launched in beta, is pre-token (no token incentives yet), and the product is essentially only testing a very small social demographic (web3) on one chain (Ethereum) and on only one social platform (X formerly Twitter). This is in addition to not yet launching their media buying platform and not yet saturating one of their primary distribution channels (3rd party discord bot integrations) .

An annualized run rate of $1.6M revenue in the weeks following the beta launch is extremely impressive, demonstrating a successful proof-of-concept platform showing early signs of strong product-market-fit.

Given some time to onboard more users via Discord bot integrations and the large social reach of the advisors and investors that have already been brought on we think a $25 - $50M annualized revenue run rate is realistically achievable in the web3 sector alone in a somewhat short period of time (6-12 months), especially if the crypto market remains bullish. This alone would put the REACH fully-diluted token valuation around $100M with a 20x revenue valuation.

This estimate is strictly based on the rev share aspect alone and does not include additional value drivers such as token fees for missions, holding inncentives, and market speculation on growth, or sell-side pressure from tokens vesting. In a bullish market with a healthy growth rate and user acquisition model, actual FDV could be significantly higher or lower.

Achieving real product market fit and product expansion into the web2 advertising space gives extreme upside potential. This will likely be a heavy lift that requires a fiat onramp, integration onto a more scalable chain like Solana, Avalanche, or Base, as well as a a stablecoin payment integration.

Some of the larger advertising platforms like Meta do extreme amounts of revenue in the tens and hundreds of billions. While these are not realistic revenue numbers to compare to, it does demonstrate the large size of the web2 advertising space and implies that capturing even a small share of the web2 ad market could propel the REACH token valuation to levels well north of $100M.

It should be noted that while /Reach sacrifices a bit of customizability in terms of features it can offer to advertisers due to it being built on top of existing social platforms, /Reach has a distinct advantage in that it can launch and operate on any social platform. In other words, Twitter can only sell ads that reach Twitter users. Meta can only sell ads that reach Facebook or Instagram users.

Meanwhile, /Reach can expand to any social platform such as Facebook, TikTok, Snapchat, etc. (and they do plan to expand past just Twitter).

This means that at a mature stage, /Reach’s total addressable market is actually extremely large as it spans all the largest social platforms.

Team

The /Reach team is doxxed and consists of 6 members with relevant experience in web3 development, marketing, UI/UX design, and traditional finance.

Hich.eth

Full stack Web3 dev, having helped launch projects in NFTs, Games, ICO and marketplaces since 2018.

L’Anamour

Started his career as a M&A banker in London advising multi-billion £ transactions, been working for private investment funds for the last 5 years. Passion project: founder of vintage photography platform FocusBloc.

8an

Entrepreneur with focus on D2C businesses. Formerly Rocket Internet venture developer leading multi-million $ monthly marketing budgets, founding team of Numan, and founder of Web3 art fractionalisation protocol Particle.

Krazle

UX/UI Designer with 15 years of experience. Formerly BNP Paribas, more recently in fintech designing apps and dApps focused around customer experience and engagement.

Neocorx

Discord and community engagement expert having built some of the top French NFT projects (BLVCK, Oxya Shinsekai etc...)

Advisors/KOLs

BoredElonMusk

0xQuit

Spvce

Merts

Adam Hollander

Seedphrase

17Mile

Lorepunk

Gman

Shillrxyz

Benjamin

Micol

Marketing/Expansion Strategy

The /Reach team has already onboarded over 1000 daily active users to the /Reach platform by creating a Discord bot to make it easy for users to create and complete missions.

The discord bot is available in the main /Reach discord server, but can also be integrated into 3rd party servers. Rug Radio, a web3 news and media entity has integrated the Reach discord bot into their Discord server that had over 58,000 members.

With the right incentives, existing discord communities will want to integrate the Reach discord bot, giving /Reach access to millions of users across a variety of ecosystems.

This has already been set in motion with the /Reach team signing on two major Discord communities that will integrate the bot in December, bringing /Reach to over 70,000 community members.

The /Reach team was unable to disclose specific communities, but shared they are in talks with multiple large Discord communities in the gaming, gambling, media, and fashion verticals.

The /Reach team has also onboarded a variety of strategic advisors with very large reaches on X (Twitter), all of which are extremely synergistic partnerships as X power-users are among the first target demographics for campaign creations while their audiences are the primary initial target demographic for campaign participants.

/Reach also plans to add functionality for TikTok and Meta (Facebook + Instagram) missions in January of 2024, further expanding their addressable market.

Concerns & Limitations

Building a marketing/advertising machine on top of existing social platforms comes with a few pros and cons. As mentioned, one of the pros is that posts are not categorized as ads, engagement is real, and the system works in line with the existing social reach algorithms to expand a post’s reach.

While this is an advantage, there is also a level of dependence on the social platform’s algorithm and a lack of control over reach. Traditional native advertising platforms are able to provide advertisers with custom controls over reach, ad spend, targeting, conversion optimization, etc.

Advertisers can spend a specific amount of $ to receive a specific predetermined amount of impressions. With /Reach, there is a lack of direct control over how many impressions a post gets per dollar spend.

There are also some tracking and attribution limitations when you don’t actually own the social platform you’re operating on, which is a big deal for advertisers. Advertisers need to know exactly how many dollars they spent to achieve x amount of conversions from each specific ad campaign so they can micro-optimize for improved results. Tracking advertising results at a granular level of detail is challenging.

With that said, the /Reach has communicated plans to build out an advanced media buying platform that will be much more web3 friendly and provide a lot of the features native ad markets do, such as optimizing directly for clicks or conversions instead of just impressions (reach).

These limitations don’t mean /Reach will not have it’s place. It is potentially very useful for advertisers to use a mix of traditional native paid advertising in conjunction with organic reach acceleration via /Reach.

One final concern is that /Reach will need to continue to grow its engagement userbase past web3 and into different verticals. If every campaign is being engaged with by the same microcosm of users, the X algorithm will likely keep this content confined to its own echo-chamber. Attracting a diverse user base outside of just web3 users will be an importantstep in attracting larger web2 advertisers.

The discord bot integration strategy should help here as there are w ide variety of extremely active Discord servers in a variety of niches such as music, gaming, gambling, sports, etc.

One last concern for /Reach is that they are potentially limited by the high transaction costs of Ethereum, making it expensive for users to claim their raffle prizes and /Reach distributions. This is something the team is aware of. They have communicated plans to eventually migrate to a more user-friendly layer 2 solution.

It should also be noted that Reach’s smart contracts and protocol have been audited by Quantstamp, a leading smart contract auditor in the web3 space.

Recommendations for /Reach:

• Give users the option to claim their reward distributions in ETH or REACH. Add an auto-compounder contract (similar to Looksrare) where users can opt to automatically compound their REACH without having to manually claim.

• Prioritize moving to a faster chain like Arbitrum, Base, Avalanche, or Solana to reduce fees and friction.

Investing Strategy

Pre-token launch evaluations are particularly difficult as there is no reference point for price, especially when there are few if any similar protocols to compare to. For this reason it’s impossible to know whether or not buying $REACH on launch day will be profitable or not and impossible to know at what fully diluted valuation the token will launch at.

Some tokens launch at extremely high token valuations for a variety of reasons and have to correct back down. Others launch under the radar without much demand, then find an equilibrium higher once the market recognizes their value.

Our guidance for $REACH is to look for inefficiencies in the market in order to enter at a lower risk.

1. Look for disparities in revenue vs token price. Remember, 10% of revenue is shared directly to REACH holders. If total annualized revenue of the protocol is greater than the REACH market cap, it’s likely a good buy, as holding the REACH tokens alone would be yielding >10% APY.
2. Look for disparities in user growth rate vs token price. If the number of daily active users is consistently climbing, but token price is trending downward or sideways, it’s likely a short-term inefficiency and a good place to buy.
3. Look to accumulate after sell-offs and/or unlocks followed by flat price action. Newly launched tokens will often see this pattern directly after launch:

Launch pump → dump → sideways accumulation → real pump

Conclusion

Reach is leveraging a web3 incentive model to build a new and advanced marketing/advertising protocol. They have a working MVP that is quickly gaining traction and an aggressive growth plan that is already working. Success for /Reach means the establishment of a new web3 advertising paradigm in which they are a first mover with dominant market share, which translates to a high token price. The /Reach platform has a great user interface, the Discord bot works smoothly, and the protocol incentives are well designed. The $REACH token itself has plenty of incentives to buy and hold and is a benefactor of the protocol’s success.

Success will be determined by /Reach’s ability to continually address the market’s desire for social reach acceleration with aligned monetary incentives.

Disclosure: Sistine Research has invested in the REACH pre-sale and intends to invest the REACH token on the open market depending on valuations.