Achieving True Mainstream Adoption in Gaming Through Web3 - TOKEN2049 Singapore 2023

good morning everyone I I hope we have some gamers in the stage because today I'll be talking about what it means to achieve like real mainstream adoption through gaming and web3 so briefly uh I've been in crypto for about 10 years now uh formerly I was at hash which is uh the biggest crypto VC in Asia managing over one billion dollars in the um and I've invested in over 40 gaming companies at hashed and recently I've become the co-founder of decentralized gaming Ventures uh and chief investment officer where we work with great talents from companies like netease Garena Riot Bandai and also scopely where we acquire gaming Studios we license uh great IPS and we create IP based games and game studios so recently a lot of great games have been seeing significant Commercial Success one of my favorite games League of Legends um Derby pretty Derby Elden ring Diablo 4 all of these games have been generating billions and billions of dollars in Revenue but unfortunately in web 3 Gamefly has been struggling a lot to get real traction and I think that there are several reasons for this so the first is that a lot of game Builders are trying to Target web3 native users by coming from web 2 to web 3 they think that a lot of Webster users are naturally very interested in gaming but historically we've seen that that's not true and in fact there's not a lot of web3 native Gamers some metrics suggest that there are about 1 million total web3 native gamers in the market so it is really difficult for new games to come out to Target such a small user base and try to become big from that user base and and thirdly it's really difficult to curve the speculative like degen-like speculative nature of crypto native users because they often go from one game to another based on what yield the game provides so if they buy a certain nft or if by if they buy a certain game token and they feel like the token is not generating a lot of yield or generating a lot of revenue for them then they sell it and they move on to the next game and lastly to to uh invite a lot of these speculative uh gaming users into their game a lot of crypto games make the mistake of trying to do an inflationary model where they give tokens away but what happens when you do that is that as the token price goes down that the users lose interest in playing the game so at the end of it all the token price goes down the metrics of the games goes down and the games are left with no users and they eventually fail so typical gamify model looks like this like a user new user comes in they go to a new game to get game rewards but then the token value drops because a lot of the users are getting these token incentives and when that happens the game's user activity drops significantly and as a result of it the game dies and this goes against a conventional game economy because in a normal game it is really important to retain users by giving things away so in a very popular game you often see that the game is trying to give items or new maps or new quests away to users but in web 3 you cannot do this because a web 3 game by Nature should be deflationary what I mean by that is in a web 3 game you cannot give things for free because people are buying nfts and people are buying tokens to get those things so in a web 2 game where you're supposed to give things away to retain users in Webster you cannot do that so if there's no retain retaining metrics or retaining modules then what you have to do is you need to give something away to retain the users that purchase your nft and as a result of it they give the tokens away because that's the easiest thing to do and also in a way it's like the laziest thing to do but when you do that then the users lose interest and go to the next game and uh I think that Star Trek Fleet is a very good example that shows what a commercially successful game should do that web 3 games are not doing so Star Trek Fleet command is actually one of the most popular games we've seen in web 2 this has been very popular for over seven years now and they're generating uh billions of dollars in Revenue and what Star Trek does is that every time a new user comes in they give new items they give new packages and programs so that the users get more excited to play it and as a result of it over a seven year period of time their user retention rate has only gone up and the num the total number of users has only gone up since then um and this is because they they focus a lot on user acquisition and to try to bring new users into the web 3 games web 2 games but in web 3 a lot of web3 gaming Studios don't focus on user acquisition at all so user acquisition is very important in the game because every game genre has a different consumer base uh One Gamer may like fighting game One Gamer might love Forex but not every gamer loves every game genre so when a new game comes out typically half of the budget is spent on user acquisition in in a conventional gaming industry bunny web 3 for some reasons a lot of gaming Studios don't believe that UA is important and they end up not spending any money in UA and without UA what happens is that in web 3 the profile of gamers in every game is the same so speculative like DJ and user jumps from one game to another to another and as a result of it now um at the like late stage of game five we end up with basically no users in the GameFly Market uh with a lot of game five projects being dead so typical game by user flow looks like this XE becomes super hot and hundreds of thousands of Dau come into XT then they move into the next hot game like God's Unchained where they see a lot of users and then Gods Unchained moves the new game and the new game and a new game and so every game end up not having any users at the end of two or three months and and the lifetime value of these games compared to normal web 2 game is disastrously low like if you compare to like Star Trek that I showed their LTV of the game is something something like multiple years and and their game right now after seven years is peaking but a lot of web3 games Peak after a few weeks of being launched and this happens because first games don't spend anything on UA so new users are not coming into game five and second uh web 3 games that are designed for web 2 gamers are just simply too hard so in a typical web 3 game user flow a user finds a new game and sees that nfts are required so what they have to do is that they have to buy the nft right so so they go to centralize exchange they try to buy ether Bitcoin or whatever to buy the nft then they have to create metamask and buy ease and transfer minimize so all these things are very new to Gamers and even though the game quality is excellent a web 2 gamer a typical web 2 gamer is never going to go through this process to actually play the game because there's so many great web 2 games out there so a web 3 game shouldn't be this complicated for the users and if it remains as complicated then no regular gamer is going to come into web3 it's just never going to happen right so my personal thesis is that don't Target web 3 Gamers but instead try to build real games for real Gamers and introduce web 3 features to them and try to use web3 for features that actually make sense in a real game rather than just putting web3 features on a game and calling it a web 3 game because when you do that then no user can actually adopt and use and play the game and if you do it in a right way where you're introducing web3 features to Gamers then eventually you can bypass the very inefficient uh Publishers traditional Publishers in the gaming industry that take 60 to 70 percent of your revenue and the margin uh and and basically maximize the revenue and profit for for your game so in my opinion how a web 3 game should actually work is that a game Studio develops a game releases it on Apple apps or Google Play and acquire its users and spend money on acquiring users but at the same time use a lot of web 3 elements to actually acquire the users and then you introduce web 3 features to them so as an example web3 features include things like governance so in a web 2 game users get no say in what and where the game development Direction goes so if web2 Gamers can actually say oh Diablo 4 actually don't like some of these features can you change it in the next season or six months from now they can actually do that through web3 because each nft holder can have that proof of ownership and governance right and what this allows is you can build a gamer community that actually appreciates web 3 features instead of uh web to web 2 gamer community that is unable to come into F3 game because it's gated by all these web3 features that they just cannot use so why is web3 actually needed in gaming right um there's there's four things that I'm thinking about the first thing is untemperable proof of ownership so if you're playing a game like Counter-Strike or League of Legends and you buy these items and you sometimes people spend hundreds of thousands of dollars in buying an item but you don't own it and you you would ideally want to own it permanently because you spend a lot of money for it right so blockchain as a decentralized ledger is perfect for the proof of ownership and then you have untamperable proof of governance so every NFD holder can actually contribute to the game development and also contribute the direction of the game by holding their nft and the game developer cannot take that away from you they cannot take away the governance the governance right that you have and a third is efficient payments so crypto stable coins all these things allow games to much more efficiently incentivize users for for example user generated content so if you create a map for a game or if you create a an item for the game then it's easy for the game to reward you for that and lastly as a result of all of this you get a very transparent reward distribution system so reasons for web 3 and gaming are based on the previous slide is that the first is you can reduce user acquisition costs through decentralized payment systems and direct Community Access and what you mean by this is it's much easier in web 3 to convince your friends to join this game through maybe telegram wallets or some kind of uh affiliate affiliate sort of you know crypto programs and you can actually bring your friends into the game that's the first thing which we saw through XC and the second thing is it's possible to empower users by allowing them to dictate where the game Direction goes so that when new content come out the users actually have a save and this makes it more much more exciting for the gamers especially Die Hard gamers and the third and the fourth is that you reduce the dependents on publishers that usually take anywhere between 50 to 80 percent of your profit margin for publishing your game in different markets and lastly the share economy that that web3 allows disrupts the publishing world and this is not a small market so the whole game Market is 200 billion but then the virtual Goods Market alone is 67.5 billion so the proof of ownership the items that I talked about that market alone is worth 67 billion dollars so if you plug this in a popular game like Star Trek users will be able to vote on new contents users can vote on game development directions users actually own the items that they that they purchase permanently and users may also earn rewards if they play well and this actually enhances web 2 Gaming experience instead of giving them a whole new experience that is difficult for them to adapt to so this is what I do at the centralized gaming Ventures so we acquire game studios we license IEPs we put them together to develop IP based game which allows us to reduce user acquisition costs significantly and it allows us to go to the market much more efficiently so we create games based on anime based on movies based on TV shows Etc and that allows us to Target a certain genre of Gamers or niche of Gamers much more efficiently and we also have different Tech that allows us to go to the market for example telegram wallets NPC wallet that allows users to come into Apple App Store and use the game and have a wallet created without them even knowing so all this Tech allows us to revolutionize the publishing world and you know if you're building great games or if you're trying to build great games with IPS please let me know and yeah you can you can talk to me after the after the talk thank you