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Happy to see you here for another edition of The Wild West of Web3.

Today we’ll explore a subject that has been mentioned several times in past editions, but due to its relevance, certainly deserves an updated view on it.

Back in edition #8, I talked about my first connection with the gaming space on a professional level. I invite you to check it out, but in short:

I was fortunate to start working with Fortune 500 companies like Samsung, Microsoft, Warner Bros, and Red Bull at the age of 16. I had the amazing opportunity of dealing with branded content, tech events, and eSports at this very early phase of my career - which I’ll be forever grateful for.

So, thanks to this “connection”, I’m excited to dive into the many ways Web3 and Gaming can interact, both for improved experiences for players and also as a (nearly) untapped business environment.

LFG!

The current state of the traditional Video Game industry

The video game industry has experienced unprecedented growth over the last two decades, transforming into the leading form of entertainment worldwide.

In 2020 the industry's revenue exceeded that of the music and film industries combined - and according to Statista, reached a revenue of nearly USD 321 billion.

This growth was significantly boosted by the pandemic - with an increased demand for digital entertainment and online solutions.

However, once things got back to “normal”, the industry faced challenges some challenges, including economic downturns and an intensified competition. Despite these obstacles, the industry's fundamentals remain strong, with predictions of reaching 3.5 billion players over the next few years.

And let’s not sleep on mobile gaming. Once the “sidekick”, this segment is becoming more and more popular. Thanks to better phones and faster internet, more people have access to this universe - whether for an idle farming game or a full moba-rpg-action-PvP experience. It’s changing the game, making playtime anytime, anywhere.

Esports and streaming? That’s a whole new story. Gaming arenas are filled with fans for gaming showdowns; Platforms like Twitch are solidifying the (not new) idea of gaming as a spectator sport, where watching someone's game is just as thrilling as playing.

So, what's the bottom line? The video game industry keeps morphing, growing, and redefining what entertainment means in our digital age.

But as usual, things are not always in easy mode.

Boss fights - The challenges ahead

Recently, this industry faced economic challenges that rattled even the most big companies. Rising interest rates, geopolitical tensions, and the shift to a post-pandemic reality have steered the industry into turbulent waters.

On top of that, there are constant delays on shipping/releasing games, a dip in spending, and mobile gaming - the industry's speed runner - hitting a wall with new privacy rules from the big tech giants, making ad targeting a whole new puzzle to solve.

Moving on to the “money game”, investors started looking at the gaming sector like it’s a high-risk level (or at least higher than “usual”), with deal activity cooling down a bit. But hey, the core of gaming - innovation, a massive player base, and tech advancements - is still strong. It’s just that investors are now playing more like strategists, looking for moves that make long-term sense rather than quick wins (just see the amount of “remakes”, sequels, prequels, etc).

But here’s where it gets interesting: Web3 is popping up as one of the next big power-ups for the industry. Blockchain, decentralization, and (true) ownership are some of the concepts that are steadily being incorporated into the gaming industry’s vocabulary.

I’m definitely not saying Web3 gaming will conquer the traditional gaming in the next 2-3 years. But we can certainly expect more (and better) integration of Web3 concepts in the gaming industry.

Time to explore what’s going on.

Overview of the Web3 Gaming Industry:
Leveling up in new dimensions

According to Footprint Analytics, active users in the blockchain gaming world jumped a whopping 54.67% from what we saw in 2023. Yes, I know that since the whole “Blockchain gaming” is a fairly new concept, numbers like this can be deceitful sometimes, but a quick online search will show that the interest around it is growing.

Now, here’s where it gets spicy – AI has been redefining how games are created, from NPCs dialogues to character creation.
Companies like Square Enix are experimenting with AI-generated images for an upcoming game. And then there’s Nvidia, partnering with Ubisoft Paris to test new ways to implement AI as a path to enhance the gaming experience.

But back to the “Overview of the Web3 Gaming Industry” idea: Last year, the number of Web3 games grew by approximately 38%, with the total number of games reaching 2916 by the end of the year.

Of course, this number also includes the (many) unsuccessful projects, but it’s important to notice that there’s much more to this industry than “just” Axie Infinity - which by the way was a huge success.

Another important metric is the “Daily Active Users”. According to Footprint, the number of players (2023) surpassed the 37-million mark. Still a long way if you compare it to “regular” games, but at the same time it’s far from being that ultra niched thing from a few years ago.

"BUT REAL GAMERS HATE WEB3/NFTS/CRYPTOCURRENCY”

Here’s a quick Google search:

This is a LOOOONG discussion - which by the way we can definitely have at BorgoAcademy - but here’s my view on it:

• In general, gamers are not big fans of drastic changes
  Apple App Store was released in 2008 and it took around a year for the first hit reach mainstream audiences (Angry Birds), and it took even longer (WAY LONGER in fact) for AAA games add mobile to their core strategies.
  

• Most Web3 games are not fun/”pretty”

  I won’t lie: right now - at least as far as I know - there are not many titles that are actually fun to play. If the game is good, fun, and engaging, people will play it. Simple as that (check the recent success of Palworld).

  
  There’s also the common complain that Web3 games look “outdated” in comparison to AAA titles.

  Ryan Wyatt, Chief Growth Officer at Optimism and former Global Head of Gaming at Youtube once said:

  “Minecraft is what changed YouTube for gaming, and that game looked like complete sh*t when it first came out”.
  

• Tech must be hidden

  Yes - part of the gaming community can get super hardcore when it comes to frames per second, engines, etc. But in the end of the day, most gamers don’t really care which shading tool was used to create that wall texture on level 3 of your game, or how many polygons the final boss’ hammer has.

  The same goes for Web3 gaming: if the focus is on the wallet-blockchain-crypto-seedphrase feature, it will just sound way too complex for a regular game to even try that game.

And on top of all that is the misconception that many gamers have that “NFTs/Web3 is just a way for gaming companies to “over monetize” their products”. Surprise: many publishers already do this - just google what the gaming community thinks about microtransactions and games-as-a-service.

Ok, so now we have covered the traditional gaming market and also explored some aspects of the Web3 part of it.

Time to dive into how these 2 things can - and in some cases should - work together.

A coop game: What We3 can bring to the table?

No, Web3 is not a “perfect solution” for gaming. However, it can help improve many of the aspects around it, while creating new opportunities, both for players and companies.

In short, when it comes to Web3, we're talking about a universe where gamers don't just play the game; they're part of the game's very fabric, owning pieces of it, sometimes even helping shape its future, and yeah, eventually making some coin while they're at it.

But before we proceed: this “making a coin”, while true is NOT the only way to talk about Web3 in gaming. The whole P2E (play to earn) thing, while very popular is only ONE of the approaches here.

Back to our story: think about the games you love. Now imagine if, in those games, every epic sword or cool spaceship you earned was actually yours. Like, really yours, to keep, sell, or trade.

Meanwhile, someone in the background is saying: “But Diego, you can already trade weapon skins in Counter-Strike or items on Runescape”

Please notice that I’m not discussing the value per se. Yes, a rare CS skin can be worth a lot of money. But the thing here is that NFTs “live” on decentralized blockchain platforms, ensuring traceable and verifiable ownership, which allows for cross-platform utility, making NFTs more versatile.

A quick example? A brand/project can airdrop (send for free) specific items/tokens/crypto into wallets that hold certain NFTs.

Another one: Studio A can develop a NFT-based game and then Studio B can create something that integrates/accepts these assets in their game.

And since I mentioned the P2E aspect: Yes, Web3 games can also bring the get-paid-while-you’re-playing ingredient, with a model that's a total game-changer (pun intended).

Depending on the title, by simply doing quests, battling monsters, or even crafting items, you can earn real crypto rewards. And with everything running on blockchain, the whole system's transparent and secure.

But as usual, there’s no magic: It’s SUPER tough to nail down the tokenomics around this, however. Most P2E earns eventually end up falling into a “ponziesque” format so if you are a player, make sure to do the proper research before risking any time/capital. And as a developer, it’s important to create a sustainable economic system so your game can thrive.

So here are the mains elements that Web3 can bring into the gaming space:

• True Ownership: Your digital loot? Yours for real. Trade, sell, or collect. Once it’s in your wallet, it’s YOURS.

• Earn While Playing: Again → there’s no magic. But there IS real potential in getting rewarded for playing games. Just make sure to do the proper research.

• Interoperability: Carry your digital swag across game universes. An item from game A may be used in game B while you control a character imported from game Z.

• Trust and Transparency: Blockchain’s got your back, ensuring fair play and secure transactions.

  Just make sure to not connect your wallet to shady pages.

• Community at the Core: As we discussed in previous editions, Web3 is all about community, and games are no different.

“You should have a strategy and also an authentic purpose”

Like any other “new thing” it’s super important to make sure you're not doing this just because “you have to”.

Whether you are adding a gaming feature to an existing project or creating a Web3 game, ask yourself: “What problem am I solving by doing this?” or “What opportunities am I creating by doing this”?

Long story short, your audience - especially your fans - you’ll certainly notice if your initiative is hype-based.

“rather build something fun”

Well, at the end of the day, the main goal of a game should be the “fun” part of it, right?

If your game is fun/engaging, the Web3 aspect of it may end up being a very welcome add-on. However, a boring title - even a “profitable” one - tends to be short-lived.

“The tech is still early but moving quickly”

I said this many times, but it applies here: even though there are MANY gaming initiatives in the Web3 space, we are still super early.

If you compare the numbers from traditional gaming, there’s still a LONG way to go. This means this may be a great moment to build something and/or to learn the necessary skills to thrive in this industry.

Some of the comments above came from this post - which contains a short clip with my view on the current state of Web3 Gaming.

THANK YOU!

Just want to say a big THANK YOU to each and every one of you reading this.

I know this may sound super cliché, but I truly mean it: I wouldn’t have come this far without you. After all, a content creator must have someone willing to invest their time to check that content, right? 😄 

And before we say goodbye: Since gaming is the largest sector in the entertainment industry, expect more editions around it, with different approaches and covering different aspects of it.

In the meantime, some of the game-related topics we have already covered include:

• Web3 Quests as go-to-market strategy: a teardown → How gamified journeys can boost customer engagement

• Social Media: How Web3 is changing the space → And the role of gaming platforms as Social networks

And if there’s something you want to see here, feel free to reach out and share your recommendation.

See you next week.

#LFGrow
Diego Borgo

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