Growth models for web3 gaming

Conditional probabilities are difficult for the human mind to grasp, and nowhere is that challenge on display more profoundly than with comparisons of web3 to the early growth of the internet. Some technology concepts develop into very large platforms that touch hundreds of millions or even billions of people, and the internet is a perfect example of that. Others attract buzz, grow to be used by a meaningful number of people, seem poised for ubiquity, and then collapse or simply see growth abate. Every significant technology was at some point niche; not all niche technologies grow to become significant.

That said, striking parallels exist between the current state of web3 gaming and the formative period of mobile free-to-play gaming in the West, which dates to roughly 2011 and coincides with the launch of Mobile Dev Memo. Some realities of the public perception of free-to-play games from that era that might sound familiar to those following web3 gaming today are:

  • Mobile free-to-play games were derided by AAA console gaming studios and fans of those titles alike as being mostly inauthentic and insubstantial;
  • Mobile free-to-play games resonated with a different core demographic than traditional, AAA console games;
  • Mobile free-to-play games were primarily promoted via aggregator apps and via community building, in the absense of purpose-built advertising channels.

The first two characteristics of the early mobile free-to-play category are certainly true of web3 gaming today, but exploring those specific points is beyond the scope of this article. Examined through the frictions and processes for audience growth, the similarities between web3 gaming, as it exists today, and the early state of mobile free-to-play gaming are powerfully obvious. It’s not clear that web3 design standards will become prominent within the gaming ecosystem. But if they do — if web3 gaming reaches mass-market adoption and captures a large share of the overall gaming market — then it’s likely that its growth models evolve in ways that are redolent of mobile free-to-play’s path to pervasiveness. Flipping this logic: any web3 games developer should actively try to steer into the growth tactics used in mobile free-to-play gaming, because those tactics worked.

Currently, launching and scaling a web3 game is mostly done via Discord, the community management platform, and through PPC web advertising on platforms like Facebook, Google AdWords, etc. Some large crypto communities and blogs also offer revenue-share promotion opportunities, in which they advertise a web3 game in exchange for a share of the revenue generated by any new users engendered by the campaign. Often the marketing beats that utilize these promotional channels are organized around pre-release token sales for in-game assets and at game launch, but few web3 games run the type of performance marketing common to the mobile free-to-play gaming category, which is referred to as user acquisition.

The lack of a user acquisition paradigm — a performance marketing-oriented, continuous set of digital marketing campaigns that accommodate the product’s unit economics and target per-user profitability — in web3 will be interpreted by different camps as a sort of Rorschach test for crypto more broadly. Advocates for web3 contend that it catalyzes a fundamentally new model of content consumption in which users are effectively owners, creating an environment in which users naturally gravitate to the products most relevant to them because they’ll be able to participate in the economics of those projects. In other words: proactive marketing isn’t necessary. This notion seems naïve and insufficiently ambitious to me.

In the 16th century, Hernando Colón endeavored to read every extant book; in 2010, Google estimated that 130MM books existed, and the average book sold fewer than 200 copies in the US in 2021. In a consumer environment with few active, professionally-developed web3 games, it might be possible to spur a vibrant and commercially potent community into existence through airdrops, promotions, and partnerships. But if the catalog of live web3 games approaches that of the App Store’s, with nearly 1MM games available for download, then effective user acquisition will begin to matter. Again, this mirrors the experience of mobile free-to-play developers: viral sensations like Angry Birds and Subway Surfers are noteworthy because most of the big viral hits from mobile’s infancy were displaced by games that mastered scaleable user acquisition. The same will be true of web3; these are marketing’s laws of physics.

On the opposite end of the enthusiasm spectrum: web3 critics point to the lack of user acquisition sensibilities as proof that all crypto projects are scams and Ponzi schemes. This faction asserts that companies building web3 games have no interest in scaleable growth mechanics because they simply aim to cash out of their projects during an initial hype cycle and don’t care about the long-term viability of their products. This is of course true for some projects and is inevitable given the broader hype halo surrounding crypto, but it’s demonstrably false for many of the teams of veteran game developers that have instantiated projects. Again, web3 gaming will be viewed through any particular person’s lens of the encapsulating crypto landscape.

It was when mobile free-to-play games developers took the growth of their titles seriously through systematic performance user acquisition that the tools to facilitate that enterprise emerged from advertising platforms. Said another way: the advertising ecosystem needed to manage growth scalably and scientifically for mobile free-to-play titles coalesced around that revenue opportunity when developers began taking that growth strategy seriously. Many of those gaming-specific advertising networks are themselves worth billions of dollars now as their fortunes mirrored the industry they served.

The current growth playbook for web3 games relies on a patchwork of highly labor-intensive and non-scalable tactics like partnerships, revenue share agreements, and web-based ad campaigns that convert very poorly, given the inherent friction from web click to registration to all of the crypto-related onboarding necessary. Mobile app stores don’t currently publish web3 games given the alternative monetization scheme, and this, along with the prospect of authentically player-run game economies, represents the biggest promise of web3: shifting consumer behaviors away from hardware-based content platforms and back to the open internet, as I outline in this three-part series on the future of mobile content platforms.

But this potential future state requires a concerted growth effort on the part of web3 games developers. The growth models for web3 gaming might ultimately become dependent on an entirely supportive ecosystem of dedicated advertising networks, as with the ascendancy of mobile free-to-play. The notion that the economics of LTV > CAC fundamentally become more friendly or manageable with web3 seems like wishful thinking. Web3 companies should plan for a future of fierce competition for consumer attention, and there exists no better prototype for that than mobile free-to-play.