In a Web3 gaming panel hosted by Polygon Studios, Forte President Andy Yang connected with a number of other leaders in the Web3 gaming community to discuss the future of the industry. One key theme was mobile gaming, particularly the need for Web3 game studios to address such a critical segment of the market and some of the key challenges involved.
In this article, we take a look at:
- Why Web3 makes sense for mobile developers; How it can unlock new opportunities, and;
- What some of the biggest hurdles are in delivering seamless Web3 gaming experiences to users on mobile.
The state of mobile gaming
It’s no secret that mobile has rapidly become the most important single vertical in gaming. With over 2.5 billion active users and annual revenues of more than $103 billion in 2022, mobile now accounts for over 50% of global gaming revenue. Despite a projected decline in year-over-year growth, there are more studios than ever making pushes into the mobile space.
However, this incredible growth has introduced new challenges, particularly for smaller studios aiming to enter the increasingly competitive market. Significant market consolidation has made it much harder for new studios to break through the noise and drive player acquisition via traditional routes.
“Being in the games industry today is getting increasingly difficult, especially on mobile,” Yang explained. “You’ve got to pay 30% to the platform, and then with ATT and privacy changes, it’s really hard now to scale and spend efficiently with your marketing dollars. Web3 is an alternative way.”
On top of that, 30% commission fees on in-app transactions are now standard across all major mobile distribution platforms. This makes the free-to-play (F2P) model that drove mobile’s early growth very difficult to sustain, adding additional pressure to small and mid-size studios.
Why mobile needs Web3
While not a panacea, Web3 presents many new opportunities for driving revenue that have many mobile-focused studios exploring the space. Tokenized game economies and digital asset ownership offer a way forward for developers of all sizes to diversify and improve their revenue and community growth models.
In-game secondary markets
In giving players real ownership and full control over their in-game assets, Web3 introduces a degree of free-market economics to games. Players in Web3 games are free to sell and trade their in-game assets with each other, including items, characters, collectibles, and more.
By facilitating these transactions and acting as a market maker for in-game secondary markets, developers can unlock a new revenue stream in the form of commissions on trades. Gray markets already exist for popular titles that enable the transfer of items between players, but developers currently miss out on the aftermarket value created in them.
With in-game, on-chain marketplaces, developers can not only realize value at the initial point of sale but also as a function of the size of the entire market. Instead of having tight control over sales to less than 40% of their players, they could earn a fair percentage of all value exchanged in the in-game markets that they cultivate and support.
For mobile games, where F2P is dominant and in-app purchases account for the vast majority of revenue, this approach would help developers move away from a zero-sum model while bringing player and developer interests into greater alignment.
Web3 also goes beyond enabling user-generated content (UGC) to support completely player-driven economies. Players in Web3 games can not only sell their creations to other users—they can earn royalties on all future sales, rent their creations, sponsor other players in eSports tournaments, and sell services.
This adds an additional layer to the in-game economy on top of secondary markets. In this model, the developers of a game become the facilitators of a complex economy, as well as participants in it. They might offer their own content or services alongside those of other creators and players while taking commissions on all value exchanged in the game.
Creating true player-driven economies would also create new avenues for driving player acquisition. As participants in an economy who benefit from its growth, creators and players offering services are incentivized to help that game and its economy grow in any way they can.
With well-balanced Web3 game economies that drive engagement through quality gameplay, these participant communities will remain a critical driver of player acquisition and retention.
“When we talk about 3 billion gamers, ninety-plus percent of those are on mobile,” said Kevin Chou, Managing Partner at Superlayer. “Having Web3 games not just be on a browser or on a client download but really reaching the market where it is, on mobile, is really important.”
Challenges in going mobile
While Web3 technology presents many opportunities for mobile game developers, there are three key hurdles that need to be overcome:
One of the biggest challenges facing Web3 mobile game developers is platform restrictions. Apple and Google both have strict policies on the use of cryptocurrencies and non-fungible tokens (NFTs) in their app stores.
Although Apple has announced support for in-app purchases (IAP) of NFTs and cryptocurrencies, that comes with restrictions. All transactions must be made through Apple’s mechanism for IAPs and NFTs cannot be used to unlock in-game features of any kind. This restriction effectively renders the player-to-player exchange of assets and services impossible and undermines the decentralized nature of Web3 games and their economies.
Google has been less explicit about its policy regarding digital assets in apps distributed on the Play Store. This opacity has made it difficult for mobile game developers to know what is required to be approved for distribution. However, Google does enforce a requirement that all transactions be processed through their payment mechanism, presenting the same complications as Apple’s IAP for Web3 games.
These restrictions may change in the future but, for now, they are significant barriers for Web3 studios looking to get their games in front of users.
Another challenge facing Web3 mobile game developers is the lack of integrated wallet and payment solutions. While there are solutions available, they are often siloed within different blockchain ecosystems and not widely adopted.
For players, this lack of support often means needing to leave the game or even their mobile environment entirely to execute transactions. This creates a poor user experience for players and greatly inhibits adoption.
If Web3 mobile games are going to onboard mainstream users, they will need seamless integration with cryptocurrency wallets, enabling players to easily manage their digital assets and sign transactions inside the game they are playing.
Finally, mobile game developers looking to integrate Web3 elements must navigate the technical challenges of integrating blockchain technology into their games. This requires a high level of technical expertise that is outside the skill set of most existing Web2 backend developers. Moreover, developers with blockchain expertise can be costly and difficult to find.
The demands of supporting and managing a live-service Web3 game also go beyond those of Web2 games. In addition to the Web2 service layer, Web3 game developers must manage integrations with one (or more) blockchains, while monitoring and balancing the health of their economy to protect against runaway inflation or deflation.
In a segment of the industry characterized by fierce competition for paying players and constant content output to keep them spending, Web3 offers a unique opportunity for mobile game developers to diversify revenue and grow their communities in the process.
On-chain digital ownership powering thriving secondary marketplaces offers a new way for developers to monetize, freeing them from the content churn of the zero-sum F2P model. Coupled with player driven-economies as a new source of value generation and player retention, Web3 is uniquely positioned to bring the interests of developers and gamers into alignment and drive consistent, organic growth for mobile games.
But, there are a number of challenges that need to be overcome to realize the potential of Web3 for mobile games. Fully integrated platform solutions like Forte enable developers to meet those challenges by handling all the complexity of Web3 infrastructure, economy management, and compliance to free them up to focus on what matters most: building fun and rewarding player experiences.