The state of play: web3 YTD
We're seeing the best practices, why so many mistakes?
Ok folks, let’s summarize. It’s the planet’s hottest summer but somehow still crypto winter. NFT trading volumes are nearly down to pre-2021 hype levels. Crypto Twitter doesn’t even exist because Twitter doesn’t exist. Why are we even still all here? Oh, right.
And yet, the number of major companies and extremely well-funded and staffed startups working—either publicly or behind-the-scenes—in web3 is growing. And we’re not talking about tiny projects or private companies. We’re talking publicly traded, US- and western-based corporations, some of whom are in highly regulated industries like banking (Mastercard or Visa) and payments (PayPal). This matches with my sentiment that the future of web3 is increasingly corporate, not wagmi culture. This is a good thing if we all want web3 to have a future.
Since everyone is in the Hamptons or Menorca for August, I figured I’d do a quick recap of the year so far of who has announced and continued to build in this whacky space of ours.
Fintech
Visa: Just announced blockchain payment infrastructure
Mastercard: KYC for web3 plus multiple projects launched
Amex: kicked off an NFT-based retail shopping experiment
Gaming
Take-Two-owned Zynga just announced Sugarland, its first web3 game
SEGA continues to license IP for web3 titles, despite some claims that they were pulling back
Nexon is plowing ahead with Maplestory development on-chain
NCSOFT threw $15M at Mysten in their last round, and is developing in that ecosystem
Square Enix announced a partnership with web3 game launcher Elixir (who is also tied up in GameStop’s ill-fated debacles)
Planet Mojo (a Sequence client) just launched on Amazon Prime Gaming
Epic has announced no fewer than 20 blockchain-supported games coming to the Epic Game Store
EA, while very much not embracing web3, deemed it brand-safe-enough to announce a future collab with Nike’s dotSwoosh
Savvy Games Group, with a warchest of $38B for gaming (and particularly web3) scooped up Scopely for $4.9B (who has already announced web3 plans)
CCP, maker of Eve Online, raised $40M for a new web3 title
Mythical Games had its NFL Rivals rocket to 1M downloads on the app store
Media
Studios like Warner Bros continuing to launch NFT programs
Multiple IP holders (NBC Universal, Paramount, etc.) are licensing content to NFTs and web3 game studios like Orange Comet
Crowdfunding underdog movies through NFTs is still a path some are going
Many voices are focusing on how web3 can support some of SAG-AFRAs needs
Across consumer brands (VW, Adidas, Nike, Gucci, LVMH, Rimowa, Mclaren and many, many more) and sports/fandom (FC Barcelona, Man City, NFL, FIFA, Messi, Paris Hilton, etc.) there are too many to list, just with announcements or launches in the last year. In all the above categories I’m missing tons. And as Coinbase recently confirmed, more than half of the Fortune 100 companies have something blockchain-y in the works, it just might not be coming with the majorly preemptive announcements that we saw in 2021 or 2022.
Without a doubt, web3 is plowing ahead and people are building.
In gaming, this is particularly impressive to see. Where many western AAA publishers lost out on the F2P shift during its early days, many western publishers are already invested and experimenting, even despite early pushback from uninformed players.
Figuring out the best practices
Even though web3 is still barely in its first inning, the speed of launches and feedback loops from consumers is giving us a fair bit of data. It’s weeding through the noise to find the best practices that is the hard part.
Looking solely at crypto prices or NFT trading volumes, for example, is nearly useless in a world where more consumers are getting on-boarded for free or cheap (remember, in-game items cost more like $1-$15, not $500+) and the use cases of having and holding those items is more incentivizing than flipping them, especially when there's no profit in toe. The future of web3 is not one where everyone gets rich, but where LTV is vastly extended and ARPPU is higher because consumers can say, “Well, I’ll buy this for $10 and probably be able to sell it for $3, so I feel more comfortable spending knowing my monthly allowance for these items next time could be $13.”
Despite the above, I still see a lot of projects and companies defaulting to old playbooks: taking to Twitter to pander in front of a handful of NFT speculators and degens. An audience that was never going to grow, but certainly one that is of little to no value to a scaling company with millions of current or potential users. (And companies that certainly should not be talking about “value to holders” in this regulatory landscape.)
There’s no better example of this than Bored Ape Yacht Club, who’s parent company, Yuga Labs, has made it beyond clear that its future is in gaming rather than throwing lavish parties or debuting spin-off collections to somehow make holders richer. For the BAYC holders, that doesn’t sound so hot, and they’ve dismissed the strategy with dramatically eroding floor prices. Sure, you can blame the market, but you can’t deny that the BAYC wagmi crew wasn’t spending $300,000 a pop for what is basically now a game pass (which cost $60 on Playstation, by the way).
Even for new projects without the baggage and history of a BAYC, as a set of consumers to appease the degen/flipper crew is insatiable and distracting. Not the kind of audience that a burgeoning game/project/strategy is able to handle. You can choose: pump the token, or make a great experience. Find me examples of both and dinner is on me.
I also notice a lot of projects still going down what we’ve known for a while is a false binary: either you onboard people seamlessly in a custodial way (kicking the friction can down the road when users will expect the benefits of fully on-chain opportunities), or embrace friction and appeal to the web3 natives (and vie for a small and mismatched audience relative to your true fans and users). This decision isn’t relevant in a world of “web2.7,” where users can get their first wallet with an existing account and acquire their first NFT with a flow that looks identical to any web2 UX, but with a setup that’s already future-proofed in being able to inject other web3 benefits.
For example, blockchain-based games being built by AAA publishers can and should 1) leverage existing web2 accounts 2) have the ability to integrate with existing player profiles and points programs 3) but also be able to integrate with the publishers’ partners’ NFT projects when the time comes.
I’m glad that Nike’s dotSwoosh x Fortnite had its moment, but the experience for users was silly. The future of web3 gaming and interactive brand experiences should not require a Tweet thread outlining “5 easy steps!” for linking accounts. This as a requirement is already obsolete, but spawned from a situation where one company has unnecessary custodial accounts and another has only web2 servers. Transitioning web2 accounts and infra into web3 is also negligible with lazy migrations and social login/wallet creation. This stuff is largely solved, folks.
Long story short: everyone is still building and launching, which is great. But navigating the sea of distracting options of how to get there and solidifying the creative and go to market strategies that jive with normal, existing audiences is a muscle that companies—whether indie dev studios or public companies—are still building. For too long, games faced and either/or situation, and those that wanted to test the waters in web3 used plans that mimicked those of monkey JPEGs, and those that wanted to onboard “mainstream gamers” had to run so far in the opposite direction that they’re now having trouble extracting the true benefits of blockchain technology.
And it’s understandable when case studies with the greatest success (in a consumer adoption sense) like Starbucks, Reddit, NFL Rivals, etc. are not necessarily the ones that have moved the needle in performance, yet (like a large but unsustainable play-to-earn game). But one thing is increasingly obvious: technology has reached a point that piecemeal infrastructure (which no game dev relies on in any other instance) and launch strategies that involve a handful of users with token hashtags on their profiles are not only unnecessary but dangerously limiting to the future we’re all building toward.