Challenges Facing Mobile Web3 Games
TL;DR
The 30% commission imposed by app stores both complicates the business model for Web3 games and serves as a catalyst for daring ideas.
Web3 games offer a high likelihood of generating new market value through secondary market transactions and the transformation of gamers into creators.
Ongoing conflicts with app store companies, cumbersome Web3 game onboarding processes, and the scarcity of blockchain developers present challenges that hinder the transition to Web3 mobile games.
Introduction
Founded in San Francisco in 2018, Forte is a project that offers development tools, wallets, electronic payment systems, and token economics consulting services related to blockchain gaming. In 2021, the company completed a fundraising round of approximately $950 million, capturing the industry's attention. Recently, Forte's COO Andy Yang participated in a Twitter Spaces discussion hosted by Polygon Studios, where he and other global leaders explored the advantages and obstacles of Web3 mobile gaming.
Forte has published an article titled "Web3 gaming is perfect for mobile, but challenges remain," documenting the key points from the discussion. In this article, we will summarize the translated content and insights from Forte's piece. For a more in-depth look at Forte's perspective, we recommend checking out the original article.
The 30% App Store Fee Debate Resurfaces
Looking back at the history of gaming, the transition from PC to mobile gaming took place over an extended period. Today, the mobile gaming market boasts over 2.5 billion active users and annual revenues exceeding $103 billion, accounting for over 50% of global gaming sales and leading the market. However, it's clear that app stores are the dominant players in this market. Typically, app store fees (mainly Apple App Store, Google Play Store, and Chinese app stores like Huawei and Xiaomi) amount to a staggering 30%, posing a significant burden on the business models of small and medium-sized game studios. In reality, completely overturning the established fee practices in the market is quite challenging (e.g., Apple vs. Epic). Some countries' fair trade commissions regulate this situation through legislation. Naturally, content providers have long been seeking alternative revenue models to counter the excessive fee system, and many are now exploring new revenue sources through Web3 technology.
Secondary Market: A Game-Changing Trend
Typically, Web3 games aim to grant gamers ownership by providing as much digital ownership as possible for in-game items. This means that, at least conceptually, players in Web3 games can freely buy, own, and sell their assets in a digital free-market economy that was previously unattainable. Game studios can generate new revenue opportunities, such as transaction fees, by helping create this open market.
Most mobile games are free-to-play (F2P) and rely on in-app purchases for revenue. By targeting the aftermarket for secondary transactions, not only can new revenue streams be generated, but it also presents an opportunity to build new game economic models. Moreover, since aftermarket platforms for secondary transactions already exist outside of games, this is an opportunity to capture the market value created in these public spaces.
From Players to Creators
As mentioned earlier, Web3 technology enables the granting of full control over in-game digital assets to players, supporting the creation of player-driven economies within games. Players can actively engage in various economic roles, such as creators, by selling or renting their created items. This could potentially lead to the formation of various digital asset markets, such as collateral lending, loans, and insurance for in-game assets.
In this player-driven economy, game studios can act as intermediaries and participants, collecting fees from transactions occurring within the game. They can also provide a portion of these revenues as incentives for creators and players to promote the growth of the game and its economy, thereby continuously driving the player-led economy in a self-sustaining cycle.
Obstacles Faced by Web3 Mobile Games
1. Battle with Platform Goliaths
Currently, Apple and Google's app stores have strict policies regarding the use of cryptocurrencies and NFTs. Although Apple has announced support for in-app purchases of cryptocurrencies and NFTs, they must go through Apple's in-app purchase process, and there are limitations on granting utilities such as unlocking game features. In other words, these restrictions make it impossible to form the in-game secondary market and player-driven economy mentioned earlier, making it difficult to fully enjoy the advantages of Web3 mobile games within major platforms. While it's possible that these policies may change in the future, it is expected to take a considerable amount of time before the current issues are resolved.
2. Improving gamer on-boarding ; First with wallets
One of the many issues hindering the adoption of Web3 mobile games is the high entry barrier for general gamers due to the lack of "integrated wallet and payment solutions." In many cases, players often have to conduct transactions outside the game or their mobile devices, resulting in an inconvenient user experience. For Web3 mobile games to convert a large audience into users, seamless integration with cryptocurrency wallets is needed, and players should be able to easily manage their digital assets and complete transactions within the game.
To address these issues, various wallets are being launched by game companies or Web3-native enterprises. As mentioned in the gaming wallet report published by Tiger Research, solutions like Hachi Labs' Face Wallet & D’CENT Wallet which provide an integrated in-game environment, are being introduced, suggesting that these problems could be resolved in the near future.
The scarcity of blockchain developers
Mobile game developers looking to integrate Web3 elements must overcome technical challenges in applying Web3 technology to their games. This requires specialized knowledge that goes beyond the scope of a traditional Web2 service backend developer. Finding such developers is not only difficult but can also be quite costly.
Furthermore, there are numerous requirements unique to Web3 technology integration, such as preventing rapid inflation or deflation, which differ from those in conventional Web2 games. As the industry evolves, developers must stay up-to-date with new techniques and tools to successfully implement Web3 components into mobile games and maintain an engaging and balanced gaming experience.
Conclusion
Web3 technology indeed offers opportunities to diversify revenue streams and secure loyal customers in the mobile gaming industry. Supporting secondary marketplaces or creating player-driven economies can not only generate new revenue but also encourage active engagement from players.
However, as mentioned, there are several challenges that Web3 mobile games must overcome. These include dealing with platform restrictions, improving the integration of wallets and payment solutions, and finding skilled blockchain developers to incorporate Web3 elements into the games. As the industry continues to evolve and address these challenges, Web3 technology is expected to become more accessible and widely adopted, unlocking its full potential in the mobile gaming market.