Tom Fleetham
Despite growing interest from Web 2.0 companies, the explosion of web3 into the mainstream, combined with the high complexity of the technology, has caught many on the back foot. There has been much confusion around how to integrate the technology into Web 2.0 business models in a way that is authentic, adds value to the customer and does not cannibalize existing revenue. There’s also plenty of healthy skepticism — is web3 enabling meaningful new user experiences, or is it just a hype bubble complicating what was already possible in Web 2.0?
There is, however, clearly inherent value in blockchain technology, and the gaming industry is poised to become the focal point for mainstream adoption.
While it’s still unclear what the winning models for web3 gaming will be, it seems increasingly likely that the next exponential growth in blockchain adoption will be driven by gaming and gamified experiences. The overarching vision for web3 gaming is to empower players with more control, reward them in proportion to the value they contribute and to lower the bar so that it’s not just the top 0.1% of players who can make a living through gaming.
If that can be achieved, then web3 gaming is going to fundamentally transform the career choices of millions and the entertainment industry for just about everyone.
Despite how promising this opportunity is, it can be a daunting prospect for many Web 2.0 brands looking to capitalize on the benefits offered by web3 gaming. So, where do we begin?
Take baby steps
Non-gaming brands have already woken up to the potential of gaming for building awareness with younger audiences. Fortnite has become famous for this type of activation within their game, such as their recent Balenciaga X Fortnite collaboration.
But the key difference in blockchain gaming is that commercial activity is already built into the core of the game. Similar activation can therefore take a player from brand awareness to conversion with less deviation than standard gameplay.
Most brands looking to attempt this should start small and expand the experience over time as they go farther down the web3 rabbit hole.
- Phase 1: Purchase advertising space within a popular web3 game. Perhaps clicking on the ad takes the player to the brand’s e-commerce store.
- Phase 2: Now, the link takes the player to their NFT collection.
- Phase 3: There’s now a branded experience within the game itself, including in-game assets linked to NFTs.
- Phase 4: Clicking an ad acts as a portal directly to the brand’s city in the metaverse.
Once blockchain games reach levels of cultural significance similar to Fortnite, the B2B opportunities for web3 games will be enormous. This is partly because micro-transactions will be an inherent part of the gaming experience, and also because players who are making a profit from a game are more likely to accept commercial activations that have the potential to benefit their own earnings.
To prepare for the shift to web3 content, Web 2.0 organizations should think about how their brand can exist within a traditional gaming environment. If you can determine the audience you want to attract, the game they’re playing today and design activations that add value to (or at least doesn’t detract from) the player experience, then you’ve done the hard part.
Subsequently, commercializing this through a complementary NFT collection that provides in-game utility or the option to purchase the brand’s core product should be relatively straightforward.
Augment the physical with the digital
One thing gamers, esports fans and web3 enthusiasts have in common is that they all attribute tangible value to things that are purely digital. A crucial challenge for many Web 2.0 brands when developing a gaming strategy is defining how to create awareness and demand for their physical product through an inherently digital medium.
Web3 gaming makes the user journey from digital to physical easier by integrating the financial infrastructure directly into the game and leveraging the same NFT marketplace for both physical and in-game item sales.
To successfully transition your web3 consumers from digital to physical engagement with your brand, Web 2.0 brands need to design an NFT collection that provides real-world utility in the form of experiences, services or physical products. Tying real-world value to your NFT is easier for some brands than others, but the failure to define this strategy has been one of the core problems with early attempts at NFT collections by conventional Web 2.0 brands.
Ultimately, if your brand fails to link real-world value to your digital NFT, the result can often just be a collection of JPEGs that nobody wants.
Implement a skill-to-earn gaming model
The reality is that the money to pay play-to-earn players has to come from somewhere. If a game is consistently welcoming new players, then it can remain financially stable through token and digital asset sales. Once the number of new players joining the platform plateaus, the token value invariably drops, resulting in players leaving en masse.
To avoid this, studios building blockchain games should begin with the right premise and operate on a skill-to-earn model, which sets the foundations for a sustainable game. Instead of handing out participation rewards, the game should incentivize players to sharpen their skills and look to only reward genuine achievements.
Create a model where a small proportion, such as 20% of gamers, make a profit while the others are net contributors to the economy. This will still prompt a revolutionary shift from the current model, and most gamers will accept this as long as the rewards are based on skill.
Beware of backlash
Brands should be aware that there is some backlash toward the blockchain gaming movement, particularly as it relates to blockchain’s environmental impact. This is where blockchain selection, clear communication and education around this topic is critical.
In addition to environmental impact, the over-commercialization of gaming is another concern. Although native blockchain gamers are less sensitive to this trend, many in the traditional gaming community resent the growing number of branded activations and monetization strategies used by modern games.
We saw a similar pattern at the birth of the free-to-play (F2P) business model for games — many players resented micro-transactions and saw in-game advertising as an exploitive replacement for the traditional pay-to-play model. Similar to F2P, the web3 gaming movement will eventually hone in on a player-friendly balance, and the number of gamers opposing web3 gaming will go down.
Ultimately, if there is a sustainable way to profit from playing a great game, then the vast majority of players will embrace it. If Web 2.0 brands can design compelling in-game activations that add to, or at least don’t detract from the overall experience, then this is the best way to reach a young, tech-savvy audience.
Select the right blockchain
The blockchain determines a number of important factors for user experience, such as performance, scalability, security, environmental impact, transaction cost and decentralization.
Evaluating the technical trade-offs between different blockchains, and how they affect the user experience and brand perception can feel overwhelming for Web 2.0 organizations with only a rudimentary understanding of web3 infrastructure. For the majority of games with blockchain integration, the user experience will benefit from a blockchain that is fast, low-cost and highly scalable.
It’s also important to consider a blockchain’s existing community. The first players to join a game and come across a Web 2.0 activation are likely to come from the hardcore community that are passionate about (and probably invested in) that blockchain’s success.
While a blockchain with a large community may seem like the obvious choice, selecting a blockchain with a midsized, dedicated community offers one major advantage: less competition in terms of games available for the community to rally behind. For example, Polygon and Solana have many games on their blockchains, so it is less likely that each member of their community plays any single game.
Provided that the UX improves, gamers and mainstream web3 adopters in general will not care which blockchain they are using. Generally, Web 2.0 brands looking to select a blockchain should focus less on the technical nuances and more on finding a genuine partner that provides a good combination of an engaged community, marketing and technical support.
Prepare for the future
The gaming industry is currently in the middle of a huge web3 experiment. Hundreds of blockchain games are being developed, all of which take a slightly different approach to optimizing the gameplay and tokenomics that will make the best use of this new technology. The next five years will be fascinating as new games are launched and the market determines the winning models.
This transitional period will drive the next exponential growth in blockchain users. Once blockchain games achieve the same or greater level of cultural significance as today’s major games, the commercial opportunity for both brands and players will be enormous.
Those who begin experimenting early, even with a few baby steps, will be best equipped to take full advantage of the next major shift in consumer behavior.
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