Hi everyone. Welcome back from the Thanksgiving holiday and a big hello to the many of you who signed up recently! As a reminder, Master the Meta is a biweekly newsletter -- built by an amazing cast of contributors -- that explores the business of gaming and where the industry's future is headed. If you're ever interested in writing with us, please reach out! You can also read all previous issues here.

Of course, we're more than just a newsletter. Naavik is a research, consulting, and advisory firm that helps companies across the spectrum master the business of gaming. Most recently, we deconstructed the #1 blockchain game, Axie Infinity, as part of our premium research launch. (We also had the privilege of discussing our research with Joseph Kim at GameMakers). This week we're publishing our new monthly market update for blockchain games, and next week we're dropping our full deconstruction of Zed Run. If interested, you can sign up here, or if you want to reach out for any reason, you can contact us here.

With that, let’s dive into Sunday's edition...

Naavik Exclusive: The Metacast Roundtable #25

In this Metacast episode, Miikka Ahonen, Matej Lancaric and Anton Gorodetsky are joined by your host Nicolas Vereecke to discuss:

  • InvestGame’s Gaming Deals Activity Report: Find the report here

  • Brands in Games: Nike and Roblox partnered to bring Nikeland onto the platform. We discuss how brands look at games, how they can build exposure within them and what games companies can do to facilitate that.

  • Facebook/Meta Reveals Haptic Gloves: Meta has silently been working on haptic technology to augment the Oculus VR Experience. We discuss how it works, the potential of this technology, and the roadblocks ahead.

As always, you can find us on Spotify, Apple Podcasts, Google Podcasts, our website, or anywhere else you listen to podcasts. Also, remember to shoot us any questions here.

#1: Designing for an Interoperable Future


Source: Lisk.com

Editor’s note: This is the introduction to a deep dive written by Naavik team member Matt Dion. The deep dive explores interoperability and how it might play into the future of gaming. The full piece can be found here.

As a relative newcomer to the world of NFTs, one word that I frequently encounter in my research is “interoperability”. This term is often referenced as a key reason why NFTs are so groundbreaking. Interoperability, or in other words, the ability for disparate systems and products to interface seamlessly (either at present or in the future), is a complex topic with many contextual nuances. Yet the importance of digital interoperability cannot be overstated.

As our world becomes increasingly networked and interconnected, having open standards, protocols, and formats will allow for the free flow of information, the efficient upgrading and maintenance of digital spaces, and the standardization of toolsets and capabilities. Interoperability has the potential to revolutionize a multitude of consumer and enterprise applications, from healthcare to finance to engineering and more.

The games industry, too, has been increasingly referenced as one hindered by issues of interoperability. Much of this can be attributed to the avalanche of Metaverse ventures fundraising in the space, as interoperability is often cited as a key prerequisite to unlocking the persistent, live, digital experiences associated with this thesis.

Underpinning this interoperable vision are the non-fungible tokens (NFTs) that form the backbone of many blockchain games’ virtual economies. NFTs endow players with ownership (as their provenance is inscribed in the blockchain), and it is this verifiable ownership that differentiates them from other virtual items found in “traditional” non-blockchain games. Where most virtual assets are trapped in the walled gardens created by their developers, the verifiable ownership of NFTs allows players to take these assets with them out of the game and (at least, in theory) into another game or application.

In a game development context, this sort of interoperability implies that there are other blockchain games prepared to utilize NFTs and recognize their value accordingly. Otherwise, an NFT is still only valuable within the context of its original game. If an NFT’s utility exists only within the confines of the game in which it originated, it’s not much different from the many collectibles, art projects, and profile pictures being minted every day outside of a gaming context. There’s nothing inherently wrong with that, of course -- many of these projects are quite interesting in their own right -- but they don’t fit the definition of interoperability, and are therefore beyond the scope of this exploration.

It’s not hard to see why interoperability is a worthwhile pursuit for gamers. Being able to take earned or purchased digital assets from one game to another -- and even out of the game entirely -- provides players with much more value and ownership than today’s free-to-play models do. The digital theme parks of the future would (ideally) allow players these freedoms. The ability to bring digital ownership from one context to another is a prerequisite for bringing digital style, digital prestige, and digital identity along with it. Once digital identity is persistent and transferable, entirely new forms of self-expression, culture, and society will emerge.

However, the case for developers and publishers to pursue this vision is less clear, at least in the near term. While embracing interoperability will eventually become table stakes in a world where a fully-fledged Metaverse has taken hold, in today’s gaming industry the incentives are not so straightforward. For large developers and publishers with established IPs and entrenched fanbases, the impetus to interoperate is not as strong (as I will discuss below). These incumbents are more likely to protect their own interests, rather than open up their ecosystems to external influence or allow their intellectual property to be used elsewhere.

For others though, interoperability has the potential to bring about a “rising tide lifts all boats” effect. Immutable* co-founder Robbie Ferguson touched on this in the Gods Unchained blog:

“Developers benefit under this model as each use-case compliments the other, raising asset-liquidity and value of the product. When items are worth more to players, they’ll be worth more to developers. And the movement towards decentralization will birth a new breed of creatives, eager to capitalize on the burgeoning market of interoperable items.”

While this sort of compounding value may hold true in the long term, there are still many obstacles to overcome before the value of interoperable items can overtake the value of today’s digital assets.

#2: Niantic Raises $300M

Source: Pokemon Go Hub

With all the recent $1B+ valuations in the blockchain gaming space, it was refreshing to see a company with large product market fit, actual revenue, and an ambitious product roadmap raise money. This news went largely under the radar because of the holiday timing, but Niantic will become a much, much bigger company than its recent $9B valuation.

Two paths are diverging: there’s a spectrum of consumer-oriented incumbents who are building XR within their walled gardens and another set of competitors who are building an open and cross-platform ecosystem. I’d bucket Meta, Apple, Snap, and Microsoft on the former and include Niantic, Epic, and Unity toward the latter. It’s important to note that most use cases for consumer AR haven’t yet worked out. Niantic’s Harry Potter and Settlers of Catan franchises sputtered, Minecraft Earth didn’t pan out, and Magic Leap pivoted toward enterprise use cases. Niantic and Snap are the only companies that have demonstrated any ability to reach AR product market fit for consumers. It’s a “real world metaverse”: Niantic has the potential to reimagine our conceptions of digital layers, and how we can leverage technology to interact with our environment. To put it in the words of CEO John Hanke:

“Building the real world metaverse lies at the intersection of two major technical undertakings: synchronizing the state of hundreds of millions of users around the world (along with the virtual objects they interact with), and tying those users and objects precisely to the physical world. The first exists today in the Niantic Lightship platform, which underpins Pokémon GO and all of our products and supports hundreds of millions of users around the world. It means that those millions of users can create, change, and interact with digital objects in the physical world and that experience is consistent and shared by everyone. In the world of software, we call that a ‘shared state’ — we are all seeing the same thing, the same enhancements to the world. If you change something it’s reflected in what I see, and vice versa, for the millions of participants using the system.”

November was a big month for Niantic. They released Pikmin Bloom, sunset Harry Potter:Wizards Unite, and launched an AR development called Lightship. Each speaks to the Niantic thesis and why they have the potential to grow past $9B:

  • 1st party content: Continue developing 1st party content in partnership with major brands. While this won’t be their main focus, it points toward a commitment toward building AR onramps for consumers. Brands are increasingly looking to license their content for new user experiences.

  • Pokemon Go: Attracting and retaining users. This game is still a cash cow, having generated $6B to date and still being on an estimated $1B+ annual run rate. Pokemon Go will be an important vehicle to reinvest money back into R&D.

  • Lightship.dev: Build the best developer experience for Lightship. This will happen through a mix of internal R&D and acquisitions. At some point, they might even develop their own App Store for AR-based hardware.

  • Social experiences. This has been done primarily through acquisitions, having recently acquired Lowkey and Mayhem.gg. It’s an important pillar for connectivity, stickiness, and revenue (Lightship is currently free except for projects with over 50K users). From Ivan Zhou, founder of Mayhem: “Niantic will be one of the most important companies shaping how people interact with each other in the future.”

While Pokemon Go has been Niantic’s only outsized commercial success to date, it’s ultimately the AR development platform that will bring in more revenue long-term. In this way, Niantic is following the Epic Games playbook: building a platform and flywheel for other services while maintaining first-party IP. Niantic has effectively de-risked itself from having to make hits games or apps by outsourcing development and marketing of apps developed through its tech to independent studios, developers, and creators. All this stems from building the infrastructure for their previous projects. It’s worth investigating their tech more deeply.

What the AR development kit offers is a set of functionalities for understanding and mapping environment and being able to play these experiences together: more interactive and realistic experiences that are cross-platform. It also works alongside Unity and runs seamlessly on iOS and Android. Developers and creators can easily get started with their resource library. Here are the main components:

  • Fast networking: P2P networking stack and managed server. Lightweight gaming functions and session persistent storage. Multiplayer capabilities that runs in parallel with Unity. Virtual content, game interactions, and movement —all in sync and all in realtime.

  • Computer vision: Their tech can understand the world around the user. They call this semantic segmentation, which can interact with the environment dynamically.

  • Mapping: Depth estimation, real-time meshing, and occlusion. Automatically adapts to surroundings and sensors without the developer needing to do anything. Creates a real-time 3D mesh map (topography, depth, and geography around the user). This can be used to create more visually real AR layers.

I highly recommend watching Niantic’s recent keynote to get a sense of their vision and tech. The company’s mapping technology will in effect create a persistent and shared understanding of the digital layer across devices that people will be able to remix, interact, and create. This becomes particularly interesting when multiplayer is integrated and there is a sense of shared community. However, for the Niantic thesis to play out, there has to be belief that there will be consumer interest for digital to physical interaction (atoms to bits), and that the digital layer will interplay and augment our real-world experiences.

I’m optimistic for this future, but part of the barrier to mainstream adoption is that a phone is still needed to be in AR. Snap Spectacles and Google Glass were some of the first attempts to tackle this problem but it will also require consumer behavior to shift to meet this technology. This also goes for Niantic’s partnership with Qualcomm to develop AR glasses. At any rate, with Meta spending billions and operating at a loss for its ambitions, Microsoft working on Hololens, and more, it’ll take a well-capitalized company to compete with or integrate into their ecosystem. The fresh $300M and Pokemon Go’s continued success will be key growth drivers. Next up: getting a critical mass of developers using Lightship. (Written by Fawzi Itani)

🎮 In Other News…

💸 Funding & Acquisitions:

  • Niantic raised $300M at a $9B valuation led by Coatue. Link

  • Moon Active raised $300M at a $5B valuation led by Insight Partners. Link

  • Animoca and Binance teamed up to launch a $200M crypto gaming fund. Link

  • Harmonix announced that it would be acquired by Epic Games. Link

  • Play Ventures announced a $75M fund for blockchain-based gaming investments. Link

  • Plug In Digital raised a $75M Series B. Link

  • 100 Thieves announced a $60M Series C raise led by Greenbay Ventures at a $460M valuation (their transparency around the raise is awesome, highly recommend watching the video). Link

  • Mainframe raised $22.5M from a16z. Link

  • Niantic acquired Lowkey.gg, which let gamers capture their favorite gameplay moments. Link

  • Sneaky Panda raised $6M in a round led by Bitkraft Ventures. Link

  • Loot Squad, a crypto gaming guild, raised $5M in around led by Delphi Digital. Link

  • Talewind raised $3.4M to build Breezy Bay in Roblox (we previously chatted with them here). Link

  • Metafy acquired coaching platform GamersRdy. Link

  • Unity acquired SyncSketch for creator development tools. Link

📊 Business:

  • Steam reached 27M concurrent users. Link

  • Playstation is rumored to be building a subscription service to compete with Xbox Game Pass. Link

  • Brawl Stars sponsored Mr. Beast’s Squid Games video and saw a 350% increasing in US downloads. Link

  • Netflix hired Amir Rahimi as VP of Game Studios. Link

🕹️ Culture & Games:

  • Interesting product strategy: the developer behind Townscaper released a web browser demo of the game. Link

  • MiHoYo, the developer behind Genshin Impact, opened a studio in Montreal to work on a AAA open-world shooter. Link

  • Fortnite introduced party worlds, virtual worlds specifically for socializing. Link

👾 Miscellaneous Musings:

  • “LoL esports still hasn’t turned a profit. That’s okay, say Riot.” Link

  • What play-to-earn gaming can tell us about the future of the digital economy. Link

  • The inevitable blockchain revolution. Link

  • Core Loop’s thinking around gameplay for WEO. Link

  • “Blockchain is only a game-changer if players are stakeholders.” Link

  • Sustainability and Sky Mavis (collab between GameMakers and Naavik). Link

🔥 Featured Jobs

You can view our entire job board — all of the open roles, as well as the ability to post new roles — below.

Thanks for reading, and see you next week! As always, if you have feedback let us know here.

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