Hi Everyone. Welcome back to Naavik Digest. If you missed last edition, we looked at the new Metaverse Standards Forum and rounded up the news for the week. We have a jam-packed edition with two deep dives (one about Gods Unchained and a Naavik Pro game deconstruction on Worldscapes) — Be sure to check both out and let us know what you think on socials. Lastly, we’ll be off next Sunday for holiday. See you on July 6th!
Crypto Corner: Autonomous Worlds and Digital Physics with 0xPARC
On this week’s Crypto Corner, tech pioneer Justin Glibert shares his vision about Autonomous Worlds with your host Nico Vereecke. Justin heads up the ‘Autonomous Worlds’ division at 0xPARC, a foundation promoting R&D and Infrastructure around Decentralized Platform. 0xPARC is currently best known for its significant contributions to games like Dark Forest. During our conversation, we go deep into why we need Autonomos Worlds, what Digital Physics are, and what the Metaverse will look like.
#1: Miniclip Buys Subway Surfers Maker SYBO
Last week, Miniclip announced that it is buying the maker of Subway Surfers, the Copenhagen-based SYBO. The terms of the deal were not disclosed. Considering the scale of SYBO’s business, it is no doubt that this is the biggest acquisition Miniclip has done so far.
SYBO was founded in Copenhagen in 2010. It only took two years until the Danish startup found a hit with Subway Surfers, originally developed in cooperation with another Danish developer Kiloo. Subway Surfers was an immediate hit and has sustained SYBO ever since.
On the other hand, SYBO has struggled with its new launches. Its follow-ups in the endless runner genre—Blades of Brim, Train Riders, and Danger Rainbow—have failed to make a splash. The recently soft launched Subway Surfers Match, the non-obvious brand extension that is exactly what it says on the label, is also yet to prove its worth.
However, it is not SYBO’s new game pipeline that makes the company compelling. Subway Surfers just celebrated its 10th birthday with a full plate of live ops activations to go with it. The result was SYBO’s best month ever, with a significant spike in user count and an even bigger impact on in-app revenue.
Growing a games business in 2022 is not easy, so this is no small feat. In fact, the scale of Subway Surfers’ player base is exceptional. The classic endless runner was the second-most downloaded game in the world across the two mobile platforms during the past 12 months, tracking just behind Garena Free Fire. SYBO further fuels Subway Surfers’ monstrous scale with a live ops machine that has churned out engaging content ever since the seasonal envelope was introduced in 2013.
Miniclip, on the other hand, was founded in 2001. It initially made its name in browser games, and eventually pivoted to mobile. The crown jewel of Miniclip’s games business is the multiplayer sports title 8 Ball Pool, but the company does boast a sizable portfolio with dozens of notable games. Miniclip has been a subsidiary of Tencent since the Chinese conglomerate snatched a majority stake in the company in 2015.
Since then, Miniclip has demonstrated its own appetite for buying companies. Its acquisitions during the past four years include Masomo (Head Ball), Ilyon (Bubble Shooter), Eight Pixels Square (Sniper Strike), Gamebasics (Online Soccer Manager), Green Horse Games (Football Rivals), and Supersonic Software (now known for word games, but they are also behind classics such as Micro Machines 2 from 1994!).
The list of companies that Miniclip has bought tells a story of acquiring organic reach. Miniclip has been out to buy companies with sustainable free-to-play businesses that complement its existing games. Miniclip’s roots are in approachable arcade games, and the pivot from browser to mobile has not changed that. SYBO definitely fits the bill: Subway Surfers is the undisputed king of arcade.
The benefits of consolidation in the industry have been covered to death during the past two years, and the story remains the same. Owning a collection of high-volume apps in a given category provides advantages in both user acquisition and the measurement thereof. If Miniclip’s plans pan out, Subway Surfers’ player base could well add fuel to the growth of the entire Miniclip portfolio—and vice versa. (Written by Miikka Ahonen, Co-founder of Lightheart Entertainment)
#2: Gods Unchained Teardown
This piece was written by Alexandra Takei at Stanford GSB. Alex has a background in the gaming industry (ex. Blizzard and System Era Softworks) on titles like Overwatch, Hearthstone, Diablo, and Astroneer. Favorite games include: Devil May Cry 5, Disco Elysium, Hades, Persona 5, The Witcher 3, GRIS, Kingdom Hearts, Final Fantasy, Fire Emblem Three Houses, Ruiner, Hearthstone, and League of Legends.
This is about Gods Unchained (GU), a TCG (trading card game) that went into development in 2018 and launched its beta in 2019. GU is one of the first games to incorporate blockchain technology into its economy and its WAU and DAU sit around 80k and 8-12k, respectively. The game was developed on Immutable X, a Layer 2 solution utilizing Starkware to trim down on proof of work Ethereum consumption. I believe GU is one of the most legitimate and underrated blockchain gaming experiences to date as it has bucked several anti web proclamations such as “it’s a ponzi scheme”, “it’s bad for the environment”, and “it’s not secure”. In my conversation with Chris Clay, the game director for GU, in late May of 2022 he said “we often don’t get credit for many of the pain points we’ve solved”.
Unlike many of the Gen1 crypto games that fit squarely “Game-Fi” and and are top of mind in the crypto gaming genre such as Pegaxy and Axie Infinity, GU is a legitimate gaming product. There is actually something genuinely fun to do vs. the shallow game loops of Gen1 crypto games.. If that’s the case, — why do we never hear about this game? What is the hypothesis behind the $GODS token valuation when the development team has delivered a stalwart gaming product with the highest number of utility NFTs in any crypto game, created a vibrant universe with substance (lore, music, and art), built an economy that has yet to collapse (and probably won’t), and found environmentally friendly solutions to high volume trading? For context, a virtual world like SANDBOX can sell plots of land at a floor price of ~1.5 ETH on OpenSea on the promise that there will be experiences in the future (respective token $SAND with a market cap of ~$1.7B).
A game like Axie Infinity whose economy at this point is confirmed unsustainable by most institutional and retail investors, which has been hacked for $624M, and has game depth that is severely wanting is trading at a price of ~$20 with respective token market cap of $1.2B at time of writing. Meanwhile, the token tied to a product with the fundamentals the market is supposed to be rewarding is not appreciating nor paired with a billion dollar market cap. I had a few hypotheses such as there not being enough utility on the token (no staking yet) or that engagement had dwindled; however, that proved to be erroneous (there’s a myriad of uses for $GODS as we’ll discuss) and although engagement has dwindled (see GU Analytics), the timing isn’t in lockstep with token decline.
It’s perhaps no secret that the token value on web3 games is more tied to earning potential vs. product fundamentals. The crypto gaming market is currently valued on principles of FOMO and hype and its customers reward economies that are unsustainable in the long term, favoring those who get in line early vs. those who are skilled. It is the market itself that is not mature enough nor ready to reward the correct products (to be honest, the mass market crypto gamer might not even know what to look for in a video game nor be interested in it). One could make the counter argument that it is not that GU is undervalued but rather than the speculator products like SANDBOX and Axie are simply overvalued, but my more my point is that because of the valuations, these games grab all the media attention and continuously put a “black mark” on crypto games.
My hypothesis is that at some point this will change and the market will course correct (as it already has been, blockchain game usership has dropped 28% in June down from ~1.2M in May, Ethereum is down 70% since the start of the year, Luna chain collapse wiped out $40B in value). The market will begin to demand the products studios failed to deliver, regardless if it’s due to overconfidence (overpromising) or malice (rug pulling). I believe the survivors will be the games and services with true utility and fun, and this is why we should care about and study Gods Unchained.
Before I dive deep into GU (gameplay, economy, marketplace, etc.), I’d like to share some extra rationale behind writing this piece. I’ve been asking myself some existential questions about crypto and its relationship to gaming, whether it’s functionally doable, ethical, and fun. I’ve had a hard time wrapping my head around why we need the blockchain for the newfound *conveniences* crypto gaming purportedly offers, struggled with the fundamental fact that so many crypto games (so far) aren’t what mainline (or the indie) gaming community would consider games but rather glorified button labor, and find the transition from $60 for Bioshock to $0 for League of Legends to a $200+ buy in for a NFT game to be ludicrous. I’ve also had a hard time convincing myself that a game experience could be better or new design features deployed because of the blockchain. With Cloud Gaming for example, we imagined a future of 1000 person battle royales and live instance alterations made possible via the tech. What is it for blockchain and crypto? Yet at the same time, designing a sustainable open economy is an exciting challenge for gaming economists.
You can read an analysis on the transition from web2 to web3 economies and the subsequent impacts on monetary and fiscal policy that I co-wrote with another student during our time at Stanford (Part 1, Part 2).
My journey began with Axie Infinity, and I will say that the gameplay loop is tragically uninspiring. I genuinely resonate with the world design; it’s cute, fun, and whimsical but from the gaming perspective, I couldn’t make myself play even with an initial $800 investment and the ability to “play to earn” it back.
Gods Unchained was different however. I’ve hit Ethereal Diamond (11th out of 12 ranks), stomping on crypto gamers and an army of bots. I’m not a *great* TCG player, but an avid one. I was a Rank 3 Hearthstone player prior to the alteration of the ranked ladder (bomb warrior for dayz) and a platinum Legends of Runeterra player. I was an early adopter of the YuGiOh Dueling Network (rest in peace) and collected cards as a kid. My Gods Unchained experience defied what I thought of as a typical clientless, web browser, more amateur crypto gaming experience, and I’m pumped to share my discoveries.
#3: Worldscapes: PeopleFun’s Move Beyond Word Games
Haven’t you heard? PeopleFun, the creators of Wordscapes, are working on something other than a word game (Worldscapes)! We’ll dig into the new game further on, but let’s first take the opportunity to see how PeopleFun’s core word games-focused business is faring and how that’s leading to broader change.
Word games have never been the most mainstream subgenre in the puzzle category. As it stands, not everyone enjoys going over all possible entries of the dictionary every move they make, but a select number of people do.
Let’s look at some numbers. In 2021, the Words subgenre made up 3.4% of the Puzzle genre’s total revenue while accounting for 10% of total puzzle genre downloads.
Over the years, we’ve seen a pretty competitive onslaught in the Words subgenre with quite a few games rising and falling over time:
Games like CodyCross, Words with Friends 2, and Word Connect have all exceeded PeopleFun’s Wordscapes in terms of downloads at some point during these years. Words of Wonders even bested PeopleFun’s game in absolute numbers. However, even though most of these games rely quite heavily on ad monetization, what makes a big difference in the end is what players are willing to invest into a game — especially an audience as loyal as Word puzzlers. And one thing is quite clear: Wordscapes is the absolute best word game at monetizing its audience. It took until October of 2020 for the next closest competitor, Zynga‘s Words with Friends 2, to start bringing home more than half of Wordscapes’ revenue each month. And even though Words with Friends 2 is steadily climbing ever since, Wordscapes is still number one.
The game’s clear, sawtooth-shaped revenue graph shows that Wordscapes has the art of creating scarcity by time pressure (through a demanding live-ops cadence and a couple time-limited progression systems) very much down. Even though its competitor, Words of Wonders, has the exact same core mechanic, the events in Wordscapes make a 10x difference in comparison.
In interviews, employees of PeopleFun have confirmed that the audience of Wordscapes is diverse and of all ages. This might be true, but the game’s biggest issue at this point is that its addressable market is capped. A whopping 88% of its $216M lifetime revenue comes from the US. The UK, Canada, and Australia contribute 5%, 4% and 3% respectively.
So what do you do when you’ve reached the majority of your audience with your best-in-class cash cow? You diversify. This is what PeopleFun is attempting with its newest game in soft-launch — Worldscapes — a block puzzler!
“What’s a block puzzler?” one might ask. It’s a relatively new game mechanic that has recently been increasingly popularized by hypercasual games like TripleDot’s Woodoku, EasyBrain’s Blockudoku, and Beetles Studio’s Wood Block Puzzle. The first game that made a visible splash in September 2017 was a different app with the same name but from Russian origin.
Not a lot can be said about this genre as there has been almost no evolution. While there are some subtle differences in core mechanics of the mentioned games, all of them feature just one level and offer no variation on the mechanic when progressing throughout each game. PeopleFun’s take on this genre is wildly more extensive and a lot more elaborate.
But will PeopleFun be able to penetrate the block puzzle market after working almost solely on their word games portfolio over the years? PeopleFun has released games before that didn’t catch on, like Magic Bricks in 2020, so why do we think Worldscapes is likely a big deal? In short, PeopleFun knows the Blockscapes mechanic and the player base’s demographics, which also means the team knows how to market a game like that. But more importantly, we’re deconstructing Worldscapes because we think — despite the risks we’ll lay out later — it has a chance to not only innovate on the block puzzle subgenre but be a case study in how a studio can successfully enter a new genre. By this time next year the game could be the Royal Match of block puzzlers, and you heard it here first!
Worldscapes looks like a game with a very different scope and level of polish than the previous PeopleFun games. This is why we will dive deep into what opportunities arise by utilizing the team’s familiar Blockscapes mechanic and the risks PeopleFun is taking by releasing their most ambitious game as of yet.
In the rest of this deconstruction, we will:
Take a look at who these Austin-based developers are and what they’ve achieved
Break down the core mechanic and its inspiration
Conduct a full analysis of every level objective in the game as it stands right now
Speculate on Worldscapes’ metagame
Weigh the pros and cons that stem from using this mechanic instead of a more proven one
And make recommendations with regards to the risks this game’s development encompasse
Content Worth Consuming
Unlocking the Metaverse: New Opportunities in Games Infrastructure (a16z Future): This piece outlines the key areas of games infrastructure innovation that James sees as essential to unlocking the huge metaverse vision. The post unpacks this by breaking up the tech stack into three distinct layers: 1)The technical layer (reimagining the game engine), 2) The creative layer (reimagining content production), 3) The experience layer (reimagining operating live services). Link
With So Many Games Being Released, How Do You Get Anyone’s Attention (Vice): “Again, six months into 2022, there have been 5,575 new games added to Steam. That’s more than 30 every day. You probably have not heard of, let alone played, most of them. That's the nature of an open platform like Steam, not to mention the ongoing accessibility of development tools, and the increasingly diverse and scattershot ways to climb sales charts.” Link
Xbox Doesn’t Have a Big 2022 Game But Does It Really Matter (Polygon): “Does it [first-party titles] really matter? The games industry’s habitual annual rhythm, peaking in the last months of the year, is hard-wired into anyone who’s been playing console games for more than a few years. But that has been driven, for decades, by the needs of a retail industry that Microsoft is barely participating in any longer. As the company extends the Xbox brand into cloud and PC gaming, holiday console sales are no longer mission-critical. (And in any case, in these supply-constrained times, Microsoft and its competitors are pretty much guaranteed to sell as many machines as they can make.)” Link
All You Need To Know About Google’s HTML5 Platform Gamesnacks (GameDeveloper): “Google's HTML5 game platform GameSnacks has crossed a notable business milestone: As of last week, the platform has acquired over 35 million users, and is shuffling inside Google to be an arm of the Google Ads business unit. Most of the platform's players are located in developing regions, where internet access is growing thanks to a proliferation of cheaper smartphones utilizing lower-speed networks.” Link
How to Go From Good to Great in Puzzle Games: Switchcraft (DoF): “From a taxonomy standpoint, Switchcraft can be described as a match-3 puzzle game with a character-based storytelling meta a là Pocket Gems’ Episodes or Pixelberry’s Choices. Given Wooga’s background and success in narrative-based hidden object games, namely Pearl’s Peril and June’s Journey, it is a reasonable direction for the company. Play to your strengths - take the widest appeal core game mechanic and fold it into an area you have expertise in.” Link
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