Hi everyone — welcome to another issue of Naavik Digest! First things first: Naavik is dropping a major announcement later this week, plus our next big game deconstruction, so make sure to keep an eye on your inbox.
Next, if you missed our last issue, check out our breakdown of which new Turkish mobile puzzle games (and the companies behind them) might be the next big winners.
In this issue, we ask the simple question: Can web3 gaming on mobile succeed? We dive into a few examples and policies that are shaping what’s possible (or not) on mobile and come to a few conclusions.
#1 Mobile Web3 Gaming — Disaster or Opportunity?
Written by Devin Becker, Naavik Contributor & Consultant
- Bringing web3 features to mobile is worth considering given the platform’s massive reach. However, friction remains.
- The largest headwind is the app stores themselves, which continue to hold vague, limiting, or undecided policies.
- Some of web3 mobile’s early games maintain active player bases and can teach us several lessons: how to leverage web3 for marketing, why these games succeed more on Android versus iOS, how to manage the friction of off-platform features, and more.
- It’s too early to come up with a repeatable playbook, and the safer path for web3 developers remains on PC.
- That said, we expect web3 mobile launches to accelerate, which will also lead to an acceleration of learnings. We look forward to helping aspiring teams implement these learnings into their games.
The web3 gaming community, which is currently going through a quieter building phase, must consider whether mobile platforms will become a major catalyst or remain a significant headache. It’s worth considering, because access elsewhere is limited. Browser-based gaming has major limitations, and both console platforms plus Steam on PC simply don’t allow web3 functionality. The next couple years are poised to witness the arrival of numerous higher-quality web3 games on desktop, primarily via custom launchers and the Epic Games Store. However, it’s crucial to remember that different platforms naturally lend themselves to different types of games, and in many countries, the primary gaming platform is mobile. Therefore, focusing solely on desktop development might limit both creative flexibility and audience reach, especially considering that countries like Brazil, the Philippines, and Japan lean heavily mobile and have been receptive to web3 gaming.
Unsettled Platform Policies
While there are several obstacles to mobile as a web3 gaming platform, the most significant is Apple itself. Although Apple provided some clarity to its web3 policies in September 2022, it left much to interpretation. The policy's most crucial segment was about both permitting and restricting non-fungible tokens (NFTs). It states:
“Apps may use in-app purchase to sell and sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring. Apps may allow users to view their own NFTs, provided that NFT ownership does not unlock features or functionality within the app. Apps may allow users to browse NFT collections owned by others, provided that the apps may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.”
While the policy permits the use of NFTs, it essentially diminishes their functionality to mere display items. Apple also emphatically upholds its "anti-steering policy", which prohibits developers from directing users to anything except In-App Purchases (IAPs) for transactions. However, following the policy update, an appeals court ruled in the Epic Games antitrust case that a lower court's injunction against Apple's anti-steering policy would be upheld. Although Apple can still appeal this decision, it could result in this aspect of the policy becoming unenforceable, which would be a blow to Apple’s firm control over the user experience.
The policy's vagueness on what "unlock features or functionality" truly means leaves many web3 game developers puzzled. This is important to clarify, because most developers and players want NFTs to have special utility beyond visual appearance — hence why many NFTs hold value in the first place. Like everything else, Apple's wording is designed to discourage any external buying, selling, or minting of NFTs that would bypass its 30% cut and tight ecosystem control. This is never explicitly articulated but it is clearly implied.
On the other side of the duopoly, Google has yet to clarify its stance on web3 gaming but has generally been permissive. The company is hearing requests from developers and indicated that a more explicit policy would be released later in the year after further consultation. Unlike Apple, Google has shown receptivity toward web3 in other areas like its Cloud initiatives, viewing them as opportunities to collaborate with developers (despite seeking its own 30% cut from IAPs). The current lack of clarity is not ideal, but it is probable that Google's policies will be more lenient, and currently numerous web3 apps and games are live on the Play Store.
Lessons & Tactics from the First Movers
Next, to see what’s really going on in the market, let’s look at a few game examples and then triangulate the takeaways.
One of the earliest web3 games to gain traction on mobile was Thetan Arena. Its developer, Wolffun, initially sought success with a game similar to Brawl Stars, a top-down arena MOBA called Heroes Strike. Despite Heroes Strike failing to gain the traction Wolffun had anticipated, the team identified an opportunity in the burgeoning web3 market. They re-released the game as Thetan Arena with added web3 components, which resulted in a tremendous surge in interest from December 2021 to February 2022. The web3 element was relatively straightforward: There were NFT versions of the game's characters that players could purchase and use as cosmetic variations in the game, and playing with them could earn players tokens.
Riding the Play-to-Earn (P2E) wave in late-2021, Thetan Arena outperformed Heroes Strike in all metrics. Notably, Android's download figures (6.2M) and active user numbers (9.3M) were 4-6 times higher than those of iOS (0.9M downloads and 2.4M active users). Revenue was nearly twice as much ($438k versus $292k) according to data.ai for December 2021. Although the game's momentum dipped during the subsequent bear market in 2022, it still maintains a sizable user base (473k on Android, 64k on iOS as of May 2023), despite no updates since December 2022.
The game, while not overtly emphasizing its web3 components, does not hide them either. The game's description on the iOS App Store explicitly mentions NFTs and earning potential. Luckily the way web3 is implemented here doesn’t actually violate Apple’s rules since the NFTs just enable token earning without altering the gameplay. While the game obviously isn’t anywhere near its peak anymore, it’s clear that the web3 angle helped massively with user acquisition when compared with Heroes Strike, and it still retained a reasonable percentage of players.
Another intriguing case study is Upland, a virtual real estate game in which players can own virtual representations of real-world locations. The game uses a normal in-game, non-cryptocurrency called UPX, which players can buy through IAPs and which drives most of the game’s revenue. Rather than “tokenize” a fungible currency, Upland focuses on NFT properties that can be bought and sold for UPX (or real money) using a special payment system. Released in June 2021, Upland, like Thetan Arena, exhibited better performance on Android than iOS; active users were 6-7x higher on Android while revenue differences were less pronounced. Although the game has struggled to maintain its active player base since Q3 2022, it still retains 100-200k active users on Android and 20-40k on iOS.
Additionally, Mir4, a K-Fantasy MMORPG, stands out as a cross-play experience available on both desktop and mobile platforms. Developed by South Korea‘s WeMade, which also runs a blockchain named WeMix, Mir4 is also available on Steam, albeit without any advertised web3 elements. South Korea's ban on cryptocurrencies and NFTs in games (due to speculative behavior) has also led companies like WeMade to release local versions of its games with web3 features disabled.
Mir4 also offers various other forms of IAPs to generate revenue outside of its web3 elements. The game operates with two blockchain tokens (Draco and Hydra), both of which have depreciated in value over time, consistent with the broader crypto market. Launched in the summer of 2021, the game also displays the now-familiar trend of outsized success on Android compared to iOS, with at least 4x users and 4-5x revenue ($7.2M vs $1.4M for December 2021, according to data.ai). Although the game peaked quickly in late 2021 and began losing players and revenue in 2022, it still maintains around 300k active users and generated $1.3M in revenue on Android in May 2023 (compared to a modest $292k on iOS). However, WeMade's follow-up to Mir4, Mir M, which launched globally this past February, has not fared as well and is already underperforming compared to Mir4's metrics.
Finally, let's consider a more recent game, NFL Rivals, which launched in February on Android and March on iOS. In this casual American football game, players use trading cards of athletes to form teams. The game keeps web3 elements separate from the mobile client, integrating them instead on its website, where players can trade NFT versions of individual athlete cards, as opposed to the in-game mechanism of opening booster packs.
Contrary to the trend observed in other games, iOS significantly outperforms Android in terms of revenue (more than 2x - $240k vs $93k) and active users (513k vs 174k). This discrepancy is likely due to the U.S.-centric nature of the NFL, and the numbers are still relatively low, but it illustrates potential opportunities for iOS. The game's muted focus on web3 elements, possibly making it more appealing to this particular audience, might also be a viable strategy given Apple's vague yet limiting policies.
Overall, there are a couple key takeaways from the past two years of web3 mobile game attempts. First, while web3 components can provide strong marketing angles during bull markets, they won’t sustain interest in bear markets without compelling gameplay to support them. Many of these early web3 games viewed P2E as the main reason for web3 elements to exist (which proved unsustainable), whereas future successes need to make these elements beneficial to the actual gameplay in sustainable ways. Said another way, web3 technologies can be used to help create new, innovative, and engaging player experiences, but using it to drive adoption through financial speculation is a losing game long-term. Second, games relying on web3 features to attract players are more likely to succeed on Android versus iOS, and they also currently enjoy slightly more implementation flexibility.
Several other successful strategies for web3 implementation on iOS are worth noting. One straightforward yet perhaps controversial approach is to avoid fungible cryptocurrencies entirely. After all, Apple will enforce stricter policies on anything resembling money, and regulators may still insist that many tokens (in-game and elsewhere) are in fact securities. Instead, consider distinguishing in-app currencies, purchasable with IAP, from any web3 currencies, and use NFTs as a potential bridge between the two.
For instance, StepN, the infamous “move-to-earn” app that sells sneaker NFTs, created a new virtual currency that can be bought as an IAP and used to purchase and mint sneaker NFTs at a 30% markup, which ultimately keeps the revenue for StepN unchanged. It either transfers the Apple tax onto players or entices them to seek cheaper alternatives outside of the app. Companies like Supercell already offer web shops where players can buy gems outside of the game without paying Apple's 30% fee, and this could get far more popular if anti-steering policies are unwound.
Another strategy involves ensuring that anything available as an NFT is also somehow obtainable in-game. In other words, if players can import guns as NFTs, similar weapons should be obtainable within the game, even if their quality might not exactly match those of the NFTs. This aligns with the gray area of "unlocking functionality," meaning that NFTs are not unlocking new features but instead provide different elements of the existing gameplay.
Blast Royale, for example, adopted this strategy by offering gear that could be randomly acquired in-game or as NFTs purchased on the blockchain. As another example, Axie Infinity: Origins got approval from Apple as a F2P game by making basic, playable Axies available for free, while the NFT versions aren’t mandatory but can be used in game (and provide benefits) if owned.
Another tactic is to keep the player-to-player marketplace entirely outside the game client or use premium in-game currency as a medium of exchange. Following the example of NFL Rivals, keeping the marketplace outside the game (as you can see above) enables NFTs to move in and out of the game without disrupting in-game NFT acquisition methods. Developers can establish ways for players to obtain NFT items without IAP (thereby avoiding Apple's 30% cut) while hosting an external NFT marketplace with a 10% royalty. However, with this setup, it's crucial that players don't feel obliged to use these off-game websites to enjoy the game. If an in-game marketplace is desired, using a premium currency like gems as the exchange medium ensures that Apple gets its share from the initial currency sale, and the developer gets revenue upfront instead of needing to enforce royalty fees.
Lastly, games that continue to generate revenue do so because their business models don’t rely solely on selling tokens. In-app purchases (or even sales via web shops) should remain the primary revenue stream for most web3 mobile games. While web3 may eventually offer novel revenue generation methods, token sales and royalties aren't sustainable for most games, especially on mobile platforms since those web3 features must largely exist elsewhere.
So… What Does This All Mean?
In summary, web3 undoubtedly has a future in mobile gaming, but its exact shape is still forming. The hostile environment — driven by Apple, regulators, the media, and even many players — will continue to hamper conservative-leaning companies and instead should mainly only appeal to our industry’s explorers who are comfortable taking risks and operating amidst ever-changing environments.
Furthermore, the ups and downs of the example games given in this piece show that even initial successes can run into numerous headwinds. For game developers who want to focus on building great games and avoid navigating through minefields of platform issues will likely find safer ground developing for desktop and leveraging friendlier platforms like the Epic Games Store.
Of course, for those brave mobile developers who wish to plow ahead with web3 features anyway, they can still mitigate some risk by adopting a few of the strategies mentioned above. We remain far away from having a reliable and repeatable playbook — that’ll only come when platform policies truly settle — but through watching other games and working with numerous middleware and service providers like Stardust, Ready Games, and Unity, teams can increasingly ease into a more comfortable “web 2.5” model if desired.
Whether successful or not, we can expect a surge of mobile web3 games in mobile app stores in the coming year. We wish all of these brave explorers the best and look forward to continue to learn from and work with many of them.
#2 Jim Ryan‘s Testimony, Nintendo’s Next Generation & Meta‘s VR Subscription Play
Written by Nick Statt, Naavik Managing Editor
PlayStation chief’s testimony raised questions. Sony Interactive Entertainment CEO Jim Ryan took the stand during the Xbox-FTC courtroom showdown this past week. Ryan only showed up via a pre-recorded video deposition featuring questioning from the FTC’s and Microsoft’s legal teams, but it was an explosive testimony nonetheless.
- Ryan confirmed that Sony would not send PS6 developer kits to Activision Blizzard if it were owned by Microsoft, saying, “We simply could not run the risk of a company that was owned by a direct competitor having access to that information.” The same was true of Minecraft for PS5, Ryan confirmed, which would explain why Mojang doesn’t offer a PS5-enhanced version.
- Ryan notably said he doesn’t view Starfield becoming an Xbox console exclusive as anti-competitive, reiterating the points made in a Ryan email shown in court last week in which the exec said he was not concerned about the fate of Call of Duty. “We’ll be OK, more than OK,” Ryan said.
- Ryan made a number of other head-turning statements in his deposition, including that publishers “unanimously do not like Game Pass because it’s value destructive” and also that even if a franchise like Call of Duty were available on PlayStation and Xbox, its presence on Game Pass should qualify as “partial foreclosure” and risks hurting Sony’s business.
- Lastly, one of Sony’s poorly redacted documents confirms that PlayStation’s top first-party titles — like Horizon Forbidden West and The Last of Us Part II — now exceed $200M to develop. That also excludes marketing costs!
Nintendo is preparing to switch generations. Nintendo has been tight-lipped about the successor to the Switch, especially in the wake of rumors back in 2021 that the company shelved a more powerful Switch Pro due to the chip shortage that year. But its secretive approach is beginning to change.
- This week, Nintendo President Shuntaro Furukawa made the rare disclosure in an investor Q&A that the company intends to make the move to the next-generation Switch a “smooth transition” using its Nintendo Account platform, which will include keeping players’ digital purchases intact. That’s good news and a departure from the past.
- Older Nintendo hardware, including the 3DS and the Wii U, utilized the messy Nintendo Network ID system, which is less ideal compared to cross-generation account syncing. To this day, popular Wii U titles like The Legend of Zelda: Wind Waker HD and Paper Mario: Color Splash are locked into the older system with no word on whether they’ll ever migrate to newer devices.
- “Many of our customers have been playing on the Nintendo Switch with download software or download-only software, and compared to previous game consoles, the ratio of digital sales has been increasing,” Furukawa said, via translation from VGC.
- We don’t know what the new Switch will be called — Switch 2 or Switch Pro are the leading contenders — and Furukawa has already said the device won’t arrive before the end of its current fiscal year in March 2024. But it now seems clear that Nintendo is starting to put the pieces together for a more public announcement next year.
Meta brings subscription gaming to VR. The Facebook parent company announced that it will launch a new Quest Plus monthly subscription service. It will cost $7.99 and provide two new games on the first of every month, similar to the free game perks of PlayStation Plus and Xbox Live Gold.
- This is far from a Game Pass-style offering. Instead of an all-you-can-play subscription, Quest Plus appears to be more of a promotional platform for new and lesser-known VR titles.
- The first two games for July will be Pistol Whip and Pixel Ripped 1995, followed in August by Walkabout Mini Golf and MOTHERGUNSHIP: FORGE. So long as you stay subscribed to Quest Plus, you’ll be able to access these games whenever you like, given you claim them from the Quest Store after the first of the month.
- While Meta controls the lion’s share of today’s VR hardware market, its sales have been declining, with headset revenue down 42% year over year in the six months that ended January 2023. There is also new competition in the form of Sony’s PSVR 2, which outsold its predecessor with more than 600,000 units in its first six weeks, and Apple’s forthcoming Vision Pro, though the latter is (for now) far less of a gaming-centric VR device and more of an AR workplace one.
- To that end, it makes sense that Meta might try to juice VR game adoption with a new subscription offering, especially as it prepares for the Quest 3 launch some time this fall.
- Coda Payments: Managing Director, Publisher Partnerships (Los Angeles, U.S. / Hybrid)
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- Nexus: Head of Sales (Remote)
- Supersocial: Game Designer (Remote)
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