Hi Everyone. Thanks for tuning in for another week of Naavik Digest. If you missed last week’s edition, we wrote about Fortnite Creative’s future vis-a-vis Unreal Engine. Check it out and let us know what you think.
This Week on The Metacast
A Deep Dive into Liquidity Pools (ft. Crypto Unicorns) — On this week’s Crypto Corner, we take a deep dive into one of the core DeFi primitives - liquidity pools. Laguna Games’ Cofounder and CEO Aron Beierschmitt and Games Researcher/Angel Kiet Fong join your Nico Vereecke to discuss:
- What are Liquidity Pools?
- Why are they relevant to Web3 games like Crypto Unicorns?
- What do game devs need to consider when setting them up?
- What are Liquidity Bootstrapping Pools?
#1: Roblox Announces Immersive Ads
The Roblox Developer Conference (RDC), which took place last week, is a rare occasion to peek into a games company outside of its quarterly financial reporting. Companies often use these events to evangelize products, make connections, and highlight community members — RDC was no exception. The most interesting takeaway from the event came from the company’s line-up of product previews and how closely they line-up with Roblox’s strategic priorities. The biggest headlines were split into three key areas:
- Safety: Including features like chat filtering, parental controls, age ratings, and a new anti-cheat system
- Identity: Including dynamic/animated avatar heads and UGC Marketplace features
- Aging Up: Including more support for cross-platform experiences via a universal app and a focus on new immersive advertisements
Of the three areas, immersive advertising particularly caught my attention. It’s no secret that Roblox has been angling toward an older age demographic in order to drive new business to an audience with entirely different interests. Immersive ads provide just that opportunity for brands to build stronger affinity among the game’s users. The news comes fresh off the heels of Xbox / Sony’s announcements about their own ad ecosystems, as well as the growing number of companies involved in immersive in-game advertising: Admix ($25M Series B), Bloxbiz (acquired by Super League Gaming), Anzu ($20M raised in March 2022), PlayerWON, URU (acquired by Adobe), and 4D Sight.
Roblox’s competitive advantage in comparison to these smaller platforms is aggregated demand – they own a platform as compared to a single integration. From the Verge’s recap:
“The new ad system will allow creators to drop 3D ads into their own experiences — like a billboard in a sports stadium or on top of a cab in a game — and to get a cut of the ad revenue… The changes are a major step in how Roblox thinks of its users and how the company approaches advertising. Roblox — and the millions of people creating games for the platform — will soon have a new way to make money and the opportunity to target a slightly older demographic. Roblox’s ability to become a billion-person platform with thousands of creators supporting themselves on it will depend on whether it can translate these new features into growth and profit.”
Roblox is just as much a budding, immersive social network as it is a platform for games and experiences. And indeed, Roblox is already growing up. Immersive advertisements will be rolled out by the end of the year. Roblox will disclose to 13+ players when the experience contains advertisements.
The biggest point to consider is that nearly 100% of Roblox revenue is driven by microtransactions, with ~90% of that revenue being subject to the 30% platform fee (given that almost all activity happens on mobile). With the launch of an immersive ads, the company can circumvent App Store rules in favor of better margins and a new revenue stream.
Exploring usage even deeper, out of their 52M+ DAUs, ~60% of these are 13+ players who spend on average of 150 minutes per day on the platform. I’m not sure any of the ad-forward tech companies below can claim similar usage metrics bar for maybe TikTok.
The other advantage Roblox has is that it can create multiple touch points for its users with a variety of brands: while searching for an experience, while creating an experience for brand awareness (e.g Gucci World), and immersive advertisements. Of course, each of these has a different monetization mechanism such as performance ads or microtransactions but imagine this flywheel: brand creates experience where players can spend time → brand also populates other worlds with immersive ads → brand pays for search banners to drive users to their experience.
I’ve previously written about how I think brands and commerce presents an enormous opportunity for Roblox’s unit economics, but immersive ads presents a new layer for the company to dig deeper. Once this is successful, they’ll layer on a purchase experience for the brands.
However, the caveat is that Roblox does have to be successful in its advertising ecosystem. If brands don’t want to pay for immersive ads and / or performance isn’t up to par, this fails. To be fair, as far as I can tell, there aren’t any immersive ad platforms that have really taken off (with the exception of maybe Admix at 300+ games), but it does have the unique advantage of aggregated demand and a moment in time: so many brands have been pursuing new approaches to advertising given IDFA, there is wide interest in commerce in the “metaverse”, and a critical mass of 13+ players on the Roblox platform.
Roblox has been patiently waiting to launch this feature and my bet is it’ll overshadow other tech companies to become a dominant advertising player in the coming years. That is, if they can keep their older players. (Written by Fawzi Itani | Thank you to Roblox for inviting Naavik to RDC!)
#2: Deconstructing Kingdom Maker
This is the introduction to a full game deconstruction of Kingdom Maker, written by Harshal Karvande. Check out Naavik Pro to request a demo, read the full write-up, and access our entire research library.
Kingdom Maker is a new 4X strategy game developed by Global Worldwide (ex-Kixeye team) and published by Scopely. The game is a product of the iterative refinement of the build & battle strategy games made by the founding team at Kixeye (formerly Casual Collective). Kixeye pioneered the mid-core strategy market on Facebook with games like Backyard Monsters, Battle Pirates, Vega Conflict, and Desktop Defender, generating more revenue per DAU and retaining players longer than most other social games on the platform.
Back in 2019 when Stillfront Group acquired Kixeye (link), the assets pertaining to Kingdom Maker were divested into Global Worldwide, along with the founding team that continued to work on it. According to Global Worldwide CEO Will Harbin (link), offers at the time did not fairly value Kingdom Maker, and hence he chose to sell the legacy games but divest Kingdom Maker and the team into another independent company, Global Worldwide.
Kixeye is famously known to have pioneered the build & battle strategy genre on Facebook, making it accessible with its stylized presentation and short-lasting battles. However, Kixeye was slow to adapt to market trends on mobile, with Backyard Monsters on Facebook being the inspiration for Supercell’s Clash of Clans on mobile/tablet devices. With the development of Kingdom Maker starting in early 2015, the team at Kixeye made a new technical start for mobile and aimed to build an architecture that supports operations at the scale of a decades-long game-as-a-service. It is seeking to further influence the future of strategy games on mobile by combining elements of the role-playing and simulation genres.
Kingdom Maker was soft-launched in the US in December 2021 for a period of 6 months before launching globally in June 2022. During the soft launch period, the game got about 26k downloads per month, generating around $200k in revenue every month, with RPD trending between $6-7. With these promising early numbers, the game was launched in partnership with Scopely, whose library includes the massively successful 4X strategy title Star Trek Fleet Command, and who saw potential in publishing the game.
Comparing Kingdom Maker’s early performance in the US with 4X strategy genre toppers like Lilith’s Rise of Kingdoms and Scopely’s Star Trek Fleet Command shows:
- In terms of RPD, Kingdom Maker is performing much better with $14.42 in RPD (US, iOS, 3 months from launch) than Rise of Kingdoms’ $9.89, and in-line with Star Trek’s $14.84.
- Rise of Kingdoms beats Kingdom Maker in retention (US, Android), likely due to the higher production values and UX improvements, but Kingdom Maker is mostly in-line with Star Trek, having a much higher D1 (43% vs 35%).
- Average revenue per DAU (US, Android) for Kingdom Maker and Rise of Kingdoms is close, yet lower than Star Trek’s, likely due to a more concentrated audience because of the Star Trek IP. This may also explain why Star Trek has lower D1 retention but better ARPDAU.
In 4X, players have extensive control over their empires, from resource gathering, base building, and raising an army for war to technological and political advancements to engage in diplomacy — all in a race to dominate a persistent and finite game world. The release of Kingdom Maker marks the refinement of what the ultimate 4X strategy game can be: one that offers players unrivaled freedom to choose between engaging in direct combat or toppling their enemies through the use of influence and espionage.
In this piece, we explore what makes Kingdom Maker deeper and broader than its competitors (and where it falls short), starting with:
- The state of the massively successful strategy genre on mobile
- What makes a 4X game?
- The unique RPG spin of Kingdom Maker on the genre
- What challenges in the post-IDFA world are holding it back?
Content Worth Consuming
Mitch Lasky — The Business of Gaming (Colossus): “Mitch Lasky is a partner at Benchmark. We cover the most important features of the modern gaming business model, how platforms like Twitch and Discord have re-shaped the industry, and what to look for when investing in gaming businesses.” Link
Roblox is Ready To Grow Up (Verge): “The changes are a major step in how Roblox thinks of its users and how the company approaches advertising. Roblox — and the millions of people creating games for the platform — will soon have a new way to make money and the opportunity to target a slightly older demographic. Roblox’s ability to become a billion-person platform with thousands of creators supporting themselves on it will depend on whether it can translate these new features into growth and profit.” Link
The Collectors Who Save Video Game History From Oblivion (New Yorker): “Michelle Flitman, a recent art-school graduate who lives in a suburb of Chicago, grew up in a home full of video games. To her dad, Mark, they were the odds and ends of corporate life: he was a game producer and designer who worked on NFL Blitz 2003, Spider-Man and Venom: Maximum Carnage, and WWF Raw. But to Michelle, they were part of the fabric of childhood, and she thought her father deserved some recognition. Michelle tried to interest YouTube hosts and Web-site owners in the relics she grew up with, but nothing came of those efforts. Then, in college, she took a course on video-game history, and her professor nudged her to write a research paper. When we spoke recently, she recalled a realization that she had: “Historians care about this stuff.” She decided to post photos of her dad’s collection—shelves of games in black-and-red boxes, some of them still in their original shrink-wrap—on a subreddit devoted to game collecting. “My dad was a video game producer for multiple companies in the 90’s/2000’s,” she typed. “We plan on selling most of his collection. Here’s a fraction of what’s in it.” Link
They Built a Minecraft Crypto Empire. Then It All Came Crashing Down (Rest of World): “Created in late 2021, Critterz incorporates nonfungible tokens (NFTs) and cryptocurrency into the Minecraft universe, bringing a “play to earn” model to the best-selling video game of all time. Players need to own an NFT to enter the Critterz server; once inside, they can earn an in-game cryptocurrency that can be traded for real money. They can buy plots of land in the Critterz world, also represented as NFTs, and sell the constructions they build on them, like Daniec’s medieval houses, to other players. It was a new experiment in play-to-earn gaming, hot on the heels of Axie Infinity, the figurehead Web3 game from developer Sky Mavis…” Link
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