Hi Everyone! Welcome back to another issue. Last Sunday’s issue caught a lot of your attention — the most popular links in the issue were GameMaker’s breakdown on structural advantages in gaming, Supercell’s official Everdale announcement, and the details behind Rally’s $50 million raise. Let’s dive into today’s issue.

From The Archive: Cloud Gaming - The Longest MILE


Zed Cloud


Although “cloud gaming” hasn’t lived up to the hype, smart teams are finding other ways to leverage cloud technologies and build new, unique types of experiences… like Massive Interactive Live Events (or MILEs). Earlier this year, Naavik content consultant Matt Dion wrote a fascinating essay about how MILEs work, why they are compelling, where they can go from here, and how companies can best succeed at them.

#1: The Rise of Zed Run

Zed Run

Source: Zed Run

In late June, Virtually Human Studios, the company behind hit NFT game Zed Run, raised a $20 million Series A with participation from firms like a16z and Red Beard Ventures. While NFTs have been making headlines for their multi-million dollar price tags the last few months, Zed Run keeps catching my attention because of what it's actually doing on top of all the NFT hype — it’s building an ecosystem.

Understanding Zed Run’s success lies in understanding the NFT market itself. Over the course of the last 12 months, the market for the crypto-based asset class has skyrocketed, with NFT marketplace OpenSea seeing trade volume break $3 billion in the month of August alone. Titles like Fortnite, Neopets, LoL, and others have long helped consumers understand the value of digital personalization through online assets. As the same concept extends beyond games into other goods like digital avatars and pets, the broader value of online goods as a whole is increasing as a result.

But just like going shopping for a new house, car, or item of clothing, I’d argue the hardest part about understanding value in the NFT world is understanding what’s worth buying and what isn’t. So far, the best NFTs are built on something non-repeatable: existing IP, community, functionality. These types of features help ground users in understanding why a particular NFT is worth investing in upfront, even if the product’s long-term vision isn’t set in stone. The project that first piqued mass consumer interest was NBA TopShot, which leveraged the NBA’s IP and players to drive millions in sales before even being able to buy or sell the NFT itself. And while TopShot sees intermittent spikes in activity following a massive boom earlier this year, Dapper Labs is reinvesting its success to innovate into a more sustainable long-term model today that stems from its early adoption.

Bankrolling its business on strong initial adoption is exactly what Zed Run did. A digital marketplace that lets players buy, breed, and race NFT horses for cash prizes, Zed Run has done more than $30 million in horse sales since launching back in 2019. Just like TopShot, Zed Run launched to success by building on the credibility of its IRL counterpart, the multi-billion dollar global horse racing industry, and can now spend the next few months growing on the back of its revenue + venture funding to set its sights on a much grander long-term ambition.

That ambition is built around one core concept: interactivity. Unlike your standard piece of NFT art, buying a horse from the game doesn’t mean it will just sit around and be nice to look at before eventually selling for a profit. Rather, the game itself has built a bustling ecosystem that incentivizes players to breed, race, and participate on the promise of seeing solid ROI on their investment. While the marketplace remains in its infancy, the existing strength of the horse racing industry + the interactivity that the game adds an extra layer to the fandom that differentiates the game from its crypto-counterparts. On top of that, Zed Run goes above and beyond the normal sport of horse racing by leveraging some of cryptos best features to drive adoption. Features including:

  • Globally Accessibility: Unlike real horse races, Zed Run is geographically agnostic, meaning you can participate from anywhere in the world.

  • Digital Community Building : Because Zed Run races happen at all hours of the day, the game has created an engaged community on Discord. This community creates evangelists of Zed Run users, who in turn go out and refer more potential buyers. The more successful each user is in winning cash on the platform, the more people they’re going to bring to the fold.

  • Low Cost of Entry: The cost of the cheapest Zed Run horse NFT at the time I’m writing this is $160. The average cost of a real race horse is $76,000. The math is pretty cut and dry - that’s a massive difference for anyone who has dreamed of owning a horse or getting in on the action themselves.

  • Dividend Creation: Unlike the real world, Zed Run is always developing, which means your NFTs can be making money even if you aren’t racing them. As it stands today, this is primarily happening via the game’s breeding functionality, which allows you to loan out your horse for a period of time to help another use sire new NFT horse. It’s literally free income you can gain by passively offering someone your digital resource.

While there’s still a lot to sort out — namely regulation and legislation around digital gambling— it’s hard to imagine the Zed Run community won’t continue to grow given the fervor in the space already — early adopters are already seeing huge returns on their initial horses and there’s a future where Zed Run competes with IRL horse racing. I’m optimistic that the company will end up as a blueprint for what a truly successful NFT company looks like in the near future. (Written by Max Lowenthal)

#2: Gaming + Commerce — A Growing Flywheel

Ze Sea

Source: Dr. Wealth

We were discussing internally as an MTM team how phenomenal the Sea Limited earnings report was a few weeks back: Free Fire surpassed 1B+ Google Play downloads with 750 QAUs and 150M DAU (not to mention 5.4M concurrent online viewers for their world series). Their newer game Pet Rumble seems to be synergistic with the larger Free Fire economy, and publishing agreements like Moonlight Blade Mobile in Taiwan also seem to be firing on all cylinders.

As amazing as the gaming numbers were this quarter, the most significant stats from the company were actually the non-gaming ones: 18% 3PL gross margins and 645% YoY growth for SeaMoney. I bring this up mainly because Sea Limited’s earnings prove that their strategy of reinvesting gaming into ecommerce is panning out in material ways. This is also a larger story for gaming as a whole. As Sea Limited demonstrates, gaming can take on a variety of functions to uplift and support a business to new heights. Here are a few examples:

  • Sea Limited leverages its Garena division to reinvest into other parts of the business like Shopee, making them more profitable over time and bringing consumers to their other services.

  • Netflix is in the early stages of launching a gaming division to beef up the value of its subscription and attract international audiences.

  • TikTok and Bilibili are investing in building out gaming ecosystems that are adjacent to their core services.

  • Axie Infinity: “The endgame is to create a single application which players can use to interact with the entire Axie Infinty Universe.”

Zed Graph

Source: Axie World

To put if more concretely for one of the examples, Axie Infinity’s data shows it has hit both a technological inflection point through its ronin bridge and a cultural inflection point by being a pioneer in “play-to-earn”. It’ll be interesting to track how the Axie Infinity team leverages their 1M+ DAUs into another inflection, which will be to enable transactions on its platform to occur in contexts beyond breeding and marketplace fees. I can certainly imagine a world where digital commerce is enabled outside of the “game”.

Zed Whitepaper

There are a plethora of other examples, but the gist is that for platforms, gaming has the potential to bring compounding value by introducing new members into an ecosystem, keeping them in that ecosystem, and having them interact in commerce transactions in synergistic ways. Media has often been leveraged as a top of funnel for companies (2PM calls this Linear Commerce; Glossier is a canonical example in DTC), but given gaming’s often hits-driven nature, has the potential to drive people somewhere exponentially faster than other forms of media.

This topic likely requires a longer examination than a 500 word column — how companies like Sea, Fortnite, etc. leveraged games to expand and how on the flipside other companies like Microsoft, Amazon, Bytdance are expanding a gaming strategy. What are the merits of both strategies, and what has worked / what hasn’t? Why should people look into a gaming strategy? And who it could work for? Hopefully this starts to stoke the thinking on what gaming and commerce can look like and why companies might be interested in leveraging as a strategy. It’s a theme we often touch on at MTM but not often enough in concrete language. (Written by Fawzi Itani)

📚 Content Worth Consuming

Netflix and Video Games (Matthew Ball): "Gaming has become a critical channel for creating new IP, telling stories with existing IP, building love for any IP, and monetizing that love, too. As a result, Netflix must participate in the category if it wants to develop or grow its franchises. But today, that means Netflix must outsource almost all of this experience. In other words, Netflix must hire a competing entertainment company to produce content that it can’t run, and which distracts its consumers away from video and towards a competing entertainment platform." Link

How Difficulty Impacts Motivation in Game Design (Gamasutra): “I’ve done a lot about the nature and design of difficulty as of late, and it was the topic of our recent gamedev roundtable discussion on the Game-Wisdom Youtube channel. When we talk about difficulty, it is intrinsically linked to the player’s skill level and what kind of experience they’re looking for. For today’s post, I want to expand more on this and talk about what difficulty and the experience mean from the consumer’s POV.” Link

Land Speculators Will Kill Your Game’s Growth (Game Developer): “The hot new trend these days is games featuring "digital real estate." I'm concerned these will lead to digital land speculation bubbles that will make players, developers, and investors alike lose stupid amounts of money. If you're developing or investing in a game or app like this and expecting to ride a blistering wave of growth to a multi-billion dollar valuation you'd better take a hard look at the fundamentals before you run smack into a brick wall. Digital real estate is not actually a new phenomenon, and history consistently shows that when "digital land" sufficiently resembles the economic properties of physical land, we see digital land speculation, digital housing crises, and even full-blown digital recessions. That means a period of exciting growth suddenly grinds to a halt once scalpers corner precious digital property and keep it out of the hands of those who actually want to play the damn game or perform valuable and productive activities for the community.” Link

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.

Don’t miss our next issue!

Sign up to receive the #1 games industry newsletter, straight in your inbox.