Better Web 3 Game Design
A slide illustrating how the each of the linear equations in the EUREKA formula interact with one another.

Better Web 3 Game Design

I was trying to fix my underfloor heating system the other day when I ran into the problem of manually adjusting the water flow in each channel to balance the distribution of heat across the floor's surface area.?I quickly realized I was facing a daunting linear algebra problem.?The documentation read; “Adjust nobs until temperature distribution is uniform”?Oh, that simple, just adjust the nobs!?It reminded me of my days grappling with online game metrics to figure out how to tune an online game design to generate maximum revenue.?

If you’re an online or mobile game developer there are all these great blogs about what gaming metrics you should track but virtually nothing about how you should apply that information to game design.?

Basically, the manual for game design reads; “Adjust game design until you maximize these metrics”.?I founded WildTangent Inc. back in the 1990’s.?It was one of the first online game publishing platforms, and grew to become the largest online game publisher in the world by 2009.?As we acquired vast volumes of user play data across thousands of games we pioneered the use of these metrics to tune game design.?The problem with online games is that they are a medium unlike any other in that they are ads for themselves.?An online game is about as pure as advertising gets.?Online games have a weird recursive dynamic that defies conventional media analysis.?The value of most media like text or video is consumed as the user views it. Good games acquire value the more people play them.??

Without writing a lengthy treatise on the topic.?One of the things the market has never figured out is how to properly mix advertising with commerce in video game design.?We figured it out at WildTangent but considered it a trade secret at the time so we never talked about how it really worked.?I found that the major reason that getting this right is so difficult is that your engineers are often gamers who think that advertising is a way to punish players who refuse to pay cash for a game.?This is the experience you find today across most mobile games.?That’s not the relationship the advertiser wants with the consumer and it’s certainly not a fun experience for the consumer. Here is how we solved it very successfully at WildTangent.

Following is the 1.0 screenshot of how we presented our WildCoins token to consumers in the launch screen for a game.?Basically we tried to reproduce the arcade experience of dropping a token in a slot (complete with arcade coin drop sound effects) to play a “session” of any game in our app store.?What we did is we built our eCommerce system on top of our ad server, enabling us to dynamically serve pricing as easily as we served ad units.?The problem with trying to blend advertising with a $20 retail game is three orders of magnitude in value separation between what a credit card transaction is worth and what a $5CPM video ad unit is worth.?However, with deep analysis of a game's metrics, we quickly discovered that if we could charge players .25 cents per game “session” then we could bridge the gap between commerce and ad monetization.??

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How ad-commerce hybridization was accomplished?

  1. Create a virtual token that has a retail value of .10-.25 cents.??
  2. Sell discounted bundles and subscriptions to those tokens to the consumer so that they can spend across all the games in your app store or all the virtual goods in a MMOG style game.??
  3. Place a classic arcade game-like UI in front of players offering them the choice between spending a token (quarter) to play one unlimited session of a game OR by viewing an ad unit to play for free!?
  4. Do the analytics work to narrow down exactly who and when a free player will convert to a paying player.?You need to get to at least 95% accuracy.

*Note that it’s a major Bronze Age monetization failure of modern app stores that they’ve missed this trick because it enables the most popular apps in your store to support monetizing all the games in your store.?Games that aren’t good at converting customers to purchase can be GREAT at consuming tokens that other games have sold. An appropriate analogy for modern app stores is that they are organized like malls instead of like Walmart. Steam, Apple, Microsoft and the Google app store all lose tons of potential revenue and user engagement to missing this trick. They try to just be a storefront that collects a cut of whatever revenue each application alone can manage to scrape from their users using whatever hodgepodge monetization approach the app has to manually define, while hiding the analytics data the apps need to monetize well. Since each application is competing with every other application for monetization, the overall experience for the consumer can feel like a great scammy bilking. Instead of being in business of providing a good unified purchasing experience, modern app stores instead place themselves in the role of mean sheriff who has to protect consumers from all the dangerous applications in their own stores.

Notice that playing for free is the default WildCoins payment option!?But a $5CPM ad unit is only worth .005 cents compared to getting a quarter!?Remember I said we served our commerce offering with an ad server??If this user has already purchased a bundle or subscription to WildCoins, then we’ve got their cash earning interest in our bank account… why ask them to redeem it when we can make additional money showing them ads??Well you want them to burn through their tokens to sell them more right??I told you we’re using an ad server, we KNOW this is a kid playing games using moms credit card.?If we let Jr. run up a $200 bill on mom’s card she’ll charge back the transaction and never pay us again!?Analytics says mom is good for $24.99/mo after that we want Jr. clicking Coca Coca Puff ad units and telling all his little friends at school how to play the games their moms won’t buy on RealArcade for FREE at WildTangent.?*Today I’d build these as FTP social games with ad-sponsored virtual goods.?

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Hit "Play" and play for free sponsored by Nissan (We knew you weren't ready to buy anyway), hit "Play Without Ads" if you want to buy. Oh look here's the game that we think is more likely to convert you to purchasing than the one you're playing!

If the user hasen't purchased yet our ad metrics are telling us they aren't likely to buy yet so why not let them keep playing for free until we detect that they are ready to pay or direct them to a game we think is more likely to convert them? Hence the games appear mostly free all the time because we're smart enough to only ask for money when we are sure we'll get it! Great user experience, great monetization. Not the experience you get from a modern app store that thinks it's in the mall business.

One might observe that free advertising-supported play should cannibalize eCommerce sales, which was absolutely true.?This would be a stupid business model without powerful analytics tools to operate it safely?Again we used our ad server to serve the commerce offerings.?We knew that 1% of the free players were likely to actually buy tokens.?More importantly we knew when they were most likely to do it for every game in our catalog, we even knew what time of day we were most likely to complete a commerce transaction with 97.6% certainty (2PM on a Saturday afternoon, best time of day to monetize a game).?So what we did is we served “free” ad-supported play until our metrics told us they were ready to buy, then we turned off the free ad-supported offering.?If the free player didn’t convert to a WildCoin purchase at that point, we were 97.6% confident they would NEVER purchase.?This means we only actually cannibalized 2.4% of our commerce revenue to roughly double our total revenue with advertising.?The free play tripled our audience so we made 6X the revenue and the token pricing models increased commerce revenues across our paying users 3X.?A year after launching WildCoins we were generating 18x the revenue from triple the gaming audience and growing rapidly as our competitors selling the same games (RealArcade) went out of business.??

Let’s look at that ad-commerce hybridization math another way.?Using round numbers, if an eCommerce transaction is worth $10 from a paying player and the same game session is worth a $10CPM to an advertiser and we have a 1% conversion to purchase rate from free play to paid play… then if we can predict that someone won’t pay with 100% accuracy we can earn .01x99 = $9.90 in ad revenue from all the free players without cannibalizing a commerce event.?We roughly doubled our revenue from the same gameplay.?In other words, if you can price your game in small enough increments that your analytics can close the gap between a retail transaction and an ad unit then you can double your revenue and make your game appear free to most of the players most of the time which increases its virality and retention!?Crazy right??

*Here’s the list of patents on this trick:

https://patents.justia.com/assignee/wildtangent-inc

Because the app stores don’t print common tokens and don’t provide the analytic services to properly hybridize advertising across the applications in their stores they miss out on roughly 2x-6x of their potential revenue (and user engagement with apps).?If Apple were smart, they’d let game developers keep 100% of the revenue the virtual tokens their games and applications consume and just keep the breakage tokens. Everyone would make more money than they do today.

The invention/discovery of ad-commerce hybridization made the WildTangent app store the world's largest game market through 2011 and the largest mobile network by 2014 entirely organically with no marketing spend.?

https://company.wildtangent.com/wildtangent-1-in-comscore-us-mobile-games-network-rankings/

By this time I was running the social network Hi5.com and had cloned Facebooks graph API’s and lured hundreds of FB social games to the Hi5.com network making it one of the worlds largest game networks after WildTangent.

https://venturebeat.com/games/hi5-becomes-a-top-ten-online-game-site/

After years of working with equations to fully model online game economics, I thought I had mastered the subject until I joined a social media platform Hi5.com and ran across network gaming behavior that defied my models.?By 2012, I had finally figured out a new set of equations that seemed to successfully encompass all gaming behaviors including social networking ones.?I created a Mathematica model and shared it online.?The problem was that by 2012 most online games were getting published through channels that blocked them from visibility into the overall network behavior.?Game developers might be able to see their metrics but not cohort metrics or overall network demand for play.?As clever as the math was, it was pretty hard to usefully apply it to anything.?What the math did say was that given just the standard metrics everyone measured, it was impossible to systematically improve them.?Those metrics don’t tell you about cohort behaviors or net audience play behavior across all games.?That made online game design a lottery business.?Game designers used their best game design intuition and sometimes got a hit game that happened to have good metrics but iterative improvement was often impractical.?

The present era of confusion about how to analyze online game design leaps to the forefront of debates about Web 3 gaming economics and crypto.?Without a Rosetta Stone for systematically designing games that will produce ideal metrics, the Web 3 game business will also be a lottery for lucky winners and losers who will succeed or fail without ever really understanding why.?The bad news is that the math that seems to describe them is composed of six linear equations and 37 parameters that require access to huge data visibility to practically apply.?Human beings, just trying stuff won’t be able to figure it out.

The good news is that there are a few powerful observations that drop out of them that provide clear answers to questions game designers seem to be eternally confused about.?Here are a few of the conclusions that I think are most valuable to grasp.

1) An online game is just an ad for itself.?It is its own marketing campaign, storefront, and product.?You have to design all of that, not just the content.??

2) The viral dynamics of an online game that has adoption friction are radically different from a game that has little to none.??

3) “Virality” doesn’t work the way you assume it does.?It’s complex, fragile, and difficult to price.

4) To understand online game design you have to deconstruct the world of retail gaming completely.??

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To understand the importance of these observations, visualize a boxed retail console game as a giant boulder and a free HTML5 web game as a glass of water.?If you throw a glass of water down a hillside it will instantly find the most optimal path to the bottom on its own without regard to the layout of the terrain.?Getting the boulder down the hill requires a HUGE push and if the boulder isn’t round, you may need to keep pushing it to get it to the bottom.?Interestingly the boulder and the water behave about the same way when you push them down a steep enough hill.?The hill is an analogy for the audience you are trying to reach with the game and its steepness is the audience's demand for that content.?The glass of water will quickly spread out to cover more area and try more paths to find its way to the bottom.?The boulder will try one route and if it encounters an obstacle it may stop completely without reaching the bottom.?When people talk about content virality they conflate the extreme differences between the boulder type vs the water type.?In the early downloadable game business I became an expert at shaving boulders into pebbles but it wasn’t until I ran a social media site that I discovered that content had another phase when it was really lite.??

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The retail-boulder type of game require a huge marketing push and a deep, pre-dug channel to follow to reach the bottom of the hill.?Because of its mass (content cost), shape (game design), and inertia it only ever encounters a very narrow subset of its potential audience.?On the other hand, a very lite online game can reach the same audience virally with little marketing but lacking the content and payment infrastructure (channel) it can fail to monetize as well.?A hit game (Fortnite), despite having massive download and channel friction can break all the rules and go viral (behave like water) despite being a massive boulder if the hill is steep enough.?Steep demand lets the boulder behave like water and become an avalanche.?The game seems to defy all the rules and you get strange phenomena like being able to defy the Apple App Store rules because the game is so popular people will buy a PC or an Android phone just to play it.

Properties of an "Ideal" viral game?

  1. No friction to discovery/adoption/monetization
  2. Evolves like a fluid in response to market input
  3. Picks a steep hill to flow down.??

Weirdly virality can work best when you deliberately slow it down a bit.?Flattening the curve, so to speak, can ensure that an epidemic lasts longer and reaches more people eventually.?For “social” viruses the density of people around who are “infected” at the same time plays a key role in the likelihood that you will become “infected” by the same content.?“Social” viruses need many repeat contacts to infect.?This observation means that there is a huge distinction between how social virality works and how viruses actually spread. We call it "virality" but it's NOT the same phenomena!

For "viral" game design this means;

  • No download
  • No initial user registration/authentication
  • No pre-commerce comittment
  • No hosting costs
  • Original and fast to market (*This hill won’t be the same slope today as it is tomorrow when a big game is finished.?If you want control over how steep the hill is, you have to ship fast when you have market visibility)
  • Rapid content iteration
  • Frictionless monetization
  • Very high replay value
  • Reasons and tools for people to talk about it (funny and controversy generally work best)

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*Remind me to write an article about the use of visual jokes in viral game design, but WildTangent downloadable games were deliberately laced with them. Notice how our bear swings his golf club? It’s designed to make a real golfer wince and want to talk about it.

People reading this may say; “But those are impossible to achieve!” Maybe, but these are the game design goals all those metrics are telling you to optimize.?If you make a game that achieves all of these metrics your marketing and channel costs will organically go from ~66-100% of revenue to approaching zero.?If you make the design decision to require a download and user registration for a game before people can experience it, you’ve decided to make it a boulder and to give 33%-66% of the game's potential revenue to a channel partner and/or to your marketing budget.?You FAILED to design the online game to be an effective ad for itself.?

Composing an online game pricing model

What else does the math tell us about how to interpret our metrics to make more successful online games??A major source of gaming business model confusion is grasping scale.?People have an intuition that something about the various gaming pricing models is valuable but they can’t figure out how to put them together successfully.?In my last post, I used a boulder vs water analogy to describe the extreme differences between retail and online games.?Returning to that idea the math tells us something else about retail thinking in game design.?Reducing a boulder to a pebble still doesn’t cause it to behave like water.?In other words, incremental approaches to making games better ads for themselves only result in incremental improvements in performance.?The transition from behaving like a boulder to becoming hugely viral requires a phase change.?That’s why we tend to find that premium console games and FTP web games tend to occupy extremely different niches in the video game market.??

There is another major reason the phase change to fluid virality is abrupt.?Monetization!?

How many ways are there for a consumer to pay for a game? (Trick question)??

  1. Cash/Credit card
  2. Ads
  3. ?

What’s the smallest valid credit card transaction you can reasonably accept for a game??$5??What’s the largest value ad impression you can reasonably generate for a web game??$5CPM = $5/1000 =?$.005.?So there is a THREE ORDERS OF MAGNITUDE gap between the smallest credit card transaction we can reasonably process and the largest ad unit??Hence a huge monetization gulf between premium games and free web ones.?There is no efficient way to monetize any gameplay that falls between $.005 and $5 in value.?Since the Ad revenue business in gaming is worth tens of billions of dollars and the retail game business is worth hundreds of billions, there is a lot of money lost in that huge gulf between viable monetization models.?This gulf is where all sorts of dumb… er confused… monetization mistakes take place.??

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Common pricing mistakes in games

  1. Let’s stick ads in premium games people have paid for!
  2. Let’s try charging the .01% of our players who are whales $1000 to pay for the thousands of free players we can’t monetize otherwise.? *Actual whales are usually degenerate gamblers on casino sites and kids who stole mom’s card on FTP sites.
  3. Let’s force them to register and commit to paying for the game before they’ve played it!
  4. Let’s mix social game mechanics (Like virtual goods sales) into bloated retail games!??
  5. Let’s make premium retail games frictionless to play on the web and then put an authentication and payment wall in front of them! (Stadia/XCloud)

I’ve seen all of this stuff from companies who are religious about their metrics but evidently clueless about how to apply them.?I attribute all of these mistakes to confusion about how to monetize the huge gap separating the boulders from the water.??Not surprisingly the math tells us there are solutions to this problem, but they are not obvious without a mathematical framework to figure them out.?Now hold my beer…

For the sake of discussion, let’s pretend that the value (after COGS) of a premium retail game can be divided as follows;

? Content

? Channel

? Marketing

So the game developer/publisher is entitled to roughly a third of the revenue from a retail game, the channel is entitled to a third and the marketing budget is about a third.?When a game is a boulder, the relationship of the consumer to the game is as the customer who pays for it.?They are the hill the boulder rolls down... When a game has NO COGS and behaves like water, the consumer can be the channel, the content, and the marketing.?The hill and the water mix, the hill erodes to create viable channels. These formerly discreet roles get all intermingled with one another.?In a multiplayer game or MMOG the player becomes an essential content element of the game.?In a multiplayer game, the consumer is often hosting the server and promoting the game to friends.?So games like WOW, Minecraft, Fortnite and Roblox seem to obey entirely different gaming physics and economics from the games that are either premium single-player retail games or FTP web games.??

The MMOG dynamic really confuses people because the MMOG is usually designed to be an utterly massive boulder, but with massive social mechanics it can't leverage! So you get a phenomena like World of Warcraft where it breaks its own channel as it roles down hill and causes an avalanche of adoption via Chinese gold farming they can't stop! Blizzard had this phenomena where the game was exploding with success because of gold farming that Blizzard was constantly battling while taking credit for the games global success BECAUSE of gold farming. Blizzards handling of this issue drove me crazy at the time because it wasn't a problem, it was a feature, that Blizzard fought instead of capitalizing on.

The challenge with designing these kinds of games is that it’s important to have a strong analytical framework to clearly identify and define when the consumer is providing valuable content, when they are providing a channel (hosting) and when they are doing your marketing for you. More importantly, game developers should know how to identify who is able to pay for a game and when they are ready to do it.?It follows that the game designer creating the game needs to have a strong mastery of these ideas (or more often, dumb luck) to design the game correctly.?

Why is this important??It turns out that the math says that the value of a free player who is being viral by promoting your game, generally falls in the value range between $.01 and $1.00.?In other words, you would have spent that much cash on marketing to get the same result as you got for free from a viral player.?So there is a unit of monetization that occupies the gap between credit card payments and advertising, which is the money you would have spent marketing your game but didn’t need to because it was self-marketing via your players.?If game designers knew who these players were and when they were behaving this way they would be happy to pay these players for their contributions to their games success!

Play-To-Earn

The math also tells us that there is ABSOLUTELY a legitimately valuable play-to-earn business model for gaming.?It also tells us how much money is locked up in gaming demand waiting for games with the correct business models to capture it.?What do you pay a player who has created $.01 in marketing or content value with??Traditionally, the answer has wisely been some free content reward. You weren't going to mail a penny to a player in Kazakhstan right?

Now before we talk about the relationship of crypto to all of this, let’s step back and paint a new more complete picture of modern online game design.?We have some valuable metrics we like to use to measure how successful a game is, but poor tools to tell us how to systematically design games to have desirable metrics.?I have powerful tools for this and these tools generally tell us;

  • Recognize that a modern game is an ad for itself as a product and design accordingly!
  • Religiously minimize adoption, payment, distribution, discovery, time-to-market, and registration friction!
  • A game that is designed to be its own ad, is a game that knows how to price and reward its players for also being valuable content, distribution, marketing, and hosting.?The monetary value of players behaving that way can be worth roughly 33%-75% of your game's revenue and falls in that three orders of magnitude monetization gap we discussed.?
  • Adopt metrics that measure the value of your players as content, marketing, hosting, distribution, etc.
  • Anyone who puts a registration and/or payment wall in front of an online or downloadable game experience has designed a bad game they are trying to monetize anyway.?*There are several dimensions on which it is bad game design; the hosting or download costs are too great to support virality, the content has low replay value, or the game is not addictive therefore nobody would pay for it once they tried it, etc.

When a game is designed this way, it behaves like water instead of like a boulder and turns into a Roblox or Minecraft instead of another marginally profitable app in the app store.??

Returning to our “Trick Question”, how many ways are there to monetize an online game efficiently?

  1. Cash/credit
  2. Advertising
  3. Paying your players to create content, promote, host, and distribute your game with free content

Method three is a bit abstract because it simply recognizes that if the content creator is smart, they can create content that pays for a game's marketing and channel distribution without sharing revenue with a marketing or channel partner!?Returning 33%-75% of the game's revenue to the content creator to support, creating more content!?The efficiency of this economic pattern is so great that the game doesn’t take one path down the hill like a bulky retail game but covers the entire hill and extracts some value from every player whether they pay for the game directly or not.

Up to this point, everything I’ve described is based on decades of online game publishing experience and access to absolutely vast quantities of player behavior data.?What I am going to observe next is purely speculation based on that experience.

“Web 4” gaming will actually evolve monetization like this;

  1. Cash/credit
  2. Advertising
  3. Crypto

“Web 5” gaming:

  1. Crypto

Crazy talk, I know.?Why will crypto turn out to be the only monetization model for online games over time??Unfortunately, the primitive scammy Web 3 experience with crypto has understandably confused and jaded a lot of people about its future as a monetization medium in games, but I would observe that if I were to update my 2012 Mathematica model for game monetization to include crypto it would end up encompassing the means of financing games in the future.?

Why is that??Once you accept that an online game is an ad for itself and accepting that causes you to realize that your players become your most valuable (decentralized) content, channel, hosting, and marketing resources, then you also realize that;

1) You need a way to pay them

2) There is no longer an arbitrary centralized barrier between funding game development and playing a hit game.?As Kickstarter has brilliantly demonstrated, game financing can be funded by a game's audience.??

If you recognize that sharing revenue with your players in the form of free content is a way of paying them for providing the decentralized channel, hosting, and marketing functions you previously paid the console platform or app store for, then you realize that you can also pay them to fund future games with future content.?What crypto does is enable a means of extending virtual credit without relying on a centralized financing institution.?So when you add the concept of “credit” to game monetization, you find a valid use for crypto and something I would hate to brand NFT 2.0.?An NFT 2.0 would be the promise of ownership of a game asset that hasn’t been created yet…?hmm yeah… I’m going straight to hell for having said this…

The other reason that cryptocurrency becomes the unified business model for games is that it can unify and simplify the complexity of designing a game to span a huge range of value propositions that can range from $.001 for an ad unit to $100,000 for a stake in a new level to a hit game.?The use of a common virtual token (within a single game) to represent all monetization scales enables game designers to focus on the game design without worrying about the specific monetization mechanics which can take place in a market external to the game.???

In simple terms, water is fluid because it’s composed of many tiny independent elements.?Future games designed for social virality will increasingly be complex compositions of smaller content elements that interact with one another in interesting ways.?There are those who believe that people want to be able to share game assets across games but this is a naive idea on many levels.?Again Minecraft and Roblox are good examples of games that are less games than Lego kits for making games.?It’s more likely to be the case that games are reduced to interesting objects and interactions that can be dropped into some well-defined game framework.?This supports the theory that faster time-to-market and finer monetization granularity will increasingly dominate the game business because math suggests it should.?Any pile of binary data can be cryptographically signed including smart game objects, so NFT objects are likely to emerge as much more meaningful cryptographic assets.

Without diverging too far off into the technically arcane, which I otherwise love to indulge in, I don’t necessarily mean today's crypto ideas either.?Ever since Bitcoin was invented people’s idea of how to structure a successful cryptocurrency has derived from blockchain ideas.?But successful virtual token models for games have existed for decades without a blockchain.?Generic blockchains were generally structured for transacting in fungible units of monetary value but NFT’s are not fungible nor is there actually any value in their decentralized nature.?What use is a rare +5 Hammer of Orc Smashing if the game studio that maintains the game that uses the item goes out of business? Are we anywhere near making decentralized games yet??No??Okay, then we don’t need a blockchain if ownership of games will be centralized for a while longer, and sharing assets between games is a dumb idea!?The idea of signing virtual contracts guaranteeing the rarity of in-game items is valuable and trivial with existing tech independent of recording the contract on a public ledger.?The valuable feature of such an NFT is the ability to auction off all your stuff in a game you’re done with to pay for a new game you want to play.?That’s where the junction between in-game currency and market-exchangeable blockchain currencies makes sense.?

Game developers don’t want/need to be in the business of building cash markets for their virtual goods in order for players to gain the benefit of the sellability of their in-game assets.?The existence of such a liquid market is a boon for game developers because liquidity will increase the value of their virtual assets.?People will pay more for them, knowing they can recover some of their gaming expenses later by selling them.??

It makes more sense that future “Web 5” game platforms will create token currencies that span a wide range of values to support the rich economics of viral gameplay and integrate with the blockchain crypto-markets to buy and sell in-game assets via these tokens.?The game needs a common internal token currency to simplify the task of pricing all the in-game assets without the game needing to support a market of its own.?This is analogous to the function of the Forex exchange which determines the price of currency exchanges between countries without the currency buyers having to manually try to total up the value of all assets in France and divide it by the French GDP in real time.?I assert that the gamer is less interested in moving their +5 Hammer of Orc Smashing from Roblox to Minecraft than they are interested in exchanging it for something of equivalent value/status in Minecraft.?

One of the big nearly dogmatic assumptions I run into among FTP game designers is that paid virtual goods should be purely cosmetic because the ability to buy items that convey an advantage in the game is cheating!?The problem is that this assumption is true, only if you are targeting Western gaming audiences and you don’t know how to design a game that resolves the conflict.?Games like World of Warcraft exploded in growth because of the illicit gold farming markets.?Nobody quit WOW because some players were buying all their gold from gold farmers.?Feeling like you are cheating at a game is FUN, that’s why pre-internet era games added cheat codes to their games and generated a third of their revenues selling cheat code books.?

Magic The Gathering clearly demonstrated how great game design resolves this conflict.?You balance luck, skill, and $$$ in roughly equal proportions such that the people who avoid grinding at a game by paying their way ahead are less skilled than the players who earned their way grinding and as such, they end up standing a relatively EQUAL chance against them in a game despite their paid advantages!?Then you mix in luck so nobody can figure out exactly what the advantage/disadvantage ratio for paying vs grinding is so they keep playing to try to get a handle on it.?Players with neither skill nor money stay engaged because luck pays off just enough to keep them engaged.?*You need the non-paying players for your payers to have fun beating up… they have content value!?

What is the correct relationship between blockchain-based cryptocurrencies and gaming??

Cryptocurrencies serve the same economic function as a bank;

  1. They provide a means of crowd-funding new game/content development. This is a positive function of what we call an NFT today.
  2. They introduce the idea of credit to gaming monetization.?A game can monetize today the value of a game asset delivered tomorrow.??
  3. They provide a means of easy liquidity and interest creation for many small currency holders by aggregating them into a larger more efficient investment pool.?What is the use of rewarding a player with $.04 cents worth of virtual currency??In addition to having meaningful content value the in-game currency can acquire speculative value on a cypto-exchange.?*Recall that $.04 was what you valued the player's virality or content value to your game's growth at, the market may value the token currency you gave them to reflect that value entirely differently.?????

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To illustrate what this dynamic may look like in real game design, imagine a Minecraft-like world where the players request a theme-park level.?A content studio issues an NFT object for the new theme park world, a magic portal that grants access to the new world to anyone and their friends who own it, for life.?They issue a hundred thousand NFTs for the portal for $10 each to raise a million dollars to build the content.?The new theme park world is so popular that the free portal NFTs become worth $500 each.?But the game designer didn’t want to deal with creating and operating a cash market.?Not a problem because their internal currency is joined to a crypto market so someone who values the portal will pay the owner say 5,000,000,000 in in-game (non-crypto) tokens for the portal which the owner can exchange externally for $500 worth of ETH or whatever.?The game developer doesn’t have to create a crypto wallet, accept crypto payments or deal with any of that nonsense to design games that participate in cash markets.?Note that the transaction happened in the local-game currency so the developer also participated in the cash transaction.?They took whatever cut they felt entitled to.

Not everyone has $10 to invest??We’ll also issue $.05 first admission ticket NFTs to anyone with a few pennies worth of tokens in their accounts.

In another scenario, I want to raise one million dollars to fund a theme park world and Kraft Foods offers to sponsor the whole thing in exchange for naming it “Kraft Park” and issuing free admittance to anyone who can show a unique barcode for a Kraft product they’ve purchased (We did something like this deal with Kraft in 2004, also Nike and McDonald's ). Kraft can auction that “NFT” to P&G foods later once their ad campaign has run its course.?WildTangent sold $15 million dollars worth of brand ads in this model back in 2005 when the world was still connecting to the Internet via modems.?

*Note the NFT in my example is not necessarily a blockchain contract, it could be a paper contract written by lawyers and signed via DocuSign by the content creators.?A legal, enforceable guarantee that they deliver the specified content and functionality in some timeframe.?As I observed earlier, the blockchain bit makes little sense until games are themselves decentralized.?A digitally signed paper contract is a lot more trustworthy, especially to advertisers.?The digital signature of the contract could additionally be published on a blockchain to make it transparent and to create a secondary market for it.?

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The sponsorship of free tokens to play a game with associated brand placements may themselves be issued as NFT-like smart objects. A game developer would issue them for brand advertisers to bid on in public NFT exchanges.

Basically cryptocurrencies introduce the concept of credit to game monetization and content strategies. Since the late 1990's we've seen advertising added as a payment method for games, MMOG's and social games introduced virality as a payment method. Multiplayer games, world building games like Roblox and Minecraft, Twitch and Youtube demonstrated how user content creation could be harnessed as a payment method and finally crypto and services like KickStarter showed how it might become possible for game development itself to be funded by a games future players. *Wait how did Twitch demonstrate that content creation could be a payment method? My point exactly! They just paid the people who made content out of playing games on camera cash, which those people certainly spent some of on the games they are making content about. It's confusing because paying people with content and paying people with cash to pay for their content is the same thing even if you didn't design your business model to capture it . Crypto exchanges can unify those ideas. If you are going to spend the money you earned playing a game on the game, there was no point in converting it to money.

Conclusion

I recognize that a lot of what I've said here, while brilliantly insightful, is still not actionable because I tried to avoid talking about the underlying technology required to support these observations. I figured I break those ideas down one at a time in separate articles. How do you make a high-production value game with no download? How do you make a giant MMOG without massive hosting costs? If you can't avoid massive download and hosting costs then how can you afford to eliminate user registration or payment walls when you can't afford to host lots of looky-loo players who won't monetize? How do you minimize monetization and commerce friction for a game that wasn't designed for it in advance? I'll take those questions soon.

John Szeder

Reasonably Articulate Carbon Construct

1 年

Really solid thoughts as usual.

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Wonderful deep dive and very informative

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Sean McEniry

Japanese Bilingual SEGA Games Greenlighting

1 年

You hit the nail on the head in saying that there should be no initial download or user registration... Are you working with anybody to make your ideas a reality? I have some ideas that I would love to contribute!

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