Monetisation in Web3 gaming — Difference between Web2 and Web3 Games Part 2
In part 1 of this article, we provided a fundamental explanation of Web3 games and discussed the underlying technologies that have made them possible. In part 2, we highlight the methods used for monetisation to give anyone interested in NFT games a starting introduction.
How Game studios Monetise
We agree that Web3 has significantly impacted developer incentives, shifting them to a more positive and beneficial path and aligning their wishes with the players for a better, more engaging game. However, game studios, no matter their focus, need to make a profit to survive. Fundamentally, the critical difference in monetisation is in the approach. A web3 developer is working in collaboration with the community to grow the total value pie, and although the pie needs to be divided amongst more players, and from a percentage perspective, the developers receive a smaller share of the pie, the volume of the pie is much larger as a web3 game has a more diverse player base.
Advertisement vs Partnerships
Advertising became a stable source of income for the game industry a while ago. Both web2 and web3 games have been known to use Ads heavily; however, the emphasis on ads has been much heavier when dealing with more traditional games. Web3 games have so far eschewed ads, focusing instead on partnerships, where they rely on some win-win outcome between players and partners (e.g. partners get exposure to web3 development and the games can tap into more mainstream audiences)
Unique to web3 games, transaction fees, sometimes called trade tax, are charged when players engage in trading. These taxes are relatively modest (e.g. 5%) compared to platform fees in traditional gaming, which can be upwards of 30%. The revenue for the developer is therefore correlated to the total trades and the value of those trades, which are both increased with more people playing, and/or participating in the ecosystem.
Royalties & Minting Costs
Web3 games often seek to monetise via secondary market transaction fees and primary market minting fees. These fees must be paid when players seek to transfer ownership or create a new asset on the blockchain. Typically these fees are paid in either the native in-game token or established cryptocurrency.
Both types of games can charge for some gameplay actions or elements. Traditional games must be much more careful with monetising gameplay elements to avoid being perceived as pay-to-win games. Microtransactions and in-game purchases have driven user satisfaction into the ground, even sparking a controversy calling their methods “predatory.”
Traditional games sink value in a one-way exchange and explicitly attempt to curtail black-market activities, going as far as permanently banning players. Web3 games, on the other hand, encourage trading and purchases. For blockchain assets, games try to preserve value as the player always has the option of on-selling their purchases to other players.
Lastly, let’s briefly discuss network value. Web3 games, by design, have a much higher network value, meaning the overall invested amount in-game. While this does not directly contribute to the revenue generated by the company, it is a valuable benchmark for attracting new players, investors, and partners. A web3 game with high network value and economic stability can monetise via other channels, especially if other projects and individuals seek to be associated with the brand and Intellectual Property (IP). Indeed, the value of IP surrounding a game’s art and assets could be worth more than its direct revenues, as seen in the many popular profile picture NFTs. Sustaining a high-value network brings universal benefits to the player and the studio.
How players make their earnings
As we have explored the basic ways web3 game companies operate, it has become increasingly clear that the relationship between players and the game studio is mutually beneficial. Finally, let’s examine how these games enable players to monetise their hard work.
A core mechanic in pretty much any blockchain game, trading is a surefire method to make some profit. While the process requires patience, knowledge, and a bit of luck, the classic “buy low” and “sell high” are core components of the free market.
Crafting / Breeding
Many games have a mechanism for allowing players to create additional assets in the game via crafting or breeding. In order to be successful in earning via crafting or breeding, the player needs to understand what the rest of the player base requires and take some risk in expending effort in acquiring materials to complete the craft.
While renting may be very game-specific, it is still worth mentioning. Renting NFTs is a practice when seasoned, or “wealthy” players rent out uncommon assets or items to other players to help them advance. Some form of revenue share from this accelerated progress is then divided between the renter and the renter.
Tournaments are events where the winner receives either token prizes or valuable items. The rewards and their value depend on the game heavily. However, it is usually true that some experience, and even decent gear or equipment, may be necessary to have a fair chance at winning (e.g. in Trading Card Games).
Staking is a game mechanic where players can lock their tokens for a specific time. The locked NFTs become available for other players, and the owner generates some passive income. Most games allow the staked items to be removed before the specified time has passed by sacrificing the potential rewards.
Earning in-game currency
Perhaps the most straightforward method is just playing the game. Players can make some income by farming the in-game currency. The amount depends on the time investment and the game itself. The in-game coin can later be sold or traded for fiat currencies.
We hope that this article has shed some light on the monetisation methods used by web3 games and has clarified how players can be expected to earn by playing games. The main takeaway is that for NFT games to prosper, they need their player base and community to thrive, resulting in a mutually beneficial, almost symbiotic relationship.
Written by Economy Designer Howie Zhang.