As gaming continues to face the challenges of the retail sector, with high hopes for mass adoption, the secondary performance of the gaming sector has been lackluster for the past 24 years. Apart from the overall market downturn, the main reason is that we are still in the early to mid stages of a bull market. Retail will come later in the cycle. Historically, the leading indicators are BTC price > Crypto interest > Chain game interest.
When they finally arrive, whether it’s game content or infrastructure, whoever truly has Product Market Fit (PMF) will stand out. In a period with not many incremental users, there has been an ecosystem that has consistently maintained a high user base and growth – Ronin (behind which Sky Mavis, the developer of the hit GameFi Axie from the previous cycle, is also present. Currently, the hottest game on Ronin is Pixel).
Ronin essentially functions as a last-generation side-chain technology, with the market only briefly paying attention when $RON and $PIXEL were listed on Binance. This article will explore the true competitive advantage behind Ronin – Sky Mavis’ localization and distribution capabilities. In a sea of ghost chains, if suddenly people realize that your property, despite not being heavily promoted with mountain views and good school districts, actually has quite a few residents, how do you think the market will reassess its pricing?
1. The rise and fall of crypto games
Whether in the crypto world or the real world, bubbles typically follow a very typical cycle. The same applies to chain games.
– The first cycle 20-21: When a new thing appears, Narratives > Fundamentals. A sexy narrative with a high enough ceiling will attract countless speculative funds and attention. We have already revolutionized traditional finance, why not revolutionize traditional internet? Why not create Web3 games? With a simple and understandable narrative plus the entire track burgeoning, the flagship GameFi projects have their market value inflated under the spotlight.
– The second cycle 21-22: The success of the new thing attracts numerous people. The fervor of funds and entrepreneurs does not seek the deep reasons for the success of the new thing but only revolves around the narrative to inflate bubbles. Among many entrepreneurial projects, some people discover the deep reasons for the success of the new thing and decide to leverage various factors to overplay this opportunity. Under various circumstances, the bubble bursts. People lose faith in narratives, and the market’s perception shifts to the other extreme. Play to earn is so dead.
– The third cycle 23-24: Due to the large amount of financing and ongoing projects left over from the previous bubbles, and the fact that the entire track has not been completely invalidated, people still harbor fantasies of reviving a bubble. So they continue to produce products for the market but find that the market no longer buys into the old narratives. Projects then try to align with new narratives… countless gaming Layer2s, countless 3A games, countless AI games. However, when a track is no longer new and there are numerous options available, the problem often is, ok, good points, but what’s so special about it? In the current third cycle of crypto games, the market is more rational, and attention and funds will concentrate on projects that truly have a moat. For gaming projects, if they cannot find their unique PMF and rely solely on narratives following the herd, failure is highly probable.
2. What is the Value pro of Crypto games? Who are the real gaming users?
There is a significant misalignment in the perceptions of project teams, VCs, players, and retail investors. VCs believe in FOCG (Fully On-Chain Gaming), groundbreaking gameplay innovations, project teams believe in 3A, exchanges believe in web2 user increments, players believe in earning piggyback meals, and retail investors believe in high multiples. We are in it for very different things, which has led to a lack of synergy in the primary and secondary performance of games in the past 23 years. All hype does not last long.
Looking back at the P2E craze of 2021, what is the real PMF of Axie, and what is the moat of Sky Mavis/YGG? The answer is not complicated; it has just been overshadowed by more flashy and sexy narratives. Crypto natives turn a blind eye to this very Web2 logic. The real core competency lies in the ground-level distribution channels/localization operations in Southeast Asia.
3. The market has been overlooked
Identifying the most PMF players as Normie e-beggers, the question is, where to find them? Southeast Asia is a market that cannot be ignored. In this cultural, linguistic, and economically unique market compared to Europe, America, and China, many Tencent-developed games relied on Garena for distribution in Southeast Asia to overcome cultural differences. Garena’s experience in localization is about creating what users like, what they can afford, and going from them to them. They shelved many skin items that did not fit the “gaming worldview,” focused on extreme lightness in games, sacrificed graphics, and maximized compatibility with low-end machines/poor networks. Products that are too far removed from the users will eventually be punished by the market.
In reality, many crypto games face difficulties in Go-To-Market (GTM) because they do not understand the market, do not know who the users are, where they are, how to acquire users (UA), and how to retain them. By overlooking the low ARPU market, they keep releasing Layer2s and 3As to an audience that is not the traditional Degen retail source (North America, China, South Korea). However, these are not issues in the Philippines, where there is a real P2E gaming scene, educated users, and infrastructure. The average income here is less than $11, and 40% of people do not have bank accounts. During the Axie craze in 2021, people could even buy snacks at gas stations/restaurants with SLP. With PESO devaluation, people in the Philippines have a strong gambling spirit.
Although the collapse of Axie caused heavy losses for many local players, with the market recovering, a new batch of P2E games has emerged in this market, showing a resurgence after the bubble burst, indicating genuine user demand. The top-ranked game Pixel on Ronin saw its user base in the Philippines grow from 80,000 to 830,000 from November ’23 to March this year, with 30% of P2E gamers worldwide based in the Philippines. Interestingly, many Pixel players are actually farmers from the outskirts of Manila, who work in the fields during the farming season and play games to supplement their income during off-seasons. Pixel’s founder Luke mentioned that Filipino farmer players even provided suggestions in the community to make the game more realistic, such as crop fertilization, planting, and harvesting cycles.
Apart from gamers, around the P2E games, there is a complex business ecosystem in the local market, including internet cafes, gold farming guilds, chain game education media, software/hardware developers, etc. Players access new game information and mature player communities through these very localized channels, which have very localized/offline organizational connections because they may come into contact with a game due to friends/neighbors/teachers/colleagues playing it.
If there is no localized touchpoint and distribution strategy, game projects in these markets are like boats in the dark. This gap cannot be bridged simply by having a few local KOLs write some soft articles. Guess what? Most players in the Philippines don’t even use Twitter.
Distribution channels are one aspect, but for P2E games that require real money investment, brand distribution/safety endorsement is even more critical. Contrary to what many outsiders imagine, the collapse of Axie, including the overall crypto world’s collapse in ’22, had limited impact on social discourse. This was not only due to the degenerate nature of this market but also because of the ongoing PR investments by YGG/Sky Mavis players over the years (such as filming documentaries, telling stories of improving the lives of low-income groups, and how the underprivileged went all-in on Axie and became wealthy), which created a relatively positive perception of crypto among local people.
Therefore, in the eyes of players, P2E games = the games they see on the Ronin platform. If you put yourself in their shoes, wouldn’t it be more reassuring to top up your funds in Tencent games? If you have all your assets in the Ronin wallet, how easy is it for you to migrate to other games? Or do you even know about other games/wallets? In fact, the entire Ronin ecosystem, unlike other interoperable chains that are eager to connect liquidity, is like an island, firmly anchoring users’ attention and funds within the ecosystem.
For projects looking to enter the Philippines, Ronin is the one and only go-to platform.
4. P2E never dies; it just grows in suitable soil
Whether it’s the Philippines, Eastern Europe, or Africa, these emerging markets with the booming zero-labor games have some similarities:
– Fiat currencies face certain crises.
– The population structure is young, with a large number of young people with free time.
– The economy is underdeveloped, with per capita income around $10.
Although these markets have good crypto adaptability, the ARPU is low, and they are not the traditional sources of Degen retail (North America, China, South Korea). As a result, they are often overlooked by project teams.
There are many ways to make things work in the crypto world; you can tell the sexiest narratives or create the most down-to-earth products. If you choose the latter path, then please seriously cultivate your underserved markets and face your Normie users head-on.
Localization in underserved markets and Normie GTM are what many Crypto-native projects lack. After all, many projects only see users as either crypto enthusiasts or speculative investors, and they completely neglect some minor language regions in operations.
Finish the cake in your hands that others look down upon, and you might discover that everyone else is hungry.
