How to Increase Long Tail Game Revenue with Web3

Most Web3 enthusiasts know that we are in the nascent stage of the development of both the technology and its applications. And in terms of Web3’s involvement in games, there is a fair amount of uncovered potential, particularly in terms of monetization.

First of all, video games in general (including what we might call ‘Web3 games’), monetize primarily at the release phase of a game. However, the mature publishers of the gaming industry monetize through a robust portfolio of titles that perform on a sustained basis for years (see, for example, puzzle games such as King’s Candy Crush, or casual games like Sybo’s Subway Surfers). Players are super loyal to these titles, and companies invest a large amount of money and effort into LiveOps, i.e. providing constant content and features in order to retain their users. All in all, they are securing their revenue in the shape of a long-tail recurring business:

Long-tail revenue over time

This long tail is always depicted as a slowly declining line, or a plateau stage at best. But Web3 opens up new opportunities at this stage, thanks to the addition of ‘secondary markets’. Secondary markets are platforms that allow the players to trade with their owned assets (remember, Web3 is all ownership). One thing that is not often acknowledged, or widely known, is that the original creator of the assets can apply a commission on the sales of those markets. In this scenario, the long tail wouldn’t necessarily be a flat line — it may even gradually increase over time.

The likely reason that this hasn’t happened yet in the Web3 gaming space is because life spans have been too short for us to really accept that any game is yet entering the long tail stage (at least compared to other games in the non-Web3 space). However, we can easily notice signs of increasing value of the assets, based only on scarcity and rarity, and therefore, a long tail that increases instead of remaining constant or dwindling.

So, is it as simple as saying “add a Web3 element to your game and make more money”? Not quite. There are two features of the secondary market that make it unsustainable:

1. The secondary market is out of our control. What else can we do when the assets are on OpenSea (the biggest secondary market) rather than waiting for the supply and demand rule to do its thing? Those markets are essentially a list of assets, without options to stand out of the crowd. It means that while you have the opportunity of trading assets, the exposure is limited. We saw this in the early days of the mobile app stores: your app can be listed in the store, but as more apps are included, yours gets buried.
2. Static nature of the assets. A card/stamp/collectible item in OpenSea has the same utility in the game as the moment when it was minted. Its use within the game is exactly the same, and so its value can only be affected by scarcity, rarity, and the desire to ‘collect’. This is the way that most of us understand a digital asset (an NFT) today: an item that does not evolve over time, having a set of features that are static throughout the game.

So, are Web3 games doomed in the long term? Definitely not. There is an approach that solves these issues and the concept is very easy to grasp (although the implementation is harder).

The key problem is that the assets are static, immutable. If we take a deeper look at the reasons stated above, one way to overcome point 1 is by modifying the value of the assets, per point 2. How can we do this?

• Through game design decisions. The most usual approach to digital assets is to use them as a collectible card. But this is not, and should not be, the only use case — or even the principal use case. Let’s imagine a merge game. You buy a simple plane (to cite a known example), and you evolve it after 100 hours of gameplay to something unique. Clearly, the value of the asset is much higher than it was initially. The value increases because of the hours you invested in it and the game design rules the developer implemented. Or a role-playing game (RPG): the initial character has evolved in terms of skills, missions accomplished, gear, or other properties. And then, the player can trade with that asset whenever she wants.
• Transmedia actions. Since the developer controls the evolution of this asset, he can connect it to external events. For instance, give a special reward or badge to the asset if you use it on your Twitter account as your avatar (remember, the asset is yours!)

The technical downside comes when we need this information to be written on-chain. Given that there are no standards for that, someone needs to write this from the ground up. Platforms like Freeverse.io are pioneering this vision and (good news!) it is already working.

The bottom line is that there are solutions that can overcome the declining long tail in games, and theoretically, mirror the figure or make it U-shaped. A new and uncharted revenue source is yet to come!