YGGTV Presents: Under the Hood of Pixels’ Growth Engine
Recently, Yield Guild Games (YGG) co-founder Gabby Dizon and Pixels founder Luke Barwikowski caught up in Venice Beach for a chat moderated by Emfarsis Director Leah Callon-Butler. During their talk, Gabby and Luke discussed their views on web3-native community building, incentive structures and reward models for sustainable growth, and the significance of social density in driving engagement inside games and virtual worlds.
A Pixels Energy Party on July 26 served as the premiere event for their recorded conversation, giving web3 founders and game developers the opportunity to learn from two of the top builders in the industry.
The following is a TL;DW (Too Long; Didn’t Watch) to summarize key takeaways from the video, which was published in full on YouTube.
Moving to Ronin Turbocharged Adoption in Southeast Asia
Initially launched on Polygon in 2022 to modest success, Pixels skyrocketed in popularity once it migrated to the Ronin Network in late 2023. The move helped Pixels solidify its presence in the Southeast Asian market, onboarding tens of thousands of new users — particularly in the Philippines, where Axie Infinity’s massive success throughout the previous bull market helped establish a strong user base in the region.
Since then, Pixels has reported consistent growth. At the YGG Web3 Games Summit (W3GS) held in Manila, Philippines, in November 2023, Sky Mavis co-founder Jihoz Zirlin announced that Pixels was the first game since Axie to hit 100,000 DAU on the Ronin network with the majority of those players identified as Filipino. Then, in March 2024, Pixels hit another big milestone, reaching 1,000,000 MAU.
Many of those who were introduced to Pixels in 2023 were YGG players who had discovered the game early on. Since its addition to YGG’s Guild Advancement Program (GAP) due to community demand, thousands more players have quested to achieve new milestones in the Pixels city of Terra Villa. The game eventually expanded its gameplay to include guilds, with YGG helping the team develop the Pixels guild system and launching a Superquest campaign to walk players through the feature.
Underscoring the importance of the Philippine market, which has been dubbed the epicenter of web3 gaming adoption, topping CoinGecko’s global list for interest in web3 gaming for three years running, a Pixels AMA hosted on “Filipino-friendly time” in March 2024 attracted double the usual attendees. The AMA netted 82,000 viewers compared to its average reach of 40,000 on its usual Pacific Standard Time slot.
Despite Pixels’ success in SEA, Gabby noted that a common criticism of gamers hailing from emerging economies, such as the Philippines and Latin America, is that they are less valuable than players from Western countries, such as the US. On the contrary, Luke said that in his experience, gamers from those regions are willing to spend, even though their motivations might be different. This claim is backed up by a 2020 study published on Newzoo, which says over half of all gamers in SEA regularly spend in games.
Pixels Pioneered the Play-to-Airdrop Meta
In the lead-up to the launch of the PIXEL token, Luke knew that users would expect an airdrop. So he decided he would “milk it for as much as possible” and create a brand-new type of growth incentive.
With that, the play-to-airdrop (P2A) model was born, disrupting the traditional airdrop process to require demonstrable community engagement prior to reward distribution. For example, Pixels’ P2A participants were required to progress throughout the game, do quests, and share Pixels content with friends, for a chance to receive an airdrop of PIXEL tokens after accumulating points. Today, P2A is used by most web3 games as their primary method of early-stage user acquisition (UA).
However, for most web3 games that utilized the P2A model, players would farm the airdrop and immediately dump the token rewards with no intention of returning to the game. As a result, the DAU would drop soon after the campaign had finished. This also left games vulnerable to bots.
Gabby noted that Pixels’ user base did not drop off after its P2A campaign had ended. In response, Luke said there’s no point getting users if you can’t keep them and earnings were always a strong driver behind players’ interest in the game. One particularly effective retention mechanism (which has since been retired) was the soft currency, $BERRY.
This inspired Luke to think about ways to skip the traditional spend that typical gaming companies normally allocated to advertising on platforms such as Facebook. Instead, Pixels would redistribute that value to its player base as a reward for their efforts to grow the platform.
Pixels’ web3-native techniques have kept traditional UA costs below US$15,000 to date. Heidi Christine, Pixels’ Chief Marketing Officer, explained that half that budget was spent on a “really fancy lawnmower” as a giveaway prize to one lucky community member that Liked and shared a tweet.
Play-to-Earn (P2E) Is a Powerful Retention Driver
Despite the criticism the model has faced, Luke and Gabby believe there’s no reason that P2E can’t work.
Pointing to MMOs like Runescape and World of Warcraft, Luke said these were the original P2E games, even if the gold had to be sold on black markets. In web3, there’s added complexity because the barrier for players to sell their in-game assets is lowered, which places more sell pressure on the in-game currency.
While open economies create challenges for game developers, Luke said that it is just a different distribution of value and can be a powerful retention driver where players get to share in the value created.
Luke noted that at Axie’s peak in mid-2021, the game’s retention metrics were “mind-bogglingly insane” due to the high earnings that players were able to achieve at that time. While this was unsustainable, Luke said that Pixels is going granular to determine exactly what metrics are needed to retain a P2E user.
For example, what level of earnings is needed to keep a player playing? Or are there certain users or cohorts that can be targeted with a P2E incentive, to make it more effective? Figuring this out would make a game “insanely massive,” said Luke.
When probed on the common mainstream criticism that financially-motivated players are game ruiners, Gabby said, “I’ve always thought that’s crazy talk.” Luke added that he loves to play fantasy football and feels more engaged when there’s money on the line. Even if it’s not huge earnings, Luke feels as though his decisions in a game matter more when there are stakes to it.
Gabby added that P2E would inevitably increase the total addressable market (TAM) of the gaming industry. With the industry currently valued at roughly US$200 billion, it is mostly oriented toward entertainment. Given the economic elements of P2E, and the ability to own and openly trade in-game assets, Gabby said that more people would be enticed to play these types of games, where they would not have bothered with games that only offered entertainment value.
Social Activities Foster Daily Engagement
During the pandemic, Luke was working on a startup called Mesh, similar to Gather.Town, that hosted enterprise events online for companies like Apple, Uber and Twitter. These spaces were intended for use as digital conference rooms, but Luke soon realized that the best-case scenario was when his customers used their virtual meeting spaces once a week on a scheduled cadence.
“It wasn’t a great business model,” Luke admitted. He added that the key lesson in driving user engagement and solving for social density was to give users something to do every single day — such as a shared goal or objective. As such, gaming made sense to him as it is naturally retentive, and farming served as the perfect way to give players a steady stream of activities on a daily basis. Every day, they would be encouraged to plant and harvest crops, craft materials and tools, and trade with other players.
Even if there were only 100 people online in the game, it was important to Luke that users would be able to see other users in the same space (unlike virtual worlds like Decentraland, which often feel vast and empty). This is why Pixels has an in-game sauna where players can take a break from planting crops to replenish their energy while chatting with each other.
During special community events, players can also gather at other locations inside the game for an “energy party,” which rewards everyone with energy for the duration of the event. These energy parties have been a successful way to incentivize community engagement, and players now anticipate them as an opportunity to come together with their guildmates and friends, sharing a common experience in real time.
Building in Public Is Important, But HARD
Pixels has an aggressive build style. Unlike Steve Jobs, who had a vision for what he wanted to bring into the world, a definitive plan, and the ability to execute, Luke prefers to “take the ego out of it” and rely on the community to find out what people resonate with the most. As a rule, Pixels is experimenting and iterating much faster than a traditional game studio, while constantly soliciting community feedback to ensure they are building “the right thing” and not wasting time if their initial hypothesis did not work out.
Leah noted that while many startup schools evangelize for this approach to building a startup, few founders actually do it because it’s incredibly hard. Gabby agreed, pointing out that it can burn a founder out if they don’t put emotional guardrails in place. “If something sucks, people will tell you it sucks publicly on Discord and on Twitter,” Gabby said, adding that Luke has been successful because he is always upfront and transparent with the community, which has allowed him to build trust.
“If we tried doing this without any communication with our players, and we released unpolished features, and we were just like these devs that never really talked to the community, I think we would have a lot of angry users,” said Luke. “And this is why we’re building in public, because we hear their feedback and we hear their concerns, and the whole point of us doing it with the community is we want to make the changes necessary to kind of ease those concerns from people.”
Onchain Reputation Is the Key to Unlocking the Value of Web3
In order to identify high-value players who bring varied skill sets and experience across multiple web3 games, YGG began issuing soulbound tokens (SBTs) in 2022 to recognize and reward player achievements and community contributions, while ensuring that those activities were immutable and verifiable onchain.
This was especially revolutionary for actions that happened offchain — such as a community member in the role of Discord moderator, or a content creator developing educational videos, or a game tester, as these valuable and legitimate achievements were not previously recorded onchain.
Luke immediately understood the value of YGG’s reputation system, explaining that it gave him “a shortcut” to uncover more data about the quality of a user based on how they play other games. When a player has a great reputation inside another web3 game, Pixels is incentivized to onboard them quicker and offer them greater rewards because that player is likely to be of high value. This also allows Pixels to avoid low-reputation users or wallets that merely extract money from their ecosystem.
Wherever financial incentives are involved, there will be bad actors and a real need for game developers to be able to filter fake users from real ones. Not wanting to enforce traditional know-your-customer (KYC) practices, the Pixels team recognized that onchain reputation systems like YGG’s could be even more effective in helping them better understand their player base while fighting against bots and Sybil attacks.
In Gabby’s opinion, onchain reputation is a very powerful primitive that is largely unexplored in web3. While most web3 primitives are centered on trading, reputation is an asset that is built up over a long period of time. For Gabby, onchain reputation will be the key to unlocking the value of web3.
Watch the full video on the YGG YouTube channel.
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