Why do traditional games need Web3 more than ever?

Author: CARV Chief Growth Officer Leo Li, Blockworks; Compiler: Deng Tong, Golden Finance

Blockchain games are back and bullish.

The industry grew 33% in the fourth quarter, with trade volumes roughly tripling in just six months. But in sharp contrast, traditional games are showing a downward trend. Global mobile gaming revenue fell for the second consecutive year as developers faced market saturation and stagnant user numbers.

To make matters worse, China unveiled draft rules to limit video game spending and rewards just before Christmas, causing top gaming giants to lose a staggering $80 billion in market value.

Faced with regulatory and revenue challenges, we should expect traditional game studios to devise other ways to attract and retain users - and they will turn to the decentralized model of Web3.

If blockchain gaming does indeed need more to win – more innovative games from skilled creators – then the gaming industry is on the cusp of mainstream adoption.

Web2’s Saturated Market and Strict Rules

Even before the holidays, Web2 gaming faces significant challenges . This is due to lower profit margins due to market saturation, slow growth and tighter regulations. For example, among leading game publishers, Tencent and NetEase, which focus on live streaming service games, experienced year-on-year revenue declines.

In December, China announced new rules to cut gaming spending, which will only make matters worse. Now, despite attempts to roll back the decision, uncertainty remains.

The problem is that there are deeper problems with the entire Web2 gaming space. First, after the rapid growth in the number of global live game and mobile game users during the pandemic, user growth is currently slowing down in various regions.

Secondly, in the face of a saturated market and similar projects, competitive pressure has increased, leading to rising advertising costs and declining profits.

Third, there are differentregulatory issues at play. Europe’s GDPR and California’s CPA are making personal identification more complex for game studios, raising costs and reducing the effectiveness of brands in reaching their target users. This further reduces the efficiency of user acquisition - a problem for both studios and ad networks that rely on gaming ad revenue. For example, Unity lost $5 billion in market value after changes to Apple's app tracking in 2022.

Web3 brings more revenue and less red tape

Thus, developers, studios in Web2 Even advertisers are looking for opportunities in the decentralized world of Web3, attracted by the unique advantages it offers to each group.

For example, game developers can avoid fierce competition in popular categories and more easily attract gamers in less crowded environments. Blockchain games also have community-driven user acquisition methods that go beyond traditional advertising such as airdrops and in-game assets. And it doesn't hurt that by making a Web3 game instead of a Web2 game, you can avoid issues with policy restrictions in some countries.

There are many benefits for games and players in Web3 that are not available in Web2. The game creates and oversees an entire online economy where players can earn digital assets by playing blockchain games: they can aggregate, control and monetize their identities. In addition to playing games, players canearn passive income by sharing information with games and engaging with brands.  

Finally, ad networks (whose primary advertisers are gaming companies) can partner with gaming platforms in Web3 to access first-party and zero-party data , for better targeting, attribution and understanding.

For a gaming industry at the crossroads of revenue and regulation, Web3 promises a competitive advantage. Even if only some Web2 gamers switch to blockchain gaming, this will greatly improve the quality of games, players, and ecosystems across the gaming landscape. Importantly, these are the three elements needed for the Web3 gaming space to become mainstream.

Blockchain gaming is ready to go mainstream

Now, as strong quarterly growth heralds Another bull market, blockchain games are well positioned to compete with lower barriers to entry, top talent, and innovative experiences. The maturation of the market, driven by the entry of AAA game studios and franchises, will only further encourage adoption.

This is an inflection point. From fewer users and lower profits to tighter regulations, Web2 is experiencing multiple blocks at the same time. Instead, blockchain gaming provides a revenue and regulatory lifeline. It’s expected that more gaming companies and ecosystem partners will embrace it and create “more opportunities.”