Is advertising the key to web3 gaming’s consumer acquisition troubles?

Out of the few industries that have profited despite the fallout of the coronavirus pandemic, web3 gaming has witnessed the most significant rise to prominence. Growth of the blockchain gaming sector soared by over 2,000% during 2021 — during which many nations were subject to strict lockdowns. The success of web3 gaming perhaps comes as no surprise, with the sector finding a comfortable niche between entertainment and reward at a time when many were out of work and housebound.

But with restrictions mostly lifted, play-to-earn (P2E) gaming platforms need to look for ways to sustain the momentum from the past year and even go beyond to appeal to audiences outside of its predominantly crypto demographic. To do so, they first need to remove a significant barrier to entry — costs.

To get started with many web3 games, users are often expected to pay exorbitant prices for in-game characters and assets, which can price out those with less capital. To compound issues further, current web3 gaming experiences simply aren’t exciting enough to retain players.

Instead, web3 gaming needs to take a leaf out of the traditional mobile gaming playbook and subsidize these high entry costs via advertising.

Learning from the past

While P2E gaming has undergone rapid growth over the past 12 months, the industry is still very much in its infancy and can learn a lot from mobile gaming. But these have two very different models. As touched upon, P2E gaming typically requires startup capital. In contrast, most mobile games often opt for free-to-play strategies — subsidized by advertising and bolstered with in-game purchases — to attract as many users as possible.

The stats of mobile gaming speak for themselves. Out of the 3 billion gamers worldwide, 2.8 billion of these were playing through a mobile device throughout 2021. Moreover, the market for mobile gaming is predicted to reach a value of $272bn by 2030 — making it one of the world’s most profitable industries.

The key selling point of the mobile gaming boom was that any user with a smartphone and an internet connection could download an app and be gaming within minutes. Fundamentally, these games were easy to access, free, and addictive, hence their popularity.

But this was not always the case. When mobile apps came to fruition in 2008, shortly after the advent of the smartphone, games on various app stores were often paid for. While these paid apps were an initial success among early investors, few managed to scale to a mass market. Attempting to rectify the issue and scale their core audience beyond those willing to pay, developers and gaming platforms decided to make their apps free to download and introduce advertising to pay publishers — giving rise to an explosion in the free-to-play mobile gaming sector.

Currently, there is little in the way of advertising for web3 games, and platforms are yet to realize the growth potential of introducing advertising as a strategy to attract more gamers and abstract lofty entry fees.

What needs to change?

There is work to be done for P2E gaming to actualize the industry's full potential. Given the likelihood that many games will adopt a play-to-earn model in the future, developers must improve the accessibility of these platforms, and advertising is a tried and tested method of increasing consumer acquisition.

Adopting an advertising model — and making P2E games free upon the initial sign-on — will reduce the barriers to entry while still monetizing the platform sustainably. Because P2E gaming is market-dependent, the in-game economy can dip during a bear market, causing players to leave. However, monetization through advertising is not reliant on markets, resulting in more consistent revenue for developers.

While blockchain gaming primarily adopts play-to-earn economies, some crypto gaming studios offer variations of free-to-play games for those new to the space who may not want to commit fully but wish to experiment. God’s Unchained, a blockchain-based trading card game, is an example of this, where the platform itself is free, and users have complete control of assets earned and rewarded in-game.

A viable option to keep the platform sustainable and profitable as well as grow the market and acquire new users is to introduce a freemium model. In this scenario, gameplay is free, and advertisements are included, but players can purchase an ad-free experience. Alternatively, once they have reached a certain level in the game, the money they have earned can be used to eliminate ads from the platform. Introducing such a model could serve as an inflection point for P2E, allowing it to cross over into the mainstream by removing the prohibitive pay-to-play element.

By leveraging the P2E model, advertisers could go further, creating ad-based minigames within a game ecosystem and incentivizing their usage by airdropping tokens for completing specific tasks.

What the future holds for ad-based P2E gaming

P2E gaming has many challenges to overcome, despite the unprecedented level at which the industry is growing. Better blockchain games need to be created that engage and incentivize gamers to continue playing. But by reducing barriers to entry, web3 gaming can attract non-crypto natives to the P2E gaming space and encourage them to stick around.

Ad-based gaming needn’t be intrusive; it can even enhance player immersion by, for example, strategically placing ads in an open-world game on billboards, TVs, vehicles — anywhere that mimics real-life placement.

Ultimately, if the game is successful and players are making considerable progress and income, advertisers and publishers will want to work on or be associated with the platform. But to attract enough gamers and make P2E platforms inclusive, a free-to-play model with subsidized entry costs through advertising stands as an attractive solution.