Founded in 2014, crypto gaming developer and investor Animoca Brands has become one of the leading companies in the metaverse in the last two years, with the company’s portfolio growing to almost 400 investments in Web3-related projects, including Dapper Labs, Decentraland, and Axie Infinity.

Meanwhile, Animoca Brands’s valuation has soared from $10-20 million when it was delisted from the Australian Stock Exchange in 2020 to $6 billion today. Yat Siu, Animoca’s co-founder and chairman, talked about why they are bullish on Web3 gaming and whether the play-to-earn gaming model is sustainable at the BEYOND Expo 2022 tech conference, held online at BEYOND Metaverse.

Yat Siu, co-founder and Chairman of Animoca Brands (left). Jon Russell, Partner at (right and moderator). Credit: BEYOND Expo

Jon Russell: How do you see “play-to-earn games” at the moment? Is that completely gone, or can it come back in the next ten years?

Yat Siu: The main point of “play-to-earn games” is that there’s financial value in the transactions that you do inside games that’s visible to the end user if they so choose. One important thing to understand is that the gaming industry today is almost a 200 billion dollar business, of which roughly a hundred and ten billion dollars is being spent on growing and advertising, basically growing these games usually through app installs and so on.

The other thing is that most of the revenue comes from the conversion of less than 3%, I think it’s about 1.9% to 2.7% as the industry average at this point, that means all of you here were probably playing games on a regular basis, but the vast majority never paid for these games. So how is it possible that a game company that never charges can make money? Well, that’s the model, 97% never pay anything for the 3% that do.

And that’s one of the magic elements that rewards the 97% of players who play for free because they contribute to the network effect. Imagine you’re going to Call of Duty and you’re the only player on the field, you’re not going to pay right? You need people to shoot right? So who are the people who shoot the ones who play for free who are having fun and enjoyment, but actually, they’re working inside the game providing entertainment for the other people. And so the question then becomes how much is that worth?

In 2021 when the value increased the way that it did, people got very excited and started to run ahead of themselves in terms of market value, which by the way in all capitalist market economies happens to be the same, whether it’s real estate market overheating or when those commodity prices are overheating. Historically, you do get that element coming through when there is an open market that doesn’t mean that just because real estate prices are overheating in certain national economies that real estate as a whole is a fad, it’s a fundamental business. But people at one point were actually making almost multi-years of their annual salaries in the Philippines, but they weren’t working, so yes that’s wonderful but is that sustainable? Probably not, I mean now they’re back to something maybe more realistic, relative to the economic size that economy provides, which doesn’t mean they’re not making anything, and also more importantly, it’s a useful choice, but I can still play something, have fun and if I wish to cash out I can do so as well.

And then I go back to the example of the 110 plus billion dollars spending app installs and that’s what’s so superior about Web3 games and why we’re so bullish about the long-term future, is that money is being spent right now entirely on Facebook, Apple, Google. All these platforms that basically extract from the network. How much are they putting back into the very industry – in this case gaming – that they take profit from? Almost nothing.

Now here, the model in Web3 gaming is you’re not paying Google that money, you’re paying your players the money to stay and play the game. And maybe you cash out, but the chances of you re-contributing back into the gaming ecosystem are far, far higher. The major conglomerate whose sole purpose is to extract value from you, then the macro is that there are only millions of players in Web3 gaming today, and the trend of player growth is definitely going to continue, that’s one of the reasons why we are so bullish because from our perspective we haven’t even scratched the surface yet.

Jon Russell: Is it realistic to believe that companies in the Web3 space can overturn the kind of dominance that Facebook and Apple have? How’s this going to happen?

Yat Siu: We think that’s going to happen because it’s the better outcome for the end user.

When you think about Web2, everything was centered around user experience because the paradigm was zero value, so in a world where you’re competing with a zero cost of playing a game, zero cost of entry social network, zero cost of whatever, the only battle to be fought is based on user experience: how can we get smoother, faster, easier to enter.

And in Web3 that paradigm has somewhat come in as well, where people are like it has to be a much better user experience than Web2. How do we do that? I think the short answer is you don’t, of course, you have to make it a good experience, but the paradigm is user value. In other words, if I’m making more value from this one it doesn’t have to just be monetary value, but this value is an experience, then I will go to that option instead.

Look at a place like the Philippines for instance, where you have millions of people who have been on board, they don’t have a bank account or a credit card, they are financially excluded, and here they are using a crypto wallet that completely defeats the argument that this is so complicated. 

Despite all these complications I haven’t found anyone who’s gone in and then comes out saying, “oh my goodness, this is rubbish I should never go back in there again.” Maybe there’s a few, but the vast majority of people I know are going into that rabbit hole never to come out for that very same reason: it is just a better experience and more of a value generator.

Jon Russell: I guess based on the investments that you’ve made, gaming is going to be the big bridge for Web3. 

Yat Siu: I think gaming has already been a big bridge and will continue to be so. We’re also really bullish on education, but with gaming in particular there are billions of people who already have an assumption that they should own their virtual goods and that’s why it seems to be such an easy one.

And Asia as a whole is going to lead that charge, much like Asia led free-to-play because many people in Asia and the gaming world are very welcoming to it. For instance, in the West, there are quite a few gaming companies who wish to enter that space but there’s been resistance from the players. 

And I think the resistance from the players comes from a different lens, which is what we’re witnessing in places like the US: a rising tide of broadly anti-capitalist sentiment. So NFTs and crypto has been viewed as sort of this capitalist rich-get-richer type of tool which is not a fair statement, but it is the belief at the moment. Whereas in Asia, it is viewed as an opportunity—it’s another avenue of capitalism, it’s another avenue of growth. I’m excited about that prospect and I think that this region could very well lead in this space in the mid-term.


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