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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Version 3.0 of Virtual Worlds

The current state of the metaverse and mobile gaming's impressive growth

Version 3.0 of Virtual Worlds

Today, we are all living at the start of version 3.0 of what people continue to refer to as the “metaverse”. Version 1.0 was in the 1990s with the proliferation of the internet, allowing people to have digital connections and experiences for really the first time in human history. Fast forward through the emergence of mobile and more interactive entertainment, Version 2.0 has been happening the past decade through people’s enhanced engagement (above and beyond simple text or email) with platforms like Instagram, Discord, Facebook, Reddit, TikTok, and (of course) video gaming worlds.

The premise of a “metaverse” is not based on the fact that people are bored with the real world or that they don’t have better things to spend their time on. This would be a shallow and incorrect perspective on what is truly evolving here. The premise for the “metaverse” and for video gaming in general is that people are continually looking for new ways to be social, to experience new things, and ways to express themselves. This is the foundation of digital engagement, virtual connectivity, and a “metaverse” social network. This is why we are now watching Version 3.0 of the metaverse emerging right in front of us.

It’s worth noting that it is currently unclear whether we will have one giant metaverse running in parallel to the real world or whether there will be a plethora of metaverses that each have their unique aesthetic, value-add, and preferences. Personally, I think that human behavior, preferences, and tastes are impossible to be homogenized into one single platform. Just like we have many versions of other B2B or B2C experiences, I think we will see many versions, platforms and variations reflected across many “metaverses”.

To be honest, it’s probably best to call them “platforms” and not use the loaded buzz word “metaverse” anymore. Nevertheless, this term has proliferated to the point where it's simultaneously in most pitch decks AND losing its meaning.

To showcase one of these platforms within gaming, the rise of Fortnite is a great case study for how people have turned a fun game into a true social experience. Since its inception, the team at Epic Games has remained nimble and adapted to the needs and desires of the gaming community. After launching in 2017 as a Player versus Environment co-op zombie survival title, the Fortnite team spent just two months pivoting to a Battle Royale format following the success achieved by PlayerUnknown's Battlegrounds (PC Gamer), and before that, H1Z1. What started as a hectic battle royale game with innovative building mechanics quickly turned into a global phenomenon. The overwhelming popularity of Fortnite has transcended gaming and enabled it to become what Donald Mustard (Epic’s Chief Creative Officer) calls “the entertainment experience of the future.” This is now more than just a game.

Ironically, the Epic v Apple court case calling the definition of a “game” into question is highly relevant to Epic’s goal of creating their own virtual world platform. This exact debate led to Roblox proactively replacing the word “game” with “experience” across their platform, and that is precisely in line with what Epic is pursuing. This verbiage maneuvering may just be posturing, but it indicates the earliest stages of these companies not building just “games” but actually building “platforms”, “experiences”, and “worlds”.

Lastly, more experiences in the real world are being mimicked, augmented, and scaled into virtual platforms (like Fortnite). One example of this is Ariana Grande’s Fortnite tour (watch the video highlights), which took place in-game from August 6th to 8th (The Verge). Beyond the in-game concert itself, the entire production featured mini-game style experiences and directly tied in with multiple aspects of the Fortnite universe. The uniqueness of experiences like this concert are a reminder that the pursuit of the metaverse is not just blurring games and reality. Rather, games are taking components of reality and attempting to create an enhanced, and far more scalable, experience. This is likely to continue as games become much more than just games. They are becoming highly comprehensive entertainment experiences.

Takeaway: we are currently in Version 3.0 of what people continually refer to as the “metaverse”. We believe that this will be reflected not through one universal digital world but through a plethora of platforms that each are unique, specialized, and immersive in their own rights. The groundwork for this is taking place through the creation of social networks (Instagram, Discord), viewership (YouTube, Twitch), creation (Unity, Unreal), play (Fortnite, Roblox, Minecraft, Grand Theft Auto). The Ariana Grande concert in Fortnite is just one example of how real-life events, IP holders, and incumbents will tell stories in game, focus on social integration and network effects, and create compelling experiences through a medium that does not know the bounds of our physical world.


Mobile Gaming’s Impressive Growth

Earlier this week, the mobile games analytics provider, App Annie, released their “2021 Mobile Gaming Tear Down” report that summarizes the industry’s performance so far this year (download the report here). Mobile continues to dominate the gaming industry, and the market is currently on pace to surpass $120B in 2021. This represents 20% growth over App Annie’s 2020 spending estimate of $100B.

Mobile gaming revenue is on track to surpass 2016 gaming revenues for mobile, PC, and console combined. As mobile gaming becomes more accessible through technical advancements and increased connectivity, developing markets will contribute to the user base in a meaningful way. Geographies such as Africa, Brazil, Indonesia, and Russia offer particularly significant growth opportunities in the coming years.

Here are some of the key insights and data points from the report:

  • 3.1x consumer spending on mobile compared to home game consoles
  • Weekly downloads first surpassed 1B after a surge in March 2020 and have remained at this elevated level
  • Over 810 games are surpassing an average of $1M in consumer spend each month with 7 of these surpassing $100M
  • India remains the largest market for mobile game downloads after overtaking the United States in 2018, while the United States dominates app store consumer spend
  • Mobile gamers skew more female than male in western markets (64% female in the United States)
  • Hypercasual is the most downloaded genre, shooters dominate in time spent, and RPGs are leading in monetization

Despite non-endemic concerns around a potential post-2020 pullback or any monetization challenges caused by changes to IDFA, this App Annie report provides a bullish outlook for the mobile games market in 2021. Sam Yang, SVP of Global Field Operations at App Annie, recently discussed how the latest updates to IDFA have not yet caused a widespread problem (GamesBeat) even though only 15% of users are opting-in to share data. Most notably, the changes do not impact the Android market and are particularly poignant for a subset of the market such as social casino and strategy games. Publishers are combating this new reality by leveraging hybrid monetization models that include in-app purchases, monetizing through the app stores, and layering advertising on top.

Takeaway: demand for mobile games has remained strong, and publishers are finding ways to navigate the challenges imposed by Apple’s recent changes to IDFA. Users continue to play and spend at impressive rates ($9 spend per device, 45% growth over the last two years) that further establish mobile as the most popular platform for gaming. We are confident that the market as a whole will continue to outperform.