Ambrus Studio: Is Web3 gaming expected to become the next big event in China?

Author: Ambrus Studio

2021 was a booming year for Web3, with a plethora of new projects, innovative gameplay, soaring project valuations, and record-breaking returns rapidly heating up the Web3 market, making the transition to the next generation of the internet seem like an imminent reality. However, as we approach the end of 2022, we can see that Web3 has not made further progress this year; instead, it has reversed course and sped in the completely opposite direction. According to Statista data, the overall market value of the cryptocurrency market reached $2.3 trillion at the end of 2021, but by the end of August 2022, it had shrunk to $1 trillion, a decline of 56.5%.

Is Web3 truly a revolutionary opportunity, or just another overhyped empty promise?

In 2022, despite the rapid cooling of the market, PE/VC investment in Web3 actually increased. In 2021, the total investment in Web3 by PE/VC was $30.2 billion, while McKinsey estimates that this figure will reach $36 billion for the entire year of 2022. The bear market presents both challenges and rare Build opportunities for project teams and investors.

If we draw a parallel to the internet bubble of the 1990s, it is foreseeable that when market noise decreases and the tide recedes, projects that break away from the overly financialized narrative and persistently build products will ultimately become the backbone that pushes Web3 into the mainstream.

As the first interaction layer for users to engage with Web3, Web3 applications serve as a bridgehead for customer acquisition during the process of Web3's mainstream penetration. Therefore, the "mainstreaming" of Web3 cannot be separated from the emergence of a killer application.

Among these, gaming is considered a natural fit for Web3 applications and is thus highly anticipated. After the explosive success of Axie Infinity and StepN, we have yet to observe the emergence of the next Web3 game project with sufficient user volume and discussion, especially in the Chinese market. Despite China having the largest player base and the highest revenue-generating gaming companies, the Chinese market has not maintained a consistent lead in the Web3 gaming sector.

Current Situation: Web3 Gaming in the Domestic Environment

Obstacles to the emergence and development of Web3 gaming still exist in the broader environment. The Chinese gaming industry continues to grow steadily, especially over the past two years. During the pandemic, gaming became a pastime for a wider audience, with the number of Chinese gaming users peaking at 667 million during the 2021 Spring Festival, and gaming revenue reaching 296.5 billion yuan for the entire year of 2021. However, since the introduction of the licensing policy, the launch of new games has become a more uncertain affair, with the vast majority of the nearly 300 billion market share generated by "old games" like League of Legends and Honor of Kings.

The development of Web3 in China is even more uncertain. It is undeniable that domestic Web3 has begun to take root, with startups and large companies exploring related applications. However, compared to the rapidly evolving Web3 market abroad, the domestic Web3 market is developing relatively slowly and has formed its own unique ecosystem that does not connect with foreign markets, such as "digital collectibles."

Strictly speaking, Web3 games have not yet appeared in the domestic market and may not be suitable for customer acquisition and operation in this market. In the long run, the trend may be for gaming products to go overseas.

Current Situation: Web3/Metaverse = Narrative Concept?

The marketing narratives of most Web3/metaverse projects far exceed their product technological innovations. While many people's understanding of Web3 remains at vague definitions like "metaverse" and "next-generation internet," project teams and brands often treat it as a buzzword for hype marketing rather than focusing on deepening product technology.

Indeed, this popular macro narrative has a positive impact on the industry, such as bringing more favorable government policies and higher project valuations. However, from the perspective of project teams, when we dissect many current Web3 projects, there is a strong sense of "same soup, different herbs." If the application of Web3 remains at the stage of conceptual hype, then truly killer applications will remain a distant dream.

Future: What is Web3 Gaming? What is the Purpose of Web3 Gaming?

In the global market, Web3 gaming has already seen two major version updates, the most recent being the "X-to-earn" model represented by StepN. However, market testing has shown that this model is not sustainable. Fundamentally, Web3 gaming has not yet detached from the essence of gaming products; the next version update should return to the core essence of being "fun."

Users are discerning, and their behavior is quite simple and direct. The only motivation for players to continue playing a game is that it is enjoyable and they can derive fun from it. From the user's perspective, project teams' use of typical Web3 methods such as issuing tokens, building early communities, and putting game assets on-chain should aim to enhance the game's fun factor and build a user pool, and their investment should not exceed that of creating the product itself.

Future: The User Value of Web3 Lies in Interoperability, Ownership, and Decentralization

The Product-Market-Fit logic applies equally to Web3 gaming. The marketing focus of Web3 games aimed at players should be "fun." When players are attracted by the fun, and they also enjoy the interoperability, true player ownership, and decentralized storage brought by the Web3 ecosystem, they will have a stronger willingness to stay within this ecosystem, develop a strong emotional bond with the game IP, and use technologies like NFTs to materialize that emotional bond into immutable on-chain data. This will become the greatest value creation of Web3 gaming.

In simple terms, we should use Web3 to create games, rather than using games to package Web3. Returning to the issue of the domestic environment, blockchain and NFT technologies have indeed been developed and initially applied in China. Although they are not in sync with mainstream developments abroad, the domestic explorations in scenarios such as online memberships and user loyalty are, in fact, converging with the current trend of NFT empowerment abroad.

All along, we have been discussing "how to get the public to accept Web3 games." This mindset has not prioritized players. Currently, Web3 games are dominated by those who cannot enjoy the fun of gaming.

When we shift our perspective to explore "how to create Web3 games that are accepted by the public," we will find that this is a snowball effect driven by players. First, there must be a game that is sufficiently fun, and second, there must be highly usable Web3 features. When players discover that they can own unique assets with just a few taps on the screen, they will naturally transition into "Web3 players." When players start to roll the snowball of user base, true mainstreaming of Web3 will begin.

The above views come from Johnson Yeh, former CEO of Riot Games Asia Pacific and founder and CEO of Web3 gaming company Ambrus Studio.

Johnson is known as the "Godfather of Chinese eSports." Before founding Ambrus Studio, he led League of Legends eSports to become the most-watched sports event in China and the highest-grossing eSports league globally, with annual viewing hours exceeding 4 billion.

Ambrus Studio is a Web3 gaming startup, with team members from Riot Games, ByteDance, Xiaohongshu, Tencent, and others. Its vision is to create a lasting and vibrant community organization through the development and distribution of a series of high-quality games, becoming a builder of an epoch-making Web3 eSports metaverse. E4C: Final Salvation is an eSports metaverse game currently in development by Ambrus Studio, which aims to provide players with a refreshing gaming experience through high-quality game production, diverse NFT product design, and a sustainable token economic model.

While creating the first major DAU Web3 game, Johnson hopes Ambrus Studio will become a mission-driven game studio, proving that games can also have positive externalities on society. The games under Ambrus Studio will have a unique environmental mission, with a worldview based on scientific data (the "Summary for Policymakers of the 2014 Climate Change Assessment Report") set in a near-future era of 2100.

By 2100, the Earth is expected to warm by an average of 4 degrees Celsius, leading to meteorological disasters, wars, and human activities that will serve as the prologue to the game's background story. Johnson hopes to help players gain a deeper understanding of the adverse effects of environmental changes and how everyone can start improving the situation through subtle education and an in-game task system. This education and shift in perspective will also demonstrate how game products can bring positive impacts to the world and foster good changes for everyone.

Ambrus Studio launched a brawl game, E4C: Fallen Arena, in September 2022 as a gift to the community. The game has recently been launched on Steam, allowing users to experience the fun of the game in advance. Ambrus Studio will open the third NFT character, Thorn (Wasp Warrior), for Freemint (free minting) on January 9, 2023. This move is also intended to give back to community users in appreciation of their support for the project.

The two previous batches of NFTs (Ultimate version NFT starting price 6.5E, Gold version NFT selling price 0.49E, Rangers version NFT selling price 0.19E) were all sold out within 24 hours of the Publicmint launch.