Rise Of Mobile Gaming, Bitcoin & Microtransactions

It's no secret that over the last decade that mobile phones have really started to take over the internet space completely. 2016 was the first where where mobile users overtook desktop users for web browsing for the first time in history and it's only continued to claw more space since then. Presently, as of October 2020, this number has climbed to 58% and doesn't seem to be slowing down any time soon either.

Continued Mobile Gaming Growth

As people continue to spend more time on their phones and as phones become more sophisticated and popular, an inordinate amount of time, money and development has gone into the creation of mobile games. This has lead to some extremely popular mobile game titles late in 2020 which include the likes of:

• Among Us
• PUBG
• Call Of Duty
• MineCraft

Most of these titles, and many more, are pretty much common household names at this point due to their ubiquity around the internet, workplace, school and other similar environments. More so now than ever, during the continuation and never ending sight of the coronavirus quarantine, many people too are choosing to play games at home in isolation. This has spawned the asymmetric growth of the game title Among Us for example which allowed friends to communicate in a friendly way while still being able to maintain a safe, sanitary distance.

Unfortunately or not, depending on your opinion on the matter, the only way that games have been able to sell profitably since the emergence of cell phones is through the use of "freemium" gaming. Freemium is a word to describe the feature whereby the game itself is free, but extra add-ons and in game (optional) app purchases are available to the user. This can be done for a variety of reasons, often time this is cosmetic but sometimes it can also have actual in game features or advantages for players depending on the game. Among Us, for example, allows you to dress up your character with various icons, some of which are for sale for various prices.

The Rise Of Mobile Freemium Gaming

Initially, developers were dubious at the idea of icons or "skins" having value in the in-game market ecosystem, but they have been met very positively by gamers in general which can support huge multi-million dollar ecosystems. Nowhere is this more prevalent than the outrageous sums of money spent by Dota 2 players during their Battle Pass season which has far exceeded 9-figures in revenue for the Valve corporation.

By making the barrier to entry as low as possible, game companies are hoping to lure in their customers easily with a free to download game. By then acquiring the user's attention, they then hope to monetize the users with their time and emotional investment into each game. And this method works. So much so that the old way of buying and owning games from the year 2000 is pretty much an afterthought at this point in time.

All of that said, game companies have had several ongoing and outstanding issues with the freemium microtransaction business model and the companies that house their payment processing networks.

Let's first start with the microtransaction issue. Credit cards charge fees that typically come in the form of a flat fee and a percentage based fee on top of the flat fee. The flat fees average around 5c to 10c and the percentage based fees can be anywhere from 1% to 5%. With microtransactions, however, the percentage based fee isn't so much the problem, it's more the flat fee that comes with each purchase. If we assume that a microtransaction purchase for one of the mobile games is a 99 cent purchase we then have to assume that a fee of 5-10c is charged per transaction. This makes up a whopping 5-10% in fees per microtransaction which is absolutely enormous, making it likely a multiplier over the commission charged by the percentage based fee by the credit card service provider. Therefore, to mitigate flat fees, we can extrapolate outwards that it becomes cheaper on a percentage basis when the costs go up for products, but not when they are cheap.

Next let's take a look at the payment processing networks. The most notorious example in 2020 has been the ongoing lawsuit with Epic Games and Apple. It is fairly widely known that the Apple App Store charges it's members a whopping 30% in processing fees for all transactions done on it's network. And it's fascism really doesn't end there because they don't allow you to use any outside channels to Apple's App store once you are a part of it. All payments must be channeled through Apple and pay the 30% fee.

And when you are all said and done as a mobile games developer, you end up getting completely destroyed by fees either by App stores and/or by payment processing fees which can also include the likes of fraud and chargebacks. It's for these reasons that Bitcoin and other cryptocurrencies have been in a unique position to bolster the mobile gaming market and really take things to the next level. There are a variety of options available to developers that have yet to be fully explored or exploited. There are the obvious ways of circumventing app stores by using an open sourced app store such as F-Droid like we talked about in our CryptoSmarts series. On top of that, users can also use cryptocurrency to really start to invent new ways to appease users.

Cryptocurrency For Mobile Gaming Disruption?

This can provide simple solutions like cheaper transactions which can allow users to make in-game purchases for pennies if they so choose to, something presently impossible with the current credit card and payment processor model. Similar to how many game developers have been getting rich off of multiple $1 purchases, game developers could do just as well by selling even more 5c purchases via cryptocurrency that feel even more detached to consumers. With low fees and no risk of chargebacks, these types of payments could flourish. A common problem in this market has been that many game developers of blockchain games have used native tokens which aren't a very good user experience since these tokens often times can be hard to sell by not being listed on very many cryptocurrency exchanges or having low market liquidity.

However, Bitcoin and cryptocurrency can take things a step further by actually offering payments to users directly, something that is also nearly impossible to engage in the current market with. This can be done by monetizing aspects of games from completion events to pegging in-game assets to real values that can be bought and sold on online marketplaces. This can drive an internal economy which can promote liquidity by encouraging market makers and arbitragers to exist, all of which can be profitable and helpful to the underlying company and game developers. Ultimately, a large economic ecosystem could thrive between game players, professional game users, market makers and game developers.

As for why this type of thing doesn't already exist on any large scale presently, this largely has to do with inadequate market penetration and consumer awareness. Many consumers to this day are not aware of cryptocurrency nor do they care to involve themselves. Furthermore, obscure platforms and game types that may not be condoned by the Apple App store may have a hard time reaching a critical mass of users. This creates a somewhat unfortunate circumstance where presently a lot of technology exists to solve a lot of problems both for game developers and for users and yet disruption isn't looking to take place any time soon.

Several companies are trying to change this dynamic, however. There are various blockchain game developers such as Spliterlands that has been involved in this space for some time. They have a fairly loyal userbase that exists off of the SteemIt / Hive networks. Additionally other companies like MintDice are developing games that will incorporate Bitcoin and other cryptocurrency payments in it's game development portfolio as a way for users to compete against one another for both real money and in game prizes via it's rewards program.

Bitcoin and blockchain gaming is clearly in it's infancy and if the right formula and marketing strategy is used, this could be an explosive market if executed correctly. Pay attention to the types of game developers that are up and coming in this space as there is a lot of disruption that could take place that will be advantageous for nearly everyone involved except for the middlemen. If this type of mobile gaming market can penetrate into cryptocurrency, there could be a new gaming revolution of sorts that paves the way for the 2030s and beyond.