Author: Duncan Matthes, Joseph A.C. Lloyd, Delphi Digital
Compiled by: Yangz, Techub News
Introduction
In the past few weeks, the most eye-catching thing in the Web3 gaming field is the TON ecosystem. From NOT's fair issuance with over $1 billion FDV without any venture capital support, to Hamster Kombat reaching 142 million registered users in 77 days, the ecosystem has achieved outstanding results almost every week.
Telegram is known as the largest Web3 user channel with its 900 million monthly active users (MAU). In addition, Telegram's more secure and privacy-friendly features, as well as its position as the fifth largest and second fastest growing chat tool in the world, have made it a mainstream encrypted communication application. Every non-US user automatically creates an abstract cryptocurrency wallet when registering on Telegram, making the TON ecosystem stand out as one of the strongest "candidates" to promote the mass adoption of Web3.
In this report, we take a deep dive into social gaming, take a closer look at the TON ecosystem, explore Telegram’s unique approach to user acquisition, highlight five standout projects currently developing games on TON, and answer the question of whether the current gaming hype on the TON ecosystem is real.
Social Platforms and Games
In the 2010s, the Internet became a public good, paving the way for the formation of online social centers. In order to retain users and achieve profitability, these platforms began to expand their business scope to games, daily services, e-commerce and more.
Social Games
In the late 2000s, the number of users of social platforms grew exponentially, and then they began to explore large-scale entertainment methods to retain as many users as possible and achieve profitability. Games are easy to spread and highly scalable, while providing users with a long-term immersive experience and bringing revenue to the platform, so they naturally became the first choice for social platforms. Facebook, Telegram, and WeChat are good examples, all of which have invested a lot of resources to build gaming departments. The advantages of large platforms are as follows:
Users have access to a wealth of content that enriches their core experience on the platform.
Games are often paired with a social layer to encourage competition and social activity.
Most games are casual and free, so they are easy to get started, easy to spread, low in development costs and fast in iteration.
Social platforms have huge user bases and much stronger distribution capabilities than most game studios.
Games provide users with ample immersion time while offering deep consumption potential, improving the platform’s overall retention rate and lifetime value (LTV).
Facebook's move into gaming marked the beginning of the social gaming era, where even simple games could gain millions of daily active users (DAU) within weeks. The speed and scale of these social gaming ecosystems are truly impressive. Farmville, a social farming game launched by Zynga on Facebook, reached 10 million MAUs two months after launch, peaking at around 80 million MAUs in 2010. Even three years after launch, the game still accounts for around 20% of Zynga's total revenue.
It’s worth noting that the social nature of these games tends to concentrate the player base in a few big games. Because players often share their gaming achievements with friends or compete with them, network effects ultimately steer players toward a few big games like Candy Crush, Farmville, and Zynga Poker, while the majority of lesser-known games often struggle to gain market share.
Discord began to venture into gaming in the late 2010s, following Facebook's success in the early 2010s. As a chat app centered around gaming, Discord's user base was hungry for gaming content, and 95% of Discord users' real-time updates were often about playing games, so it was only natural to launch native games within the app. However, after launching a game store and game library in 2018, Discord quickly abandoned the plan due to limited success and shifted its focus to Nitro subscriptions in 2019. The lack of easy monetization made development too risky, limiting potential revenue and innovation.
In the context of the 2020 pandemic, the entire gaming industry saw massive growth in users, leading to a surge in Discord users. The company saw this as an opportunity to expand its target audience, planning to expand its user base from gamers to ordinary consumers. However, four years later, Discord has pivoted again after failing to break into the broader consumer market and promised to return to its roots and customize the platform to the needs of gamers again.
WeChat: More than just communication
While most messaging apps have added social features such as short videos and groups over time, the extent to which they can promote user engagement and monetization through other entertainment features such as games remains limited. While game developers generally do not face any direct obstacles in developing games in this environment, such as early TikTok games, they face challenges and risks due to the lack of proper infrastructure and payment channels. Due to the slim margins in the gaming industry, most development teams will not risk unnecessary user friction by limiting in-app purchases (IAP).
Although Facebook games have gradually faded from people's sight, the growth of WeChat shows that there is still huge room for the intersection of social applications and games. WeChat can be said to be a super application. Users can not only chat and make calls, but also pay utility bills, order food, book overseas travel, etc. 80% of Chinese citizens use the application monthly, and spend an average of about 80 minutes on WeChat every day. In contrast, about 37% of American mobile Internet users use TikTok at least once a month, and spend an average of about 58 minutes on the application every day.
In 2017, WeChat launched Mini Programs, which allowed certain small applications to run natively within WeChat. Soon after, WeChat Mini Programs launched the first few WeChat Mini Games (first-party games developed by Tencent), leveraging the natural fit between games and social platforms. In 2018, third-party developers were allowed to access the platform, and by the end of the same year, there were more than 7,000 registered WeChat Mini Games.
In the following years, WeChat launched a number of updates to support larger-scale mini-games and more complex game mechanics. However, in 2021, although the number of small game developers is well over 100,000, the number of MAUs has not grown significantly since the feature was launched (the number of MAUs in 2017 was about 20 million). User acquisition is obviously a challenge for these games, so small game developers began to place ads throughout the Tencent ecosystem.
This was a critical moment for WeChat Mini Games, but the real rise was due to the support of Bilibili and Douban, which began to allow users to jump directly to WeChat Mini Games when clicking on ads. After that, there was a series of viral spreads, the best of which was "Sheep and Sheep", which reportedly attracted 60 million daily active users in one month!
By June 2023, there will be more than 300,000 WeChat Mini Game developers and 400 million monthly active players, accounting for about 31% of WeChat's 1.3 billion users. In addition, according to industry estimates, the WeChat Mini Game market will be valued at $6 billion in 2023, with an annual growth rate of 25% to 30% over the next five years.
As of the second quarter of 2023, more than 100 mini games have quarterly revenues of RMB 10 million (approximately $1.38 million), and several of these games have monthly revenues of more than $15 million. A key factor in the success of WeChat mini games is that they have much higher profit margins (over 30%) compared to traditional mobile games.
However, it is important to note that games only account for about 10% of the top 500 WeChat Mini Programs by MAU. WeChat is still a social application first, a life service application second, and applications such as games last. Nevertheless, WeChat is still a good case study to illustrate what can be achieved by using games to increase user engagement and add new monetization avenues on a highly integrated and nearly frictionless platform.
After learning about the above platforms, we turn our attention back to Telegram, the TON Foundation, and the sudden outbreak of Telegram mini games.
Extensions for Telegram
Telegram was the first pure chat app to really venture into gaming. After integrating HTML5 compatibility for Telegram bots in 2016, the development of the TON blockchain, launched in 2017, aims to provide other key features to further reduce user and developer friction. Through TON, developers can build payment facilities, decentralized storage of in-game assets, or smart contracts for secure and automated game mechanics, while also efficiently distributing content to a community of 900 million MAU.
TON Ecosystem
TON's technology stack provides developers with tools to develop various dApps on Telegram. Hundreds of teams are providing services for wallets, exchanges, cross-chain bridges, games, and more market needs in the ecosystem.
TON tokens are the core of the TON ecosystem. First, TON can be used to pay gas fees to power all transactions on the blockchain. Second, validators need to hold TON to participate in the proof-of-stake validation process, similar to the Ethereum and Solana networks. In addition, developers need to pay TON to push and run smart contracts on TON. The total fee includes base fees, storage fees, and execution fees to ensure scalable token utility and validator income.
In addition, users and developers can use TON to exchange value in the ecosystem with minimal friction. Although the supply of TON tokens increases by a fixed 0.6% per year, 50% of network fees will be destroyed, prompting people to hold it as an asset. If we use the destruction rate in June 2024 as a benchmark, the annual destruction volume is about 2.89 million TON, which is less than 10% of the 30.65 million new TONs that will enter the ecosystem due to inflation in the next 12 months.
To decentralize decision-making, TON holders receive governance rights in proportion to their risk exposure. While governance is not the primary use case for TON, it can serve as a supplementary utility that could theoretically play an important role in shaping the future of the protocol. However, the high degree of centralization (the top 100 holders hold 92% of the supply) severely limits decision-making influence.
TON supply is being destroyed after a vote in June 2023 on a possible destruction of 50% of network fees (98% in favor). It is worth noting that the voting consensus on TON is very high. Although only four proposals were voted on, all proposals passed with an average approval rate of 96%, that is, the community consistency within the TON ecosystem is very high. And this overwhelming consensus also relies heavily on the high concentration of TON tokens, with more than 92% of the voting power coming from 100 wallets.
The Ton Believers Fund is another example of the strong belief at the heart of the community. Over 1.3 billion TONs are locked in the fund for five years, representing approximately 25% of the total supply. In 2023, the fund stops accepting funds and initiates a two-year hard lockup, after which locked tokens and rewards are subject to a three-year linear vesting period. While locking up a significant amount of supply for five years demonstrates the long-term belief of the TON community, it also further centralizes governance. Additionally, the incentive structure is unclear, with TON rewards to stakers coming from “donations” and a proposal that passed with 99.4% of the vote to distribute 1 million TONs (<0.1% of staked tokens) to stakers.
TON’s popularity
TON’s growth has been explosive. dApps in the TON ecosystem continue to set new user records, with Notcoin reaching 40 million users in six months and Hamster Kombat exceeding 200 million registered users and over 30 million DAU. This coincides with the fast-paced growth we saw in early social games such as Farmville and Sheep, and also highlights the power of cryptocurrency growth incentives. Hamster Kombat is expected to launch a token soon, while NOT launched on Binance last month with an FDV of $1 billion, $2.1 billion at its peak, and has now pulled back to around $1.45 billion.
The popularity of the TON ecosystem is attributed to a move announced by Telegram in late February that its advertising network will distribute 50% of the revenue generated through TON to channel owners. This move opens up a huge potential market for advertisers, allowing advertisers to access Telegram's huge user base. On the day the news was released, TON rose by as much as 40%, and its market share has not stopped growing since then.
The ecosystem has seen steady growth in its developer community from Q1 2022 to Q4 2023. In Q1 2022, TON’s Telegram development community had around 2,200 users; by Q4 2023, that number had risen to 13,500. As of June 2024, the number of users has increased by nearly 100% to 36,500, a significant spike compared to previous growth.
Recently, the number of developers in the Mandarin community has increased significantly, from 2,300 to more than 7,300, an increase of more than 300%. By comparison, the Russian-speaking community grew by only about 50 percent. This phenomenon shows the growing interest from the Chinese cryptocurrency community.
TON’s daily active wallets and transactions have been trending upwards in the second quarter, driven primarily by Notcoin and Hamster Kombat. Likewise, transaction volume has seen a significant increase over the past three months, recently surpassing the 8 million daily transaction mark after hovering between 500,000 and 1.3 million in the first quarter (excluding a three-week peak after the ad network launch).
This trend is reflected in the number of wallets, wallets activated on-chain, NFT minting volume, and overall DAU. Activity metrics are starting to see exponential growth across the board.
TON Growth Plan
The TON Foundation plays a key role in overseeing the ecosystem and promoting development. As a non-profit organization, its mission is to incentivize innovation and benefit the entire TON ecosystem. Supported by a $90 million ecosystem fund established in 2022 and a newly established 30 million TON community reward program (currently valued at approximately $228 million), the Foundation has implemented various investments and grants to promote the development of ecosystem-native dApps.
The TON Foundation’s accelerator program has experienced significant growth since March. Of the 82 proposals approved on Questbook, 17 were gaming or gaming infrastructure, with GameFi becoming one of the most well-represented areas. Recently, TON also announced a TONX accelerator program worth US$5 million to help promote its aggressive development strategy.
Additionally, the TON community recently announced that it will host an eight-week offline “Open Alliance Hackathon” in 13 IRL locations. Teams from all over the world will have the opportunity to win up to $500,000 in prizes and build connections.
Community rewards are an important part of TON's long-term development strategy. Most events last for 2-4 weeks and are often simple to attract as many participants as possible. To date, the TON Foundation has issued more than $40 million worth of rewards, and there are many more events ongoing or planned. In the airdrop rewards, LP Boosts, and The Open League Battles events, the TON Foundation has issued a total of $22.4 million in rewards, of which 17% ($3.9 million) was allocated to gaming projects.
In the above activities, TON ecosystem game projects have achieved great success and dominated the application battle rankings. TAP Fantasy ranked second in the Beta season and won the championship in the first season. The championships in the second and third seasons were both won by Catizen, which was developed by a Chinese team with experience in WeChat mini-games. Citizen is currently expected to retain the championship in the third season, followed by Yescoin and SquidTG, which may become the top three in the rankings.
Games bring valuable and sustainable user traction to TON. Teams like Catizen have generated over $10 million in revenue from in-game purchases in the past three months, showing that teams with monetization expertise can turn hyped user metrics into valuable revenue streams.
While Catizen is taking its time to build its empire, Hamster Kombat and Notcoin have also been in the spotlight in the past few weeks. Hamster Kombat’s Twitter followers have exceeded 9.9 million in 77 days, with an average of more than 2 million views per tweet and 142 million users. Meanwhile, Notcoin launched its token through the Binance Launch pool in early May and has $1.45 billion in FDV, 2.44 million on-chain holders, and 40 million active users.
While these numbers are impressive, project teams building on TON need to demonstrate their ability to operate on a regular basis and convert free-to-play users into paying users without adopting a strategy of infinitely inflated token rewards. User acquisition is critical, but it also requires regular delivery of new things to keep users, especially in an attention economy like Web3.
Furthermore, since bots are cheap, they will soon become a problem for project teams. If effective countermeasures are not taken, the prospect of economic rewards will attract a large number of bots, diluting player rewards while creating additional selling pressure.
Games and User Acquisition
User acquisition (UA) is a key metric for any mobile gaming studio. In this ultra-competitive, profit-thin industry, the ability to grow the user base is key to sustained success. According to CNBC calculations, the operating profit margin of the gaming business is less than 6%, forcing gaming companies to cut costs across the board.
Currently, there are more than 300,000 game apps on Google PlayStore and more than 225,000 on Apple AppStore. The large number of games competing for the approximately 2.2 billion mobile gamers worldwide has led to a sharp increase in UA costs. Back in 2018, the cost per install (CPI) was about $1.24 on iOS and about $0.53 on Android. Just six years later, these costs have risen to $2 to $5 on iOS and $1.5 to $4 on Android.
According to a report by Sensor Tower, in 2020, 28,000 mobile game publishers had revenues below $1 million, contributing a cumulative total of approximately $834 million (2%) to AppStore game revenues. In contrast, 940 studios with revenues exceeding $1 million contributed a cumulative total of $34 billion (98%). This shows that the mobile game industry is seriously unbalanced, and small studios that cannot afford large amounts of UA expenditures are at an extreme disadvantage. Assuming that approximately 60% of users spend their time in games that are more than six years old, it is no surprise that 83% of mobile games fail within three years of launch. For new mobile game studios that want to sustainably penetrate the industry, efficient UA has become the basis for survival.
To help developers cope with the increasingly competitive mobile gaming market and further improve the efficiency of the transition from Web2 to Web3, Telegram recently launched a native IAP currency, stars, which can be easily integrated into bots and mini-games. Now, users can seamlessly purchase their favorite game props through this AppStore-compliant currency, bringing developers deeper player consumption and a more stable revenue stream, and developers will receive 70% of the IAP share.
By paying subsidies to teams that pay for advertising in stars, Telegram not only helps game publishers reduce customer acquisition costs, but also makes itself and its Web3-friendly user base an attractive Web3 marketing platform. In addition, stars can be exchanged for TON, effectively connecting them to a wider liquidity market. As long as the TON token remains healthy, developers can be guaranteed to receive stable and efficient rewards.
Considering the rising cost of UA for mobile games and Telegram's large crypto-open user base, TON has the potential to become a valuable channel for Web3 games to help them incorporate new Web3 users into their ecosystem. While the technology stack limits the scope of developers building games for Telegram, the large user base, low platform development costs, and low-friction environment for users make it a strong pillar for the Web3 gaming ecosystem.
It is foreseeable that mature gaming projects will undoubtedly take advantage of TON in the near future. Telegram is uniquely positioned to be an attractive platform for top mobile gaming UAs. By building experiences on TON that can be accessed with minimal friction and do not require much effort from players, gaming teams can cast a wide net to attract users. Distributing modest utility rewards in games can also be an effective bait to bring new potential players into the ecosystem.
Popular games on TON
The TON gaming ecosystem has been on a tear over the past few months. Driven by various TON growth plans, relatively simple HTML5 games, minimal development costs, and a large number of potential players, TON has established itself as an attractive option.
Incentivized referrals are one of the main drivers of strong growth in its social metrics. While this strategy has been proven to bring a large number of new users to the ecosystem, it does not solve the lack of deep monetization inherent in casual games like Notcoin and Hamster Kombat. This is also a key issue for game retention and sustainability.
Clicker games are fundamentally ill-equipped to achieve meaningful user monetization, while hybrid, casual, and hardcore games combine the necessary low-friction onboarding with deep potential revenue streams. Finding the right balance between low-barrier gameplay and providing enough social competition and entertainment value to make users feel the need to upgrade will determine the success of these small games.
Notcoin
Few teams have captured the culture and primitives of Web3 like Notcoin recently. By distributing 95% of tokens to users, Notcoin has created a special brand that combines memes with a sense of community. As a simple "tap-to-earn" game, the threshold for players to participate is extremely low. This also realizes the decentralized distribution of NOT, with over 2.44 million on-chain holders.
Notcoin's fast-paced development, completely community-centric distribution, and meme-like culture made it a catalyst for the entire TON ecosystem. Incremental games existed long before Web3. Cookie Clicker, a clicker game originally released in 2013, is probably the best-known example. The game peaked at around 1.5 million players in August 2023, and still has an average of 15,000 concurrent players today. A recent incremental game, Banana, has been the second most concurrently played game on Steam for three weeks in a row.
NOT has been successfully cross-used throughout the TON ecosystem, with various TON games accepting NOT for in-game purchases. In addition, the Notcoin team has negotiated a burn rate for each transaction, so for example, 10% of NOT used in Catizen will be burned, reducing supply and increasing buying pressure. Since the game itself lacks sustainable entertainment value, Notcoin will have to rely on its cultural significance to be integrated into as many ecosystems as possible to provide continued utility.
By conducting its initial token offering on Binance Launch Pool, Notcoin has taken full advantage of its recent growth and consolidated its position among the top gaming tokens, becoming the leader in this round of game issuance. According to CoinMarketcap (06.24.24), NOT is the third largest gaming token by market capitalization. Since its launch on May 16, Notcoin's average daily trading volume has ranged from $300 million to $1.5 billion, ranking among the top gaming tokens in all ecosystems.
Catizen
When it comes to popular games on TON, we have to mention Catizen. The game team's previous experience in developing games on WeChat has been transformed into Catizen's outstanding online performance. In just two months, it has more than 20 million registered users. The Catizen core team has developed more than 20 mini-games since 2018, with more than 300 million downloads on WeChat, Google Play, and Facebook. Catizen is the game on TON that has the most in-game revenue through IAP, and its 2.7 million DAUs have brought the game more than $10 million in TON revenue. In addition, of the 1.25 million on-chain users, about 50% are paying users, and the average spending per player is about $170. In addition, the game has a conversion rate of 7%, which is 900% higher than the average conversion rate of 0.66% for Telegram games.
Catizen's game design is simple and fun. The game is set in Meowverse. Players will receive a digital cat when they register, and they can upgrade to improve their leaderboard rankings. By breeding cats, completing tasks or participating in mini-games, players can receive tokens and NFT rewards and continue to improve their strength in the game. The company plans to launch more than 200 mini-games in the next few months, establish an open task platform as a user funnel for other projects, and integrate e-commerce, which shows the huge scope of its business.
TON Games has been very active in community distribution, which has been one of the main catalysts for its exponential user growth. In the TGE, most Web3 game teams do not have the ability to airdrop a significant portion of the supply to the community, while Catizen used 42% of the supply for community airdrops. Surprisingly, players mostly do not consider ROI when spending, because in order to get a significant token return, they must pay extremely high fixed costs.
Hamster Kombat
While Catizen and Notcoin stood out for their excellent monetization strategies and clever use of Web3 culture, Hamster Kombat shined through its social influence. In the past seven days, Hamster Kombat Twitter posts have averaged 2.2 million views, 20,000 likes, and over 2,000 retweets.
The core gameplay of Hamster Kombat is very similar to Notcoin. Users enter the game, tap the screen, and accumulate points over time. Players take on the role of a fictional hamster, the CEO of a cryptocurrency exchange, with the goal of mining as many HMSTR coins as possible. Players can increase their income by investing in marketing, licenses, talent, and new products in the game or by referring new players.
This simple game has attracted over 200 million registered users. The prospect of potential rewards, combined with the minimum requirements on the user side, has led to exponential growth in the number of users. The team has not only been active on Telegram and Twitter, but has also invested a lot of effort in gamification on their YouTube channel. The team publishes two 2-minute videos every day, one covering daily cryptocurrency news and the other, which is usually an educational video. The team hides clues in the videos to incentivize users to continue participating.
Hamster Kombat’s YouTube channel currently has over 28 million subscribers, making it one of the fastest growing YouTube channels of all time. The 137 videos uploaded have generated a total of 461 million+ views. To put other Web3 games in perspective, this number is about 100 times that of the Illuvium YouTube channel.
Fanton
Disclosure: Delphi Ventures is an investor in Fanton.
Despite being a soccer app launched during the European Football Championship, Fanton has attracted far less attention than the above three projects. The project has been relatively low-profile, but still ranked fifth in the third season of the Open League, bringing the team $30,000 in net revenue. The game's lack of social capital may be due to their more niche audience, fierce competition (mainly Sorare), and their relatively less aggressive token strategy, without promising a large community airdrop at the TGE.
The game uses a typical fantasy football gameplay, where users can pick 5 players to form a team lineup and score them based on their real-life performance. Users who pick the best lineup combination and get the highest score on a specific match day can be rewarded through the leaderboard. The game covers the top five European leagues, the Brazilian League and the current European Football Championship, which is broadcast in 229 territories and has a cumulative viewing of 5.2 billion (1.9 billion unique viewers), with an average live match audience of more than 100 million in 2020.
Users can participate in regular tournaments or NFT tournaments, the latter of which require users to own NFTs to participate. Winners receive TON and NFT rewards, unlocking tournaments with higher rewards. Despite the MAU of 200,000, the number of players in typical free tournaments has reportedly ranged from 1,000 to 5,000 in the past few weeks, while the number of players in paid-entry tournaments has ranged from 10 to 1,000.
It is worth noting that the first round of the $100,000 Euro Championship had about 37,000 participants. The second round saw a significant drop in registrations, with only about 7,000 people. Furthermore, while showing a prize pool to attract users, the 81% drop in registered users after the second round suggests that it is having trouble retaining users. Without an active token approach similar to Notcoin or Catizen, it will be difficult for the project to compete with larger projects like Sorare.
Cat
Gatto is a game that is a cross between a tamagotchi, a platform game, and a farm simulator. Players can collect NFTs, take care of their pets, and level up in the game. On March 26, the TON Accelerator Program accepted 11 applications (out of 170), and Gatto was one of them. As a result, it has also received wider ecological support and promoted game development.
Compared to the above games, Gatto's community is not so impressive, with only 23.5k followers on its official Twitter account and less than 10 posts. Player communication is basically carried out through Telegram, and its message channel has more than 75,000 subscribers. Focusing on Telegram has not affected Gatto's user acquisition. The game's registered users exceeded 1 million more than three months ago.
Gatto promises to launch RPG content, PvE class modes, and PVP expansions in the second half of 2024. In early 2025, Gatto hopes to develop city-building games to add another layer of progression to its ecosystem. However, ideals are full of reality, and in the past three months, Gatto has been left behind by games like Catizen and Hamster Kombat. The next few months will be an interesting case study in how implementation operations work in Telegram mini-games, and whether Gatto can close the gap with simple games like Hamster Kombat.
Bear Market and Bull Market Theory
Some readers may naturally compare today’s Telegram Mini Games ecosystem to the early WeChat Mini Programs, and then unconsciously get excited about exponential growth in the years ahead. While there is some truth to this assumption, before outlining our “bull thesis”, it is necessary to briefly outline some of the obvious and insurmountable differences between the two.
Bear Market Theory
It is unlikely, if not impossible, that Telegram will become a universal app on the same scale as WeChat in the next five to ten years. User behavior will continue to diverge between the two platforms. For WeChat in China (the world’s second largest economy), the number of competitors vying for user attention and spending is far less than for Telegram and its global audience.
In addition, WeChat directly benefits from its highly centralized structure. WeChat not only benefits from Tencent's extensive product and service ecosystem, but also benefits from a very favorable regulatory environment, which has enabled its domestic market share to grow rapidly.
WeChat’s highly integrated wallet app is a good example, but its functionality is not easy to replicate. With its undisputed dominance in the domestic market, WeChat has direct integration with virtually all domestic banks. As a result, in many cases, the process for WeChat users to go from playing a game to purchasing in-game items is less involved than downloading an app from an app store. In contrast, TON users must first purchase a fixed number of stars or deposit cryptocurrency directly before they can participate in in-game processes involving currency.
Another key point is UA. While Telegram allows lower ad spend with the use of Stars, this does not change the fact that ad networks on the platform have limited performance. The best that Telegram mini-game developers can hope for is to identify users who have opened certain mini-apps. This is the exact opposite of WeChat, which has a lot of rich data on all users, including financial, credit, and social scores.
Furthermore, while ad networks will improve over time and introduce more third-party integrations (such as WeChat’s partnership with TikTok), Telegram’s privacy-centric value proposition will mean that highly granular data such as demographics and geolocation may remain unavailable.
Bull Market Theory
Despite this, Telegram/TON still maintains many unique features that are different not only from WeChat, but also from all other Western social applications. The establishment of TON immediately positioned Telegram as one of the largest entrances for Web2 users to enter Web3, and also made Telegram's approximately 900 million MAUs the largest "Web2.5 user" pool and a major distribution channel for almost all major cryptocurrency markets.
More importantly, unlike centralized exchanges such as Coinbase and Binance, Telegram is fundamentally a social application, which means that user behavior within the application is very different. In other words, since users log in to Coinbase to trade cryptocurrencies (a highly independent and serious behavior), when it launches any leisure, entertainment or social functions, users will undoubtedly have a stronger tendency to resist or churn. On the other hand, Telegram tends to the other extreme, so social-related applications such as games are easier to integrate with it, and the product-market fit is also higher.
Encouragingly, based on the case studies in this report, Telegram users appear to be highly aligned with apps that combine social apps with heavily financialized incentives. Even assuming that more than 80% of these “users” are attracted to “finding the next Notcoin,” the metrics for these simple games already exceed many of the big-budget games in this and previous rounds.
Looking back at WeChat’s path, readers should remember that its situation really started to heat up as more cross-platform UA channels opened up and customer acquisition costs decreased. We hope that Telegram will use this knowledge to make third-party integration a priority, despite the risk of user churn.
This, combined with a deep understanding of native user behavior and genre-market fit, will provide opportunities for Telegram Mini Games that understand how to be professionally live-operated and monetized to grow on the platform.
In addition, many developers may choose to continue to use Telegram as a UA channel at the top of the user screening funnel. After all, although the ceiling of WeChat Mini Games is high, only about 30% of all WeChat Mini Games are pure Mini Game studios. Most studios operate independent apps while operating Mini Games in order to obtain cross-platform user experience, cross-platform games (players using multiple platforms usually spend more) and a larger addressable market.
in conclusion
In recent months, TON has gained an impressive share of user mind. The mini-game ecosystem, led by Catizen, Notcoin, and Hamster Kombat, has played an important role in the sharp growth of on-chain activity. Hundreds of millions of users are playing TON games and have invested tens of millions of dollars in the ecosystem this year.
The grant program is key to TON’s recent success and further illustrates the struggles Web3 game developers currently face in competing for player liquidity. The newly deployed growth program provides funding, technical support, and marketing assistance to game teams, further accelerating the pace at which teams join the ecosystem.
The introduction of Star as a native Telegram in-app currency, flowing to the Web3 system in a near frictionless manner, will hopefully allow the team to increase the level of in-game monetization. Games like Catizen, Notcoin, and Hamster Kombat have established themselves as serious gamers. After the success of Notcoin, everyone is waiting for the next game to launch to gauge how it will develop. Whether the success of Catizen and Hamster Kombat can be replicated is questionable, but they have the potential to challenge the top twenty game tokens in terms of market capitalization at launch.
In the short term, many teams will likely take advantage of TON’s current mind share and attempt to divert users away from the platform and towards their own games or protocols. However, if we assume that developer tools and support will become more robust over time, then native games that can take lessons from platforms like WeChat and apply them to Telegram will be a case study worth watching in the medium to long term.
The second half of 2024 will be critical for TON Games. After the initial explosion of users laid a solid foundation for the ecosystem, the focus will now shift to retention and LTV. Compared to user acquisition, these two key sustainability metrics are more dependent on content than virality. These metrics will force the team to execute meaningful and regular operations to achieve sustainable development.
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