Jonathan Pan

Retailers, e-commerce platforms, and game companies are competing and working together to explore the next frontiers for commerce

Meta deprecated live shopping in Facebook last year and in Instagram this March due to poor results. Instead, Meta has pivoted to shoppable ads and has partnered with Amazon to enable customers to purchase directly from Amazon ads in Facebook and Instagram.

While the war over live shopping is front page news, a lesser known battle over immersive commerce is happening behind the scenes. Immersive commerce is the buying and selling of physical products in virtual 3D environments like games and virtual stores.

Coresight Research estimates $1.5 billion in immersive commerce sales in the US this year. Even though this figure represents less than 5% of live shopping sales, retailers, e-commerce platforms, and game companies are competing and working together to explore this emerging frontier of commerce.

Selling Physical Goods in Games

Shopify proclaimed that gaming is a “new frontier for commerce” when it announced its Unity Buy SDK at the Unite 2017 conference. Shopify detailed how the the indie mobile game Alto’s Adventure “made 60% of its annual merch revenue in 30 days.” The Shopify Unity Buy SDK did not gain traction and it was deprecated this July.

Amazon entered the fray this May with Amazon Anywhere, an offering that “enables immersive shopping experiences for video games, virtual worlds, and mobile apps.” Amazon’s launch partner was Niantic’s Peridot. Merch was again the category of physical products being sold in the game. Both Shopify and Amazon chose smaller games to test in. Sensor Tower estimates that Peridot had 10k downloads in the past month vs. millions of downloads for Niantic’s other games like Monster Hunter and Pokémon Go. Alto’s Adventure also has a smaller audience as self-described indie game.

• Purchase curated physical goods found on Walmart.com like the Better Homes & Gardens 14" Artificial Pampas in White Rounded Ceramic Vase, Better Homes & Gardens 50 inch Brookbury Gas Burning Fire Pit Table, Better Homes & Gardens 15-Count Shatterproof Edison Bulb Outdoor String Lights with Black Wire, and more. This is a departure from focusing on merch.
• Claim virtual versions of these physical goods through in-game activity like weekly login bonus and checking in at the Walmart Landmark.

Physical commerce in games culminated during Roblox’s 2023 Investor Day this month. Roblox CEO David Baszucki announced dates for real-world commerce²: tests in 2023 leading to full launch in 2025. Real-world commerce is phase three of the evolution of Roblox’s economy. The first phase was the virtual economy, which is the buying and selling of virtual goods through their digital currency, Robux. The sale of Robux resulted in $839.5 million of revenue in Q2 2023. The second phase is what he calls the ad economy, which has rapidly developed this year. Ads offerings include immersive ads, video ads, sponsored experiences, and more.

Baszucki makes the bull case for the shopping economy, which he describes as a “wonderful closed loop of walking with a friend, going to a brand store, buying virtual items, watching videos, trying things on, and arguably buying [physical goods] right there.”

The bear case is that players primarily play games for fun, to hang out with friends, to gain mastery, and for many other reasons that don’t include buying physical goods. Gamers are notorious for vehemently rejecting any monetization that appears to be “money-grubby.” Ubisoft learned this the hard way when they tested NFTs and when they “accidentally” displayed ads in game.

Player behavior and perception may change and it has a higher chance of changing on a social UGC platform like Roblox. While we wait for that future to play out, there are customers buying physical goods in a lesser known category of virtual 3D environments: virtual stores.

Virtual Stores

Virtual stores, which are immersive web-based e-commerce shops, have been largely under the radar for the past few years. The leaders in the market are Obsess and Emperia. Obsess has launched over 300 virtual stores since it’s founding in 2017 and Emperia has launched over 45 virtual stores. Notable launches over the past few months include Crate and Barrel (by Obsess), L’Occitane (by Emperia), Macy’s (by Journee), and Amazon Prime Video launched its first-ever virtual store (called Godolkin University), as a companion to it’s show Gen V.

Coresight Research surveyed 150 decision-makers at US-based brands and retailers and found the following:

• 88% of brands and retailers that have invested in virtual stores have seen significant or moderate increases in total sales as a result.
• 91% of brands and retailers that have invested in virtual stores have seen significant or moderate increases in online sales as a result.
• Only a tiny proportion (1%) of respondents indicated that virtual stores had no measurable impact on sales — both in total and online.
• No surveyed brands or retailers that have invested in virtual stores reported a decrease in sales as a result.
• 77% of surveyed companies have seen an increase in click-through rate as a result of investing in virtual stores, making product and category discovery the most widespread benefit of this type of immersive experience.

In a separate survey by Obsess, they found that 70% of all consumers who have visited a virtual store have made a purchase. The hype around virtual stores have been muted because many people don’t think 3D virtual stores in browsers are something to get excited about. However, physical commerce in virtual stores and games are just two sides of the same coin. Recall Baszucki’s description of physical commerce as a “wonderful closed loop of walking with a friend, going to a brand store, buying virtual items, watching videos, trying things on, and arguably buying [physical goods] right there.”

Customers in virtual stores have purchase intent and the immersive experience provides a different way to discover and experience e-commerce. Video can be added; social is harder but possible. Players in games are learning about brands through immersive experiences but likely have very low purchase intent. Video and social is already there. Either way, brands and retailers can win even without the direct purchase on the spot — these experiences can serve the broader omnichannel experience. One personal example is me purchasing a pair of yoga pants at Alo Yoga, a brand I discovered first through Roblox and ZEPETO. This is why more than 200 brands (100+ in 2022 alone) have built experiences or partnered with creators to create virtual items on Roblox.

New virtual store competitors like Journee and Xsolla Metasites feel more like games and Roblox as they are built in Unreal. There is an avatar that users control to engage with the experience. Technically, my best guess is that the Unreal project (5.2 seems optimal) is uploaded and played at a server and streamed to a link accessed by browsers. So in other words, a form of cloud gaming.

Meanwhile, established virtual store providers like Obsess and Emperia still feel more like a website than a game. There is no avatar, so users have to click to move to different areas or angles. But this doesn’t seem to be holding them back for now. In a recent conversation with Neha Singh, CEO of Obsess, I asked about the notable amount of brands gravitating towards her platform. Her response:

The reason Obsess has been able to work with the largest global brands across fashion, beauty, CPG/FMCG, media & entertainment and more to create virtual stores, is because of our focus on user experience — which includes frictionless access on mobile (i.e. not having to download an app), fast loading times across all kinds of network conditions and on all devices (which is not currently possible with streaming via gaming engines on web), intuitive navigation (that even non-gamers can understand), photorealism (which was very important for brands to enter this space, especially in luxury) and lastly, a focus on shopping vs. gaming (as users are coming to our experiences with a purchase intent). Brands can choose the level of immersion they want to have in their Obsess virtual stores — ranging from recreating physical stores to creating fantastical branded environments to letting users navigate as avatars and invite their friends to shop together with them.

Web-Based UGC Platforms

Are virtual 3D worlds like games becoming the next frontier for commerce or are immersive commerce experiences like virtual stores the next form of e-commerce? Web-based UGC platforms straddle both of these paths. Companies like dot big bang have “built a complete game engine and a revolutionary multiplayer game editor that runs on *every* modern OS and device directly in your web browser and crammed it all into 4MB. Create with friends across Windows, macOS, Linux, ChromeOS, iOS and Android with cross-play.”

These web-based UGC platforms enable creators to make games directly on their websites and then publish their games for others to play through most devices. Web-based UGC platforms share some similarities with Instant Games, which are web games that players can play without downloads or onboarding flows.

Social media companies like Facebook, Snap, and TikTok have launched and then deprecated or massively decreased investment in instant games in recent years. Facebook was the OG of Flash games during the Zynga era. Zynga’s FarmVille peaked at 32 million daily active users and the game had nearly 85 million players over all in 2010. Flash games worked well on the web, but was terrible on mobile. In 2016, Facebook started testing instant games built in HTML5 in a closed beta. Facebook opened up the instant games platform to all developers in 2018. 350 million people play instant games on Facebook each month.

Snap quietly acquired PlayCanvas, a HTML5 game engine, in 2018 and launched their first games by April 2019. At it’s peak, 30 million of Snap’s 500 million monthly active users played Snap Games (2021). One key innovation was allowing users to use their own Bitmoji avatar in certain in Snap games. One year later, Snap shut down their gaming efforts as part of a broader layoff.

TikTok is the latest social media company to take a crack at instant games given that 82% of TikTok users play games (anywhere) at least once a week. It launched its first instant game in September 2021. TikTok confirmed via TechCrunch in July 2022 that, “Currently, we’re exploring bringing HTML5 games to TikTok through integrations with third-party game developers and studios.” Meanwhile, a small group of hackers are building their own games that work on TikTok Live.

According to Rob Anderberg, CEO of ControlZee, his dot big bang platform boasts a more advanced engine compared to traditional 2D instant game platforms, leading to immersive and captivating gameplay.

dot big bang has an extremely capable game engine written using TypeScript and Web Assembly and provides excellent tools for creators which enable them to build richer and deeper experiences than competing platforms. While other platforms are successful with simple graphics, an older audience expects something more refined, which dot big bang can deliver. Combined with a social layer, creators can have players jump directly into a multiplayer experience from a QR code without needing an account, then seamlessly upgrade to an account where they can purchase virtual items.

The historical and current audience size of instant games, coupled with an estimated estimated 3.2B active 3D-capable browsers, indicates a substantial demand for web-based gaming experiences. Enabling creators to easily create 3D web games on platforms such as dot big bang and HiberWorld has the potential to significantly expand this segment.

These platforms have two main growth strategies: 1) compete for creators and developers who will make compelling games against dominant UGC game platforms that are paying out hundreds of millions to developers like Roblox (Fortnite is paying out a billion dollars to its creators), or 2) compete for brands interested in virtual stores and use brand-paid development and affiliate fees to jump start a developer ecosystem, hoping that some of them will believe in the platform enough to develop games on top of “work-for-hire” virtual stores.

Winner Sells All

In 1997, Amazon generated $148 million in e-commerce sales while Walmart celebrated it’s first $100 billion in physical sales. The question arises: will immersive commerce reach the same significance as e-commerce or live shopping, or will it remain a niche channel for commerce? The answer hinges on consumer interest in shopping for physical goods within immersive experiences.

Baszucki has a grand vision for immersive commerce, “[a] wonderful closed loop of walking with a friend, going to a brand store, buying virtual items, watching videos, trying things on, and arguably buying [physical goods] right there.” If he’s right, immersive commerce could emerge as a battleground not only for commerce giants like Walmart and Amazon but also for other retailers, e-commerce platforms, and gaming companies.

1. Note that I’m sharing only publicly announced or launched initiatives and that my commentary may not reflect Walmart’s views.
2. Baszucki uses a few phrases interchangeably to describe selling physical goods in games: real-world commerce, physical shopping, and shopping economy.

A Guide for Non-Endemic Companies to Operate in the Metaverse

The term “metaverse” evokes grand visions: a successor to the mobile internet, a parallel plane for human existence, and the final computing platform. It has also become an umbrella term encompassing mixed reality, web3, blockchains, NFTs, online multiplayer games, and more. It's evident that these ambitious goals cannot be achieved by a single company. We need numerous well-funded, both endemic and non-endemic, companies to contribute to the long-term visions of the metaverse.

“One of the things I’ve always found is that you’ve got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you are going to try and sell it.” — Steve Jobs

Most companies will not delve into metaverse infrastructure technology and should instead concentrate on customer experiences, which predominantly manifest as games today. Many CFOs are understandably hesitant about their companies venturing into the hit-driven business of game development. However, most companies will not need to create games; rather, they must learn how to develop or interact with virtual worlds, virtual items, and avatars, which are all integral components of online games today. Players customize their avatars and participate in social experiences and mini-games within virtual worlds. These virtual worlds and metaverses generate revenue by selling virtual items to players.

Many online multiplayer games are metaverses comprising millions of virtual worlds like Puma DLC (Minecraft), Adopt Me (Roblox), and Coachella Island (Fortnite). In 2022, Roblox players visited over 15 million virtual worlds on the platform, with developers and creators publishing more than 15,000 experiences daily. Top virtual worlds like Brookhaven RP can garner over 12 billion visits in a year.¹

Creators of virtual worlds generate income through various methods across different platforms. On Roblox, the primary revenue source comes from selling virtual items. In contrast, Fortnite Creative creators earn money based on engagement, sharing 40% of net revenue from the majority of real-money purchases made within Fortnite. Minecraft creators generate income through downloadable content, which encompasses not only virtual items like skin packs but also virtual worlds such as adventure maps.

Virtual items represent a significant business opportunity. In Roblox, players use a virtual currency called “Robux” to buy virtual items. The company refers to Robux sales as "bookings." In 2021, Roblox generated $2.7 billion in bookings, 25 million virtual items were created by the Roblox community, and 5.8 billion virtual items sold (both free and paid).

Players typically buy virtual items for "affinity” and/or utility purposes. The business model behind many successful online games today is free-to-play (F2P). F2P games provide players with access to a significant portion (or all) of the content at no cost, often including competitive or social elements that reward skilled players. To support these games, players purchase affinity items such as skins (cosmetic) and emotes (social).

Examples of "utility" virtual items in F2P games include keys that unlock chests containing random affinity items and items that increase levels faster (grants no competitive advantage vs. other players). While many games market themselves as F2P, most strive to avoid the pay-to-win (P2W) label. P2W games have the stigma that players can buy powerful items, buffs, and other advantages with real money, allowing those with greater real life financial means to win as much or more than skilled players.

Avatars serve as a fundamental way for people to express their identity (or multiple identities) in apps, games, and the metaverse. Avatar customization can include fictional or real characters, animals, personal representations, and more. Mark Zuckerberg recently announced that over one billion Meta avatars have been created. In Roblox, one in five daily active users updated their avatar, resulting in over 165 billion avatar updates in 2021.

The Playground and the Stage

Today's practical metaverse customers primarily consist of Gen Alpha and Gen Z, for whom gaming is an integral part of their lives. Gen Alpha, the demographic cohort succeeding Gen Z, includes children born in or after 2010. By 2025, this generation will number almost 2 billion, making it "the largest generation in the history of the world." According to Newzoo:

• 9 in 10 Gen Alpha and Gen Z are game enthusiasts, respectively, compared to 79% of the total online population.

• 70% of Gen Z are interested in socializing in in-game worlds beyond gameplay in the future (% definitely/probably).

• 50% of Gen Alpha and Gen Z spend money on video games, respectively, compared to 42% of the total online population.

Legendary game investor Mitch Lasky uses "The Playground and the Stage" framework to describe the interaction between sandbox games (playground) and the user-generated content of these games (stage). Sandbox games have open-ended gameplay with little to no goals, reflecting the timeless play pattern of using imagination to create stories. The players decide what they do. The popularity of games like Minecraft and Roblox among children is well-known, but lesser-known examples include Toca Boca games.

Toca Boca, a Swedish game developer, dominates the mobile kids' games category. As of March 2023, eight out of the top 12 paid iPad apps for kids on the Apple App Store were created by Toca. Toca games are popular because they enable kids to use their imagination to create stories for the characters in the games. Children enjoy unrestricted creativity, with no rules or goals, reminiscent of Montessori-style play. Kids want to roleplay what they see their parents or others doing, but in their own way.

Gaming has evolved into a cultural phenomenon, becoming increasingly important in the lives of Gen Z, Gen Alpha, and future generations. Many popular sandbox games leverage the Playground and the Stage framework to activate a flywheel of: 1) leverage imagination and no rules in play, 2) show off and monetize engaging content, and 3) acquire new players/audience through user-generated content who will play and create.

Virtual Worlds: Experiences, Islands, and Maps

Microsoft CEO Satya Nadella believes that virtual worlds are to the metaverse what websites are to the internet. Microsoft's experience with virtual worlds is extensive, having acquired Minecraft in 2014.

Companies that agree with Nadella's virtual world-website analogy will need to know how to create virtual worlds. Virtual world creation used to require proprietary game engines built by hard-to-recruit game developers. The gaming industry has been improving this product for decades. Nowadays, players, creators, and brands can quickly create simple virtual worlds on platforms like Minecraft, Roblox and Fortnite Creative. The three most common ways to build virtual worlds are: 1) build a branded world, 2) brand integrations into an existing world, or 3) build a platform-native game.³ Different platforms are better suited for these options.

Roblox is the leading platform for building branded worlds. I estimate 100-200 branded worlds on Roblox, ~40 on Fortnite, and ~15 on Minecraft (if you have better numbers, please reach out!). Examples of branded worlds include Gucci Garden (Roblox), Verizon 5G Superbowl Stadium (Fortnite), and Burberry: Freedom to Go Beyond (Minecraft). Branded worlds typically operate for a few months, whereas some platform-native games have operated for years.

Fortnite Creative is the leading platform for integrating IP and celebrities. The platform boasts numerous IP/celebrity collaborations (e.g., Marvel, Mr. Beast, Spiderman), so many that a dedicated wiki is required to track them all. A few years ago, each of these deals would have made major gaming news, but now the steady stream of collaborations is almost taken for granted.

Marketing teams have pushed for branded worlds to reach younger demographics and invest in metaverse platforms as new advertising channels with low CPMs. Meanwhile, creator-led agencies (e.g., Beyond Creative) and VC-backed startups (e.g., Gamefam) have focused on platform-native games. These startups also engage in work-for-hire branded world builds.

Branded worlds and brand integrations have lower risk and cost but also lower potential rewards. Platform-native games have the potential to become significant businesses. For example, the top game on Roblox, Adopt Me!, generates an estimated $50M in annual revenue. It would rank as the ~197th top mobile game globally by revenue. Games like Adopt Me! succeed because they prioritize core gameplay and then offer opportunities for brand integration.

The focus of platform-native games is delivering a fun experience rather than showcasing a brand. Platform-native games have not been widely adopted yet because it's more challenging. According to data.ai, 1,419 apps and games generated over $10 million annually in 2022. This cohort of mobile game developers faces challenges due to macro advertising and tracking headwinds. Non-endemic companies and brands should collaborate with these developers to build platform-native games in Roblox, Fortnite, Minecraft, and more.

If an opportunity arises to work with Minecraft, seize it, as they are particularly cautious about commercializing their platform. There have only been a handful of Minecraft branded worlds as compared to Roblox and Fortnite, so a brief overview may be helpful. The Minecraft Marketplace provides these options for creators and brands: 1) skin packs, 2) texture packs, 3) mash-up packs, 4) adventure maps, 5) mini-games, and 6) survival spawns. Skin packs comprise virtual items (skins) for avatar customization, while texture packs are “skins” for the virtual world. Adventure maps, mini-games, and survival spawns represent virtual worlds, and mash-up packs are bundles that combine skin packs, texture packs, and virtual worlds.

The maturity of developer ecosystem varies across each platform. Roblox boasts the most robust developer ecosystem, which includes some VC-backed startups. Some of the top Roblox developers could be found on the Roblox Innovation Awards winners list (full list of finalists here). I’ve personally had a great experience working with Supersocial; they excel in creating impressive brand experiences, such as NARS Color Quest. More importantly, they're pushing the boundaries of Roblox-native games (though I can't reveal specifics at the moment).

The Fortnite Creative developer ecosystem has been less developed so far. However, this is about to change significantly with the recent launch of the Unreal Editor for Fortnite (UEFN). As part of this announcement, Epic Games will now share 40% of Fortnite revenue with eligible Islands (the term for virtual worlds in Fortnite Creative). This means that Epic Games has increased their creator payout pool to an estimated $800M per year, assuming $2B in revenues.⁴

The best developer of branded worlds on Minecraft is Blockception. They just won a 2023 Webby Award in the “Best Partnership or Collaboration Metaverse, Immersive & Virtual” category for their work with Burberry.

Virtual Items Create Real Value

Popular virtual items on Roblox have garnered millions of impressions, as measured by favorites, and in 2022, virtual items on the platform generated a total of $2.9 billion. Creating virtual items typically requires just a single creator or a small team, who can complete the task within a few days to weeks, sometimes for as little as a few hundred dollars per item. There are four major approaches to working with virtual items: 1) branded virtual items within branded worlds, 2) standalone virtual items, 3) "phygital" items, and 4) NFTs.

Branded virtual items typically exist within branded worlds, but they can also be standalone items. Players usually don't pay to access a branded world; instead, they purchase cosmetic virtual items that offer social value. The investments made by brands into branded worlds suggest a belief that existing real world brands will transition into the digital realm, beginning with online games. Luxury fashion brands have invested the most in this transition.

Gucci has established fashion-focused virtual worlds in Roblox, Zepeto, and the Sandbox, while Burberry is present in Minecraft and Balenciaga in Fortnite. Other luxury fashion brands participating in metaverse fashion include Louis Vuitton, Nike, PRADA, Hermès, and more. Gucci was the first luxury retail brand to launch a permanent branded virtual world in Roblox, in May 2022, which featured eight virtual items such as the Gucci Colourblock Zip Jacket, Gucci Oversized Sunglasses, and Gucci "Hair Piece 1." Building a permanent virtual world demonstrates a significant commitment to the community. Gucci has been experimenting with Roblox since October 2020 when their first virtual items appeared in the game, followed by a limited-time immersive experience, Gucci Garden, in May 2021. One of the most expensive Gucci items in Roblox, the Dionysus bag, sold for 350,000 Robux (then worth about $4,115), which was more than the price of the physical purse.

The Minecraft x Burberry activation explored “phygital,” a term for experiences that involve both physical and digital elements.⁵

• A branded virtual world (Burberry: Freedom to Go Beyond)

• 15 free skins bundled in the virtual world, five of which are modelled on the physical capsule collection

• The Minecraft x Burberry capsule collection consists of classic Burberry garments combined with Minecraft-inspired prints. For example, this is the Minecraft version of the iconic Burberry Check Scarf (original scarf here).

• In select Burberry stores where the physical collection is available, screens displaying scenes from the game will line the walls and floors (photo here).

• QR codes can be found in Burberry flagship stores. When scanned, it’ll take users to a site where a code will be generated to access 5 Character Creator Items. This code can be redeemed at Minecraft.net (video explanation here).

• Character Creator Items are different from skins as they are items/assets that customize individual body parts like arms, legs, hair, etc. Skins are whole-body textures that are placed on a character. Skins can also be higher resolution (32x32 pixels) whereas Character Creator Items are 16x16 pixels - but can be animated.

• Minecraft and Burberry jointly donated $100K to Conservation International’s forest protection and restoration programs. Anyone who donated to Conservation International from Nov’22 to Jan’23 also received the aforementioned Character Creator Items.

The concept of "phygital" items assumes that there will be consumer demand and value in owning a physical object with a digital counterpart, and vice versa. For instance, using the Minecraft x Burberry example, would a Minecraft player enjoy the free skins enough to be convinced to purchase a physical item from the Minecraft x Burberry capsule collection? Alternatively, would a non-player become interested in Minecraft (and potentially download or play the game) because they see the branding in physical stores?

A key term noticeably absent in the Minecraft x Burberry example is NFTs. Many phygital experiments have been associated with the web3/NFT hype as NFT creators sought ways to provide utility for their NFT holders.

In March 2021, RTFKT Studios sold 608 pairs of NFT sneakers in just six minutes, generating more than $3 million in revenue. Nike acquired RTFKT in December of the same year. RTFKT's model has focused on granting existing holders priority access to new digital, physical, and phygital drops. Some purchase these items as collectors, while others speculate on their resale value.

Another example is a Bored Ape Yacht Club (BAYC) NFT owner who opened a burger restaurant in Long Beach, California. Other BAYC NFT holders can receive perks like free meals, discounts, and merchandise at this restaurant.

One of the biggest debates surrounding NFTs is whether they are necessary to deliver their intended benefits. Just last month, Roblox announced Limiteds, a type of virtual item in Roblox where creators can set limited quantities and earn 10% from every resale. The scarcity and creator royalties features of Limiteds closely resemble NFTs.

Generating virtual item revenue will be a long-term goal for specific product categories (appliances, flooring, etc.). A viable goal today is to use virtual items as a testing ground for physical products. Digital fashion is an excellent category for this.

In Roblox’s Metaverse Fashion Survey, “70% of Gen Z said their avatars dress at least somewhat like their IRL style, with equally as many (70%) saying they also get physical style inspiration from dressing their avatars.” Forever 21 is on track to sell 1.5 million black beanies in Roblox for $0.70 cents each. This beanie and other digital-first items were first tested in Roblox before they launched it in stores.

Avatars and Digital Fashion

Every metaverse experience starts with digital identity creation through an avatar system. The avatar system generates the visual asset that users select to represent themselves in a digital experience. A significant emphasis in metaverse experiences is placed on avatar customization: hair, facial features, body shape, and more. Non-customizable avatars are typically employed to portray specific characters in games or other interactive media. Avatar fidelity spans a range from cartoonish (games) to photorealistic (Meta’s Codec Avatars). A vast majority of companies will not need to develop their own avatar system. Instead, they choose the platform on which they want to create a virtual world, and then customers create their avatars through the platform's avatar system.

Many people are referring to digital fashion rather than avatar systems when they say “avatar.” After all, fashion brands have been some of the earliest investors in branded virtual worlds, where they are selling (or giving away for free) branded virtual items. These virtual items are “worn” by avatars. Some may question how digital fashion works with Minecraft’s and Roblox’s boxy avatars, but they should consider how players think.

Roblox is the leading metaverse platform for digital fashion and their 2022 Metaverse Fashion Trends report highlights the following insights that underscore the importance of digital fashion and avatar customization for their players6:

1. The influence of creator communities on fashion is accelerating

2. The impact and prestige of digital fashion is on the rise

3. Self-expression and inclusivity in digital fashion is essential for Gen Z

4. IRL trends influence metaverse fashion and vice versa

5. Survey says, nearly 3 in 4 Gen Z will pay for digital fashion

It’s essential to include Zepeto in the discussion of avatars and digital fashion. Zepeto is Asia’s largest metaverse platform, with a reported 15 - 20 million MAU. Zepeto's audience composition (70% female, mostly aged between 13 and 21) sets it apart from the current metaverse games, which tend to attract teenage males. The most popular virtual world on Zepeto is Runway Z, a fashion tournament game. Runway Z resonates with the platform's predominantly young adult female audience who have a strong interest in fashion.

Some of the previously mentioned agencies offer virtual item creation, but independent creators are also viable options. For instance, Rebecca Minkoff hired 23-year-old Roblox creator Samuel Jordan to create a 20-piece virtual fashion collection and a 5-piece limited purse collection. Additionally, there are up-and-coming metaverse fashion designers like Arjun Goel, a high school student in India.

Alternatively, companies can train their existing staff in metaverse fashion design through various courses. Roblox and Parsons School of Design recently collaborated to create a digital fashion course, teaching students how to use Roblox tools. Parsons also offers a CLO Virtual Fashion, a platform-agnostic virtual fashion tool, design course. Launched in 2009, CLO Virtual Fashion has gained increased attention as digital fashion grows in popularity. [Update 5/12] - a few days after I posted this, Epic Games and CLO Virtual Fashion announced that they have purchased shares in each other. I think points to Fortnite Creative enabling the sale of creator items within their experiences in the near future.

The Metaverse Is Dead, Long Live the Metaverse

As we transition away from the peak of the metaverse hype cycle that characterized 2022, companies are now wrestling with how they are going to capture a part of the $5 trillion in metaverse value that McKinsey predicted or the $8 to $13 trillion metaverse addressable market that Citi predicted. Meanwhile, generative AI is taking up a lot of the limited innovation bandwidth companies have.

In my opinion, companies still stand to reap tangible benefits from testing in the practical metaverse. These include engaging Gen Z and Gen Alpha audiences authentically, using virtual items as a platform for testing physical products, and for fashion brands, exploring how IRL trends influence metaverse fashion and vice versa.

Ultimately, it’s going to take a lot of boring but steady execution and product innovations in virtual worlds, virtual items, and avatars to help companies realize demonstrable impact and value through their practical metaverse efforts. I'm excited to see companies continue to innovate in this space.

For example, Amazon announced today the launch of Amazon Anywhere, an offering that enables discovery and purchase of physical products from Amazon stores in mobile games and apps. The word “metaverse” was not used in their press release but they are clearly testing the intersection between physical goods and digital experiences.

Roblox is the leading platform for companies to build virtual worlds and the virtual items used within them, including those for avatars. Companies can experiment with virtual items for as little as hundreds of dollars to building branded virtual worlds for hundreds of thousands of dollars.

1. I focus on Roblox figures as they are public traded versus Fortnite, which is made by a private company (Epic Games). Meanwhile, Microsoft rarely publishes data on Minecraft.

Navigating the end of the longest bull market for transitioning veterans

About 250,000 service members transition to civilian life each year. I transitioned from active duty to the “civilian” job market over a decade ago. Since then, I’ve been involved with veteran hiring initiatives across many companies: Ernst & Young, Riot Games, Amazon, and more. At Amazon, I helped ten transitioning service members receive offers as a product or program manager.

Over the past few years, transitioning service members have read and been excited about the unprecedented increases in compensation, perks, and mobility, especially in Big Tech. And these companies are hiring veterans. Amazon alone is committed to hiring 100,000 U.S. Veterans and Military Spouses by 2024. However, the combination of the recession, hiring freezes, and layoffs — 120K layoffs in tech companies alone (layoffs.fyi) — has forced everyone to reevaluate their game plan.

Transitioning veterans must now adopt a “security first” mindset. Security first means many things, but it is most commonly drilled into soldiers during the end of training exercises when soldiers most wanted to eat and sleep. New soldiers quickly learn that eating and sleeping comes after security is established, a withdraw plan is created, communications with headquarters is established, mission preparation and planning is complete, weapons and equipment maintenance, water resupply, and more.

Applied to a civilian career switch, that means gaining the right skills, the right network, and the right mindset before thinking about compensation, titles, and perks.

Skills

Network

Mindset

Most veterans are given the advice “translate your experiences into something civilians can understand.” I agree to some degree, but I’m pretty sick of hearing veterans contort their interview answers to fit some template and company commanders calling themselves “program managers” on LinkedIn. Leading a 120-person infantry company in combat is not “program management” and we don’t need to force it into “civilian” language. There is no civilian equivalent job and that’s okay.

Those who have served in combat arms and/or combat are also given the advice of “don’t be so aggressive.” To me, being aggressive means ruthlessly pursuing goals in a business context. Business schools and CEOs often promote reading Sun Tzu’s The Art of War as required business reading. The word strategy itself derives from the Greek word “strategos,” which means “general.” The Romans used the phrase “ars imperatoria” — which means the art of generals — to describe strategy.

You’ll find that most of the meaningful contributions and impact you deliver in your work and industry will be difficult and requires an aggressive, not passive, mindset. Don’t dull that edge, lean into it.

Building the largest and most retentive web3 sports player base

Two weeks ago, I shared that I was working on a game on the Flow blockchain. The IP is Ballerz, a 10k generative, basketball-themed NFT project. Sports NFTs have the ability to broaden to a mainstream audience and Flow is becoming THE blockchain for sports NFTS (NBA Top Shot, NFL All Day, etc.). Today, I want to share our thinking and philosophy behind the Ballerz games ecosystem.

North Star (Where we are going)

The Ballerz portfolio of games will have the largest and most retentive player base in web3 sports games.

Tenets (What we believe in)

A tenet is a principle or belief honored by a person or, more often, a group of people. One thing I picked up working for Amazon is to start most documents with tenets because we need to align on what we believe in before we discuss strategy.

Here are tenets for Ballerz Games:

1. Community first. We need to do right by customers who have invested their precious time and money into our project. That means prioritizing long-term growth, which is often painful.
2. Art drives commerce, not the other way around. The current era of game monetization (F2P) focuses on providing value to gamers first, before you ask them for money (usually spent on cosmetic items). Web3 games have turned that upside down by asking players to spend hundreds to thousands of dollars upfront. We will focus on providing fun/value first.
3. Expand the base. Even if we expand to 10k unique holders, that’s not enough players to sustain a F2P economy. We’re using games to transcend the Ballerz IP into a household name and that means growing beyond the original NFT holders.
4. Not an insider’s game. We’re going to be as transparent as possible. It’s not about being in the right group chat, the right discord, etc. Generally, “show, not tell” works best in game development, but in web3 games — we’re competing for attention against both web3 and web2 entertainment.

Strategy (How do we get to the North Star)

Strategy is as much about what we’re not going to do as what we are going to do. For example, building an Otherside just doesn’t make much sense as the first Ballerz game nor is it that relevant for sports fans.

Our strategy is to create a series of mini-games built on established game concepts while we build a flagship game experience. The monetization models are going to be more F2P than P2E.

1. Why mini-games? Building a fun game that can retain users will take months (browser/instant games) to years (MMOs). Web3 degens don’t have that level of patience and there are plenty of new web2/web3 projects constantly vying for their attention.
2. Why established game concepts? New game genres and new game concepts take years to come to fruition. There’s just too much risk. We’re much better off delivering mini-games that have an established audience (e.g. smaller version of NBA Jam, Triple Triad, etc.).

Roadmap

The first game we’re focusing on is an idle, basketball simulation browser game. Players can view, bet on, and potentially contort the league’s rules via weekly elections. Think Salty Bet but with a NBA Jam-like game that is powered via Basketball GM simulation ‘engine.’ There are two game modes that we’re calling ‘active’ and ‘passive’ — we will come up with better names soon!

The passive game is free-to-play. Players will pick one team per week and the season will run itself and there will be a winner at the end of the week. Specific details like number of players, rewards, and more will come later.

The active game requires having Ballerz and potentially Sneakerz. Two players will select X Ballerz, equip Y Sneakerz and the competition will either be simulated or adopt a rock/paper/scissor approach.

We will share more on Twitter Spaces at 1pm on Friday, July 1st.

Frequently Asked Questions

1. What about UBL?

UBL is great and that’s what helped us decide to focus first on an advanced simulation game. In terms of what we’re going to do with the UBL, we will create a plan after our first game is in development. Games and esports are closely intertwined and we expect the game to drive the competition.

2. What do accessories do?

Every accessory will have an ability that will affect existing stats (shooting, dunks, playmaking, defense, jump) or applied differently depending on the game and/or setting. Accessories that are more rare will have higher impact in specific games. For example, if a game depends on vision, 3D Glasses will benefit the Baller more than something like an armband/headband, which are more common

3. How do I submit game ideas?

This community is full of great ideas and we’re piloting a system for intake, evaluation, and decision with the Whalez community. We will evaluate if, how, and when we would expand this to the broader Ballerz community.

I’ll keep updating the FAQ section as I get more questions and we’ll migrate these to the Ballerz website once we have a games section up and running.

Building the intersection between the metaverse, web3, and gaming

I recently started Jogo Labs, a venture studio, to build the intersection between the metaverse, web3, and gaming. It is understandable that some may think that this is an incredibly stupid time to focus one’s time and energy on anything metaverse/web3 + gaming related.

After all, most gamers, professional game designers, and gaming publications hate everything web3 gaming related (especially P2E). Many companies think the ‘metaverse’ is bullshit by their own definition or Meta’s definition. To top it off, we’re in a bear market, especially for growth stocks and crypto/NFTs.

I understand all the negativity and frankly, most of it is justified (NFT rug pulls, Luna/Celsius, metaverse brand experience with 0 players, etc.). However, there is a lot to be excited about. Here are three theses I’m actively working on.

1) By 2030, every company (and many individuals) will have a metaverse destination.

John Riccitiello, the CEO of Unity, made this prediction during his 2022 AWE conference talk. Microsoft CEO Satya Nadella echoed a similar sentiment in his Q2’22 earnings call. There’s a lot of debate about the definition of the metaverse and I personally like Riccitiello’s the most: “The metaverse is the next generation of the internet that is 1) always real-time, 2) mostly 3D, 3) mostly interactive, 4) mostly social, and 5) mostly persistent.” I believe it’s more useful to start using terms that are more descriptive than just metaverse, like metaverse destinations.

This reminds me a lot the late 1990s where many folks, including myself, were learning how to make websites like Blue’s News or Shacknews. Those were the days where animated gifs were considered “advanced” web design. Today, companies/brands are building in games/platforms like Roblox, Fortnite Creative, and Sandbox. For example: JP Morgan in Decentraland, Gucci Garden in Roblox, Carrefour in Fortnite Creative, and countless other brands launching their worlds every week.

In the short term, we’re going to see more agencies (like WPP) and consulting firms (like Accenture) jump into this space to help brands build in games/gaming platforms. Creators are almost always better at world building but they won’t know how to manage master service agreements and statements of works as well as agencies, so they’ll end up paying a tax. Eventually, as the creator ecosystem develops, I envision game companies focusing more on letting creators help brands directly.

In the long term, I believe companies/brands will want to have their own destinations either on a dominant platform (like Horizon, if Meta wins) or imagine future websites having desktop, mobile, and metaverse versions powered by Mesh/Azure, AWS metaverse services, or Google Cloud metaverse services. There could be some VC-return metaverse SaaS startups that focus on Avatars (like Genies), photos → 3D assets (like RealityScan), NFT management, and more.

My current focus is to work on a couple of metaverse SaaS idea mazes by building metaverse destinations for companies/brands in Fortnite Creative, Sandbox, etc.

2) By 2025, there will be at least one AAA web3-first 100MM MAU game.

Web3 essentially boils down to ownership and in the world of gaming, multiple vectors have been attempted in the past (Diablo 3 Auction House, trading Pokémon across games, CSGO skins [1,2], and more). It is just as likely that a “web2” game with a large but declining userbase starts adopting some web3/ownership elements as a web3-native game builds a player base > 100MM MAU.

Games that charge up front, yield a token in game, or have p2e as their primary monetization models will largely be non-existent from a AAA game perspective, but may survive as some form of social casino game.

In the short term, we’re going to see a lot of browser-based games that integrate NFTs built on PixiJS (primarily 2D games) or PlayCanvas (primarily 3D games). I see a convergence between NFTs and instant games and companies like Snap (acquired PlayCanvas) are the most well-positioned to win that field today.

In the long run, we’re going to see web3 games across all platforms, built across all blockchains. Let’s be real: players of mainstream web3 games probably won’t care if a game is built on Solana, Flow, Immutable X, Polygon, or Avalanche. While there are differences between each blockchain’s developer ecosystem today, I foresee tech parity eventually. Don’t know enough and won’t know enough to opine on which chain wins, which leads to my next point.

My current focus is to build a game on each chain, exploring different components per game, e.g. using the chain as the source of truth for a game engine, typical NFT management, throughput, etc. My first project will be on Flow, more in this in a future post.

3) By 2025, NFTs become mainstream when attention is monetized.

The biggest question not being asked with NFTs are, “who is paying?” Setting art NFTs aside, especially on the gaming front, I can play a game like Elden Ring for $60. Besides speculation, why in the world would we want players to pay hundreds to thousands of dollars for games that don’t even match 5% of that experience?

If companies, games, and projects want to raise capital via NFTs, then just say so. But it’s time to stop thinking of players as the only source of capital. If your game, NFTs, etc. are truly that fun, you are essentially capturing attention. And the tech/media industries has decades of experience of capturing that attention via ads.

In the short term, well-funded NFTs will experiment with utility other than access (e.g. content). Maybe it’ll be a TV series like White Horse Tavern, even though Seth Green had to buy back his bored ape. Or maybe it’ll be an ad-supported f2p mobile game that leverages popular NFTs.

In the long run, I believe most NFTs will become free-to-mint. There will always be the blue chips and speculative newness, but competition will force NFTs to compete on utility — and someone or some entity besides the user/player will have to pay for that.

My current focus is centered around experimenting with non-access utility with a third-party for the gaming project mentioned above.

Let’s build together

There are so many examples of failures, scams, and heartache in crypto, web3 gaming, and NFTs. There’s a chorus of critics across social media, especially with the recent market turn. Meanwhile, success and fun are a lot more rare, especially when “success” is measured via number of PR releases rather than engagement, retention, and monetization.

I appreciate the critics because their intent is generally around consumer protection. However, my main criticism of the critics is that they generally have not built anything in web3 — so it’s all theoretical for them. And they very well may be right, but our team is going to build it and see it for ourselves before making a conclusion.

Please reach out via DMs on Twitter or jon@jogolabs.xyz if you want to collaborate. We have pursued a variety of models (profit sharing, equity, work-for-hire, etc.) for our first-party and third-party projects.

We’re very interested in speaking with PixiJS and PlayCanvas developers as well! Introductions are welcomed!

Looking back at the past decade, I’m awed at just how lucky I was especially on the career front. I’m writing this end-of-decade note to acknowledge some of the people who opened a door for me, to relive some stories, and to serve as a personal reminder to pay it forward.

2010: Troop Surge

I started this decade deployed in southern Afghanistan. President Barack Obama ordered a troop surge — starting with a Marine Expeditionary Brigade and an Army Stryker Brigade in 2009— to provide security for the country’s upcoming election in the fall. I was part of that Stryker Brigade.

The upcoming elections were vital to Afghanistan’s future. Following the fall of the Taliban government in 2001, twenty-five prominent Afghans met in the German city of Bonn to decide on a plan for governing the country. The group chose Hamid Karzai to lead the interim Afghan government and scheduled presidential and parliamentary elections in 2004.

Karzai was elected as President of Afghanistan with 55.3 percent of the vote during the national election in 2004. There was a 75 percent voter turnout as the Taliban only controlled 30 out of the 397 districts in Afghanistan. The security situation deteriorated considerably by 2009 as the United States and its allies focused war efforts on Iraq instead. A resurgent Taliban now controlled 164 districts and aimed to keep voters away from the polling booths.

That was the situation that faced my unit, the 5th Stryker Brigade Combat Team, 2nd Infantry Division. We helped with election security during the first two months of our deployment and then we conducted many counter-insurgency and counter-guerrilla operations. 35 soldiers were killed due to hostile fire and 238 soldiers were wounded in theater while pursuing our brigade’s mission. By my count, our brigade has the grim distinction of losing more soldiers due to hostile fire during a deployment than any other brigade since September 11, 2001. I’m incredibly proud of the work our unit did as well as the work done by the hundreds of thousands of men and women who came before and after us.

On a topical note, I do not believe there was a systematic and widespread effort to deceive the American people on the war, as claimed by the Washington Post’s Afghanistan Papers. I do believe that Americans and our soldiers have been let down, but not lied to.

I was one of the lucky ones to have returned home in July, and with no injuries. By December, I left active duty and was driving across the country from Fort Lewis (near Seattle) to New York for my first “civilian” job at Ernst & Young. Driving across Montana and North Dakota in the winter was quite the experience. The winds were close to pushing my car off the road, meanwhile, there were few lights on the highway at night. I made it safely to New York by New Year’s Eve and celebrated with family.

2011–2012: Dodd–Frank

I was excited and a bit nervous to find out that my first project was in London. I just joined the firm two weeks ago and knew very little about consulting or financial services firms. I’m grateful that my first boss, Alan Paris, hired me and then took me under his wings so I could feel like a contributing member to our project immediately.

The bulk of the projects I worked on revolved around helping our clients comply with The Dodd–Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd–Frank). I spent weeks reading the statute (848 pages long) and the subsequent regulations that agencies revised or created. I was proud of our work contributing to the increased resilience of financial services firms without unduly limiting credit availability or economic growth. It’s unfortunate that a rollback of the law was passed in 2018.

I’m also grateful that Ernst & Young hired so many veterans, many of whom didn’t have the exact skills and knowledge to do the job day one. The company spent considerable time and resources to train new employees. There was a big and very active Veterans Affinity group and we helped each other out a lot.

2012–2014: Business School

Fast forward two years and I started my MBA at NYU Stern. Many people, including myself, attend business school to network with a diverse group of people and to change careers. Some of my best friends today are people I met in business school and it’s a wonderful feeling to be able to travel to almost any major city in the world and have someone to call for some local tips, if you need help, or just want to catch up.

Getting there was a bit of a journey in itself. For those of you familiar with business school applications, applicants need to write many essays and request typically three letters of recommendations. People normally apply only to a few schools, I applied to the top sixteen schools at the time so that meant my former commanders in the Army, Patrick Gaydon and Harry Tunnell, each wrote a dozen customized letters for me. They didn’t have to do that as I was no longer in the Army by then, but a theme that you may have noticed here is that veterans take care of each other. Meanwhile, I leaned heavily into the Veterans Clubs at each school to “get some intel” on each school’s process and to hear unfiltered thoughts on what they really felt about the program. These were all complete strangers and I always got a call back, if not an in-person coffee chat.

During school, I became fascinated with Amazon. I literally did every project I could on Amazon. I even wrote a blog about Amazon, just for fun (we may have different definitions of fun). In 2012, I wrote a business plan on the “Amazon Concept Store.” Even though the Amazon team that reviewed my plan rejected the idea — the concept of an Amazon store was realized in 2018 with the launch of the Amazon 4-star and Amazon Go stores. With all my research and work on Amazon, I thought a summer internship would be a slam dunk, but I didn’t make the cut. The hiring manager consoled me by telling me to get “any other Product Management internship” during the summer and then apply full-time.

I typed in “Product Management internship” in Google and found out that a startup called Riot Games was hiring interns. It’s important to note that only one FAANG company, Amazon, was deliberately hiring non-technical PMs. At this point, I had never heard of Riot Games or League of Legends. I never seriously considered the video game industry as a career path because it was never talked about at Stern or any other MBA programs at the time. This all changed in a few years as many top video game companies actively recruited MBAs and the video game industry became a big topic in classrooms.

The Riot recruiter told me that if I was serious about an internship, I needed to get level 30 before we scheduled an official interview. I was a big gamer and I was intrigued. I reached level 30 (and played a lot more after that, don’t look me up) in a few months and then went for an onsite in Santa Monica.

I didn’t think I’d get the gig. After all, I knew little about being a product manager and little about the video game industry. That’s why I was surprised and grateful that Riot gave me a shot, especially Hermann Peterscheck who hired me for the internship and for a full-time PM position. This was my first step into the video game industry and I haven’t looked back since. The theme of others giving me opportunities strikes again. This is why I always strive to pay it forward, especially for veterans and high-potential folks who may not have direct experience in a given field.

2013–2015: Riot Games

Working at Riot during this period was both a blessing and a curse. It was a blessing because working at a profitable, hypergrowth startup was essentially a risk-free endeavor. The game was already wildly successful and the biggest challenge was scaling people and technology. Only a few startups ever reach this stage.

The curse was that I took working there for granted. At this point, I didn’t know the pain, effort, and luck it took to get to this stage. I also didn’t know what it was like to work on many failed games before reaching a commercially successful hit (for any entertainment product). That’s why I believe that long-term veterans of the game industry tend to do well at Riot, because they know how hard it is to get to where that company is today. My main regret is not staying longer to work on some of the unique problems that only Riot Games faced.

In exchange, I went on a two-year startup journey into esports. ESPN just ranked the 2013 League of Legends season and world championship as one of the best esports moments of the decade. For me, it was the 2014 world championship in Seoul. Attending that event was like looking into the future of sports, media, livestreaming, etc. I knew right then and there that I had to do a startup in this space.

I had many mentors at Riot. One mentor was Dylan Jadeja, who was the CFO at the time. Dylan told me there was never a good time to do a startup. He was right. I took the plunge and left without a concrete plan or specific esports idea. Eventually, I decided to raise capital for an esports team.

Starting an esports team sounded like a fun and, at the time, a relatively “inexpensive” endeavor. A pre-franchise LCS team was valued around $1 million for a lower end team in late 2015 / early 2016. The last LCS sale was estimated to be around $30 million, according to ESPN (September 2019).

2015–2017: Esports Startups

In hindsight, trying to raise capital with just an idea, no team, and for a non-software startup was frankly, pretty dumb. The one thing I had going for me was the explosive interest from investors in esports that started in 2015. Investors from top VC firms like Sequoia, Upfront, and USV started following me on Twitter and they wanted to talk to me. It was a thrilling time.

I ended up talking with a lot of smart people, but didn’t get a term sheet. After months of hearing no, I was on the verge of giving up. But I’m glad I didn’t because a few weeks later, I received two offers.

The first offer was to work for Jens Hilgers. He just started an esports fund called Bitkraft and an esports data startup called DOJO Madness. On a side note, I have to acknowledge that Jens is a visionary as many people doubted what he was trying to do back in 2015 and since then, Bitkraft and some of its portfolio companies have done extremely well and I’m very happy for their success and what they are doing for the esports industry overall.

The second offer was getting a seed round to fund an esports team. I wanted to do both, I did, and that was essentially the beginning of the end. It was impossible to try to work full-time for essentially three startups and to do even one job well. A few months into these jobs, I decided to focus completely on the esports team (Ember).

Ember was a wild ride. We lost the first game in the season and won every other game until we lost in the playoffs, to two teams that cheated. Then our investors pulled out. I don’t blame anything on the cheating teams or our investors. The fact was 1) we were given the opportunity to pursue our passions, 2) we tried to do something big and different, 3) we were equipped with everything we needed to win. But we still fell short and I have a whole blog post about that here. I’m really proud of our players, many of whom are starting players in the LCS today.

Startup porn rarely talks about what it’s like to wind down a startup. How do you break the news to the team (and in our case, to parents of our younger players)? Who stays on to shut things down? What do we do with the two-year lease we just signed? How do we deal with healthcare for people we let go? In the midst of all this, two of my MBA classmates who read my esports newsletter, Nina Pablo and Eli Daquioag, reached out about a month-long consulting gig at Brave Ventures, a strategic advisory and investment firm.

That month-long gig turned into a full-time Entrepreneur in Residence position. I got the opportunity to do a tour in strategy with people like David Beck, Shelly Kellner, and Alison Farber. I’ll admit that I didn’t pay too much attention to the strategy class during business school and I’m really grateful to learn how to do this function really well from some pros. I also learned a bit about the media business in the process, which was very helpful in trying to figure out how esports could fit into a traditional media business and vice versa. One of our main clients, Turner, eventually acquired us.

Then I received an unexpected email from a recruiter at Amazon, my dream company since I was a business school student. They wanted to talk about a Head of Esports role for an upcoming title they were developing. I didn’t get an onsite interview but I was happy to get some feedback from Ilja Rotelli, the hiring manager and my future boss (more on this in a future post). Normally, companies want to play it safe with feedback but I was very appreciative that Ilja took the time to provide feedback to me and we stayed in touch. Four months later, I found myself interviewing for the same role and getting it.

Two weeks before I started my new position at Amazon, I went to deliver a TEDx talk in Den Helder, a city in the Netherlands. I met many interesting people in Den Helder and that city has a fascinating history. For the military history buffs out there, Den Helder was the scene of one of the rare encounters between a cavalry and a navy. It is believed that the French cavalry defeated and captured a significant portion of the Dutch fleet in 1794–5.

I was invited to participate in this event by Michael Alderwegen, an officer in the Royal Dutch Navy I met in Afghanistan in 2010. The Dutch were one of many NATO allies that were with us in Afghanistan. I prepared four months for that talk and it was very rewarding and educational experience. From this point on, I started my journey at Amazon.

2017-Now: Amazon

I’ve learned and accomplished more at Amazon than any other company I’ve worked at so that deserves it’s own story, which I’ll publish in February when I hit my three-year mark here. If you read this far, thanks for reading, and I hope you are inspired to open a door for someone.

What strategies are Sony, Microsoft, and Nintendo pursuing?

More people are watching and playing esports than ever before

Sumail Hassan is one of the most interesting 18 year olds that you’ve probably never heard of. Last year, he was recognized as one of the 30 most influential teens by Time magazine. He was on that list because he’s one of the best Dota 2 players in the world. If you are unfamiliar with Dota 2, it is one of several online video games where professional teams compete for fame and fortune. Collectively, these games are called esports.

Sumail started playing Dota 2 when he was seven. Since he didn’t own a computer, he would pile up on a motorbike with his friends to go to the local internet cafe to play. Even with those circumstances, he got so good at the game that he was recruited by a top American esports team when he was fifteen. By the time he was sixteen, he became the youngest esports player to earn more than $1 million dollar in prize earnings. A large part of his earnings was from winning the The International 2015, the world championship for Dota 2, netting his team $6,634,661.

The Olympians of tomorrow will include esports players like Sumail not because esports is the sport of the future, but because esports is here and esports is big, today.

Today, professional teams are competing for millions of dollars in front of millions of fans. Today, professional esports tournaments are being played in marquee stadiums, like Madison Square Garden in New York City, Staples Center in Los Angeles, and this year, a finals game will be held at the Bird’s Nest in China. Today, there are over forty traditional sports organizations invested in esports, including the Philadelphia 76ers, an NBA team, and Manchester City, an English Premier League team.

These teams and their billionaire owners are getting involved because they know that there are more people watching and playing esports than ever before. Meanwhile, traditional sports are declining on both fronts.

Less sports, more esports

Summer Olympics ratings: down 15%. The National Football League’s ratings: down 9% for the 2016 regular season. English Premier League ratings: down nearly 20%. Not only are people watching sports less, they are playing less. According to the Aspen Institute, in the United States, the number of children who play sports have dropped by millions over the past few years. Furthermore, for the children who do play sports, the total number of sports that each child plays has declined as well.

Why? Because it is becoming very expensive to watch and play sports.

ESPN is on track to pay $7.3 billion dollar in total rights fees this year. That’s more for rights fees than any company in America. Meanwhile, it has lost 9 million subscribers, a 9% drop, since 2013.

In 2015, only 38 percent of kids from homes with $25,000 or less in income played team sports, compared to 67 percent of kids from $100,000+ homes. According to another study, up to 10.5 percent of a family’s gross income could be spent on sports. That means a family earning the median household income of $55,755 could be spending $5,854 on sports.

Beyond financial considerations, some institutions blame the decline in sports on the rise of esports. And they are right. According to Newzoo, a gaming market research company, 76% of US millennial males (age 21–35) said that their esports viewership is taking away hours they used to spend watching traditional sports. That makes sense as younger generations growing up in front of computers and other devices instead of TVs. And in terms of digital hours watched, esports far eclipses any other sport in the world.

The Super Bowl is one of the biggest sporting events in the world and it pales in comparison to the League of Legends World Championship on the digital front. The Super Bowls have reached less than 5 million unique viewers as compared to 43 million for LoL. The only Super Bowl peak concurrent figures ever reported was 1.3 million. It is 14.7 million for LoL.

Besides watching major tournaments, there are 100 million people on Twitch watching a variety of esports content. That’s 10 million more people than ESPN.

This is Faker, who is often called the Michael Jordan of esports, and also nicknamed “God” by his competitors and fans alike. There were over 245K people who tuned in simultaneously to watch Faker’s first stream, breaking a record for an individual streamer on Twitch. For context, that’s like you preferring to watch your favorite football player practice than watching a professional match.

And that’s why this audience continues to grow, people are watching matches plus other content from players. Newzoo estimates that there will be 385 million people who will watch esports this year, with the audience growing to 589 million by 2020. But esports fans don’t just watch, they play too. There are over 100 million players playing League of Legends every month. That’s more people playing LoL than people living in France, Germany, or the United Kingdom. Over 10 million players play CS:GO and Dota 2.

It is clear that esports is here and esports is big. Esports is good for the Olympics because it would increase viewership and encourage youth participation. IOC President Thomas Bach said, “We want to take sport to the youth. With the many options that young people have, we cannot expect any more that they will come automatically to us.”

I agree with Bach. I believe that esport is the sport that the IOC should take to the youth. However, esports faces a few hurdles that it must overcome before it becomes an Olympic sport.

Hurdles that esports face

First hurdle: unlike sports which can live on forever, esports are at its core, video games created and maintained by private companies. Video games historically have had a finite shelf life, especially when game developers make new releases. You would have to walk into the store to buy the new game.

However, things are changing. The PC video games business model has largely transitioned from a retail, pay once up front model, to a games-as-a-service model. The concept of games-as-a-service means that game developers are constantly enhancing and updating their games, especially esports games, with the intent of making them last as long as they can. We’re beginning to see the emergence of major esports genres: MOBA, FPS, strategy, much like we see major types of sports: basketball, football, cricket.

Here’s some preliminary data that supports this point. Steam is the leading online game distribution platform in the world. Six of Steam’s top 12 grossing games of 2016 were released before that year. One of those games is CS:GO, which was originally created in 1999 and as an esport, it is more popular than ever before. Earlier this year, the ELEAGUE CS:GO Major tournament broke the highest concurrent viewership on Twitch, at one million.

Second hurdle: how could governing bodies for esports work? Organization is very important to becoming recognized by the International Olympic Committee (IOC). Snowboarding couldn’t have become an Olympic sport without aligning itself with the International Ski Federation, and BMX couldn’t have become an Olympic sport without aligning itself with the International Cycling Union.

Since there are no comparable organizations for esports, we had to start from scratch. On both a national and global level, South Korea has been leading the charge for esports governance. The Korea Esports Association, also known as KeSPA, sits under the Ministry of Culture, Sports and Tourism. KeSPA was formed in 2000 and has done a variety of things for the Korean esports ecosystem.

They enforce competitive integrity by actively litigating against match fixers and having the power to ban players from esports competitions. Working with game developers, they ushered in regulations regarding the welfare of Korean esports players, which includes minimum salaries and minimum duration for contracts. KeSPA also licenses and regulates internet cafes, known as PC bangs in Korea, to combat internet addiction and to support the development of amateur esports. While KeSPA isn’t without problems, we can look at an organization that has lasted 17 years and has successfully evolved with the growth of esports.

On the international front, the IeSF was formed in 2008 with the mission of recognizing esports as a sport. As of today, it has helped 22 countries, including China, Finland, Italy, and Russia, recognize esports as a sport. And there are 25 countries in the process of gaining recognition. Like KeSPA there has been a lot of slow and steady improvements over the past few years. Last year, IeSF petitioned the IOC to be recognized, and the IOC came back with a list of demands.

The third and main hurdle that esports faces is the perception that it requires little to no physical activity. They are wrong. Esports, like sports, requires body, will, and mind. Many sports spectators, including myself, have been too focused on the body portion: I used to think that an athlete is only someone who looks like this, who is physically fit.

Greyson Gilmer was a player on my team. He was a high school football player and his biceps are the size of my head. And I have a pretty big head. Greyson stays fit because he knows it helps him win.

I’ll admit that not every esports player looks like Greyson today, but the trend in professional esports is towards more physical fitness. Furthermore, gamers are also no longer the nerds who hide in the basement, they are more socially accepted than ever before.

I think it’s also important to consider what traditional athletes think of esports athletes. Michael Phelps, a 23-time Olympic gold medalist called esports players, “his fellow athletes.” Phelps said, “There’s absolutely no question to me the level of skill, training and devotion it requires to become a professional gamer.” I agree with Phelps and as a founder of an esports team, I learned first hand about how hard esports athletes worked to win.

Esports require body, will, and mind

When we started this training, some of our players were against it, but then we started winning games, and that’s all that mattered for them.

We had two guys help us with both will and mind. Jonathan Carter focused on resilience training, he is a primary instructor for the U.S. Army’s Master Resilience Trainers Course. Resilience is important in esports because esports is mentally exhausting. Mark Cuban, the owner of the Dallas Mavericks, a basketball team, calls esports five-dimensional chess.

So it isn’t about just getting better mechanically, it isn’t about clicking a mouse or keyboard faster, players need to develop a growth mindset to think of innovative, real-time strategies to win. That’s what Weldon Green focused on. He is a top esports psychologist and he created and maintained a high performance environment for the players and coaching staff: from goal-setting, maintaining a positive mindset, and facilitating player communication.

Our players trained twelve hours every day, five-six days a week.

All of this training is part of the reason why the United States started offering athlete visas for esports players of certain games. All of this training is why Phelps recognized esports players as fellow athletes. And all of this training is why esports should be considered an Olympic Sport.

Esports at the Olympics

So how do we get there?

First, the IOC needs to recognize the IeSF as the official governing body for esports.

Second, we need a host city to petition to add specific esport(s) as part of their summer games. The Paris Olympic bid committee will consider esports for inclusion as a medal event in the 2024 Olympic Games.

If this doesn’t happen in 2024, Los Angeles would be next on deck. Los Angeles is uniquely positioned to support esports competitions given the abundance of esports infrastructure and talent. After all, LA and Southern California is home to some of the top esports developers and top esports teams in the world. The founders of two of the most successful esports game developers graduated from two LA schools, USC and UCLA.

Furthermore, esports is extremely popular in southern California. That’s important because locally popular and youth focused sports are more likely to be included in the Olympics. This is why baseball, skateboarding, and karate were added to the Tokyo 2020 Games.

If you agree, here’s how you can help. Go to change.org and sign my petition. With your help, we can help bring esports to the Olympics, leveraging this global phenomenon in a positive way to help improve body, will, and mind for millions of young people around the world.

Tencent is using its social networks, WeChat and QQ, and video games to build an entertainment juggernaut.

By Jonathan Pan and Taylor Ward