My Honest Reaction: Delphi Pro Gaming Report (Yuga Labs)

Earlier this week, we published a report analyzing Yuga Labs’ vision to build out a gaming ecosystem, with a focus on the core business model at work. The report — available for Delphi Pro subscribers — outlines Yuga’s efforts thus far with casual games as they continue to work on their flagship experience, dubbed “The Otherside”.

We all know of Yuga Labs. They created Bored Apes and all its derivatives (BAKC, MAYC); they bought the IP for CryptoPunks from Larva Labs. They don’t just own the IP for two important NFT collections, they also have a huge amount of runway from their $450M fundraise + collections they sold + their take from the APE token launch. Joe estimates in the report that Yuga Labs has roughly $750M at their disposal.

Now, Yuga’s plan is pretty simple: take their time building the Otherside metaverse and feed the market with tiny, casual games in the meantime so people don’t get restless/give up on them. The biggest risk here, in my opinion, is if Yuga is able to keep interest up with games like Dookey Dash and HVMTL, but is unable to deliver on the Otherside. In fact, I would argue that their strategy is gradually raising expectations for the Otherside. The longer they take to ship that while distracting their core user base with ancillary games, the higher expectations get.

It would be extremely disappointing if all of this went in vain given the vast resources they have. But what’s more interesting — and some may consider this troubling — is the ability for other NFT collections to run the same playbook.

Chiru Labs, the creators of Azuki, have raised approximately $600K via formal fundraises. But they also pocketed over $30M from the sale of Elementals — their somewhat controversial new NFT collection. From the team spaces last month, it does seem like they are heading in a similar direction of building an immersive experience with Azuki’s at the center.

Now, the Yuga approach has no real merit yet in my eyes. Not until they actually deliver a terrific experience with “The Otherside” given the amount of capital they can spend. And it would be far from ideal if their business model falls flat and a bunch of other collections blindly follow the same path.

So to the larger question this report tries to answer, of whether Yuga Labs approach to building a gaming ecosystem seems sustainable, my take right now is that it hasn’t really proven much yet. If they do simply launch one “temple-run-esque” game after another, then I would expect interest to eventually permanently dissipate. It’s vital, in my opinion, that the end-game of a successful Otherside launch comes to fruition to prove out this model.

They way things are going, I see one core assumption when it comes to user acquisition: focusing on people who are deeply invested in the Ape ecosystem. Following this path keeps revenue per user high but overall user numbers relatively low compared to other games, as the report astutely points out.

There’s no doubt in my mind that Yuga are trailblazers attempting to pioneer a completely new business model. Whether this is viable or not remains uncertain given how experimental all of this is.

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