A TON of Gaming Hype

Introduction

Over the last few weeks, nothing has been louder in Web3 gaming than the TON ecosystem. From $NOT’s fair launch without any VC backing opening at $1B+ FDV to Hamster Kombat reaching 142M registered users within 77 days, every week there seems to be another standout milestone for the ecosystem.

Telegram and its 900M MAU represent what is perhaps the largest distribution channel for Web3 adjacent users. Being perceived as more secure and protective of user privacy, the fifth largest and second fastest-growing messenger has established itself as the primary crypto communication app. Every non-US user automatically receives an abstracted crypto wallet when registering on Telegram, making the overall TON ecosystem stand out as one of the strongest candidates to push Web3 adoption at scale.Throughout this report, we will dive into social gaming, take a close look at the TON ecosystem, explore what makes Telegram unique in terms of user acquisition,  highlight five standout projects that are currently developing games on TON, and finally answer the question of whether there is any substance to the hype or if this is just the next meme frenzy.

Social Platforms & Gaming

The 2010s made the Internet an accessible public good, paving the way for social hubs to form online. In their quest to retain and monetize their users, those platforms have started to expand their scope into gaming, daily services, e-commerce, and many more areas.

Social Gaming

After Social Platforms saw their user bases grow exponentially in the late 2000s, they started looking for ways to entertain at scale in order to retain and monetize as many users as possible. Games being easy to distribute and highly scalable while offering deep time sinks for users that generate revenue for the platform made them a natural fit. Facebook, Telegram, and WeChat are prominent examples that have dedicated resources to build up their own gaming divisions. The benefits for large platforms are numerous:

• Users can access a broad array of content that complements their core experience on the platform.
• Games are usually paired with a social layer, encouraging competition and social activity.
• Most of these games’ casual, free-to-play nature makes them very accessible, easy to distribute, cheap to develop, and fast to iterate upon.
• Social platforms have large user bases in the first place and have vastly superior distribution capabilities compared to most gaming studios.
• Games offer ample time sinks for users while providing a deep spending potential, improving overall platform retention and Lifetime Value (LTV).

Facebook’s efforts to extend its platform marked the start of the social gaming era, where simple games were able to gain millions of daily active users (DAU) within weeks. The velocity and scale of these social gaming ecosystems are truly impressive. Farmville—a social farming game built on Facebook by Zynga—reached 10M monthly active users (MAU) just two months after launch and peaked at around 80M MAU in 2010. Even three years after launch, the game was responsible for roughly 20% of Zynga’s entire revenue.

It is important to note that the social nature of these games tends to concentrate player bases among a few big titles. As players want to compete with their friends and share their accomplishments, the ensuing network effects end up funneling players toward a handful of big titles like Candy Crush, Farmville, and Zynga Poker. This left many lesser-known titles struggling to capture market share.

After Facebook’s success in the early 2010s, Discord began to venture into gaming during the back half of the decade. As a gaming-centric chat app with a user base that is hungry for gaming content, 95% of Discord users play games, so taking the path towards implementing games natively in-app was natural. After introducing a games store and library in 2018, the team quickly dropped its plans to shift its focus towards Nitro subscriptions in 2019 after failing to generate meaningful traction. The lack of easy monetization made development risky, limiting potential revenue and innovation.During the 2020 lockdowns, the entire gaming industry saw massive user growth, which led to a correlated spike in Discord users. The company saw that as an opportunity to broaden its target audience from gamers to the average consumer. Four years later, Discord pivoted once more after failing to penetrate the broader consumer market and promised to return to its roots by tailoring its platform to the needs of gamers again.

WeChat – More than a Messenger

Even though most messenger apps have added additional social features like short videos and groups over time, the depth of user engagement and monetization via alternative entertainment features, such as gaming, remains limited. Even though there is often nothing directly stopping game developers from building in this environment, as seen with early TikTok games, the lack of proper infrastructure and payment rails makes it both challenging and risky. The gaming industry operates on tiny margins, and most developer teams cannot risk unnecessary user friction that limits in-app purchases (IAPs).

However, despite the fact that Facebook games have faded into obscurity, WeChat, the Chinese everything platform, is demonstrating that there is still significant growth to be had at the intersection of social apps and gaming. WeChat can be considered a Super App; users can chat, make calls, pay utility bills, order food, book a trip abroad, and much more. This led 80% of Chinese citizens using the app on a monthly basis, averaging around 80 minutes spent on WeChat daily. For perspective, about 37% of US mobile internet users use TikTok at least once per month, and the time spent on the app averages around 58 minutes per day.

In 2017, WeChat introduced mini-apps, a feature that allowed small applications to live natively within the app. Shortly after, due to the natural fit, the first few WeChat mini-games were introduced (first-party titles developed by Tencent). Later, in 2018, third-party developers were allowed access to the platform, and by the end of that same year, there were over 7k registered WeChat mini-games.

Over the next couple of years, WeChat introduced several new support features and updates that ultimately allowed mini-games to be larger, better looking, and leverage more sophisticated game mechanics. By 2021, despite the number of mini-game developers far surpassing 100k, the number of MAU had not grown significantly since the feature’s launch (~20M MAU in 2017). User acquisition was a clear challenge for these games so the ability for mini-game developers to purchase ads across the entire Tencent ecosystem was introduced.

This was a pivotal moment in the growth of mini-games, but things only started to heat up when two adjacent Chinese social platforms, Bilibili and DouYin (Chinese TikTok) allowed advertisements to hyperlink users straight to WeChat mini-games. What ensued was a series of viral hits, spearheaded by OHHH Sheep, a match-3-style tile game that hit a reported 60M daily active users within one month!

By June 2023, there were more than 300k WeChat mini-game developers and 400M monthly active gamers, representing approximately 31% of the total 1.3B WeChat users. Moreover, anecdotal estimates from incumbents valued the WeChat mini-game market at $6B in 2023, with a yearly growth forecast between 25% and 30% over the next five years.

Over 100 mini-games reached ¥10M ($1.38M) in quarterly revenue by Q2 2023, and several titles hit above $15M in monthly revenue. A key contributing factor to this success is that WeChat mini-games benefit from much larger margins (>30%) compared to their classical mobile counterparts.

Taking a step back, it is important to note that games only represent roughly 10% of the top 500 WeChat mini-programs by MAU. WeChat is still predominantly a social app, followed by a lifestyle services app, and finally, gaming et al. It is, however, the best case study for what can be achieved by leveraging games to increase user engagement and add new monetization pathways on a highly integrated, near-frictionless platform.

With this in mind, we move our attention back to Telegram, the TON Foundation, and the sudden explosion of interest in Telegram mini-games.

Telegram Expansion

Telegram is the first chat-only app that has seriously forayed into gaming. After integrating HTML5 compatibility for Telegram bots in 2016, the development of the TON blockchain, which kicked off in 2017, aimed at providing key features to further reduce friction for users and developers. Through TON, developers can access payment rails, decentralized storage for in-game assets, or smart contracts for secure and automated game mechanics, all the while being able to efficiently distribute their content to a community with 900M MAU.

TON Ecosystem

TON’s tech stack gives developers the tools to develop all kinds of dApps on top of Telegram. Wallets, Exchanges, Bridges, Games, and many more market needs are being serviced within the ecosystem by hundreds of teams.

The $TON token sits at the heart of the TON ecosystem. First and foremost, it is the gas token that powers all transactions on the blockchain. Validators need to stake TON to participate in the proof-of-stake validation process, similar to the ETH or SOL networks. Additionally, developers are required to pay in $TON to push and run smart contracts on TON. The total fee comprises a base fee, storage fee, and execution fee, ensuring scalable token utility and validator revenue.

Moreover, users and developers can use TON to exchange value within the ecosystem with minimal friction. While the TON token supply increases by a fixed 0.6% each year, 50% of network fees get burned, creating incentives to hold the token as an asset that scales in value with TON network activity. If we take the June 2024 burn rate as a baseline, the yearly burn comes down to approximately 2.89M TON, less than 10% of the 30.65M fresh TON that will enter the ecosystem via inflation over the next 12 months.

In an attempt to decentralize decision-making, governance rights are given to TON holders proportional to their exposure. While governance is not the primary benefit of the token, it serves as a complement utility and theoretically plays an important role in shaping the protocol’s future. However, the high degree of centralization—the top 100 holders hold 92% of the supply—heavily limits the impact of decentralized decision-making through governance rights.After voting on potentially burning 50% of network fees in June 2023 – 98% of votes were in favor – the network now constantly burns supply, putting pressure on the token that scales with network activity. Notably, voting consensus on TON is exceptionally high. Although only four proposals have been put to vote, all passed with an average of 96% in favor, showing how strong community alignment is within the ecosystem. The overwhelming consensus can largely be attributed to the substantial degree of centralization of the TON token, leading to over 92% of voting power coming from 100 wallets.

The Ton Believers Fund is another example of the strong core community conviction. Over 1.3B TON have been locked into the fund for five years, representing around 25% of the total supply. In 2023, the fund stopped accepting funds and started a two year hard lock period, after which the locked tokens + rewards start their three year linear vesting period. While locking up a considerable amount of supply for five years emphasizes the TON community’s long-term belief, this further centralizes governance. Additionally, the incentive structure is unclear as rewards for stakers come from “donations” and a proposal that passed with 99.4% and greenlit a 1M TON allocation (<0.1% of staked tokens) going to stakers.

A TON of Attention

TON’s growth has been nothing short of explosive. Ecosystem dApps have been smashing records, starting with Notcoin, which reached 40M users within six months, and Hamster Kombat surpassing 200M registered users with over 30M DAU. This echoes the fast-paced growth we saw with early social games like Farmville and OHHH Sheep, but highlights the increased power of crypto growth incentives. While Hamster Kombat is expected to launch their token soon, $NOT launched on Binance at $1B FDV last month, more than doubled its FDV at peak ($2.1B), and now has retraced back to around $1.45B.

Telegram’s announcement in late February that its ad network will distribute 50% of generated revenue with channel owners via TON has been the major catalyst for this move. Implementing accessible payment rails unlocks a vast potential market for advertisers that can now access Telegram’s large user base. Toncoin saw a 40% upward move the day of the announcement and hasn’t stopped gaining mindshare since.

The ecosystem has seen steady growth among their dev community between Q1 2022 and Q4 2023. In Q1 2022, TON’s Telegram dev community counted roughly 2,200 users; by Q4 2023, this number had risen to 13,500. As of June 2024, the number of users increased by nearly 100% to reach 36,500, a sharp spike compared to previous growth.

The recent increase in the number of Mandarin-speaking developers is notable. While the Mandarin community grew from 2,300 to over 7,300, a >300% increase, the Russian-speaking community grew only by around 50%, indicating rising interest from the crypto affine Chinese community.TON’s daily active wallets and transactions have been on the rise in Q2, with Notcoin and Hamster Kombat leading the charge. Similarly, transaction volume has seen a sharp increase over the last three months and recently surpassed the 8M daily transactions mark after hovering between 500k and 1.3M in Q1 (excluding a three-week spike after the ad network announcement).

This trend is mirrored in wallet numbers, on-chain activated wallets, minted NFTs, and overall DAU. Activity metrics are starting to see exponential growth across the board.

TON Growth Initiatives

The TON Foundation plays a pivotal role in overseeing the ecosystem and driving development. As a non-profit organization, it has the mission to incentivize innovation to benefit the overall TON ecosystem. Backed by a $90M ecosystem fund from 2022 and a newly established 30M $TON community rewards initiative (currently valued at around $228M), it has made various investments and grants to promote native dApps across TON.

Their accelerator program has gained significant traction since March. Out of the 82 approved proposals on Questbook, 17 are either games or gaming infrastructure, making GameFi one of the best-represented sectors. TON just recently announced a fresh $5M TONX Accelerator Program that should help fuel their aggressive growth strategy.

Furthermore, the TON Community recently announced an eight-week offline “Open League Hackathon” across 13 IRL locations. Teams around the world will be able to participate for a chance to win up to $500k for their project while having the opportunity to network, learn from TON experts, and showcase their skills. Over $2M in prizes will be awarded to teams, providing significant incentives for participants.

Community incentives are a big part of TON’s long-term growth strategy. Most initiatives run for 2-4 weeks and are very accessible by design in order to attract a maximum number of participants. Over $40M in TON has been awarded so far, with many more initiatives either active or planned for the future. Between rewards for Airdrops, LP Boosts, and The Open League Battles, a total of $22.4M have been distributed, of which 17% ($3.9M) has been allocated to games.

TON games have been very successful in these competitions and have dominated the app battle leaderboards. TAP Fantasy secured the second spot during the Beta season and won season 1 right after. Seasons 2 & 3 have both been won by Catizen, a game developed by a Chinese team with previous WeChat mini-game experience. Citizen is currently on track to win for the third time in a row, trailed by Yescoin and SquidTG to complete the trio of games at the top of the leaderboard.

Games are one of the primary ways for TON to generate meaningful and sustainable user traction. A team like Catizen has been able to generate over $10M via in-game purchases within the last three months, proving that teams with monetization expertise can translate the somewhat hype-fuelled user metrics into meaningful revenue streams.

While Catizen is not-so-quietly building an empire, Hamster Kombat and Notcoin have been in the spotlight these past few weeks. Hamster Kombat passed 9.9M X followers, averaged over 2M impressions per post, and scaled to 142M users in 77 days. In the meantime, Notcoin launched its token via the Binance launch pool in early May and boasts a $1.45B FDV, 2.44M on-chain holders, and 40M activated users.

Although those numbers are impressive, teams building on TON will need to prove their ability to run successful liveops and convert free-to-play users into paying customers without infinite inflationary token reward strategies. Acquiring users is the first crucial step, but retaining them requires regular fresh content, especially in an attention economy like Web3.

Furthermore, botting, being cost-efficient, can quickly become a problem. Without effective countermeasures, the prospect of financial rewards will attract a large number of bots, diluting player rewards while creating additional sell pressure.

Gaming & User Acquisition

UA has become a key metric for any mobile gaming studio. Being able to scale a user base is crucial for sustainable success in an incredibly competitive industry operating on tiny margins. According to a CNBC calculation, the operating margin in the gaming business came in just under 6%, forcing companies to cut costs all over the place.

There are over 300,000 gaming apps available on the PlayStore and more than 225,000 on the AppStore. This large number of games competing for the approximately 2.2 billion mobile gamers in the world has led to a drastic increase in UA costs. Back in 2018, costs per install (CPI) were around $1.24 for iOS and around $0.53 for Android. Just six years later, those costs had risen to $2-$5 for iOS and $1.5-$4 for Android.

According to a Sensor Tower report, 28,000 mobile publishers generated under $1M in 2020, cumulatively accounting for about $834M (2%) of AppStore games revenue. In contrast, the 940 studios that generated over $1M accounted for a cumulative $34B (98%). This shows how top-heavy the industry is, leaving small studios that cannot afford massive UA spending at a massive disadvantage. If we account for the fact that about 60% of playtime goes to games older than six years, it is no surprise that 83% of mobile games fail within three years after launch. Efficient UA has become existential for new mobile studios that want to penetrate the industry sustainably.

In a bid to help developers in an increasingly competitive mobile landscape while also further improving Web2→Web3 ramps, Telegram recently introduced stars, a native IAP currency that can easily be integrated into bots and mini-games. Users can now seamlessly purchase items from their favorite games via this AppStore-compliant currency, unlocking deeper player spending and more stable revenue flows for developers that will get a 70% share of IAPs.

Source: Telegram | Stars In-App Purchase User Flow

By subsidizing advertisements purchased in stars, Telegram allows teams to meaningfully reduce their customer acquisition costs, making Telegram and its Web3-friendly user base an attractive platform for Web3 marketing. Furthermore, stars can be converted to $TON, effectively connecting them to the broader liquid markets. This should ensure steady and efficient developer payouts as long as the TON token stays healthy.

Considering the rising costs of mobile gaming UA and Telegram’s large crypto-open user base, TON could potentially become a valuable funnel for Web3 games that want to onboard new Web3 users into their ecosystem. While the tech stack limits the scope of games developers can build for Telegram, the huge user base, low platform development costs, and low friction environment for the user make it a potent complementary piece for gaming ecosystems in Web3.

We can expect established gaming projects to capitalize on this funnel in the near future. Telegram’s unique position makes it an attractive platform for top-of-the-funnel mobile gaming UA. By building experiences on TON that can be accessed with minimal friction and require low amounts of effort from the player, teams can cast a broad net and fish for users. Distributing modest rewards with in-game utility can be an effective bait that introduces and exposes new potential players to their ecosystem.

Notable TON Games

The TON gaming ecosystem has been on the rise over the last few months. Fueled by the various TON growth initiatives, comparatively simple HTML5 games, minimal development costs, and a large available pool of potential players, TON is establishing itself as an attractive option.Incentivized referrals have been one of the main drivers of their strong growth in social metrics. While this strategy has proven potent when onboarding large numbers of new users to the ecosystem, it does not solve the inherent lack of deep monetization that comes with hypercasual games like Notcoin and Hamster Kombat. This will become a crucial issue in the fight for retention and sustainability.

While the clicker genre is fundamentally unequipped for meaningful user monetization, hybrid, mid-core, and core genres combine the necessary low-friction onboarding with deep potential revenue streams. Finding the right balance between low-lift gameplay while offering enough social competition and entertainment value for users to feel the need to progress will define long-term success for these mini-games.

Notcoin

Few teams have recently captured Web3 culture and meta as well as Notcoin. Their exceptional branding that bridges memes and community feeling was fueled by a 95% token allocation to their users. As a simple tap-to-earn game, players were confronted with an incredibly low participation threshold. This led to a decentralized distribution with over 2.44M onchain token holders.

Their fast-paced growth, fully community-focused distribution, and meme-like culture turned them into a catalyst for the entire TON ecosystem. Incremental games have existed long before Web3. Cookie Clicker—a clicker game originally released in 2013—is probably the most famous example. It peaked at around 1.5M players in August 2023 and still averages 15k concurrent players to this day. The most recent example, Banana, has remained the second most-played game by concurrent users on Steam for the third week in a row.Their successful cross-pollination throughout the TON ecosystem, which saw various TON games accept $NOT for in-game purchases, gives the token utility across the entire ecosystem. Additionally, the Notcoin team negotiates a burn % for every deal – for example, 10% of NOT used in Catizen is burned – in order to simultaneously reduce supply and increase buying pressure. As 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 continuous utility.By launching on Binance through its launch pool at TGE, Notcoin capitalized on its recent growth and cemented itself among the top gaming tokens as the top gaming launch of this cycle. It now ranks as the third largest gaming token by marketcap, according to CoinMarketcap (06.24.24). Since its launch on May 16th, Notcoin has averaged between $300M and $1.5B in daily volume, comfortably putting it at the top of gaming tokens by volume across all ecosystems.

Catizen

Among the top games on TON, Catizen manages to stand out. The team’s experience as WeChat game developers has translated into a remarkable launch, seeing over 20M registered users within just two months. Their core team has developed over 20 mini-games since 2018, generating over 300M downloads across WeChat, Google Play, and Facebook.Catizen is the top game by in-game revenue through IAPs on TON. Over $10M in TON has been sunk into the game by their 2.7M DAU. Additionally, around 50% of the 1.25M on-chain users are paying customers. This puts the average spend per player around $170, indicating significant initial spend depth. At a 7% conversion rate, the game eclipses the average Telegram game conversion rate of 0.66% by over 900%.

The game loop is simple and enjoyable. Set in Meowverse, players are gifted a digital cat upon registration that they can then upgrade to climb the leaderboard. By breeding their cats, completing quests, or participating in mini-games, players can earn tokens and NFTs to progress through the game. With plans to unveil over 200 mini-games within the next few months, an open task platform as a user funnel for other projects, and an upcoming e-commerce integration, the scope of their undertaking is huge.

TON games have been very aggressive with their community allocation, which has been one of the major catalysts for their exponential user growth. Whereas most Web3 gaming teams cannot afford to airdrop a significant portion of their supply to their community at TGE, Catizen will distribute 42% to their community airdrop. Astonishingly, players mostly spend without ROI in mind, as the level of progression that unlocks meaningful token returns comes with incredibly high fixed costs.

Hamster Kombat

Where Catizen and Notcoin stand out through excellent monetization strategies and clever play on Web3 culture respectively, Hamster Kombat shines with its social presence. No game comes close to its community engagement, which saw an average of 2.2M impressions, 20k likes, and 2k+ retweets per post over the last seven days.

In terms of gameplay, Hamster Kombat is very similar to Notcoin at its core. Users access the game, tap on the screen, and accrue points over time. You play as the fictional Hamster CEO of a crypto exchange, and the goal is to mine as many HMSTR coins as possible. Players can boost their earnings by investing in marketing, licenses, talent, and new products in-game or referring new players.

This simple loop has attracted over 200M registered users to date. The prospect of potential returns paired with minimal effort requirements on the user side has led to exponential growth. The team didn’t focus solely on Telegram and Twitter but has put significant efforts into gamifying their YouTube channel. The team releases two 2-minute videos a day—one covering daily crypto news while the other is usually an educational video—and hides clues within the videos to incentivize users to stay continuously engaged.Their account has grown to 28M+ subscribers, making it one of the fastest-growing YouTube channels ever. Their 137 videos have generated 461M+ views. To put this into perspective from a Web3 gaming standpoint, this comes down to about 100x more than the Illuvium YouTube channel.

Fanton

Disclosure: Delphi Ventures is an investor in Fanton.

Despite being a fantasy soccer app during the UEFA European Football Championship, Fanton has attracted much less attention than the above three projects. The project has been comparatively flying under the radar but still managed to rank fifth during the third season of The Open League, netting the team $30,000. Their lack of social capital can be attributed to their more niche audience, strong competition (mainly Sorare), and a comparatively less aggressive token strategy that doesn’t promise large community airdrops at TGE, which has been vital to Notcoin’s success.

Going with the typical fantasy soccer playbook, the game lets users pick a squad of 5 players that get rated based on their real-life performances. Rewards are distributed via a leaderboard to users who picked the best squad combinations and scored the most points on a given matchday. The game covers the top 5 European leagues, the Brazilian league, and currently the UEFA European Football Championship, an event broadcasted across 229 territories and saw 5.2B cumulative views (1.9B being unique) with an average live match audience of over 100M in 2020.

Users can enter either common or NFT tournaments, the latter requiring users to own NFTs to participate. Winners are rewarded with TON and NFTs that unlock the higher reward tournaments. Despite a reported 200k MAU, the typical free competitions over the last few weeks reached between 1,000 and 5,000 players, while the paid entry tournaments reached between 10 and 1000 players.

Notably, the first round of the $100k EURO tournament saw roughly 37,000 participants. The second round saw a significant drop-off, reaching only about 7,000 registrations. While showing how prize pools can attract significant user numbers, the 81% decrease in registered users after the second round indicates a struggle with retention. Without an aggressive token approach similar to Notcoin or Catizen, the project will struggle to compete with a behemoth like Sorare.

Gatto

Gatto is a mesh between the tamagotchi, platformer, and farm simulator genres. Players can collect NFTs and take care of their pets to progress through the game. They were one out of eleven applications (out of 170) that got accepted by the TON accelerator program on March 26th, securing them support from the broader ecosystem to push development forward.

Their community is much less prominent on X, where the official account stands at only 23.5k followers and has made less than 10 posts. The entire communication flows through Telegram, with over 75k subscribers to their info channel. The Telegram focus hasn’t hurt their UA, as the game passed 1M registered users over three months ago.

Their roadmap is busy, promising RPG content, PvE rogue-like mode, and a PVP expansion within the second half of 2024. For early 2025, the Gatto team wants to tackle the city builder genre to add another progression layer to their ecosystem. Despite those promises, Gatto has lost its headstart to games like Catizen and Hamster Kombat over the last three months. The next few months will provide an interesting case study on how liveops works in Telegram mini-games and whether Gatto can close the gap between them and shallower game loops like Hamster Kombat.

Bear vs. Bull Case

It may be the natural reaction of some readers to compare today’s Telegram mini-game ecosystem to the early days of WeChat mini-apps and thus be excited for many more years of exponential growth ahead. Although there is some merit to this assumption, it is important that we briefly outline some of the apparent, insurmountable differences between the two before outlining our bull thesis.

Bear Case

Although not impossible, it is unlikely Telegram will become an everything app on the same scale as WeChat within the next five to ten years. Subsequently, user behaviors on both platforms will continue to differ. The number of competitors fighting for user attention and spending is much lower for WeChat in China (the world’s second-largest economy) than it is for Telegram and its global audience.

Furthermore, WeChat directly benefits from its highly-centralized structure. Tencent is a global tech giant with direct ties to the Chinese government. As such, it has allowed WeChat not only to benefit from Tencent’s wide reaching ecosystem of products and services, but also a highly favorable regulatory environment that has fast-tracked the app’s growth in domestic market share.

WeChat’s highly integrated wallet app is a good example of a feature that is not easily replicated. Due to WeChat’s undeniable domestic market dominance, it has secured direct integrations with essentially every Chinese bank. As a result, in many cases, the user flow from playing to purchasing requires fewer steps than downloading an app from the app store. Compare this to TON, where users must first purchase a fixed number of Stars or directly deposit crypto funds before engaging with in-game monetization, and it is likely the relatively low player-to-payer conversion rate will persist into the future.

Another key point is with UA. Although Telegram allows for cheaper ad spending if using Stars, it does not change the fact that ad networks available on the platform are limited in performance. The best a Telegram mini-game developer can hope for is identifying users who have opened certain mini-apps. This is the opposite of WeChat, which has a plethora of rich data, including financial, credit, and social scores, on all of its users.

Furthermore, although ad networks will improve over time and more third-party integrations (like the WeChat <> DouYin cooperation) will be introduced, Telegram’s privacy-centric value proposition will mean that highly granular data, such as demographics and location, will likely remain out of reach.

Bull Case

With all that said, Telegram/TON maintains a number of unique features that not only separates it from WeChat, but also all of the other Western social apps. The establishment of TON immediately positioned Telegram as one of the largest onramps for Web2 users into Web3. This makes Telegram’s ~900M MAU one of the largest pools of “Web2.5 users” and a primary distribution channel for almost all major crypto markets.

What’s more, unlike central exchanges like Coinbase and Binance, Telegram is fundamentally a social app, meaning that in-app user behaviors differ drastically. In other words, because users login to Coinbase with the intention of trading crypto (a highly solitary and serious behavior), they will undoubtedly have a higher propensity to resist or churn when presented with any casual enjoyment-focused or social features. Telegram, on the other hand, falls further on the other side of the spectrum, and thus, social-adjacent applications like games are more easily integrated and have a better product-market fit.

Encouragingly, based on the case studies presented in this report, Telegram users appear to be highly compatible with applications that combine social applications with heavily financialized incentives. Even assuming >80% of these “users” are bots attracted like flies to the hopium that they will find the next Notcoin, the metrics for these simple games have surpassed many of the big-budget blockbusters of this cycle and last.

To reference back to the section on WeChat’s path to growth, readers should remember that things only really started to heat up as more cross-platform UA channels opened up and cost per customer acquisition decreased. We hope that Telegram uses this knowledge and makes third-party integrations a priority despite the user cannibalization risks it presents.

This, combined with a deeper understanding of native-user behavior and genre-market-fit, would provide Telegram mini-games that understand how to conduct professional LiveOps and monetization with a compelling growth opportunity on the platform.

Alternatively, many developers may choose to continue to leverage Telegram as a top-of-funnel UA channel. After all, despite the high ceiling, only around 30% of all WeChat mini-games are mini-game-only studios. The majority operate mini-games alongside stand-alone apps in order to appreciate cross-platform UA, cross-play (players who use multiple platforms typically spend more), and a larger total addressable market.

Conclusion

The considerable amount of mindshare that TON has gained over the recent months is impressive. Their mini-game ecosystem led by Catizen, Notcoin, and Hamster Kombat has played an important role in the sharp increase in on-chain activity. Hundreds of millions of non-descript users are playing TON games and have sunk tens of millions of dollars into the ecosystem this year.

Distribution is the crux to TON’s recent success and further illustrates the struggles Web3 game developers are currently facing in the fight for player liquidity. The addition of growth initiatives that support teams with grants, tech support, and marketing assistance has further sped up the onboarding of teams into the ecosystem.

Introducing Stars as the native Telegram in-app currency with near-frictionless flows to Web3 systems will hopefully allow teams to improve their in-game monetization. Games like Catizen, Notcoin, and Hamster Kombat have established themselves as serious players by navigating the meta incredibly well. After the success of Notcoin, everyone is waiting for the next launch to evaluate the trend. While it is doubtful whether their launch success can be replicated, Catizen and Hamster Kombat have the potential to challenge the top twenty gaming tokens in terms of market cap at launch.

It is likely that in the short term, many teams will leverage TON’s current mindshare to its fullest and try to funnel users off the platform and into their game or protocol. However, if we assume that developer tools and support become more robust over time, games that take learnings from platforms like WeChat and apply them in a Telegram-native approach will be interesting case studies to watch over the medium to long term.

The second half of 2024 will be crucial for TON gaming. After the initial user explosion that laid a solid initial foundation for the ecosystem, the focus now shifts towards retention and LTV. Compared to UA, those two key sustainability metrics depend more on content and less on virality, forcing teams to execute on meaningful liveops to become sustainable.