As money and talent flows into the crypto and blockchain worlds, a persistent question keeps coming up: what is going to be the “killer app” that drives adoption for these nascent technologies? The answer may well be quite simple: gaming in Asia.
That’s the hypothesi for Cryptokitties, the notable purveyor of cute cats. The company has started expanding into China, Japan, and Korea as it attempts to capture a large market of gamer and crypto fanatics there, and it is building on the playbook pioneered by Uber when it launched in China in 2014.
Back in March, Andreessen and Union Square Ventures resulted a $12 million Series A round into Cryptokitties. A portion of that money went into Cryptokitties’ ambitions to expand into Asia. In fact, Cryptokitties’ largest user marketplaces ought to have, and still are, the U.S. and China, followed by Russia.
For those unfamiliar with Cryptokitties, it’s often been alluded to as a digital version of Beanie Babies. Cryptokitties are virtual collectibles in the form of cute cats that can be bought, sold, collected and traded with cryptocurrency, with all the transactions listed on the blockchain. Owners who purchase these kitties can then breed them with other kitties to make new baby kitties.
The company is part of Axiom Zen, the Vancouver and San Francisco-based design studio that originally built the game. Since its launching in 2017, Cryptokitties has also constructed a third-party app platform for crypto developers called the Kittyverse, open-sourced their digital asset licensing platform, and started a crypto gaming investment fund. The company currently has about 70 employees and is headquartered in Vancouver.
One of the main purposes why Cryptokitties raised venture capital was for geographical expansion. Having ample capital to not worry about cash flow as the company steps on the gas is certainly quite helpful. But as a business, Cryptokitties was already doing fine. Back in June when I was having a discussion with the company, Cryptokitties was already profitable from the very beginning of week three.
The company has enabled us to distinguished itself from many other crypto decentralized apps( dApps for short) companies out there by proving that they could make money first and have a sustainable user base. Jimmy Song from Blockchain Capital once said, you can make money three styles in crypto, and those are “selling mining machines, starting a business Crypto exchanges, and coordinating Crypto conferences.” Nonetheless, Cryptokitties was an outlier. With its newly raised fund, the team was looking to deploy the capital for hiring, constructing out it’s Kittyverse, and expanding in Asia.
Asia and China has a Large and Untapped Crypto Gaming Market
Benny Giang, one of the co-founders of Cryptokitties, has been tasked with Cryptokitties Asia expansion since late 2017. Since then, the team has launched Cryptokitties in China, Hong Kong, and Taiwan. During the launch, in order to avoid another one of Ethereum’s network clogs like what happened in late 2017, the iOS app launching was initially limited to 5,000 new players, based on selected WeChat accounts.
Benny believes blockchain games in Asia are a huge untapped market but with increasing competition. Whereas the intersection of gaming and blockchain users is still fairly limited in the Americas, in Asia, that audience is significantly larger. This is primarily due to three reasons: 1) the awareness of cryptocurrency and blockchain is more prevalent in Asia, 2) the regulatory markets are more developed and sophisticated( for better or worse) in China, Korea, and Japan, and 3) there is a proportionally higher number of gamers in Asia than the U.S.
China is the biggest market in this intersection, but there have been challenges. As Cryptokitties launched and grew in the last year, the company assured competitor and copycats( pun aimed) from China moving speedily into the market. In the beginning of 2018, just as Cryptokitties was launching in China, Xiaomi, the mobile phone maker that recently IPO-ed on the Hong Kong Stock Exchange, launched their own crypto collectible called Cryptobunny. Baidu, the large search engine of China, also recently launched Cryptopuppy.
Go to Market Learnings from Uber in China- Identifying the Right Local Partners and Hires
As Benny and squad began doing research on the Asia market, they realized that working in a market that’s twelve hours away is not easy. Taking some of its lessons from Uber’s experience in China , they decided that they needed to localize their go-to-market approach.
One of the reasons why Uber ended up exiting the Chinese marketplace was that it did not successfully build a product catered to Chinese citizens. Despite the large sum of money it was pouring into the Chinese marketplace, Uber was still losing market share to Didi. Another suggested reason for the failing was that Uber should have gone to market with a local partner like Didi instead of running head to head with them. The Cryptokitties squad knew that they wanted to expand correctly, and subsequently identified a local partner in China to target the market there.
In January 2018, Axiom Zen partnered with Animoca Brands to publish the Cryptokitties game on mobile in China, Hong Kong, and Taiwan. Animoca is a Hong Kong-based, privately-held developer and publisher of games, with a number of games use popular IP such as Garfield, Ultraman, and Doraemon. By working with Animoca, Cryptokitties was able to build out a localised website for its Chinese-speaking audience, provide native-speaker support services, and host numerous giveaway events.
In my discussion with him, Benny some insightful advice on go to market strategy in Asia . First, he mentioned that for a blockchain gaming company like themselves, it is best to find two local partners- one in blockchain and one in gaming- to assist navigate the landscape. This various kinds of well-thought-out, go-to-market strategy involves hard work and local community understanding that very few cryptocurrency teams have achieved.
Currently, most Western crypto companies do not apply a traditional tech-oriented go-to-market strategy when trying to expand into other regions. Instead, most of them choose to leverage their” global communities .” They would incentivize these regional token holders to do local marketing and encourage them to find more token advocates and purchasers in their region. Nonetheless, that type of marketing approach effectively identifies people who want to make a quick buck, rather than users who can sustain a platform.
Secondly, tasteful and culturally-appealing design is also very important when it is necessary to dApps. Cryptokitties originally distinguished themselves from other dApps by creating beautiful cats on the blockchain that immediately caught people’s attention. They have also decided to apply a similar local strategy in China.
Momo Wang is the creator of the highly popular Tuzki character, a black and white line drawing of a bunny that’s used widely across various instant messaging platforms, especially WeChat.
Cryptokitties hired Momo as a brand ambassador and contributor to the Artist Series to design kitties for them. By doing so, they are able to appeal to an audience who may have a different local taste.
Benny adds that it is essential for dApp companies to create beautiful websites and great user experiences that appeal to local communities. However, there are also cons when building beautiful websites for a blockchain company that is decentralized by nature. Smooth user interfaces in the form of a traditional website or an app fall under the jurisdiction of a traditional tech business. Internet companies in China, for example, require approval and licensing from the government to be able to operate and serve its citizens.
China has become the wild west of crypto and blockchain, and there will continue to be unforeseen obstacles. It certainly isn’t easy for Cryptokitties to be the first western dApp company to venture into China, but in the next five years, we’ll insure a great number of Western companies heading east- and these early learnings will be invaluable.