Level 39: Getting Steam(y) with Marketplaces
A look into why Valve is a top 5 marketplace over companies like Classpass, Udemy and Turo
Marketplace Economies:
This week in news, venture-firm a16z released a report on marketplace economies. Travel and Food categories dominate the market while wholesale and celebrity engagement exhibit the fastest growth, often 3-5x increase year-over-year. Valve (creators of gaming marketplace Steam) came in as the #5 largest marketplace by gross merchandise value (GMV), a metric that measures how much consumers are spending with each company. To put it in perspective, the top four companies account for 76% of the observed GMV, meaning that in reality, Valve is capturing <6% of the total share of consumer spending. It isn’t even comparable.
The implications of this are interesting:
Valve falls within the top 5 companies, which means that people are transacting on the platform at an enormous rate. The volume of these transactions is further accentuated by games’ geographically agnostic nature; people anywhere can play games as long as they have a PC.
This data doesn’t capture mobile game marketplaces like the Apple App Store/Google Play. It only looks as private companies and startups. Valve’s consumer transactions stem from solely PC purchases. Will we see a decline as mobile purchases start to capture more of our time?
Landing at #5 still equates to an enormous market share for gaming in the marketplace space. Expect to see more gaming platforms crack in the list in future years, as Steam’s biggest competitor, The Epic Game Store (EGS) will make marked progress.
We’re also thinking about the implications that fast-growing marketplace categories will have on monetization strategies in gaming. Aren’t celebrity shout outs already a thing on Twitch/YouTube/Mixer for much, much cheaper than on rival marketplace platform Cameo? Perhaps gaming streetwear could be a sub-vertical/platform in the world of fashion marketplaces, and take on rival players like #10 StockX. Can we draw parallels between wholesale marketplace retailers and in-game virtual goods? Fortnite and other titles (Dota 2/LoL) have already disrupted the virtual marketplace economies; soon, value in games will be accrued by bartering, buying and selling in-game items. Food for thought as you read through the article. Link
The Sandbox Gets Wider
This week, popular VR start-up Sandbox VR announced they’d be creating an SDK that allows developers to tinker with their proprietary technology. SDKs (short for Software Developer Kits) are useful tools that allow third-party developers to include functionality from other companies/platforms in their products. You know that little “Access my Location” button that pops up when you use a new iOS app? That’s an example of one of Apple’s SDKs in action.
As a quick refresher, Sandbox VR’s big bet is that their “holodeck” technology is the first new, major medium since movies. Experiences with Sandbox VR are not what you’d expect to find in your living room, they’re fully immersive, interactive, and memorable worlds. That’s the idea anyway. In practice, Sandbox VR is still ways away from becoming the next movie theater or arcade.
All that being said, the release of an SDK is a step in the right direction. In PB’s review of Sandbox VR, Max noted that $48 was too much for what turned out to be a decent gaming experience. Our visit made it clear that asking one company to build futuristic retail spaces, compact hardware, and groundbreaking games all at once is too overwhelming. With the advent of an SDK, Sandbox can enable VR-fanatics and indie game developers to build the next superstar holodeck title for them. The best part? If any third-developer strikes gold on a title, game design concept, or technical implementation, Sandbox VR is free to co-opt it into their own experiences, or just hire the developer outright. SDKs are a goldmine for high-quality product ideas and finding new employees.
From a technical perspective, the company is making life even easier for developers using agnostic project generation. This essentially means that developers won’t need exorbitant technologies to build something good (e.g Snapchat recently came back on the radar in part due to their SDK). Instead third-party creations should simply work, regardless of the software version or hardware quality. It’s a smart play to remove the cost barrier that's typically associated with developing for VR.
Implementation is still unclear, but assuming they get it right, Sandbox VR could be onto something big here. The company’s current slate of five games is small now, but could see a healthy jump with third-party support in the near future. Link
Quick Bites:
Coronavirus is hurting the global economy due to halts in production, but the games industry isn’t necessarily suffering — people are playing more video games than ever. Link
French Indie Game Designer, Christophe Galati, spent five months as an artist in residency in the mountains of Kyoto. He shares his story and game development process. Link
In last week’s edition, we posed the question, “Why pay money for Pokemon Home?” Turns out some people love the nostalgic association of a story to each Pokemon. Others, like our friends, just forget that they’re paying a monthly subscription fee. I really like this Wired feature. Link
We came across the Adventure Snack newsletter earlier this week. we love the way it invites you to participate playfully in its story. Link
A feature on Flashpoint, which preserved over 38,000 Flash Games by Pirating them. Link
This week’s Nintendo Direct (for real this time) will focus on Animal Crossing: New Horizons. Link
This is the most effective endorsement of Need For Speed Heat we’ve seen. Cosmetic and customization freedom enhances and prolongs the playing experience. Link
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