The future of gaming, Web3 and the metaverse

Aleksandr Agapitov:

My personal view, you don’t go to Fortnite. You just go to the website, meta sites. You go to the Chrome, type the URL as you used to, and you can go full screen and boom, you’re there. It’s 3D photo realistic experience, and everybody would understand it. And I think that’s how it’s going to be.

Aleksandr Agapitov:

Thank you for having me.

Aleksandr Agapitov:

Sure. Simply saying we are B2B company in a B2C industry, so we’re helping game developers to have more sales simply saying. So we living inside the video games like Fortnite, Escape from Tarkov, and some other games, like some of the Ubisoft games and Roblox. And every times when people make a transactions outside of the Apple, way most likely using our service. And we’re helping the gamers from all over the world, buy in game purchases, micro transactions, or buy the games, because in the global world, gamers want to have the access to the games, same games like we have here in the US and we’re helping game developers make more money and gamers to play the games on day one.

Aleksandr Agapitov:

Yes.

Aleksandr Agapitov:

I started this company when I was 22, in 2006.

Aleksandr Agapitov:

Yeah, roughly while we speak in, it’s 10 million users every month spending 15 bucks on average and for the past year was two billion dollars gross volume. And my company is charging the 5% from that.

Aleksandr Agapitov:

Yeah.

Aleksandr Agapitov:

Well, gaming industry is growing and we’re growing, yes.

Aleksandr Agapitov:

I don’t have a lot of options and opportunities. As you hear my accent, I was grow up in a very poor family in the Siberia. And I was a student in the Math University and I just want to find opportunities to make money, to buy shoes and jeans for myself. It’s not something that [inaudible 00:04:41] would want to change the world. It’s just looking for opportunity and looking the way to survive and get up. And back then in 2005, it was the few things happening online.

There’s a lot of online games and a lot of new online payments. And I think opportunity always somewhere and is very visible. So today’s crypto and metaverse, something’s happening there definitely. And past 16 years I saw some of those things also, it’s pretty quite obvious what we’re starting. It’s just opportunity’s like a bus, they come in every 20 minutes and they’re very obvious. 2005, it was very obvious something’s going on there.

Aleksandr Agapitov:

I never have a developer a job. I never have the formal education as the developers, but I don’t have a funding in the beginning. So as the founders, I do everything by myself. I create the first version of the website myself. And for that, I learn the new developer language and HTML. I create first contract for my customers. And I get a lot of inspirations from the internet. And I think on internet, you can learn almost everything. And yeah, there’s a lot of copy paste, as you can assume with legal agreements. But yeah, I managed to do my presentation and the business speech, everything by myself in the beginning.

And that’s how I think today, my employees and the colleagues is a growing. They doing themself and then later are able to build their own team and hire. And that’s how organisation grow. We’re not that kind of the static organisation when it’s a static size and employees going from the [inaudible 00:07:14], which is stand up path. So if you can’t join Xsolla, you most likely soon or later is going expect that you’re going to build your organisations under you. That’s how we naturally inorganically grow. It’s a growth forecast [inaudible 00:07:30].

Aleksandr Agapitov:

And I congratulate you on that because I know what it’s like to copy and paste contracts from the internet and all that stuff. That’s kind of the ultimate kind of the bootstrapping process. It’s like seriously starting from scratch. But so you’ve achieved some pretty good success in the last 16 years. And so you would’ve seen quite a lot change. And I think if anyone who’s listening can remember back in 2005 and 2006, I think there was still a company called MySpace back then. I think this is before Facebook even launched.

Aleksandr Agapitov:

When I begin with a lot of the browser based games and it’s a quite world budget games, when I start working with. It’s basically a chat and you can have some extra social activities there. And many of those games is respectably free to play. And that’s why services like mine is really interesting for those game developers, because we want to monetize most of the users. So in free to play games is, let’s say 10% people actually spending the money and 90% is paying for free. So you can easily imagine if you have relevant payment options and little seamless process, it could go from 10% to 20%. It could be double money for game developers. It’s a big deal. And I’m charging my just 5% and I’m helping the game developers of all size now. But I begin with working with those [inaudible 00:10:10] teams. One way to Facebook introduce the Converse games. And you probably can remember the FarmVille.

Aleksandr Agapitov:

Yeah. So that was kind of also the waves and what’s interesting vital mechanics and have a lot of the kind of Converse games. It was a flash games, which is now also that I would never imagine I would live one given flash, but it’s that. And obviously mobile games enter the market right after the social games become this. And some people thinking mobile games is going to be something like social games, or it could be similar platform, not kind of big deal. Many established game developers thought about mobile games. It’s not real games. It’s not like this amazing artwork we’re creating for the council on OPC.

Similar like today, many established game developers, they don’t respect the new crypto games, let’s say. But to announce mobile games, it’s enable a whole bunch of the new audiences would never play games before. Of course people who play on PC probably very rare would switch to the mobile. And then become the mobile dominate and investors. And we see saying about the PC games and PC as the platforms dying literally every three years.

And I was having very serious concerns about my business. Oh my God, what is really happening with my business if PC truly will die? But then Esports kind of kick in and we learn most of the Esports and serious gaming is happening on PC platform. And because it’s open platform and most likely something, what we call metaverse, most likely going to have happening on the open platform as well. However, I have my own view on the metaverse and how it could be my own vision on the metaverse, how it could distribute faster when we think, and yeah.

Aleksandr Agapitov:

Yeah. That’s appliable for my business. That’s my personal journey was that my payments and my service is most relevant.

Aleksandr Agapitov:

Yeah. But on Apple before fight with the Fortnite, I don’t know if you followed that, it’s a big lawsuit battle between Epic and Apple. So Apple control how the payments get made inside the ecosystem, similar to PlayStation. And that’s a part of the strategy. That’s a part of the monetization of their own platform. I think it’s fair to say Apple may treat some of the game developers as a suppliers, not as the consumers, because end users is their consumers.

What my company is succeeded in doing is having game developers as a customer. So my customers are game developers. I need to apologise to my gamers users because I’m selling them and monetizing them. I’m that evil corp who monetizing the gamers and it keeps in the [inaudible 00:15:18]. And we give the fair refunds and fast and fair refunds, that’s also because it’s good for the business, give the safe to the consumers in my view.

Aleksandr Agapitov:

Well, the mobile segment is the fastest growing segment. And with a lot of the consumers and a lot of the gamers and a lot of the industry growth coming from the mobile, however, PC and console have a very steady growth and a lot of the hardcore gamers and they prefer to the PC. And mobile games is a good introduction for the casual users and who want to get … have something fast.

What’s interesting is also, a lot of the research in a company like Newzoo have the reports about the industry [inaudible 00:16:49] and growing the [inaudible 00:16:51]. And in my view, many of those research firms, they underestimate PC market share. And the reason is because everything that’s happening on the mobile, it’s open. There’s a company called up [inaudible 00:17:10], you can find for the pay little subscriptions, how much each of the game developers make money. And Xbox and PlayStation, they’re both public companies. So we report some of the numbers about their own sales and the market.

But whatever happened on PC, if some of the game developers, maybe 20 people create an amazing indie game, maybe first games and making a hundred million of dollars or 200 million of dollars. Nobody would know that because there’s no data. And I think PC is very underestimated. It’s a bigger one, a media think it is. And industry surveys on game developers confidence in some [inaudible 00:18:05], I think it’s like 60 something percent of the game developers actually developing games for PC now.

Aleksandr Agapitov:

Yeah. Most of the discipline. And that’s actually, in my view, my humble opinion is a little bit overheated. People talk media and people talk a lot about the Esports, but in reality it’s less than 1% of representing the gaming industry money wise and even user wise.

Aleksandr Agapitov:

Definitely everybody’s thinking about the metaverse and what does it mean, and I believe metaverse will come definitely from the gaming technology. The people who work for the gaming industry have understanding what’s possible and a lot of innovation coming from the gaming industry. And that’s a reason I really … enjoying the lifestyle of the business I have.

For example, we can pick any innovation, a great innovation like artificial intelligence, self-driving cars. They exist because of the company Nvidia exist. And company Nvidia exists because of the video games. Nvidia is video graphic cards manufacture. Or we can pick the virtual reality as an innovation. And virtual reality most likely, before we’re going to do the surgery. And virtual reality most likely is going to be a game play in virtual reality. And many other things. We have a fast iPhones and fast computers not to run office applications. People buy them to play video games. People buy the new iPhone to have a better camera and video games.

Aleksandr Agapitov:

My vision for metaverse is it’s when game developers will develop the websites. So websites, as you know, you open your Chrome and you go on the website, it’s now flat. It’s like a book. In the future, every experience, new website, so I would call them meta sites will be develop using the game developers technologies. And you go to, I don’t know, adidas.com today and shop the shoes. In the future you go, adidas.3dworld, and can have experience what you expect as a video games. You can walk in 3D dimensions. It could be photo realistic, or it could be in some graphic style. And if you can see other visitors of the meta sites, you maybe get some items with you from one meta site to another meta site.

Aleksandr Agapitov:

Yeah. In video games, I get used to nobody knows anything. I’m trying to predict what’s the next turn. And it’s often coming from nowhere. And the video games, a lot of the things unpredictable.

Aleksandr Agapitov:

In my view, it’s photo realistic 3D. And the reason why is photo realistic, so today what I heard from the developers, photo realistic, using the unreal engine instead of the art technology, unreal engine five, it’s maybe even cheaper to create when it’s creating illustrative and like an artist. Because they’re using the technology called meta scan. It’s easy to scan objects in real world and maybe fine tune it and mix it with some of the created objects. And in my view, it’s a photo realistic 3D using cloud gaming and deliver to the masses through just a simple [inaudible 00:24:56].

Aleksandr Agapitov:

No, it’s unlimited land. It’s like a website. So every business, every company, maybe some people want to have them own home side or meta side and similar like websites, every business want to have a website.

Aleksandr Agapitov:

My personal view, you don’t go to Fortnite. You just go to the website, meta sites, you go to the Chrome, type the URL as you used to, and you can go full screen and boom, you are there, it’s a 3D photo realistic experience, and everybody would understand it. And I think that’s how it’s going to be.

Aleksandr Agapitov:

Yes. That’s one of the feature.

Aleksandr Agapitov:

Yeah. Today you can bring the little piece of the information with you from one side to another side, it’s like a layer. So in the future, in Web3 you’re going to have the whole baggage of everything. So you’re going to have a lot of the files with you and going to decide if we want to use this luggage, some of this item or not. Is it practical for them to give you some benefits if you have some of the luggage?

Aleksandr Agapitov:

In my vision of metaverse, I see it as, every meta sites will be created like old fashioned Hollywood, Hollywood model movie. So bunch of talented people come together, create this experience with artists, there’s developers, there’s vendors. They create this experience. They establish among them, how they’re going to split the revenue and then move to the next project. And when you move to the next project, maybe you change some of the vendors, some of the artists, somebody playing the leading role, different actors and it’s set of other people. And those people and groups like in Hollywood will develop all those meta sites. And each of them going to have the credit source or revenue share or stake [inaudible 00:29:44] tokens. And we’re going to get paid for the effort and contribution.

Aleksandr Agapitov:

I’m happy to-

Aleksandr Agapitov:

… [inaudible 00:30:02] my ideas.

Aleksandr Agapitov:

I would not be surprised if the Facebook will fell in four to eight years as a company, we will not remember, will become absolute. I would not be surprised. What we’re trying to do and I’m assuming we’re trying to create a gaming console, which is people done before. However, in his presentation, Zuckerberg talk about different items and NFTs, and they’re going to adopt NFTs for the Instagram.

And I think Facebook is really tough spot. And they need that rebranding more. And just as a fresh idea because of the issues. But I think inability to create the currency, which US government not allow them to create the currency where we can transact. That’s a big deal. That’s a deal breaker. And adopt the other cryptocurrency. They’re very behind from other companies who’d done that. Companies like Coinbase, who could become this explorer in the metaverse.

One of the race is creating the explorer for the metaverse. What I’m building is, I’m building the cloud gaming technology with the Google and unreal engine and with my payments. So you can explore those meta sites created by a group of people. And we have this project that’s my new project, and I focus on X.LA. Somebody could create this different explorer for those meta sites. And it could be displaced up to your head with 48% taxes, that’s possible.

But I think people would more adopt if you’re just in Chrome and radically new web experiences, which is most of the gamers having now and enjoying it many decades now. When the people say, “Oh, imagine you can get the item, virtual item, and you can own it.” And people who play video games and say, “Come on guys, do you ever play [inaudible 00:33:13]?” They have that many years ago. But was roughly few hundred million players, hardcore players gamers. It’s not two billion users on internet or three billion users on internet.

I think having this cloud gaming. Are you familiar with the cloud gaming? It’s like a Stadia, Google Stadia, when you actually don’t need to download the games. It’s a streaming. It’s like YouTube, but you can control it. It’s a video stream like YouTube, but you can control it and play, PlayStation, have Xbox, have a lot of successful. So playing actual PC games without the PC, but for cloud gaming, that could be the metaverse.

Aleksandr Agapitov:

Yeah. Think about like YouTube. But you play not the 3D experiences. Game developers tools, it’s radically developed and it’s on very high pace. There’s two companies called Unity, which is get successful and get the water funding from going public. And Epic games who get a lot of success with the Fortnite and get funding and reinvesting all the money we earn in Fortnite to democratise the video game developers.

Those two competing in game engine is creating amazing tools. And today very small team can create really immersive experience and photo realistic unimaginable experiences. So in Xsolla, we have game developers of all sizes launching the games with us. I don’t know, 40 times a month, 40 different games a month. And some of the games to just come in from nowhere at student projects. And it’s a very small team and we created decent games and have decent revenue. And that’s very inspiring. And it seems like it’s very democratising, similar to YouTube when people get the cheap cameras and it’s available to everyone, everybody can become creators. In the future anybody can become the creator of some of the environment or assets.

Of course obviously those technologies are going to create breakthrough innovations for the very creative teams and very talent engineers. But whoever was going up from the top tier and for the bottom tier, very, very fast.

Aleksandr Agapitov:

Yeah. As I said, it’s think about as just the websites or meta sites, every business going to want to have it meta sites, they own it, they manage it, they admin it and they accept in the guest visitors. And when you visit those meta sites, you can see other visitors and you can bring items to you, or you can get the items from this experience. And maybe you can have a shopping when you have a social. And it’s hard to predict what use case is going to be, similar as hard to predict what use case is going to be for the iPhone in 2005. But to start, it’s going to be social and shorten most likely.

Aleksandr Agapitov:

Yeah.

Aleksandr Agapitov:

Yeah. Brands want to have a presence in the metaverse. I think Minecraft have done a lot of collaboration with [inaudible 00:38:32] and other brands. On entertainment side, Fortnite definitely is number one, having the live concerts and integration with [inaudible 00:38:44] and Spider-Man and Marvel. But in my view, what’s common is just everybody will have their own experience. Every business want to have their own experience. And some of the businesses will be created around, think about like web studios helping to create websites for your business.

And very niche [inaudible 00:39:22] could have … I would go to the Daft Punk Legacy Park and have this experience, [inaudible 00:39:29] experience, or Studio 54 experience and [inaudible 00:39:36]. And maybe that’s what’s intriguing is we cannot predict what kind of real application is going to be, because when we have this technology, when we start using it, whether something’s going to pop up, something like Uber emerge from the iPhone, because now this device have geolocation and it’s could be Uber.

Until we have it, it’s really hard to predict. But yeah, definitely shopping can, and social. I hope it’s going to be less advertising. I think advertising is people get tired from advertising everywhere. And I think whereas Web3, where’s alternative way how to promote the brands and items and people could be more appreciated. One of the things what we see today is what’s called airdrops, with NFT community. But I think it’s going to be a higher potential, maybe not necessarily NFT, but imagine you give away the digital items to the people who visited this show, this podcast, for example. I would be happy to give them Xsolla NFTs special for the show.

And later on, when they come back to my experience, I would recognise them and give them a t-shirt or I would give them virtual item, or maybe I give them free tickets for something. That would be one of the mechanics. And because you helping me to give away those NFTs, you’re actually helping me to acquire potential customers for my future endeavours, for my business. I maybe embedded that in some sort of the revenue share for the customers who help me to acquire.

In that sense with no [inaudible 00:41:52] advertising people could, if they like what I’m talking about, they can claim the items and they can get the items they don’t like, way probably can move on. And I think when we, in the future, users would most likely to accept items, especially NFTs. And because they know somebody may have valued this, eventually it’s maybe not them personally, but somebody who missed this live show could want to buy this NFT because value it’s provided, it could redeem in many experiences. And one of the reason I think Facebook could be out of business in eight years, I think it’s changing how advertising work.

Aleksandr Agapitov:

Yeah. That’s pretty straightforward. Before Google was Yahoo, who is manually collect the links of the sites they like by category. So it’s easy, imagine how in 3D experience, when you have … want to navigate the users and promote other meta sites you like or your partners, it’s going to be doors of portals. So you can go to this portals and end up on different meta sites. And it can be collection of the portals. And so yeah, organised by-

Aleksandr Agapitov:

No problem.

Aleksandr Agapitov:

Yeah.

Aleksandr Agapitov:

We are very early with NFT protocol. A lot of the good critics are saying, NFT is not totally decentralised. They’re still an open sea. And it’s open sea and bond NFTs and stuff like that. I imagine is with the things called decentralised inter planetary file system, IPFS I think. It’s technology allowing to store files on a decentralised network.

I think next version of NFT, we are going to keep some of the source files necessarily for the, it’s working for the game, inside the games, store on that file system. It’s very hard to develop the items, which is work from one game to another game. And for the game developers, game developers drives them nuts. Why would I add some piece of the content for one users and why I would support the items somebody else sold if I’m not going to get any money.

And I think the biggest challenge here is economic incentives around those words working together. And I think the solution is somewhere among user acquisition and in the user exchange. If one item’s moving from one game to another game, that could be used as a mechanics to create a context on the user requisitions. So if that’s been one game developers helping another game developers acquire the users. And most of the game developers, they want to have new users, but they still need to find a way how it doesn’t need to be justified. It’s a long progress until those dreams, when one item to another, we will work in many games because the biggest challenge is how to incentivize game developers work together. And in my view, they value users, they own users and they value user requisition, so it’s something there.

Aleksandr Agapitov:

Yeah. First, this need to be next NFT standards specifically for the bigger games. And second there’s need to be alignment on game developers, financial alignment.

Aleksandr Agapitov:

Solving, crypto is designed to solve those, yes.

Aleksandr Agapitov:

Crypto is designed to solve the economic alignments. Yes.

Aleksandr Agapitov:

Well, today crypto gaming, it’s games with NFTs and they not get a lot of respect from the traditional game developers. Same way how the mobile game developers doesn’t get respect early on, very, very early on. And it could possible, crypto game has become open up for the new set of the players, that’s one scenario. But I choose to believe eventually that the crypto games could work with many traditional game developers.

Aleksandr Agapitov:

Yeah. Well, crypto games is something when you purchase NFTs and use those NFT to play the game. And maybe you do something with this NFT and they give you another NFT, that kind of [inaudible 00:51:06].

Aleksandr Agapitov:

Yeah. Where digital items exist as indicates, the thing is NFT is attempt to have standards for digital items, when same digital items could work in different games and it doesn’t work today. And the two things need to be happen, so it start working together. The economic alignment and NFT format need to be upgraded.

Aleksandr Agapitov:

Industry knows as a company Kongregate payments, we want to be known as a company who aggregate opportunities and that’s meaning we not only aggregate payments for the games, but we also want to help them to find ideas, how to earn more. And it’s definitely something with the crypto and NFT. And two months ago, I decide to establish the [inaudible 00:53:23] department in Xsolla. And I decided to be myself, the Web3 entrepreneurs because I build this enterprise and it have a lot of employees. We have a lot of customers and it’s money involved. It’s a very serious business.

My CTO is become CEO of the Xsolla. And roughly it’s a 500 people work there and we have more traditional payments and traditional video games industry, and have its own potential to grow also because mobile seems open up after epic stores. So one of the mobile first game developers now seriously considering to have the browser based games or PC version of their games, but some mobile publishers like Scopely and they have a lot of Marvel IP, which is I’m big fan.

They launched the browser version of their games and with the 40 people who is work with me on X.LA, and I do my entrepreneurial stuff again. And it’s a totally different work, Web3 it’s completely different. Everything is upside down. It’s the way how people operate and deal with internal strangers. And it’s very fascinating, definitely something happening there.

Aleksandr Agapitov:

40.

Aleksandr Agapitov:

The fix, what we’re building, we’re not going to own it.

Aleksandr Agapitov:

Yeah, it has to be open source. And it’s traditional, in traditional business, you have a concept, you have a product market feed, you prove it, you raise the money and you scale with sellers and partners. And in Web3 where things we’re going to build, we will not own, a community will own it. Internet will own it. We now look for the partners who will help us to build it, who believe this things, what we’re building it’s necessary for the internet. After that, we might raise a lot of money, but not for ourself, but to actually to pay the partners who help us to build it. And only after that, we will have a product market. We hope it’s going to be, somebody will like what we’ve build.

Aleksandr Agapitov:

And I’m building the company, I’m not going to own it and that’s a very strange feeling.

Aleksandr Agapitov:

They can go to the X.LA and leave their email and they’re going to get NFT from me and they’re going to have an opportunity in metaverse, what we’re building.

Aleksandr Agapitov:

Thank you.