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 Chrome, type the URL as you used to, and you can go full screen and boom, you're there. It takes a 3D photorealistic experience and everybody would understand it. I think that's how it's going to be.

Thank you for having me. Yes, this is going to be a good conversation because I think the gaming industry is just expanding very quickly right now. There's integration of NFTs and there's this whole other conversation of the metaverse, which for gamers probably is quite easy to understand but for non-gamers, talking about the metaverse is confusing at the very least. So let's get straight into it and let's start with Xsolla. So can you quickly explain to the listeners exactly what Xsolla does? Sure, so simply saying, we are a B2B company in a B2C industry. We're helping game developers to have more sales. Simply saying, we live inside the video games like Fortnite, Escape from Tarkov, and some other games like some of the Ubisoft games, Roblox. Every time when people make transactions outside of the Apple way, most likely they are using our service. We're helping the gamers from all over the world buy in-game purchases, microtransactions, or buy the games. Because in the global world, gamers want to have access to the same games like we have here in the US. We're helping game developers make more money and gamers to play the games on day one.

I started this company when I was 22 in 2006.

Yeah, roughly while we're speaking, it's 10 million users every month spending $15 on average. And that's for the past 365 days, for the past year, it was a $2 billion gross volume. My company is charging 5% from that. If I can do quick math, $2 billion, 5%, $100 million a year roughly.

Well, the gaming industry is growing and we're growing with it.

I don't have a lot of options and opportunities. As you hear my accent, I grew up in a very poor family in Siberia. I was a student at MAF University and I just wanted to find opportunities to make money to buy shoes and jeans for myself. So it's not something romantic like we want to change the world. It's just looking for opportunity and looking for a way to survive and get up. But back then in 2005, there were a few things happening: a lot of online games and a lot of new online payments. I think opportunity always somewhere and it's very visible. Today's crypto and metaverse, something's happening there definitely. Over the past 16 years, I saw some of those things. It's pretty obvious what was starting. Opportunities like a bus come every 20 minutes and they're very obvious. In 2005, it was very average, something's going on there.

I never had a developer job. I never have the formal education of a developer. But I didn't have funding at the beginning, so as a founder, I did everything by myself. I created the first version of the website myself, and for that I learned the developer language and HTML. I created the first contract for my customers. I got a lot of inspiration from the internet. I think on the internet you can learn everything, almost everything. There's a lot of copy-paste as you can assume for legal agreements. But I managed to do my presentation and business speech everything by myself in the beginning. That's how I think today many of my employees and colleagues are growing. They do it themselves and then later are able to build their own team and hire. That's how organizations grow. We're not that kind of static organization where an employee goes from a standard career path. If you join Xsolla, you most likely sooner or later will expect that you're going to build your own organization under you. That's how we naturally and organically grow.

When I began, there were a lot of browser-based games, quite low-budget games. When I started working with them, it was basically a chat and you could have some extra social activities. Many of those games were expected to be free to play, and that's why services like mine were really interesting for those game developers because we want to monetize most of the users. In free-to-play games, let's say 10 people are actually spending money and 90 are playing for free. So you can easily imagine if you have relevant payment options and a little stimulus process, it could go from 10 to 20, so it could be double money for game developers. That's a big deal. I'm charging just 5% and I'm helping game developers of all sizes. I began working with those browser-based teams. Later, Facebook introduced canvas games, you probably remember FarmVille. Everyone remembers FarmVille, that was big. That was one wave. Then mobile games entered the market after social games. Some people thought mobile games would be like social games or not a big deal. Many established game developers thought mobile games were not real games, not like the amazing artwork they were creating for console or PC. Similarly today, many established game developers don't respect the new crypto games. But mobile games enabled a whole new audience that had never played games before. People who play on PC would very rarely switch to mobile. Then mobile dominated. Investors and VCs were saying PC games and other platforms are dying every three years. I had serious concern about my business, thinking what would happen if PC truly died. But then esports kicked in, and we learned most esports and serious games happen on PC because it's an open platform. Most likely something called the metaverse will happen on the open platform as well. However, I have my own view on the metaverse and how it could be distributed faster.

Yeah, yeah. But on Apple, before the fight with Fortnite, I don't know if you followed that, it's a big lawsuit battle between Epic and Apple. Apple controls how payments get made inside the ecosystem, similar to PlayStation. That's part of the strategy, part of the monetization of their own platform. I think it's fair to say Apple may treat some game developers as suppliers, not as consumers, because users are their consumers. But what my company succeeded in doing is having game developers as customers. My customers are game developers. I need to apologize to my gamers, users, because I'm selling them and monetizing them. I'm that evil corp who monetizes. But we give fair refunds, fast and fair refunds. That's part of keeping it safe for consumers.

Well, the mobile segment is the fastest growing segment, with a lot of consumers and gamers and industry growth coming from mobile. However, PC and console have very steady growth. A lot of hardcore gamers prefer PC. Mobile games are a good introduction for casual users who want something fast. What's interesting is that with a lot of research from companies like Newzoo, they have reports about the industry. In my view, many of those research firms underestimate PC market share. The reason is that everything happening on mobile is almost open, you can find with a company like App Annie for very little subscription how much each game developer makes. Xbox and PlayStation are public companies, so they report some numbers. But whatever happens on PC, if some game developers, maybe 20 people, create an amazing indie game and make hundreds of millions of dollars, nobody would know because there's no data. I think PC is very underestimated. It's bigger. A media thing and industry surveys at the Game Developers Conference in San Francisco show that about 60% of game developers are actually developing games for PC now.

Yeah, most of the disciplines. And that's actually, in my humble opinion, a little bit overheated. People in the media talk a lot about esports, but in reality it's less than 1% of the gaming industry, money-wise and even user-wise.

Definitely everybody is thinking about the metaverse and what it means. I believe the metaverse will come from gaming technology. People who work in the gaming industry have an understanding of what's possible. A lot of innovation comes from the gaming industry. That's a reason I really love and enjoy the lifestyle of the business I have. For example, we can pick any innovation. Artificial intelligence and self-driving cars exist because of Nvidia, and Nvidia exists because of video games. Nvidia is a video graphics card manufacturer. Or we can pick virtual reality. Before we do surgery in virtual reality, it will most likely be a gameplay in virtual reality. Many other things: we have 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 for video games. So okay, I understand the gaming industry. I think we've talked about that pretty well. Now let's jump to the metaverse and to NFTs. I was going to start with NFTs, but let's start with the metaverse because they're both integrated. So let's go to the metaverse. How do you define the metaverse? Let's start with that. If you ask anyone what the metaverse is, someone in the gaming space can probably explain it better, but for the average person, even the professional person, trying to get their head around what is the metaverse, who owns it, what is Facebook's part in it. How do you define the metaverse?

My vision for the metaverse is when game developers will develop websites. Websites as you know, you open your browser and go to a website, it's flat, like a book. In the future, every experience, new website, I would call them meta sites, will be developed using game developer technologies. You go to adidas.com today and see shoes. In the future, you go to adidas and it's a 3D world. You can have an experience like in video games, you can walk in 3D dimensions. It could be photorealistic or in some graphic style. If you can see other visitors of the meta sites, you may be able to get some items with you from one meta site to another.

In video games, I'm used to nobody knowing anything. I'm trying to predict what's the next turn, and it often comes from nowhere. Video games are one of the unpredictable things. So, is it 3D? In my view, it's photorealistic 3D. The reason is that today, from what I heard from developers, using Unreal Engine 5, it's maybe even cheaper to create photorealistic than illustrative, because they use technology called MetaHuman scans. It's easy to scan objects in the real world and fine-tune them. In my view, it's photorealistic 3D using cloud gaming and delivered to the masses through a simple home screen.

No, it's unlimited land. It's like a website. Every business, every company, maybe some people want to have their own home site or meta site. Similar to how every business wants to have a website.

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

Yes, that's one of the future. Yes, that's one.

Yeah, today you can bring a little piece of information with you from one site to another. It's like a layer. In the future in Web3, you're going to have the whole baggage of everything. You'll have a lot of files with you, and the site will decide if they want to use this luggage, some of these items, or not. Is it practical for them to give you some benefits if you have some of the luggage? Yeah.

In my vision of the metaverse, I see it as every meta site will be created like an old-fashioned Hollywood movie model. A bunch of talented people come together, create this experience with artists, developers, vendors. They establish among themselves how they're going to split the revenue, and then move to the next project. When you move to the next project, maybe you change some vendors, some artists, somebody plays the leading role. Those people and groups, like in Hollywood, will develop all those meta sites, and each of them will have credits or revenue share or stake in.

Involving the tokens and they're going to get paid for their effort and contribution.

I wouldn't be surprised if Facebook fails in four to eight years as a company. They need this rebranding because of issues like the inability to create a currency. They're behind other companies like Coinbase. I'm building cloud gaming technology with Google, Unreal Engine, and my payments system so you can explore meta sites. It's like a video stream you can control. People will adopt it more at home. Gamers have had virtual items for 20 years, but now it's about cloud gaming for billions.

Think of it like YouTube but for 3D experiences. Game engine tools are advancing rapidly with Unity and Epic Games. Small teams can create immersive experiences. At Xsolla, we launch about 40 games a month. It's democratizing like YouTube. Anybody can become a creator. It's not about a closed system; every business will own their meta sites, manage them, and accept visitors. You can bring items with you. It's hard to predict the use cases, similar to the iPhone in 2005. It will start with social and shopping.

Yes, think of it as websites or meta sites. Every business will want their own. You visit them, see others, bring items, maybe shop or socialize. Brands like Fortnite have done concerts and collaborations. Every business will have their own experience. There will be a new industry like web studios for meta sites. I hope it's less advertising; Web 3 offers alternative promotion like airdrops. Imagine giving NFTs to podcast listeners, then recognizing them later and giving free tickets. That's non-annoying marketing.

Brands like Minecraft and Fortnite have done collaborations with Marvel and concerts. Every business will have their own experience. Museums could have virtual experiences. It's hard to predict what will emerge, like Uber from the iPhone. Shopping and social will be key. I hope it's less advertising; Web 3 can use airdrops and NFTs for marketing.

Before Google, there was Yahoo manually collecting links. In 3D, it will be doors or portals. You'll have portals to different meta sites. That's straightforward.

We're very early with NFTs. There are critics about centralization. Next version NFTs will use IPFS for decentralized storage. It's hard to make items work across games due to economic incentives. The solution is around user acquisition: if items move between games, that can be a user acquisition mechanic. Game developers need to align financially. There needs to be a new NFT standard for games and financial alignment. Crypto can solve that economic alignment.

Yes, first a new NFT standard for games, then financial alignment among developers. Crypto is designed for that.

Today crypto gaming is games with NFTs, not respected by traditional developers, like mobile games early on. It could open up to new players, but I believe eventually traditional developers will adopt it.

It's where you purchase NFTs to play the game, and maybe you get another NFT. It's about standardizing digital items so they work across games.

Yes, digital items have existed, but NFTs are an attempt at standards. For them to work across games, we need economic alignment and upgraded NFT formats.

We aggregate payments and opportunities. Two months ago I established a Web 3 department at Xsolla and decided to be a Web 3 entrepreneur myself. My CTO became CEO of Xsolla, which has about 500 people. I'm now building XLA with 40 people to create a new explorer for meta sites.

In Web 3, we build something we won't own; the community will own it. We look for partners to help build it, and we may raise money not for ourselves but to pay partners. Only after that we hope for product-market fit. It's a strange feeling not owning the company.

They can go to x.dot.away and leave their email. They'll get an NFT and an opportunity in what we're building.

Thank you.