How South Korean gaming veteran Joonmo Kwon sees the new reality for Web3 games | The DeanBeat

Joonmo Kwon, a former CEO of Nexon, is an example of an established game developer who decided to march into the wilds of Web3 gaming.

He started Delabs Games in South Korea back in 2020 and moved into Web3 at the end of 2021. He raised a round of funding March 2023 ($12 million to date) and then went to work on a variety of games. He is also chairman of 4:33 Creative Lab (parent company of Delabs Games), which saw 70 million downloads for its hit game Boxing Star.

Earlier this year, his company launched Rumble Racing Star, a Web3 kart racer on both PC and mobile. The game has reached nearly 10,000 daily active players who have played 2.4 million races during that time, and I had a chance to catch up with him on the state of blockchain gaming. We had an interesting conversation, especially around why Web3 gaming is taking a while to catch on in the West.

Rumble Racing Star is one of the games that bridges Web2 free-to-play gaming with Web3 player ownership. Kwon thinks of it as “challenge to earn” when it comes to Web3 gaming. Kwon said the company’s Metabolts NFTs sold out in May and the firm is working on Space Frontier. Key partnership include Ambrus Studio, Batching AI, Cow Cup, and Proof of Play. Delabs is building on the Arbitrum protocol and is working on the the Delabs Playable Layer.

What has he learned? Web3 gaming has a loyal following but a relatively small community. The games need to be fun, have a sensible economy, and they also need marketing. And while it has taken a lot longer to reach the mass market in the West than imagined, there are bright spots like the viral nature of mini-games on Telegram, Kwon said.

The company has 30 people, and it’s working on an RPG survival game, an anime game and updates to the racing game. The game has nearly 10,000 daily active users and retention is high. He expects real success will come in 2024 or 2025.

And Kwon is pivoting to focus on games on Telegram using the TON blockchain, with launches coming for Ragnarok (not the same as Ragnarok: Monster World from Zero X/Gravity) and Boxing Star on Telegram, which has seen a surge in blockchain gamers in 2024 because of the success of other companies’ games like Hamster Kombat and Notcoin. Delabs Games’ titles will see beta tests soon.

This past July, Delabs Games launched its first game on Telegram with the baseball game Giga Chad Bat. The idea is to take games to where gamers are already connecting. The company is planning to launch the Delabs Games Platform Mini App, designed as a gateway for Web3 integration in its games. This platform is set to debut in December, initially targeting Telegram users to build momentum before the official game launches.

Here’s an edited transcript of our interview.

GamesBeat: We spoke when you first announced Delabs Games.

Joonmo Kwon: Yes, Delabs founded in May 2020. We started out in Web3 games at the end of 2021. This year we’re marketing aggressively.

GamesBeat: What’s happened since you started? How much progress have you made since unveiling the web3 focus?

Kwon: In Web3 gaming, the product is most important. You need sensible economics around NFTs (non-fungible tokens) and the game economy. But we also need marketing. We’ve been doing a lot of marketing and building community. We have a very solid, loyal community on Twitter and elsewhere. We launched our first game, Rumble Racing Star, last December and in January on PC and smartphones. We’ve had very good traction so far. The users are very engaged. We’ve seen good revenue.

We launched a mini-game on Telegram. We’ve been polishing that. We plan to launch more games this year and early next year, including more Telegram games in the fall. (He explained this move in a recent tweet).

GamesBeat: In the spring of 2023 you mentioned a racing game, an RPG survival game, and an anime-style game.

Kwon: Right, those are our three major games. Rumble Racing Star is an arcade racing game. It’s good for streaming, tournaments, and esports. The second game, Space Frontier, is a survival MMORPG game, and the third game is also an MMORPG. They’re in good shape and ready to be launched soon.

GamesBeat: How many people work for you now?

Kwon: We have 30 people in-house now. We outsource some graphics work, but 90% of the work is done in-house.

GamesBeat: How much money did you raise altogether?

Kwon: It was about $12 million.

GamesBeat: The Web3 element, how does that work? You mentioned NFTs. What do people get that they can use in a racing game?

Kwon: We like sport value tokens (SVTs) and achievements. They get SVTs and NFTs. We have the genesis NFT for Delabs called Adventure Pass. If you have this Adventure Pass, you get special parts for the racing game. You also get multipliers for boosting your points. It’s like a pass in Disneyland. Every game will have benefits for the Adventure Pass.

GamesBeat: Part of the game is free to play, and then part of the game relates to the Web3 purchases?

Kwon: It’s mostly free to play. That’s much more easily accessible to users. We have three billion gamers around the world. We wanted to make it much easier to access. A smooth experience for gamers is the most important thing.

GamesBeat: When did Rumble Racing Star first launch?

Kwon: Last November we launched the PC version. The mobile version followed in January.

GamesBeat: How many races have you had now?

Kwon: It keeps growing. We’re at (2.4 million) now.

GamesBeat: In what context do you consider that to be a success? Is it the engagement?

Kwon: Not only engagement, but also the core gameplay loop. This is our first web3 game. We have about 10,000 DAUs, which is very satisfactory. Our users enjoy playing the game. Retention is pretty high. A lot of them stream. In terms of revenue, we’re not super successful yet, but in terms of gameplay and user satisfaction and community satisfaction, we’ve been very successful. We’ve gained a lot of experience and learned a lot on this game.

GamesBeat: How widely available is the game now? Is it worldwide?

Kwon: It’s worldwide on both mobile and PC, except for a few countries that prohibit Web3 gaming. In those cases we just block the web3 parts. You can still enjoy the game without any Web3 elements.

GamesBeat: How large a market cap does the game have, the token market cap?

Kwon: We plan to have more than five games, but we won’t launch them all until early next year. We use only one native token. But the token isn’t out yet.

GamesBeat: How are you able to get on the app stores? Are there limitations related to the Web3 functions so you can get on the app stores?

Kwon: Yes, we don’t include the Web3 elements on the iOS App Store or the Google Play Store. You have to connect through our website, Star Garage. Then you can play with the Web3 features – connect your wallet, access NFTs, get the SVTs and so on.

GamesBeat: I talked to the folks who do the NFL Rivals game. It’s another Web3 game on iOS and Android. Apple lets them on the App Store because the functionality stays the same between Web2 and Web3. Players don’t get a different game or more features in the Web3 version. That gives them access to the App Store, but it’s a limitation on what the Web3 game can be. Is it the same with what you have to do with your Web3 version?

Kwon: Exactly. We separate the Web3 and NFT elements. To connect your Web3 wallet you have to use our separate website. It’s not a very smooth experience for users.

GamesBeat: The way this stays within the rules of the app stores, you have to buy a virtual currency with a credit card or some other way that allows Apple and Google to get their 30%? Then you can use that currency in the web3 game if you want.

Kwon: Yes, that’s right.

GamesBeat: Are you satisfied with this? Do you think being able to access the app stores this way will help you have successful games in the longer term?

Kwon: No, I don’t think so. Gaming is all about experiences. We analyze our data and look at the funnel our users enter. When there’s any kind of friction around login or payment, or something like a tutorial that players feel is too long, they just leave. It’s free to play. It takes about a minute to download a new game. If players aren’t satisfied after a few minutes, they can just delete it and move on. Added friction is not good for the user experience. There’s still a lot of friction in Web3 games. That’s why the Telegram platform is getting a lot of attention from web3 game developers. They find much less friction there.

GamesBeat: I’ve heard that about Telegram, that it feels like the old Facebook with how frictionless it is. Games can spread very easily.

Kwon: Exactly. There’s much less friction. They have more than a billion users. Chat apps like WeChat, Kakao, the old Facebook, or LINE have been very successful platforms for games. In terms of friction, it’s easy to log in. It’s easy to make and connect a wallet. It’s a social platform. It has that virality. You can do things like set up leaderboards with your friends.

GamesBeat: How far along are you with Telegram? What have you done there so far?

Kwon: We launched a game called Giga Chad Bat, a Pokemon-like battle game. There’s a PvP element with scoreboards and guilds. The important part is the virality. You can invite your friends and play together. It’s just a test launch so far. We’ll keep polishing the game. We got a new build yesterday.

We’re going to launch a major future project in Telegram. What we’re doing right now is very simple, but we’ve been watching the evolution of these chat app games. They started with hypercasual, but the user base has expanded. With mass adoption, they’ve slowly evolved into casual and mid-core games.

GamesBeat: Do you expect Telegram games to progress in terms of the kind of gameplay you can create? Or do you think it will still stay relatively casual?

Kwon: It’ll definitely evolve. If you look at what’s happened with WeChat, which is the largest chat app in China with 1.3 billion users, or Kakao, which has something like 99% adoption in South Korea, it’ll definitely evolve. We’re looking at the next generation of Telegram games. They’re going to be more like mid-core games, but with very short game loops, around five minutes, and very social. You can invite your friends, collaborate with your friends, play with your friends.

GamesBeat: How large do you think Web3 games can get in terms of audience size, given the friction involved for new players? Do you think it’s still possible for them to grow to very large sizes through the mobile app stores?

Kwon: Web2 gamers aren’t very happy right now. The Web2 industry is shrinking. We’ve seen about a 10% minus trend in the Korean market. Games have been commodified by the platforms, and there are so many games. We’re seeing as many as 250,000 or 300,000 new games every year. Games are becoming more and more aggressive with their monetization because the platforms take too much, and because they have to spend so much on marketing. They need to find ways to make more money.

We see broader changes in media consumption, too. A younger generation is used to things like TikTok and YouTube shorts. When I ride the subway in Korea, I used to see people playing smartphone games, but these days I feel like 80-90% of what I see is people watching short videos on their phones. Their attention spans are very short, and they want to engage with socially interactive media.

GamesBeat: In South Korea, what is the Web3 audience like? Can you compare it to the western or American view of web3 gaming? Is it more accepted in South Korea?

Kwon: Koreans are always early adopters of technology. In terms of the crypto market, Korea is the second-largest individual country in the world. The Korean won is the second-most traded currency on crypto exchanges. We have about six million active crypto investors. That’s about 20% of the voting population in Korea. There have been times, during a bull market, that the daily trading volume of the crypto market in Korea was bigger than the stock market. At the same time, South Korea is the fourth-largest gaming market.

There was a backlash around the collapse of Terra, though. Investors lost a lot of money on Terra and Luna in Korea. The government tried to create more clarity through regulation. I think that’s a good thing in the long term.

GamesBeat: Are there things that you can or can’t do in the Korean market when it comes to Web3, compared to other markets like the U.S.? Are there restrictions you have to work around?

Kwon: Right now, play-to-earn games are not allowed. But I think this is going to change. The government’s outlook right now is pretty harsh about crypto games after the Terra experience and some other scam tokens. Again, though, we expect it to change.

GamesBeat: Where are most of your Web3 players, then? Are they in the U.S. or elsewhere?

Kwon: They’re all over the world. We have players in the U.S., Russia, southeast Asia, the Middle East, Latin America, and Europe. We have some in Japan. A few Chinese users come in through VPNs as well.

GamesBeat: What’s your expectation as far as how your company can grow and how this market can grow? What do you see in the coming years when it comes to web3 games?

Kwon: I’m bullish on Web3 games. In Web2 games, the market is already a red ocean. Users aren’t satisfied. A lot of Korean game companies are spending a lot of money on security, real-world security, because of angry users. We’ve had users coming to companies to demonstrate. Web3 feels like the direction that the game industry will go. But we need good products. We need fun games. We need smart economics to make these economies work, inside and outside of our games. We need the right marketing for web3.

I’ve been through many years of innovations in the game industry. I’ve experienced stand-alone online games, paid downloadable games, free-to-play games. The innovation around web3 can be much bigger than those combined.

GamesBeat: There are some very interesting features web2 games can’t match, like player ownership and the ability to resell items. Wreck League had a very interesting structure, where the Web2 players needed the Web3 players, because they could buy more special mechs from the Web3 players, while the Web3 players had that ability to create their own mechs and sell them, but also enter those mechs into esports tournaments. They could fight for pink slips, essentially. But each side benefited. There was a symbiotic relationship between both groups of players. (Editor’s note: The game did not quite go as expected).

Kwon: It’s a smart way to structure a game. I believe that in the near future, though, players won’t necessarily even know that they’re playing a game that’s Web2 or Web3. They’ll engage with a game, and they won’t look at an item as an NFT. It just won’t be a rental from a company. They’ll truly own it, and they can trade it or use it to participate in a community, in a DAO (decentralized autonomous organization). I believe in user-generated content as well, and in interoperability, where items from one game can be used in other games. That’s how the ecosystem of Web3 gaming as a whole can expand.

GamesBeat: Are there other successful Korean Web3 game companies so far? It feels like Koreans have been much more aggressive at moving into Web3.

Kwon: Korea is a small country, with only about 50 million people, but it’s been leading innovation in the game industry for years. Free-to-play was invented here. The first esports competitions here were in 1998. We had some of the first pro gamers. Parents were freaked out at the time. We had the first 24-hour cable TV gaming channel. We had some of the first internet cafes, 30,000 internet cafes by 2000. Japan is still big in animation and in console games, but in terms of online games and free-to-play games, Korea and China have been innovating much faster. There’s been a leapfrog effect.

When you look at the hit rate in games, the chances of making a blockbuster, it’s very low. Even with the best team, the best developers. With a web3 game there are more things you have to do right. You have to get the economics right. You have to get the Web3 part right. It’s a much bigger challenge.

GamesBeat: I wonder if something like Hamster Kombat could end up being the biggest Web3 game.

Kwon: It’s an interesting movement. Those kinds of games–can you even call it a game? But it’s off to a good start. I’ve looked at the data on one of the biggest Telegram games. I heard from the founder that 40% of their new users have never experienced Web3 games. That’s a very interesting, exciting data point. That might be a platform where mass adoption can happen.

GamesBeat: Do you see a major benefit to having that adoption happen on mobile or PC instead of Telegram?

Kwon: I don’t really care where that mass adoption happens, which platform. Once players experience Web3 gaming, then it’s hard for them to go back. It’s like free-to-play. Once players experienced that, once they didn’t have to pay, the market just got bigger and bigger. You can truly own your in-game items. You can participate in governance. You can make your own content, your own skins and costumes, and sell those items. Why would you go back to centralized games? Once people experience Web3, whether it’s through browser or PC or smartphone or Telegram, they’ll keep looking for Web3 games.

GamesBeat: Looking back at the history of free-to-play, what was the moment when that succeeded? When did that overcome the friction, or the fear of change?

Kwon: The first free-to-play game was invented by Nexon. That was QuizQuiz. It was very small at first. I think the monthly revenue was maybe $10,000. But everyone could access it without any payment. They could play it and decide whether they wanted to keep going or stop. Online games grew alongside free-to-play. With online games, you needed more users, more concurrent users. It’s a virtual society, or a virtual party. The more, the merrier.

Everyone enjoys these games in a different way. A doctor, one hour of his time is worth more to him than, say, a high-school kid. Spending some money to reduce your grinding time just creates a more fair competition. I like spending an hour or so playing a game, but I don’t have the time to grind. An earlier generation of gamers, especially console gamers, they criticized free-to-play at first. They said that it was just paying to win, that it wasn’t fair. But look at it now. Three-fourths of the market is free-to-play.

GamesBeat: Do you expect a similar moment for Web3 games any time soon, when we can say this is clearly successful?

Kwon: I think it will be this year or the next. Once we have a huge, successful game–that’s what happened in Korea. The first free-to-play games was very small in terms of revenue. But when Maple Story launched, when all the FPS games launched in 2003 to 2005, they built a critical mass of users. The paradigm shift happened very quickly. It’s all about user experience. The big challenge for Web3 is that smooth experience, a frictionless experience. I think Telegram can be one of the platforms that provides a catalyst to create that.

GamesBeat: I caught up with the nWay people recently when they launched a new game, and I asked them about Wreck League. They felt like the Web3 players right now are not as hardcore. They like more casual games. It’s more difficult to make a hardcore Web3 game succeed. That was one of their interesting observations about launching Wreck League. They haven’t given up on it, but they feel like it might be too early for that style of game in Web3. It takes a lot of skill. It’s not a super easy game to play. What do you think?

Kwon: Yeah, I agree. I know the founder of nWay (Taehoon Kim, who is now former CEO) very well. He’s a very insightful developer. Web3 gamers are not highly committed gamers yet. They don’t necessarily want complicated games. The big difference in Web3 is about true ownership of in-game assets. If it’s too casual a game, there isn’t an opportunity to own those assets. We need games that involve progression, like RPGs, where you grow and collect items and upgrade equipment and level up your characters. But it should start very casually. As you progress and own more assets, you’re likely to settle down in a game. In real life, you’re more likely to stay someplace once you have more assets there – a car, an apartment. It’s the same in a game. Once you’ve invested more of your time and energy, you’re going to stay with it.

A lot of Web3 gamers aren’t necessarily even gamers at all, in a way. They’re grinders. It’s not a game. It’s more like a job for them. That’s okay. They’re just extrinsically motivated users. As they grow and progress and gain more items and so on, they’ll settle down as well. That extrinsic motivation can convert into an intrinsic motivation. It happened to me when I was young. My mom wanted me to read books, so she’d give me some money every time I read a book and told her about the story. Later on she stopped giving me money, but I still loved to read. It’s just about finding that primary motivation. It can be extrinsic, earning money and trading items, and intrinsic as well, enjoying that activity more than other ways of making money. It’s a primary and secondary thing, not 100% one way or the other.

GamesBeat: We had a lot of Web3 game companies that got started, and they found a lot of funding. When I looked at that funding, at one point 50% of all the companies receiving venture capital were Web3 game companies. It hasn’t taken off as fast as some of those companies and investors expected, though, and a lot of those companies just went out of business. The market has taken off too slowly. How many successful Web3 game companies do you think we’re going to see?

Kwon: Number one, when you look at Web2, it’s really tough, as I say, to launch a game and be successful. The same is going to be true with Web3 games. You need a good product, a fun game, and that’s tough. Plus, with Web3 you have to have smart economics, inside and outside the game. You need to build a community. You have to maintain that decentralized governance. There are so many more things you have to do.

A lot of the Web3 game projects I see — some of them don’t have the product. They just have hype and speculation. For a time it was easy to draw investment that way. Some companies have a good product, but they don’t know how to make it a good Web3 game. But once one of these games hits big, the returns will be huge. This can be a perpetual game, an autonomous world.