VNG Product Case – Gaming Track

Chúng mình là CRUSH Team - Mong là BGK sẽ PHẢI LÒNG

Introduction với Strategies của tụi mình

Our work uses desk research methods, using information retrieved from secondary data
sources which were published on the VNG website, DappRadar, NewZoo and public articles.

First, we would analyze the External environment by using the PESTLE model which
considered the major external factors that have influences on the sector, and Porter’s 5 Forces
model to understand the NFT-Game industry in more detail. Then, we would figure out the
opportunities and threats from the external environment.

Second, we would analyze the Internal environment to point out the strengths and
weaknesses of VNG Games by focusing on the Value chains and Resources of the company.

The next step is to determine the gains and losses for VNG if it enters to NFTs gaming market.

After collecting all the needed data, the research team synthesized results and proposed
Approaching Strategies for VNG.
External Environment
OVERVIEW: NFT GAME MARKET

Based on messati.io, the overall value of NFT games reached 7.63 billion USD in 2021, representing a variable rise of
2,300% over 2017 → attractive growth market, but it is still a relatively small market within the game industry

There are now 398 active NFT games, defined as having at least one active wallet in the past 24 hours within the game,
which is a 92% increase from a year ago (DappRadar, 2022) → competition is heating up

The number of daily unique wallets interacting with game-related smart contracts surged to 1.3 million last year, a 46-fold
increase over the 28,000 at the end of 2020 (DappRadar, 2022) → a rapid pace of adoption of NFT gaming

Venture capital firms have invested $4 billion to support the development and creation of blockchain-based games and their
underlying infrastructure (DappRadar, 2022) → such a large investment help to grow the ecosystem

Key considerations Some key drivers for NFT gaming: Some key near-term risks:
• Mainstream adoption of crypto will increase the profile of NFT games • A broader slowdown in the mass adoption of crypto
• DeFi adoption as a “money-lego” for gamers to cash out/earn additional income • Poor UI/UX of existing games and applications
• Better infrastructure (both in terms of technology tools and blockchain scalability) resulting in accessibility difficulties and a decline in
• eSports will help promote NFT games whilst expanding the wallet size at the same time engagement levels
• Mobile version of NFT games will help target a more diverse audience • High gas fee for transactions
 Nansen.ai
First-generation (2017-2019)
The first generation of NFT games was predominantly based
on digital collectibles

Second-generation (2019 -present)

Second generation - where the focus has been on improving
long-term player engagement through their in-game digital
economies, particularly with the help of “Play-to-Earn” (P2E)

Third-generation (upcoming)
The upcoming third generation of NFT games is expected to
come with a more refined gaming experience, leveraging on
the strengths of play-to-earn combined with better game
design/graphics that would align it with lower-budget AAA
games.

Fourth-generation (near future)

In the past, large game developers took a passive approach
towards NFT gaming, largely by funding crypto-native
developers through incubation labs (such as Ubisoft’s
Entrepreneurs Lab). The development cost of an AAA game is
significant, and hence these large developers would only take
the risk of a big-budget project once NFT gaming becomes
Source: Nansen.ai mainstream.

Implications: Small game developers and start-up can only get “first-mover advantage” in the early stage before some big players
(EA, Ubisoft, etc.) with huge competitive advantages join in the market, although the early-mover will be exposed to higher risk of
volatile market
 MACRO: PEST ANALYSIS

PEST External Factors Influencing the industry Importance

Political - Government policy - The instability due to the tensions inside the U.S., between U.S. and China, between EU members can lead to - High
- Change in taxation extreme policies affecting blockchain technological projects, such is the ban of Bitcoin in China (Zhong.R and - High
Lee.S, 2021) & (BBC News, 2021)
- The taxation and regulation toward cryptos and NFTs (Davison.L, 2021)

Economic - Economic Trend
- Inflation
Implications: Under legal uncertainty, NFT game developers may face the risk of infringing securities, anti-money
laundering, intellectual property, etc. laws and regulations and be banned.
- Because of the stimulus packages due to Covid towards companies and individuals, and the interest rates - Medium
worldwide at minimum or even negative in some countries, NFT gaming and the metaverse markets were - Low
experiencing full wing in 2020 (Lope Calvo de Quinto, 2021)
- In the post-Covid, a large amount of US dollars injected into the economy for recovery results in inflation
(Romei. V. 2021)

Implications: Huge boom in the NFT game market can fuel the participation of more competitors and investors
Social - Digital - Major activities from working on distance to purchasing online has surge during the lockdowns and has been - Medium
Transformation stablish as a new norm (LaBerge. L, O’Toole. C. 2020) - High
- FOMO - Due to the rise of cryptos and NFTs many people fear of missing out an opportunity to get "rich" and are risking
considerable savings in projects without proper valuation or knowledge on the topic (Wigglesworth. R. 2021)

Implications: The new norm may facilitate the crypto-adoption in some certain areas. FOMO phenomenon drives
people’s huge interests in play-to-earn games, also drives investors toward NFT game projects
Technology - Innovations - Ongoing innovations in blockchain technology, cryptography, and tokenization have a crucial role to play in the - High
NFT gaming industry

Implications: Implementing innovations (Metaverse, ect.) in NFT games can help enhancing players’ experiences
 MICRO: PORTER’S 5 FORCES

Buyer Power: Medium Rivalry: Medium Supplier power: Medium

According to Statita.com, the users
count over the past 30 days (Jan,
2022) for each game title is not so
much, also as the modest number of
users showed in the case package →
buyers may have many choices over
the NFT games, however, there is high
switching cost due to different game
processes on different platforms.
(Show in figure 1 & 2)
There are now 398 active NFT games
(DappRadar, 2022), with some prominent
competitors such as Axie Infinity, Alien
Worlds, Spinterlands, SandBox in the last
30 days (provided in the case package)
varied among different genres (RPG,
simulation, card games).
The top titles are dominated by
independent developers. Large traditional
game publishers have yet to release any
major blockchain game titles.
Some of the services can be easily found in
competitors for a reasonable price, such as
web services, network infrastructure,
software. (Lope Calvo de Quinto, 2021)
However, there are only some highlighted
suppliers such as NFT game development
service, blockchain providers and wallet
providers which provide businesses the
unique platforms and game contents.

New entrants: High Substitutes: Medium

Stratis recently conducted a survey of 197 game developers across the Substitute for entertainment is high: sports, movies, books or
U.S. and U.K., with 72 percent of respondents saying they could see even the traditional games due to cheaper cost.
themselves adopting NFTs or blockchain technologies in the future and
Substitute for “play to earn" is high since there are many
56 percent planning to do so in the next 12 months. (Forbes, 2022)
investment channels nowadays. These channels are even more
familiar with users, such as stocks, bonds.
Gaming giant Ubisoft has announced plans to launch blockchain-based
However, it’s not easy for users to switch to these above
games. Also, a number of new blockchain-based gaming startups have
substitutes since they have been spending a lot of money, time
launched, including Neon, which raised more than $10 million to
and effort on installing wallet and starting to play NFTs games.
develop a blockchain-based AAA shooter game. (Forte, 2021)
 Statista

Figure 1, 2: NFT games with the highest player count in the last 30 days as of January 10, 2022

Statista.com
 VNG’s website & reports,
Internal Environment Public articles
VNG GAMES: VALUE CHAIN

Firm - VNG Corporation has both C-suite executives and President

Infrastructure: - VNG’s head office is located in Ho Chi Minh City

Human Resources - Actively looking for potential candidates and new talents through promoting annually management program
Development: - Further development through training program at the company or through cooperation with foreign partners

Technologies
- Research and produce “Made in Vietnam” games in order to increase added value and diversify products
Development:

Procurement: - VNG has big partners from China such as KingSoft, Tencent, …

Inbound Activities Operating Outbound Activities Marketing & Sales Services

Cooperating with Advanced technology Qualified inspection Online-game Increase promotion

reputable online-game in operating and system and modern distribution system and and public relations
suppliers, yet passive developing products software development agents nationwide activities
towards problem model
 VNG’s website & reports,
Internal Environment Public articles
RESOURCE & CAPABILITY

TANGIBLE INTANGIBLE

Financial capabilities:
• Investing in many large profitable projects: To June 2020, VNG’s total • VNG has been building a winning reputation
capital was over 7800 billion VND in the Vietnamese gaming market & leading
• Cash and cash equivalents at the end of 2020 was over 2400 billion VND this industry. In 2016, VNG holds 35 percent
of the PC game market and 50 percent of
Technological capabilities: the mobile game market in Vietnam.

• Most of VNG’s products are imported from abroad • VNG is also the leading publisher in
• Distribute online game internationally, build facilities and technical Southeast Asia with over 3200 associates,
infrastructure for game and entertainment services, and online platforms reaching over 80 million users in 193
countries with 15 languages.
Organizational capabilities:
• VNG has a strong R&D team and resources
• VNG pays great attention to investing in building a complete human
resource management system, which is considered a great asset of an
enterprise
STRENGTHS
High reputation as game publisher in Vietnam & Southeast Asia
Advanced technology (both by cooperating & self-develop)
High-qualified and skillful employees
Strong R&D team
SWOT
OPPORTUNITIES
Analysis
The NFT games market is expected to grow swiftly
NFT games now have huge attention from Venture Capitals
The new norm may facilitate the crypto-adoption, as well as NFTs
FOMO phenomenon drives people’s huge interests in play-to-
earn games, also drives investors’ interests in NFT game projects
WEAKNESSES
Incompetent to develop games, dependent on purchasing
products from foreign suppliers
The testing system is still limited
THREATS
Legal uncertainty toward crypto trade, NFTs
NFT games aren’t yet big enough to really qualify as a fully-
fledged category
The competition among rivalries is getting fiercer
The early-adoption players' pool isn't large enough to be
served by abundant NFT-game publishers
“What if VNG decides to make a blockchain game or adds NFTs to its
existing games?”
1/ VNG has to carefully evaluate any possible gains compared to the loss. Considering high switching costs for successful
traditional developers: Most blockchain game and infrastructure development has come from crypto-native developers, such
as Dapper Labs, Sky Mavis and Immutable (Bitkraft.vn, 2022). Traditional games selling items to players and taking 100% of
the money, with an endless supply of primary drops, is the norm. Them integrating NFTs is them losing out on revenue
because of the secondary market, where users will take 100% of the profits (dependent on royalty fee, could be a bit less).
And this is also a reason some traditional game studios aren’t even looking at NFTs, they don’t see it as worth their time until
the statistics show they can make more money. (loop-news.com)

2/ The likes of Electronic Arts and Ubisoft, who publicly support blockchain projects, have faced backlash from traditional
gamers (cryptonews.com). There continues to be mistrust in blockchain projects from the mainstream due to misinformation,
which is unfortunate, and education is required for them to change their mind. However, it will be very hard and may take
years. But the more years traditional game studios wait for them to be accepted, the longer it will take to catch up to
everyone building in this space. (loop-news.com)

3/ A few traditional game studios that don’t care and take the step forward this sector would start from scratch rather than
implement NFT to their existing games. Integrating NFTs to games that have an already existing userbase won’t work well
because the tech isn’t ready for many users yet (loop-news.com)
Approaching Strategy
(Noting that, O: Opportunity, T: Threat, S: Strength, W: weakness)

1. Facing the potential growth of NFT games (O), VNG is still incompetent within this sector (W) → VNG should invest in NFT
games and collaborate with studios that are building already. It’s the optimal way to gain exposure to the inevitable big boom,
without sacrificing their existing users that are against NFTs

2. Considering FOMO, Play-to-earn has been a key driver for gaming’s increasing popularity, and it’ll likely remain so (O).
Meanwhile, the players’ pool are not too big (T) → VNG should research well on the design of appropriate rewards, gameplay
and play-to-earn model which incentivizes gamers

3. Still, there is lack of a thorough study on how big NFT-gaming is and will become in the near-future (T), go along with the rise
of many NFT-game projects (T) → VNG should utilize its R&D strength (S) to conduct a thorough study and make considerable
degree of experimentation as the sector decides what works and what doesn’t.

4. Although VNG has limited testing system capacity (W) and may face the risk of an uncertain regulatory environment when it
enters to NFT game sector (T), it has a pool of skillful developers, artists, and game designers with years of experience (S) →
VNG should collaborate with blockchain technology providers dedicated to regulatory compliance, gaming expertise and
enterprise considerations