Yuga Labs CEO Daniel Alegre: We focus on content and community

Yuga Labs CEO Daniel Alegre: Content and community are our focus.

Compiled by Dong Nuo

Yuga Labs CEO Daniel Alegre attended an offline event hosted by the Overpriced APEC podcast in Austin to share some of their views and development plans.

Host Carly Reilly: Judging by the number of people in this room, I know there are many others who are very interested in this conversation. When you were announced as the new CEO, it felt very important, even though you only recently started your formal job. But it’s really inspiring and uplifting because you come from what may be one of the world’s largest gaming companies, worked in a C-level executive position, and now come to our Web3 world to manage Yoga Labs.

Today you have a major announcement, I believe it’s about the hiring of Mike Sievers as the new Uganda Labs CTO. Mike recently served as EVP at Epic Games and was previously CTO at Riot.

And he has a very impressive gaming background. I want to ask you a question, as the beginning of our conversation, to express your vision for Yuga. What did you tell Mike, how did you persuade him to leave his superior position in Web2 gaming companies, come to our challenging Web 3 world, and join Yuga? How did you talk to him?

Daniel: I initially tried to recruit Mike Sievers as the Chief Technology Officer (CTO) of Blizzard Entertainment, but after we opened the Fract branch for about three weeks, Microsoft’s deal was announced, so I decided to suspend the CTO role setting for the Fract branch. But I always remembered Mike’s talent. So when I came to Yuga Labs, I immediately called Mike and said, “Do you remember our previous conversation? There is a great company, Activision Blizzard, but there is a better company called Yuga Labs.” I introduced Yuga Labs’ vision to Mike and where I want the company to go, and I assured him that he would meet some great people, including someone with innovative thinking, excellent cultural adaptability, and a deep understanding of Web 3. You will see Mike make amazing achievements in inheriting the great will of Yuga Labs’ founders.

Host Carly Reilly: Do you need to sell Web 3 to him? Or is he already interested in it?

Daniel: Sometimes you come across a situation, and I’m sure many of you have experienced this, where when I spoke to him, he was candid in saying that he actually hadn’t thought too much about it and truthfully didn’t know much about Web 3. But I started to explain my reasoning, which also answers the question that you might have, which is why are we doing this.

Host Carly Reilly: Okay, keep going, now you can speak freely and efficiently answer questions.

Daniel: It was obvious to me why I came to Web3. Blizzard Entertainment does have some of the world’s most iconic games like World of Warcraft, Call of Duty, Overwatch, Diablo, and so on. And there were two things that happened while I was there that were obvious, but it wasn’t until I actually sat in the chairman’s seat of the company that I realized how important they were. One of them is that no matter how good your game is, if you don’t have the endorsement of an influencer, the game is not going to be successful. So even if you make great branding, TV ads, or do any display advertising online, it won’t progress if a notable influencer doesn’t give their approval of your game.

Now, if you look at what Ryan Reynolds is doing with Mint Mobile, you’ll see that influencers are getting away from just being game endorsers or talking about games. They actually want to be involved in the entire ecosystem of what’s happening in the game. So they know they don’t want to say Diablo is great, they don’t want to say other games are great, give me money. They say, how can I be part of the entire ecosystem? This is very clear to me, it’s a signal. We need to fundamentally rethink how games work between influencers and players. Game players spend a lot of time and money in the game, hoping to use them to make progress and achieve success in the game.

Now, if you don’t like the next version of the game or you’ve reached your limit, you’re going to be frustrated and you’re going to want to start over in another game. So when I was in Miami and I met with the two co-founders of Yuga Labs, Greg and Wylie, we started chatting and they talked about this problem, and we can solve it for you through Yuga Labs, and where we want to take Yuga Labs. Frankly, it was a match made in heaven because they were thinking about how to focus on content and content creation as well as community building.

Then, games are not just about the games themselves, but the entire entertainment industry and the relationships between people through entertainment, putting creators and communities at the core. This is what games should really focus on. This is the path you should take.

Host Carly Reilly: I don’t want to delve too deep into this, but how did you first connect with Wylie and Greg? Did they reach out to you, or were you interested in Web3 and actively seeking partners?

Daniel: It was a great recruiter who told me, “Hey, you should meet these two guys.” We were supposed to meet for dinner in New York, but it didn’t happen as planned. Later, I went to Mexico to visit my parents and they told me, “Hey, we’re in Miami. Do you want to fly over and meet them?” So I did, and obviously it was good recruiting.

Host Carly Reilly: I think that’s very attractive and shows your belief in this as the future. I found an interesting thing. Roadblock raised funding with a valuation of $4 billion in 2020, and many people may know that Yuga Labs also raised funding with a valuation of $4 billion, both led by a16z. When Roadblocks reached this valuation in 2020, they had 115 million monthly active users. So what is your vision for Yuga Labs to achieve 115 million monthly active users?

Daniel: That may underestimate the direction I want to go.

That’s just hype. The reality is that there is an obvious tension between where we are now and where we need to go, right? We have a very close-knit community, including the Board Ape community, CryptoPunks community, MeeBits community, etc. It’s a relatively small community with very close connections. We want to make sure we continue to maintain the cohesiveness of this community and continue to provide value to them.

At the same time, I’m not focused on the $4 billion, $40 billion valuation issue. What I really care about is providing excellent and unique experiences and connections for the community. If this leads to 150 million, 200 million, or 300 million independent users, that’s great. But that’s not the real reason why all of this is happening. The driving force is very clear to me, and I think everyone here can understand that this is a groundbreaking change that is about to happen in many fields such as media, tourism, finance, etc. For me, the key is that we continue to be a company known for creativity, connection, and community.

However, due to the fact that we already have such a large lead, many people hope that we not only continue to innovate, but also bring more people into the world of Web3. On the other hand, this is clearly one way to achieve this goal. This reminds me of the Internet in 1994 and 1995. Some of you may still remember what it was like to connect to the Internet. You had to connect a modem to your computer and then call the telecommunications company. The telecommunications company would say that we don’t have anyone who knows the Internet specifically. So he’ll show up in two weeks, then connect for half an hour, but then it won’t work anymore.

Then a company called America Online appeared. They will send you a CD. What do you do with the CD? Insert it into your computer? This is a miracle that those without a computer science degree can really connect to the Internet. This is where the opportunity lies, right? How do we provide a great experience? Obviously, we want to use the technology that Web3 brings to bring as many potential Web3 users as possible to our platform. This is what I want to do on the Other Side. Many people have been asking me, Daniel, you come from Activision Blizzard, you have just hired Acto from Riot and Epic, and your Chief Gaming Officer comes from Scopely. Are you a gaming company now? We are not a gaming company. We are a content company, a community company, but we are using games as a way to enter Web3, because there is a very strong similarity between the gaming experience and the online gaming experience.

What can you do in Web3 is not as daunting as it used to be to connect to the Internet. By the way, I don’t want to compare us with AOL because AOL failed four years later. But the principle is the same. This is why Spencer Tucker is here. He is our Chief Gaming Officer, and the experience he is developing will allow consumers and gamers to truly experience the fun of Web3 without feeling commercialized like Web2 companies. I have to say, this is what we can do. This is why we take games as a way to enter Web3, and the experience and technology in this area can help more people understand Web3. There is a strong similarity to the experience of online games, but the potential of Web3 is greater. We hope to make people feel surprised and engaged through these experiences.

Host Carly Reilly: So you’re not a game company, which is interesting, but your current focus and attention is on games. This is your tool to attract people. For example, you made Duke Dash. But what I think is more interesting is that you have casual games like Duty to actually and Legends of Mara. I’m curious about how casual games fit into Yuga when you consider it. When considering Other Side, do you think it is a 3A-grade game in itself, and these casual games (such as Duke Dash, etc.) may be a testing ground for features, or a way to continue audience engagement while developing 3A-grade games? Or do you see Other Side as a platform where many casual games will exist on it?

Daniel: Do you want a very precise and quick answer?

Host Carly Reilly: Let me ask you this, what do you think is the best metaphor for Other Side?

Daniel: You will understand a lot more if you look at what Facebook is doing in their metaverse. First, the idea that the metaverse is new is a misconception. In fact, the metaverse has been around for a long time. You can look at World of Warcraft or Warcraft, they are the metaverse. These experiences are like metaphors, and they are heading in the direction they encounter on Facebook. Basically, what they are doing is building these features and tools, and people will like it. And the approach we are taking on Other Side is very different. First, we are building these features, some of which are actually casual games. You can imagine that eventually, the games and gamification on Other Side will surpass casual games and become more immersive. We will work with third-parties to build applications on this platform. But we are sowing the seeds for a very passionate community that has a reason to come together. This is a very different approach from what other companies are taking, so this is why we brought PollDers to Other Side, they have experienced the first and second journeys of gaming. The gaming experience Spencer and his team are building is to bring the community together and make them aware of other aspects.

Now that you’re on Other Side, you can connect. These are other things you can do, experience, like how Web 2.0 players experience Web 3.0. This is what NFT holders can experience on the platform gamification. This is the first stage. We will reach the point where Other Side is no longer in its current decentralized state, right?

There is a 7-8 month gap between the first and second journeys, around April. Yes, it’s a very long gap. We’ll reach a persistent state of the Other Side, which will have some great gameplay experiences, but we’ll also have other community elements. What is the ultimate goal of the Other Side? First of all, we basically believe in interoperability, we don’t necessarily want to be a platform, but we want to be an innovative platform. We hope that other platforms will need to work with us and enter the market together. This is not a zero-sum game. We can benefit from many users. Fundamentally, from Web 3, the interoperability of Web 3 will actually become a huge differentiating factor and market driver.

Host Carly Reilly: How long will it take to reach a more persistent state of the Other Side? Is it a matter of months? That’s a question that can be answered quickly. So I want to talk about the economic issues here. This may lead me to ask some questions about risk, because a lot has changed since that $4 billion valuation.

So I want to ask you about some of the risks you see. But specifically here, you used to work at Blizzard Entertainment. At that time, Candy Crush was a very successful game, free to play, but earned a lot of revenue through in-game upgrades and purchases. And what’s interesting about games like Dooky Dash is that you can only buy items in the game with ape coin, and you need a pass to play the game. I want to know how you’re thinking about the future development of this issue.

Before I ask my question, there’s one more thing to say. I saw a quote from you on Bloomberg, where you said that the income of every user of Duke Dash is what you dreamed of at Blizzard Entertainment. Did I understand this correctly?

Daniel: Yes, you understood it correctly.

Host Carly Reilly: I know you want to correct some substantive content. Yes, you said you were dedicated to this economic model. At Blizzard Entertainment, I guess the game’s profit was mainly based on the two aspects I just mentioned: people buying ape coin and then using ape coin to buy upgrades in Dooky Dash, and buying passes for secondary sales, but you also stopped selling passes after you left.

In my opinion, for casual games, a game economy model like Duke Dash is a successful business model. However, as time goes by and technology develops, we can also see more payment methods and game versions that allow anyone to play the game, not just token-based versions. Regarding versions that use passes as token thresholds, do you think this model will continue to be maintained in the future?

Daniel: I want to answer your question completely transparently. Honestly, I don’t know the exact answer. We are trying various models. One thing we are very, very attentive to is scalability and how to quickly reach 150 million or 200 million users. We want to ensure that our property holders, other property holders, and NFT holders can derive significant value from the investments they make. But at the same time, we also know that if we only have 50,000 or 100,000 unique holders, we cannot be a truly scalable platform. We need to reach a larger scale.

We are now trying to figure out the mechanism. What does it mean to own property? What special value will you get? If you participate in the experience from the outside but are not necessarily a property holder or NFT holder, what impact will there be on the profit point? This is what excites me very much. When I announced that I joined Yoga in December last year, Spencer and his team introduced me to how they plan to operate Dooky Dash.

Then I said, okay, let me think about this mechanism. So you will limit the number of users and they can only play for three weeks. This is incredible in the game, right? Who would say that only these people can play, and you can only play for a limited time. I have to rethink my understanding of the entire game process and see how all of this works. Another thing that really makes me nervous is that you have a AAA-level company with more than 100 people. From owning a Board Ape to obtaining a token, to receiving a token and starting the game, the entire process is complicated, and there are cheating issues. Finally, you must ensure that you have the correct statistics and the server is running properly, etc. Are you sure you can do it? By then, I realized that I was a person from a big company, right? Because Activision may have thousands of people working on this issue for months.

But you have a passionate team who said, “We’re going to have an amazing experience no matter what.” Their only issue is they’re delayed by three days, Spencer’s four. Other than that, everything is seamless and the economics are great. But that’s not what’s really exciting me. What’s really exciting me is that this is a team that knows how to have fun, and they’re doing it. That’s awesome.”

Host Carly Reilly: This may be a stupid question, but you described it very clearly. You said you only had three weeks and a limited number of people who could play this game. Why did it succeed? It looks weird.

Daniel: I think the first thing is that people have a fear and concern about Web 3 and NFT games. Traditional Web 2.0 companies have tainted the concept of NFTs by saying, “Yes, we believe in NFTs. So now you can buy a limited edition sword in the game. We’ll make money off of you now.” But players see through that. They say, “Okay, so you’ve already asked me to pay $70 for a premium game, plus digital goods, plus you’re going to sell me a sword. That’s not fun.” But if you think about game creation from the perspective of Web 3, you need to fundamentally rethink the idea of game creation. Spencer mentioned this several times today. He said when you think from the perspective of Web 3, you get real ideas that need to disrupt game creation. That’s the concept of Dookie Dash. It’s the first experiment that shows NFT holders an experience right from the game. Ultimately, you can imagine it entering other areas with ownership and identity at its core, what will the experience be like?

When people experience this game, they easily understand its mechanics, and of course, winning the game is very difficult. Yes, I’m not going to tell you how poorly I performed, but I really did perform poorly. I think people realize that it’s not just about making money, it’s an experience. People are participating just to participate.

Host Carly Reilly: So you say people realize it’s not just about making money, but I’m actually curious, do you think the success of Duke Dash expresses some of the fundamental characteristics of Web 3? To what extent does it express something about Yuga, that your stuff is really valuable? Is it about money that players win more Yuga items that they can sell for a lot of money?

Daniel: Duke Dash’s players are token holders. I think we can split them up into three categories. The first group of people are those who love the game and are willing to spend time playing it. The second group of people are those who see an opportunity here and want to see what it will bring them. They have professional players represent them in tournaments. The third group of people may be professional players.

There are also some people who basically say, “I’m not a gamer. I don’t really understand it, but I want to get some value out of my token.” So they actually sell the token. The result that has produced is that it’s brought us revenue, but it’s also attracted a lot of new community members to join our platform, and this is a zero-cost marketing that has produced huge engagement and attracted some professional players, like Fortnite players who have won tournaments, to join our platform and experiment.

So we see a lot of different reasons why they like it. One is I can make money from it. If I sell my token, I can let someone else play and then I can get the benefit of it. Second, I can really play it, enjoy it, have fun. We actually cover these three different components. And from the standpoint of engagement, conversion rate, and average revenue per user, in some cases, we’re achieving 100 to 200 times more revenue than a regular game that lasts for several months.

Host Carly Reilly: I have more follow-up questions, but I’m also mindful of time, and I need to move on. So I’ll take your word for it. We’ll have further conversations to explore sustainability issues. I want to talk about risk. I mentioned earlier that things have changed since the $4 billion valuation, that secondary royalties suddenly faced a major crisis, that the trend is no longer there, and there’s quite a bit of regulatory headwind. Because Yuga is so prominent, you’re definitely in the eye of the storm. Also, the trading volume and active users on the market are at historic lows. What do you think is the biggest risk for Yuga? Or to put it another way, if the worst-case scenario happened and the vision wasn’t realized, Yuga didn’t succeed, what would this story be?

Daniel: When you have such an iconic brand, the community’s expectations are very high, so I was definitely concerned about that. But I saw a lot of support and expectations from the community in the responses I received on Twitter, which was very encouraging. Our founder has always been committed to the values that Yoga represents. As I said, we have reached a consensus on what we really want to build, to stay true to Yoga’s values and move forward in the future. I think we will continue to do the right thing for the community, stay closely connected and listen to feedback, because we really care about the community’s feedback. We just need to continue to surprise people and launch really great products.

Host Carly Reilly: This is the last question, what is Koda?

Daniel: For Koda, code is something you must possess.