This is a VB Lab Insight article presented by Xsolla.

At GDC 2023, Dean Takahashi, lead writer for GamesBeat, welcomed Chris Hewish, president of Xsolla, to discuss the new initiatives Xsolla recently announced. They talked about the opportunities its new cloud gaming solution will crack open for game developers, featuring a new pay-as-you-go model, and the company’s expansion of the Xsolla Digital Distribution Hub into the telecommunications industry and its global audience of 7.3 billion mobile phone users.

The focus is on building relationships with players, Hewish says – and a lot of that comes from the ability to connect directly with them, via online hubs, outside of app stores.

“We’re seeing some companies are generating up to 40 or 45 percent of their revenue through these online web shops,” he said. “They’re seeing incredible engagement from players that visit them. Up to 80 percent of the visitors make a purchase. We’re seeing the average number of purchases on a web shop monthly is five per visitor. And then 35 percent of those visitors are doing 10 or more purchases a month.”

This all ties back to the increased democratization of gaming. It’s about unlocking the ability for players  to pay or engage with a game no matter where they are in the world, and giving them alternative payment methods and distribution channels to make the experience global and universal.

The vision behind Xsolla’s new cloud gaming solution

Cloud gaming has had a mixed reception over the years, but if you look at it as a tool rather than a replacement platform, it’s opening up opportunities for a new kind of player connection and engagement, without the complexity, Hewish said.

“We’ve offered a new solution for our partners where they can have a single point of contact for their players to come in and experience a game that is running through the cloud — but on the back end, we’re solving for a lot of the problems that have limited cloud in prior years,” he explained.

Cloud had previously been viewed as an all or nothing proposition — you choose one cloud provider, and deploy globally from there. However, most of these providers didn’t have the reach necessary, with audience segments too far from the necessary servers.

“The experience falls apart. The monetization model maybe wasn’t really transferable,” Hewish said. “We’ve created something that allows multiple cloud services to come together on the back end and, as a player that comes to check out your game, they’re not having to face which cloud service they should choose, which build type. They just log in and play the game.”

On the back end, Xsolla’s customer is directed to the best provider of cloud services with the lowest latency for wherever they are in the world. On top of that, the company has developed a new business model, in which players now have a pay-as-you-play option. It opens new markets, in territories where disposable income might be lower. Offering a pay-to-play option, testing games before they buy, gives players more confidence in making a purchase. Their engagement with the title is higher, and the relationship with the developer stronger.

“This really allows game companies to monetize cloud in an entirely new way, and offset some of those costs that normally would be a negative when it’s a free-to-play game and you have additional cloud costs,” he said. “Again, it’s kind of a tool that can go alongside your existing business to access new audiences — not a replacement for your entire business.”

It can also be used beyond monitization for things such as beta testing. Putting a new build in the cloud gets it into the hands of more testers, and it can be updated quickly on the back end.

Expansion into telecom industry opening democratization for gamers

Between the big phone and telecommunication companies like Verizon and T-Mobile there are more than 7 billion customers. And these companies are beginning to recognize the opportunities gaming opens up for customer engagement.

Xsolla has created a solution called a digital distribution hub that allows publishers to plug into not only this vast network of telecom companies, but super apps, banking apps, and all the other companies building their own digital hubs, online or in an app. It means customers have their games and can make in-app purchases in the same place they spend much of their online time. Xsolla handles the backend issues for developers, so that game developers just focus on making great games and seeing their business grow.

“Now people can transact and engage with your game while they’re doing their banking or while they’re looking at their carrier billing or whatever it might be,” Hewish said. “It also creates a whole new round of marketing opportunities, because these companies will promote it.”

These super apps have enormous audiences around the world, where users can live their digital lives in a single hub, and games are just another great addition to that, he added.

“It really opens up the audience,” he said. “The data we’ve found, the research we’ve done, talking with telco customers, they say about 35 percent of the telecom customers say that they would happily transact on a game purchase within their super app or on their AT&T app or Verizon app or whatever if they’re presented with these opportunities.”

But he stressed that it’s not an either-or — themversus the app stores. Rather, it’s a whole new opportunity to grow the business in another arena, while continuing to nourish it on other digital platforms by giving customers more choice. This is an especially key benefit, as discovery has become a significant issue for game companies, particular mobile games, which have often struggled to build communities around their games in the same way that indie PC game companies can. However, these web shops offer the opportunity for engagement with users, both before and after launch. “It’s a great way to deliver content. The thing that I personally am excited about is it’s a great way to build that direct relationship,” Hewish said. “Being an old school PC gamer myself, knowing the power of being able to connect directly with the game maker, it creates such an awesome experience for everyone. That’s what we’re seeing in the mobile space. Companies are starting to see the benefit of that, of having that direct relationship.”

Watch the entire conversation here.

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