Intro
Gm folks,
It’s been rough out there. The MC Enterprise is stuck on an icy moon, and Admiral Pumpson used up all of his space-gel. Honey has been “arbing” vodka futures alone at home. Some days, I’ve thought to myself, “I should have just taken the investment advice of the TG scammers.” But, then, it happened. I caught the full-blown crypto bug, and I want to buidl some mf games.
Authors
- Jon Rodis (Dolly Dali)
Summary
We propose creating a Merit Circle subDAO that will launch and operate a word game platform named Seed Words. Seed Words will be a one-stop destination to play versions of well-known word games (e.g. crossword puzzles, Scrabble, etc.). It will also give players new social gameplay experiences and connect them to creators in ways that are only possible on Web3.
We believe this is a low-risk / high-reward opportunity. In fact, we think the word game market naturally fits a “winner-takes-most” model, and we believe we have a viral growth strategy that can attract a large percentage of the daily word game players, connect them, and create high barriers to exit.
Investors are looking for real returns and products that can ship and grow a user base quickly. By developing games in-house, we keep our cap table lean, but shipping our first game with in-house development changes our value proposition for investors forever. Not only can Seed Words ship, it can help Merit Circle take the lead in using Web3 market-creating tools without spending a lot of money.
For these reasons, we propose that Merit Circle allocate funds (up to $500,000) to build the platform and scale its community.
Phase 1: Seed Words launch event (Season 1)
Phase 2: Minimum viable platform
Phase 3: Social media word gaming platform
Abstract
The word game market
The crypto market has been challenging lately, especially in the GameFi industry where many projects are still developing sustainable game economies. Given the DAO’s expertise in this area, I’m convinced that we at Merit Circle can create sustainable game economies within multiple genres, and capture a large percentage of the GameFi space. After thorough analysis, I propose that one of the best GameFi opportunities is word games.
Consider, in word games:
- The network effects of existing platforms are relatively weak and the barriers to player exit are low.
- The games are evergreen, the design is not IP-driven, and the players are loyal to wordplay itself–not the publisher, app, etc.
- The development costs are low for all word game genres.
- The lean capital structure for word game projects means:
- Low sell pressure on tokens at launch (or no sell pressure if a token is not needed to repay investors immediately)
- Low barriers to player entry. Projects with limited initial investment can afford to on-board new players using a F2P model. No economic barriers to entry means no P2E sell-pressure.
- Word games are intrinsically fun for word gamers. They don’t expect financial reward. They just want good gaming experiences.
However, when you look at the economic value of the word game market (pre-pandemic projections for 2020 were for $450 million), the player experience is actually pretty bad. The market is highly fragmented instead of consolidated into a single platform for word game discovery and social, even though:
- The games are very small and inexpensive to develop
- They all use the same set of player skills (solving riddles, making words from tiles, etc.) and presumably have the same player demographic
We have a three phase plan to grow and consolidate the word game market.
Phase 1 - Seeds Words Launch Event
I think we can capture a large percentage of that market with an all-in-one platform. But, no matter what kind of word game product we build eventually, we will first want to get everyone’s attention in the word game world by doing degenerate crypto stuff with word games: I want to use existing (free) crypto infrastructure like wallets, an NFT marketplace (ours, as soon as it’s live), and a crypto donation processor called The Giving Block to teach people that crypto isn’t just stateless, decentralized capital on frictionless rails….It’s a game show!
I’m designing a launch event, Seed Words: Season 1. It has a narrative arc with many thematic tie-ins to crypto. But each short episode (about 25 in total) will have 2-3 word games / puzzles that advance the story. These short episodes will be released over the course of about 2 months on, say, Thursday, Friday, and Saturday. Most of the events will result in the winner(s) making it to the season finale. There, the finalists will race to figure out the final clue. That clue will give them the actual seed words of the wallet holding the Season 1 grand prize and let them withdraw it to their own crypto wallet. It’s a narrative, on-chain, crypto game show that anyone can play, with a big payoff at the end.
I propose we put $100k in the main wallet to be “hacked” in the finale. It’s an eye-popping figure. People may write articles about how stupid crypto is and how dare we because don’t we know there are people starving? People may say it’s brilliant and, who doesn’t want to be on a game show? On one hand, a $100k grand prize is actually pretty reasonable for an MMO game show with original IP/narrative that lasts a couple of months. We’re experimenting with a format that has never been tried before, and that has value for us as a DAO and to the crypto space, in general. On the other hand, $100k is two year’s median salary in the U.S. This prize dwarfs anything available for competitive puzzle/crossword tournaments. Any publicity is welcome because this is viral marketing and really just an experiment on how to use free crypto infrastructure for games. So, $100k is worth it despite being crazy and because it’s crazy.
I have a lot of ideas on how we can use free, existing, and secure crypto infrastructure, but I’ll just spoil one more now: I think we can use this event to raise a lot of money for nonprofits while getting normies into the crypto space, playing alongside the degens. Let’s allow two kinds of players to participate: “white hats,” who will be playing F2P on behalf of their chosen nonprofit. (We may decide to set up multisig wallets for “white hat” finalists so they can still withdraw the jackpot to “their” wallet. We would send the jackpot from there to a third party crypto donation processor, The Giving Block.) Of course, “black hats” will pay a small crypto entrance fee to play each episode. But like a true “black hat,” they would withdraw the grand prize to their own wallet. And it can all be visible on-chain.
There are a number of ways we can transfer the grand prize to the winner—and the DAO should weigh-in on pros/cons, including the security risks. It’s not necessary, but there is a lot of drama if we have the “white hat” and “black hat” finalists competing for the same jackpot at the end, however. (Who will crack the Seed Words…white hats or black hats?) Regardless of how we set up grand prize security, we can put forward two original narratives in GameFi. First, Play-to-Give (P2G) gaming. I’ve been in contact with The Giving Block who calls crypto giving “degen-erosity.” But this would be the first time it’s in the context of a game, as far as I know. Second, this would be an early example of an MMO game in crypto for stakes. Let’s pioneer both.
We could launch Seed Words: Season 1 in two months. In a way, the launch event could have been the whole DAO proposal because these events could become net-profitable fairly quickly. But, if Seed Words Season 1 gets traction, there’s a reason to use it as a launchpad to capture more of the word game market by building out more infrastructure.
Competitors/Market research
Below are 4 competitors whose player bases could be consolidated into an ongoing Seed Words platform if we build out a player community and infrastructure together.
New York Times games app:
The NYT understands the monetary value of digital word games and recently hired Jonathan Knight from Zynga to be their General Manager of Games.
NYT games business model:
- Use game subscriptions to offset losses in advertising and retain subscribers
- Generating about $40 million/yr revenue for the newspaper
- Digitizing the same old pre-internet delivery model:
- One puzzle (of each type) per day
- Little/no social network functionality
- No user-generated content
- Pay-outs to crossword puzzle authors are extremely low despite the value of games app. Estimated total annual payout of $350,000 to crossword authors (assuming all have 3+ published already) against $40 million games revenue plus subscriber retention for the newspaper.
High revenue for crossword publishers (NYT) and low payout to creators indicates there is a distribution bottleneck: The market wants more crosswords, and plenty of authors are there to provide them. But, centralized publishing is suppressing supply, leaving consumers hungry for more word games, and keeping a large number of would-be professional puzzle creators out of the market.
The NYT design model is:
- Many games in one place
- Authored puzzles + procedurally generated mini-games
- No social
- Relaxing, minimalist interface
- Ideal for retaining/attracting newspaper subscribers
Zynga:
Zynga is huge in the casual space with Farmville, Words with Friends, and many other popular franchises. They were recently acquired by Take-Two for $12.7 billion, and it’s not hard to see why. Though Words with Friends was developed for $200,000, it recently generated $2 million in Jan. 2022 alone. Their model is to leverage Facebook contacts to get people playing Words with Friends and monetize players through in-game items.
The Zynga design model is:
- Focus player attention on one game that sucks you into a Las Vegas style wormhole
- Social linked to Web2 and phone contacts for some network effects
- Sensory-overload interface design
- Ideal for monetizing users on a per-play basis
Mobile app stores + word mini-game apps
These mobile app store games have the most minimalistic interfaces possible. No IP. All procedurally-generated word puzzles drawing from a word list. This is ideal for small indie shops that can bootstrap the smallest possible game and draw long-tail revenue forever with minimal maintenance to the game. Indie shops must list these on app stores and just hope that players pick theirs instead of another clone. There is no reason why we can’t build F2P versions of each of these types of games and get them in the Seed Words platform ASAP, but without the redundancy that players get in the mobile app stores.
Indie word-based video games:
These are cool. They take basic word gaming skills and turn them into a video game. It’s an ideal strategy for slightly larger indie game studios that still need low-cost development. Of course, the development costs are higher than the “indie mini-game app,” but there’s no reason why Seed Words couldn’t develop these kinds of games in-house and place them in the Seed Words stream as a one-time purchase or F2P game. At scale, Seed Words could partner with these developers to make word-based video games and publish them in Seed Words rather than in the AppStore. And we can do so with better app discovery.
Ex 1: Spellspire
Ex 2: Alphabear
Phase 2 - Seed Words Product Strategy
We may be able to repeat our launch strategy several times to create viral marketing for our community. (Perhaps 2-3 seasons per year without burning out our audience on the concept.) But, viral marketing does not create network effects, we need a daily content platform that we can start to build network effects around. At the conclusion of Season 1, we can begin hosting daily puzzle content on our website, just as the New York Times and other publications do. This lets us draw more word game creators, word game players, literary creators, and advertisers into our ecosystem as daily users. If Season 1 is successful, we will have already created enough buzz for our minimum platform site to be revenue-neutral from advertising.
We can embed F2P daily content from Amuse Labs to satisfy general audience word game needs. This includes daily crossword and other popular games akin to Spelling Bee. Amuse Labs charge per-play, and let us rapidly scale our games offerings with our user base without large capital investment. We can also support existing puzzle communities by increasing brand awareness and giving them a platform to offer subscriptions to our users. We can collect a hosting fee to remain revenue-neutral. The goal here is not to squeeze these partners out of profitability. We want long-term partners for developing Seed Words: Season 2+ content, platform design, and governance. That “grow the pie” approach will help us build a large, cohesive community that the word game player base will want to join, too.
We can begin hosting competitive crossword tournaments (using the Amuse Lab infrastructure). We can also use leaderboards as payout opportunities. These payouts can go to individual winners. We can continue the Play-to-Give model by letting players direct their individual winnings to The Giving Block Impact Index-Funds (i.e. charitable donations split between separate nonprofits working toward a similar cause like mental health, for example). https://thegivingblock.com/
Phase 2 also lets us focus on interacting with long-term partners through TG and Discord–the people who came for the launch event but want to stay for the building. We can build out our subDAO governance forum and explore more capital-intensive projects like hosting browser-based digital word games (e.g. a version of Scrabble / Words with Friends) and video games (e.g. Alphabear / Spellspire). Such games could be designed in-house or through contracts with other studios, including those from other members of the Merit Circle family. Because these are capital-intensive, designed for competitive/cooperative play (i.e. network effects), and involve new and larger partnerships w/ indie video game designers, the video game initiatives should be thought of as mid to late stage Phase 2 project that is both a launchpad and checkpoint for Phase 3.
Whereas Phase 1 is a guerilla, Web3 strategy, Phase 2 is a frugal, eclectic, and community-building mix of Web 1-3 strategies. We have limited social media functionality (maybe some messaging), centralized revenue sharing, and a take-rate that lets us be profitable but substantially undercuts the New York Times games app subscription of $40/yr while offering much more content and play modes. This model could be net-profitable and let us develop Seed Words: Seasons 2+. If we decide that this is as far as the platform can go, we could simply keep our Phase 1+2 strategies active, with subDAO profits going to investors, proportionally. However, as long as a transition to Phase 3 is viable, then Phase 2 lets us plan spending/design for Phase 3 infrastructure with ongoing input and testing from our creative partners and player community.
Phase 3 - Seed Words Product Strategy
Phase 3 strategy is to take the player-friendly elements of all of the major word game competitors, elements of Web2 social media, and Web 3 functionality to build a single streamlined user experience for word gamers that is browser-based and mobile compatible:
We think the best play experience for most word gamers will be to discover and play games in a Twitter-style, single vertical scrolling feed, curated to match players’ interests, game formats, difficulty level, and in-platform social network. It looks like a social media app, but it’s not for free-form personal expression/branding. It’s just for playing word games, logic puzzles, and word-based video games then connecting the people who love them. Our goal is that Seed Words will help you zone out like when you were a kid doing one of these:
=>
But because we’re using Web2 and Web3 tools, it will be a word game activity book just for you. It can be as relaxing, mind-crushing, easy, furiously competitive, friendly, social, and/or solitary as you want it to be. A vertical feed (rather than a static game library) helps people engage with the content that they like just by giving them some novelty and social connection. Word games don’t need quite so much of the addictive monetization mechanics (buy more gems now or lose!) that are common in casual games just to be interesting:
The browser-based, mobile-compatible interface above is unified but includes multiple business models that address the needs of players, puzzle authors, video game designers, advertisers, and non-profits in a circular economy. These business models can reinforce each other to create user growth (virality) and barriers to exit (network effects):
- Competitive word game platform:
- We plan on continuing to host Seed Words: Seasons 2+, crossword tournaments, Scrabble tournaments, and leaderboards with payouts for the life of the platform.
- We may continue to use free infrastructure (i.e. wallets, NFT marketplaces, etc.). But we may build native infrastructure into the platform to handle small jackpots, betting, etc. as that infrastructure becomes more available/affordable/secure.
- A native social network helps us make these more viral and create barriers to exit for players and a competitive moat
- Crossword puzzle social marketplace (i.e. how we source crossword content):
- This continues to work in a Web2 model (i.e. we pay creators for content; users pay subscriptions to creators minus a platform fee). But it could transition to a Web3 model as that infrastructure becomes affordable (i.e. users invest in creators’ IP by purchasing/licensing copyright).
- Regardless of a Web2 or Web3 backend, a social media platform lets crossword writers and editors easily form syndicates to generate their own subscription revenues and find product-market-fit for niche and general audiences.
- Because individual crossword constructors will be paid according to their follower count on Seed Words, they are incentivized to micropublish riddles, trivia, small puzzles, etc. through their creator accounts to grow their follower base akin to Twitter brand-building
- Crossword puzzle authors are also highly incentivized to bring their existing Web2 followers to Seed Words.
- Creators can use their creator page to host AMAs, sell books, sell merch, etc.
- Select creators can access/fulfill commissions from our advertisers to construct playable word game ads
- NFT/email enabled ads. Integration with ecommerce platforms (e.g. Shopify)
- Sale of in-game items like custom letter tiles, custom Scrabble boards, etc.
- Revenue type: Fees
- 1st party game developer + 2nd party platform:
- At relatively modest scale (e.g. 10-20k daily users) it is relatively easy for us to raise capital for many new digital word games
- 4-5 high quality games would put us into direct competition with mobile app stores for one of their popular games segments
- We can undercut their take-rate (30%) and/or allow platform-native crowdfunding or even licensing for players
- Revenue type: Sales, advertising, equity
- Publisher:
- Seed Words sells advertising space and playable ads
- Because players can link their crypto wallets, I’d like Seed Words to pioneer airdropped NFT marketing to players. Consumer NFT marketing is likely to be a significant part of the entire marketing industry over the next 5 years. Again, because we are F2P, the expectation is that most of our players will not start with a crypto wallet but may eventually open a crypto wallet to access the full-functionality of our platform. Revenue type: Advertising
- Social media platform:
- Seed words is a limited social network for friends with chat, messaging, feed, invitations to play, etc…
- We will allow for the creation of teams for team vs. team challenges and leaderboards
- We may want to build a friend recommendation algorithm that matches players based on interest in addition to word game factors
- We may allow social functions that promote or would be easily adapted to book clubs / game groups
- All posts will be sharable to Web2 social media for virality
- Bulletin board for local brick-and-mortar bookstores and hobby board game stores
- Revenue type: Advertising
- Non-profit social marketplace:
- Though we feature Play-to-Give starting Phase 1, we may be able to decentralize this in Phase 3 with platform-native rails (e.g. single player winning a single, small leaderboard payout may be able to pledge their winnings directly to a nonprofit of their choice)
- We’d like to combine our Web2 tools for forming teams, issuing challenges, etc. and our Web3 tools for pledging and offering bounties. This would let us facilitate organically occurring pledge drive competitions between groups with natural rivalries. For example, a NL team leader could challenge a German team leader during the World Cup,
- the national fan base could select themselves into each national team
- each side could pledge to donate to their preferred non-profit
- for-profit companies (or individual givers) could contribute to the bounty, and
- a viral marketing event could happen organically. This is a model that Web3 games could explore generally, but it is easiest to explore with short, F2P games that the general public already knows how to play.
- Organic, viral, nonprofit events would create substantial network effects, benefitting all platform stakeholders.
- Crypto industry marketing funnel
- We believe that F2P, advertising-based games and platforms may be the most lucrative because they don’t require players to have crypto wallets. But these types of games/platforms can transition non-crypto users to crypto users through interaction with the game/platform.
- So far, there have been two major crypto on-boarding paths
- Investment curiosity about Bitcoin => CEX => alts => DeFi
- Artistic curiosity about NFT art => NFT marketplaces => NFT communities
- We believe Seed Words can be a game-based crypto onboarding funnel that isn’t focused on the players’ profit motive.
- Desire to play a game => interaction with crypto-enabled n-sided ecosystem => crypto ecosystem user w/wallet => crypto investment / Web3 content creator
- Crypto onboarding is present in Phase 1 but becomes most viral and defensible for us in Phase 3
- Not only will we have investment from the games sector, but this on-boarding model could bring more eyes, advisor revenue, and partnerships to Merit Circle and Seed Words from outside the games sector regarding:
- User acquisition strategies
- Web3 revenue distribution
- Web3+Web2 viral marketing strategies
- Public/private partnerships
- Circular economies
- DAO governance
Motivation / Team
I have many reasons to ask Merit Circle to get behind this proposal, but the core motivation is that it’s a good fit for who I am as a person. I want to do this. I definitely think it can generate enough money for me to retire–and that’s a big incentive. But, mostly it’s been incredibly fun, and I’ve already been working on it for months unpaid. Mostly, I want to build this project and keep myself in a flow state. I’ve been in flow the whole time puzzling through how to get all of the stakeholders fed at the same table: players, puzzle designers, Merit Circle, advertisers, investors, non-profits, and even language learners.
I’m a mental health counselor by profession and training, but I’ve had an interest in entrepreneurship and board game design for a long time. I’m a big word gamer and a songwriter, too. Strangely, this work feels a lot like songwriting and doing group therapy—inspiration, iteration, and thinking very deeply about other people’s needs and how they can help each other. Even with an eclectic, non-tech, non-business background, I can tell I’m the right founder for this project. I’ve got a “grow the pie”, not a take the other person’s slice of the pie attitude, which I think is appropriate to a Web3 founder.
I think Merit Circle is the right partner, too. As a founder, I could have gone separately to venture capital with this project idea, but I don’t think they would have seen it the same way that Merit Circle will see it. I don’t think venture alone would have added enough value. It can benefit Merit Circle more than it would other projects/funds, and we know how to execute this better than anyone else.
So, I started pitching the idea of a single, original multiplayer word game to Mark in the middle of February. We’ve been developing it through a number of phone and Telegram sessions, and as I’ve worked on the idea more and more, I’ve built out the plan for the platform above. HT to Freek, as well, for tremendous help in the editing of this proposal—his editing input helped clarify how to best roll out Phases 1-3.
Key partners I have mentioned include existing platform partners like Amuse Labs and the Giving Block. But there are many existing puzzle communities that I would like to reach out to who I believe would be great long-term collaborators for content. These include DASH, the Crossword Puzzle Collaboration Directory, Inkubator, the Hub, and many more.
Phase 1 will require we contract with a small or single person web design team who can create a site for on-boarding F2P and crypto wallet using players, integrating the Amuse Labs content (using iframes). I will be commissioning some puzzles, creating puzzles myself, and writing the main narrative arc. I may reach out to creators in the Merit Circle ecosystem for developmental editing for the narrative. I have friends in web design and marketing who have agreed to give me some guidance on branding and marketing strategy, and I’ve let them know that some contract work might be available if the project is approved. I do have a design for a multiplayer, “challenge” version of Wordle that I would like to include in the launch event. If a multiplayer version of the game isn’t available at launch, it certainly can launch as a single-player version. Mark obtained a design proposal from Dept. and I’m in the process of talking with Amuse Labs staff for a custom build.
Phase 2 involves expanding the functionality of the Phase 1 site, including expanding user account functionality for creators. Phase 2 also involves a separate capital raise at some juncture specifically for building key games (e.g. a Scrabble-type) either in-house game development or contract work.
Phase 3 would require a large capital raise that would be justified only with a sufficient number of daily active users in Phase 2. This would also require a larger development team handling UI design, much more extensive commerce functions in the platform, etc.
Budget
The following represents a working budget for Phases 1-3, but I’m only including Phase 1 and 2 in the proposal, with a separate capital raise planned for developing standalone video games.
Rationale
Pros:
- Low-risk / high-reward opportunity
- Word games strategy has no current Web3 competition
- Well-developed market analysis / business plan
- Advertising/fee economy means no investor/player dump
- 1st Merit Circle subDAO is from MC holder
- Potential buy pressure on $MC is potentially large and sustainable
- Project can drive new Web3 models/narratives:
- On-chain grand prize for launch event
- Non-crypto user onboarding
- Competitive play
- Play-to-give (nonprofit pledging, team challenges with bounties)
- NFT advertising
- Game feed (not app)
- Playable advertising
- Revenue distribution to creators / social marketplace
- NFT equity raise, no native token needed to be profitable at this time
Cons:
- Hard to bootstrap user growth of social network
- Word gamers may have stronger barriers to exit traditional apps/sites than I assumed
- Technical difficulty of Phase 3 FinTech—cheap tooling may not exist for Web3 social marketplace for years
Poll
For / against launch of Seed Words as subDAO
For / against allocation of up to $500k
For / against grand prize of Seed Words launch event being on-chain vs. sent manually to winner(s)
Copyright
Copyright and related rights waived via Creative Commons