Why invest in catizen and the scarcity of catizen under the TG investment paradox

Author: kirin_alen d/acc Source: X, @qiqileyuan

In less than 3 months, Catizen has more than 23 million users and nearly 3.5 million DAU. It has accumulated $16 million in in-game purchase revenue, of which the Telegram Premium user community has more than 2 million members, which means that 40% of Telegram members are Catizen users, and there are 1.5 million on-chain users and more than 550,000 paying users, with an ARPU of $30. It also announced the release of a game center.

Coinciding with the launch of Ton on Binance, this article will review why we chose to support Catizen at the end of 2022, and why we continue to be optimistic about Catizen today under the TG ecosystem.

Back to when I decided to invest in the Catizen team in 2022, these were completely unexpected to me. At that time, FTX exploded and the industry was at its lowest point. At that time, in addition to confidence in the prices of Bitcoin and Ethereum, there was no concept of what projects would succeed in the next wave. The vague judgment is that the stories of NFT and MetaVerse in 21 years have made Crypto out of the circle, and many traditional institutions and celebrities have begun to get in touch, but the experience is not pleasant. If there is a new Mass Adaption model in the next cycle, at least the model needs to be verified and more replicable to allow these people and even incremental newcomers to re-enter.

"We like incremental growth, and we want to bring the IAA+IAP mini-program hybrid monetization model into the cryptocurrency circle"

This was the idea that the Catizen team talked about when they first discussed the project. At this time, they already had experience with GameFi. For this team that originally made traditional investment and flow games, pure PVP GameFi games lack prospects. In the team's view, the hybrid model of IAA+IAP (in-game advertising monetization and in-app purchase monetization) combined with Crypto cashback is more exciting than making money with Ponzi, and it is easier to give play to the team's experience in traditional investment and flow growth, as well as the reserves of small games - "We think we should try to bring the game to our home court."

“Mini program games are short videos of game versions, which meet the needs of modern people’s fast-paced life”

I had a sense of this at the time, because I was bored in the bear market, and I often browsed Bilibili and Douyin, and often saw advertisements for some mini program games (I recommend "War of Peas", a three-in-one tower defense). As a console player, I didn’t know how to play them, but these game materials are more human-like and have hooks. There are always some quiet and sleepless nights when you will click on these mini games and recharge the first charge of 68, or watch the nesting doll advertisements to pass the level. Then play for 1 or 2 weeks and delete it, and play another one after a while, just like quitting masturbation, my friend. I have an intuitive sense that mini program games are addictive and make money.

Almost everyone has played it. It is an average game but addictive.

A fast-growing mini-game.

I recently read a report from dataeyes. After only one year, by 2023, the revenue of domestic mini-program games has reached 20 billion yuan. It is expected that the revenue this year will exceed 60 billion yuan, a year-on-year increase of 300%. According to Tencent data, the monthly active users of mini-program games have exceeded 500 million, with an online time of about one hour per day, and the 14-day retention rate of the market exceeds 50%. User habits are being formed, and mini-program games are entering the iPhone moment this year. At the same time, the overall market user growth of the entire game is scarce, and mini-games have become the only hope for domestic games to break out of the "stock game era". The situation of finding incremental growth in the stock era is very similar to that of the currency circle.

At present, domestic mini-programs are also evolving, with heavy and diversified forms, mixed changes in monetization models, and other directions. The value of mini-program games is still increasing. The overseas expansion of mini-games has reached 470 million US dollars in the first half of 2024, and is still in the early stage of exploration, with great room for development.

However, it is not that easy to export mini-program games overseas. The main reason is that there is a natural traffic source and launcher of WeChat mini-programs in China, but there is no mini-program environment overseas. PWA, the predecessor of mini-programs, has not become popular due to interest issues such as "Apple tax" until friend.tech became popular again. (On a side note, I recommend playing Ton.place, onlyfans in the form of PWA, which has a good user experience).

The team also came up with a solution for this.

"We want to All In Telegram Ecosystem"

At the beginning of 2023, the team felt that the answer to "mini-program games + exporting to the world + Crypto" was TG, a platform that is easiest to use as a benchmark for WeChat overseas. At the same time, the team is willing to imitate WeChat for commercialization attempts, and also understands Crypto and has a large number of users.

But at that time, the infrastructure of Telegram and Ton was not mature yet, and they were also in the stage of commercialization attempts. Unlike now, it has become a prominent source of incremental growth in the cryptocurrency circle. It was not as easy to make this decision and stick to it as it is now imagined. But in order to better communicate and run-in with the TG team, the team will also take Russian culture and Russian lessons. Behind the first wave of traffic dividends in the TG ecosystem is invisible persistence and dedication.

"Why choose to be a cat?" "Because I am a cat slave" "..."

Now it seems that the initial investment in Catizen was more of a metaphysical factor. I physically recognized the addictiveness and incrementality of small games, believed in the market growth space of IAA+IAP mixed monetization, and felt that the combination of TG could have a good performance. I understood and recognized the team's past successful experience in investing in traffic and buying games and the resources in the circle, and the combination of experience in the cryptocurrency circle and the ambition for success.

If the accidental metaphysical factors of investment at that time were greater, but seeing the flourishing of TG applets today, I am more optimistic about the future of Catizen.

The former is vaguely correct, while the latter excludes wrong answers.

The paradox of TG ecological investment

1. The functions of TG and TON are decoupled, and the project needs to seize the TG traffic dividend period

Unlike SOL, what we need is the 900 million potential users on TG to bring incremental users to the currency circle, not TON users. Long before the TON ecosystem became popular, there were trading bots such as maestro, unibot, bananagun, and pepeboost that relied on TG channels to meet the user's on-chain fast transaction needs and made a lot of money, and they could be operated directly with a custodial wallet. They meet the needs of Web3 users. If the project can find products that meet the needs of Web2 users, then TG and Ton wallets will serve as traffic and payment channels, which can make business simpler without complex smart contracts.

Considering that TG is just trying to commercialize its traffic dividend period, overseas users have not been exposed to the penetration of domestic mini-program games (domestic mini-program games are still developing rapidly), and MiniApp itself has H5 restrictions. At the beginning, the quality of MiniApp was low, and the homogeneous competition of Tap projects was serious, which was foreseeable, but the future development of MiniApp towards diversification and heavy development is also an inevitable trend. At this stage, it is the best way to seize the TG traffic dividend first, and then slowly iterate the product after seizing it. Moreover, the product should also be developed from a more "humanistic" perspective, rather than competing with the quality of traditional games.

2. TG MiniApp is more like a small business, suitable for entrepreneurship, but not for investment

Traditional cryptocurrency projects focus on a narrative + Infra, "If you want to get rich, build roads first", and after raising rounds of financing from VCs and building one overpass after another, they found that there was no real demand, so they became "ghost towns". The essence of issuing coins is actually a form of non-performing asset disposal of local debt debt-to-equity swaps, but it is regarded as a high-potential asset under the addition of narrative.

But Telegram comes with its own infrastructure and residents, and now it is allowed to open up to attract investment, allowing people to open small restaurants, milk tea shops, massage shops and other entertainment facilities to make money. As long as the early entry of subdivided categories that meet the basic needs of residents is not too bad, they can all enjoy the traffic dividend, and even those who do well can get rich. But this is more like a small business, and the boss can make money, which does not mean it is a good investment target.

From the perspective of whether it is investable, the current low threshold of TG MiniApp means that if a MiniApp team has mastered the traffic code that can be monetized in TG and can make money continuously, then he actually does not need financing, and considering the exit pressure after financing, such as regulatory issues, the need to consider the narrative problem of raising the ceiling in order to issue coins, as well as the issues of issuing coins on exchanges and subsequent price maintenance, community maintenance, etc., there should be many founders who want to make a fortune quietly. If the team has not mastered the traffic code of TG in such a low-threshold entrepreneurial background, it will not be attractive enough to investors. This is the difference between the traditional currency circle Infra project caused by the low cost of falsification. This is easy to face in the investment stage, and those who have not run out will either not raise funds or have a high valuation.

From the exit perspective, the traditional coin issuance exit is not as good as the exit mode of diverting water or dividends in the TG-MiniApp track.

Exit by issuing coins, as I just said, has the founder's willingness, as well as the problem of narrative ceiling and business model (most listed consumer companies make money from supply chain and franchise)

And exit by diverting water or dividends, in the currency circle, there are also practical considerations such as very restrictive laws.

In fact, TG-MiniApp is very similar to the NFT era. They are all small pictures with no threshold. The competition is about who has strong community operation and sales ability. Those who can sell them have the right to "continue narrative financing". If they can't sell them, the cost is not high. But for investors, unless they sell small pictures and share the money with you, when they reach the investable state, the valuation is very expensive, and there are very few projects that can really exit by issuing coins. Most of them are in a state of making noise but not making money.

But the point that TG MiniApp is better than PFP is that PFP is still a one-time deal, and it is not easy to issue more at will, while TG MiniApp may have continuous in-app purchase income. However, in the environment of weak Crypto constraints, there is still the problem of how to ensure that turnover and dividends can be distributed.

Therefore, for teams with executive power, TG MiniApp is a low-threshold track suitable for active development to obtain real users and income, but for investors, it is no different from Meme to retail investors, and the main focus is on luck. Suitable for entrepreneurship, but not suitable for investment.

Does this mean that TG is completely unsuitable for investment? But in my opinion:

TG's investment paradox proves the scarcity of Catizen.

On the whole, if we use the above logic to work backwards, to invest in projects on TG, the team needs:

1. Basic capabilities: The team can complete PMF, find the intersection of TG channels and applications, and complete user onboarding

The above basic capabilities can ensure that the project has the possibility to survive or make money

2. The team has the ability and willingness to distribute profits and issue coins

The problem of dividends being difficult to execute just now, if the founder is willing to distribute dividends and issue coins at the same time, or vice versa, then the dilemma can be solved by combining the issuance of coins to confirm income on the chain and using smart contracts to execute profit sharing.

3. Ability to upgrade and implement narrative and business model

The randomness and homogeneity of MiniApp's success means that if the team wants to issue coins, it also needs to upgrade the narrative and business model and have the ability to implement

The narrative expansion corresponding to mini games is nothing more than: 1) game platform (self-made or distributed); 2) game public chain. This is the legacy left by GameFi, and it has become relatively aesthetically fatigued. The reason is nothing more than the lack of continuous supply of high-quality games. The lack of high-quality game supply ability is mainly due to the fact that the channel end of Mass Adaption is not open, which makes self-made games time-consuming and laborious, and there is no bargaining power for outsourced high-quality games. Fortunately, TG opened the channel port, making the story of the game platform feasible. It depends on whether the team can continue to discover and distribute high-quality games. And find good games and sell them at a good price. In this regard, the Chinese team has a natural advantage.

And Catizen can meet all the above points:

1. Catizen has used data to prove its product development, community operation, and traffic acquisition and monetization capabilities on the TG side. In less than 3 months, the number of users has exceeded 23 million, the DAU is nearly 3.5 million, and the cumulative in-game purchase revenue has exceeded 16 million US dollars, with 1.5 million on-chain users and more than 550,000 paying users, and an ARPU of 30 US dollars;

2. The team has publicly stated that it will airdrop and will continue to empower in the future;

Summary:

Cats are so cute!