After the much-hyped 2 day blackout, Fortnite is back online! You might be wondering why we compared Fortnite’s financials to social networks and not other video games. Well, Fortnite is a social network. They are a pioneer in creating a free-to-play game ecosystem, which follows the same methodology as social media:
No barriers for user entry (paying) and monetize once consumers find value in the product
Rely on network effects to grow the platform (Duo and Squad game types, gifting skins, etc.)
Incentivize users to come back often (challenges, new items, new seasons, play with friends)
Leverage habit-forming behaviors (Read a few articles of parents complaining that their children are addicted to Fortnite)
Allow access on any device (phone, tablet, console, PC) They take the ecosystem one step further with massive audiences watching Twitch streams (professionals playing the game) and hosting Esports events with muliti-million dollar prizes
When Tencent ($TCEHY- Chinese Tech Conglomerate with a $405B market cap) acquired a 40% stake in Epic back in 2012, they saw the Unreal Engine as a platform to build out more games while bringing in revenue like how an app store charges commission to companies listed. Epic takes a 5% cut off all games that run their engine, like global phenomenon PUBG. Fortnite has served as a great proof of concept of this strategy, enticing many new game developers to build using Epic’s tools. This game is an absolute beast financially, and will set the precedent for the multiplayer gaming industry in the future. Feel free to DM us if you want to play Chapter 2!