GAMETECH REPORT GLOBAL & MENAP OUTLOOK POWERED BY Q2 2023 TABLE OF CONTENTS GAMETECH REPORT Q2 Foreword Partners and Contributors Market Dashboard Global Outlook Global Investment Landscape MENAP Outlook MENAP Investment Landscape About SHFT Page 03 Page 04 Page 06 Page 07 Page 25 Page 31 Page 38 Page 41 TAREK FOUAD PARTNER, SHOROOQ PARTNERS This quarter, we reveal the key trends shaping the industry, from the cross-platform engagement boom to emerging blockchain technologies. We live in an era where a large proportion of users participate in multi-platform experiences, dedicating substantial daily hours to this digital interaction. This presents an unprecedented opportunity for brands to engage with their audience. As expenditures in digital advertising reach impressive numbers, businesses can effectively use this vibrant platform for reaching and connecting with their customers. Even during economic volatility, we see the resilience of certain emerging sectors, underlined by a robust user engagement. This is driving more influence of well-capitalized public companies, preparing the ground for an active M&A environment in the foreseeable future. In the MENAP region, the industry is experiencing explosive growth, expected to significantly surpass previous forecasts in 2023. From the preference for mobile interaction in Saudi Arabia to the high per-user revenue in the UAE, we explore the regional nuances contributing to this thriving market. However, we also recognize the challenges. As we stand on the brink of a data-driven era, the industry faces privacy concerns with a significant percentage of users apprehensive about sharing their personal data. This report is more than a compilation of statistics and trends; it's an in-depth study of a transformative sector where technology, culture, and economy intersect. We invite you to join us as we navigate this dynamic landscape, learning from the past and present, and looking forward to the future. FOREWORD Players need for a seamless cross-play experience requires startups tackling compatibility and control variation issues within cross-platform game development • Startups will need to invest heavily in overcoming compatibility issues across hardware and software, which remain significant barriers to entry in the cross-platform space. • Variations in control schemes and input delays between platforms create a challenge for developers but also an opportunity for startups that can streamline this experience. With the rise of Cloud-gaming, the startup scene today is seeing a significant gap in security infrastructure, jeopardizing the large pipeline of games being developed today. • The need for sophisticated security measures to tackle unique cheating methods across platforms presents both a challenge and an investment opportunity in cybersecurity solutions for gaming. • With the advancement in processing power, startups focusing on cloud gaming have the potential to eliminate latency issues, offering a significant value proposition for investors. The new wave of innovative UA Models will come from startups leveraging AI and Data to offer native hyper customized Ad experience for gamers and brands • The increasing mainstreaming of AI-driven personalized ads and subscriptions could be a key differentiator for startups looking to gain an edge in player engagement. • Brands are now turning to games to offer interactive and immersive advertising experiences for players INVESTOR OUTLOOK OUR CONTRIBUTORS AND PARTNERS MARKET DASHBOARD Q2 2023 GLOBAL MENAP GLOBAL GAMING MARKET 2023 (+9%) GLOBAL GAMING VC INVESTMENT IN Q2’23 CROSS-PLATFORM GAMES IN Q2’23 $210+ bn $600+ mm 44% $59.5 mm RAISED BY GAMING STARTUPS IN MENAP $3+ bn GAMING MARKET 13% HIGHER THAN PROJECTED IN Q1’23 70% PROTECTIVE OF THEIR DATA POSING A CHALLENGE FOR PUBLISHERS GLOBAL OUTLOOK Q2 2023 PAGE 9 8 IN 10 GAMERS ARE TRI-PLATFORM PLAYERS: PAVING THE PATH FOR CROSS-PLATFORM PROGRESSION IN GAME DEVELOPMENT CONSUMER BRANDS SEIZE OPPORTUNITIES IN IMMERSIVE AND INTERACTIVE GAME ADVERTISING EXPERIENCES WEB3 GAMES DEFY CRYPTO WINTER: SUSTAINING 600,000 DAILY UNIQUE ACTIVE WALLETS (DUAW) PUBLIC COMPANIES HOLDING $45BN IN CASH WILL OFFER A HEALTHY M&A ENVIRONMENT FOR THE UPCOMING PERIOD AT A GLANCE GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LAND 1 IN 4 GAMERS TODAY ARE MULTI-PLATFORM PLAYERS: A $25+ bn MARKET UP FOR GRABS FOR CROSS-PLATFORM GAME DEVELOPERS PLATFORM BREAKDOWN OF GAMES DEVELOPED IN 2023 For users, the key is convenience and a rich social experience. Gamers want to be able to play their games on a multitude of devices, be it PC, PS Consoles, Xbox, or others, without the constraints imposed by limitations on each platform.This is a suitable value-add for big gaming companies who have been finding a hard-time maximizing subscription revenue. The rise of cross-platform gaming, however promising, is not without significant challenges. These hurdles range from technical issues like compatibility across diverse hardware and software specifications. Moreover, the variety in control schemes and discrepancies in input delays among platforms can impact the gaming experience, making it difficult for gamers to switch platforms or compete fairly. Another pressing concern is the prevalence of distinct cheating methods across platforms, which can complicate cheat prevention in cross-platform games. Despite these obstacles, the appeal of cross-platform gaming is evident in its growing popularity. (Newzoo, 2023) With a compound annual growth rate (CAGR) of 10.2% from 2021, the global gaming industry is estimated to exceed $218.8 bn by 2023. A pivotal force driving this expansion is the trend of cross-platform gaming. With 44% of games being developed for cross-platform play, developers are capitalizing on a $25+ bn market opportunity, where 1 in 4 gamers are multi-platform players. - ) + 12% PC ONLY 35% MOBIE ONLY 9% CONSOLE ONLY 44% CROSS PLATFORM PAGE 10 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LAND CROSS-PLATFORM GAME DEVELOPMENT DOUBLES IN 2023, FURTHER ENHANCED BY QUANTUM COMPUTING ADVANCEMENTS CROSS-PLATFORM GAMING MARKET This will further be driven by advancement in quantum computing. Unlike conventional computers that use binary bits (0s and 1s) for data processing, quantum computers employ quantum bits or qubits. These qubits exist in a superimposed state, capable of being 0, 1, or both simultaneously. This unique quantum trait equips quantum computers to process vast amounts of data concurrently, vastly surpassing today’s most advanced supercomputers. Leading technology corporations like Google, IBM, and Microsoft have recently plunged into the quantum field, each introducing their quantum prototypes to harness this immense potential. With the augmented processing power, issues such as latency in cloud gaming could be eliminated, providing an uninterrupted gaming experience, even for those without top-tier gaming PCs. (Newzoo, 2023) / (GamesIndustry.biz, 2023) / (IDC, 2023) In 2023, the gaming sector has witnessed significant advancements in cloud gaming, social play features, and esports, leading to the doubling of cross-platform players. This year, cloud gaming has become notably accessible, with several services including Nvidia GeForce Now and Xbox Cloud Gaming offering a myriad of games. This provides over traditional gamingt access to games without the need for downloading or installing, significantly reducing the entry barrier for prospective gamers. In addition, it offers a superior gaming experience to players with low-end devices, democratizing the gaming landscape and reaching wider audiences. AVG # OF CROSS PLATFORM PLAYERS # OF CROSS PLATFORM PLAYERS CLOUD GAMING PENETRATION COMMON SOCIAL GAMING FEATURES VOICE CHAT, LIVE STREAMING, IN-GAME EVENTS AR/VR, CROSS PLATFORM CHAT, SOCIAL GAMING INFLUENCERS 50 MILLIONS 100 1% 500 10% 100 MILLIONS 2020 2023 PAGE 11 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE PAGE 12 8 IN 10 GAMERS ARE TRI-PLATFORM PLAYERS: PAVING THE PATH FOR CROSS-PLATFORM PROGRESSION IN GAME DEVELOPMENT TRI-PLATFORM PLAYER PERSONA DISTRIBUTION OF TIME SPENT VS. GAMING PLATFORMS OWNED The growing trend of tri-platform gamers, those who engage in gaming across PC, console, and mobile devices, presents an exciting opportunity for game developers to embrace cross-platform progression. Such a feature allows gamers to maintain their progress, character developments, and in-game purchases across multiple platforms. This ensures a seamless gaming experience and enhanced player engagement devoid of interruptions, where players can fluidly switch devices while safeguarding their progress. This increased engagement leads to longer play sessions and an uptick in opportunities for in-game purchases. Furthermore, supporting cross-platform progression enables developers to expand their target market beyond a single platform, attracting players across all major platforms. In an industry where player retention and engagement are vital for success, cross-platform progression emerges as a significant competitive advantage. Catering to the increasing tri-platform player base can help developers steer the gaming industry towards a more integrated, user-centric future. (Newzoo, 2023) 46% AGED 10 - 25 62% MALE TOP 3 GENRES: ADVENTURE / OPEN WORLD EXPLORATION / SURVIVAL 57% 64% 81% 1 Platform 2 Platforms 3 Platforms OF PLAYERS OF PLAYERS OF PLAYERS AVG TIME SPENT 11.13 HRS AVG TIME SPENT 8.18 HRS AVG TIME SPENT 4.18 HRS GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LAND The exciting opportunities that cross-platform play brings to players include the ability to access their gaming experience from different platforms and ensure that their progress remains synchronized. This synchronization is crucial, as repeating tasks they've already accomplished could lead to negative experiences. Players offer insights into valuable aspects of the game, and capturing these insights while demonstrating progress along those lines holds considerable significance. Cross-platform play offers the benefit of multi-platform progress tracking, which can incentivize gameplay across different platforms. However, it is important to ensure that the design does not penalize players for their platform choice. For instance, exclusive content available only on a specific platform could create divisions among the player base. Therefore, the design should focus on rewarding rather than inadvertently punishing players based on their platform preferences. The key issue lies in ensuring gameplay mechanics translate effectively across multiple platforms. While identical experiences aren't always necessary and may even be simplified based on the platform, developers need to be attuned to player expectations for each platform. This insight should guide the design of the gameplay experience, clarifying which elements should be consistent or unique across platforms. Mike Ambinder Founder and Chief Research Officer - Cognitive Explorations WHY HAS CROSS-PLATFORM PLAY BECOME CRITICAL TO TODAY’S GAMER? Mike Ambinder spent 15 years at Valve working as a research scientist and applied experimental psychologist and is regarded as a pioneer in the fields of games user research and neurogaming. He currently consults and advises for companies in the domains of games user research, game design, non-invasive Brain-Computer Interfaces, data science, and applied psychology. ABOUT MIKE AMBINDER PAGE 13 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE FREE-TO-PLAY GAMES PUSH TO INNOVATE MONETIZATION TO PRESERVE 80% MARKET DOMINANCE IN MOBILE GAMING DISTRIBUTION OF MOBILE GAMES BUSINESS MODEL AND MARKET SHARE MONETIZATION MODEL REVENUE (IN $ bn) MARKET SHARE Subscription Free to Play Pay to Play Other 11.8 99.3 7.2 1.7 12% 80% 7% 1% However, the rising trend is a hybrid monetization approach, combining in-app ads, purchases, and subscriptions. An App Annie study suggests that mixing rewarded ads and in-app purchases can increase revenue by up to 35%. Another noteworthy strategy is monetizing the game's meta layer, introducing additional activities, narratives, and collectibles to enhance player engagement and revenue indirectly. Also, the growth of playable ads, which are interactive and engaging, continues to accelerate, resulting in increased CTRs. Looking ahead to 2023-2024, these models are predicted to continue growing in adoption and sophistication. A more personalized approach in ad and subscription offerings, driven by AI and machine learning, could become more mainstream. Not only will this allow for better ad experience but will also enhance data driven decisions for studios. In 2023, the mobile gaming industry sees a paradigm shift towards innovative monetization models, prominently rewarded video ads, subscription models, and hybrid monetization strategies. Rewarded video ads have gained traction as they offer in-game rewards, boosting eCPM and CTRs significantly. Subscription models, particularly battle passes, are prevalent due to their potential for recurring revenue and exclusive content access. (App Annie, 2023) PAGE 14 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE CONSUMER BRANDS SEIZE OPPORTUNITIES IN IMMERSIVE AND INTERACTIVE GAME ADVERTISING EXPERIENCES (1/2) REVENUE FROM IN-GAME ADS ANNUALLY Consumer brands are increasingly recognizing the opportunities present in advertising within games, particularly in the expanding market of mobile and online gaming. With consumers spending more time on digital platforms, games offer an avenue to engage with a diverse and highly engaged audience. This trend gained traction in 2020 during the global pandemic, and as of 2023, continues to rise. In-game advertising can be immersive and interactive, making it more impactful than traditional advertising mediums. Unlike passive viewing in TV ads, gamers interact with brands in-game, leading to higher engagement levels and brand recall. Brands can leverage various ad formats, from banner ads to rewarded videos and branded in-game items. (APPTICA, 2023) 50.7% 10% 7% 5.8% 5.5% Games Tools Productivity Lifestyle Shopping Finance Education Health & Fitness Social Food & Drink +8% +1.6% -1.4% -1.5% -0.4% Share of advertisers 1st H’23 SHARE OF ADVERTISERS IN MOBILE APPS – H1’23 PAGE 15 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE CONSUMER BRANDS SEIZE OPPORTUNITIES IN IMMERSIVE AND INTERACTIVE GAME ADVERTISING EXPERIENCES (2/2) ATTITUDES TOWARDS BRAND ADVERTISEMENT & ENDORSEMENT IN GAMING However, several challenges exist in this landscape. First, ensuring ad relevance is crucial for preventing disruptions to the gaming experience. Insertion of irrelevant ads could lead to negative brand perception. Second, measuring the effectiveness of in-game advertising is complex, given the multitude of metrics and the challenge of attributing in-game interactions to actual sales. Additionally, concerns about privacy and data security can limit the scope of personalized advertising in gaming. Regulations such as GDPR in Europe impose restrictions on data usage, complicating the execution of targeted ads. Looking ahead, the opportunity for consumer brands in the gaming space is substantial, but a careful, well-devised strategy is a prerequisite. Brands must focus on creating value for gamers, delivering ads that enrich rather than interrupt the gaming experience, while navigating the challenges of measurement, privacy, and regulation effectively. 50% HAVE DISCOVERED NEW BRANDS WHILE GAMING 47% MORE LIKELY TO BUY FROM A BRAND FEATURED IN FAVORITE GAME(S) 42% BOUGHT A PRODUCT OR SERVICE RECOMENDED OR USED BY A FAVORITE STREAMER (APPTICA, 2023) PAGE 16 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE WEB3 GAMES DEFY CRYPTO WINTER: SUSTAINING 600,000 DAILY UNIQUE ACTIVE WALLETS (DUAW) DISTRIBUTION OF DAUW ACROSS WEB3 VERTICALS Several factors contribute to the tenacity of Web3 gaming. First, the Play-to-Earn (P2E) model provides players with compelling incentives to sustain their game engagement, even amid market turbulence. Players can earn cryptocurrencies, transforming entertainment into a viable income stream. Secondly, the inherent principles of blockchain technology confer actual ownership of in-game assets to players. This ownership structure empowers players to trade or sell assets on decentralized exchanges, adding a new dimension of value that can counterbalance crypto market volatility. Interestingly, data reveals a slight uptick in daily active wallets within Web3 gaming in 2023, contrary to trends observed in other Web3 verticals. Though it is essential to consider the crypto economy’s inherent volatility when interpreting these numbers, Web3 gaming’s resilience suggests a promising future – a birth of a new economic model that could potentially disrupt traditional gaming paradigms in the coming years. In an era of intense digital disruption, the fusion of gaming and blockchain technology is forging an innovative economic model. Despite the volatility and cyclical downturns that define the broader cryptocurrency landscape, Web3 gaming has shown remarkable resilience. Web3 gaming's resilience contrasts starkly with other Web3 verticals such as Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs), which have encountered significant fluctuations. (DappRadar, 2023) Gaming 550,000 600,000 NFT DeFi 300,000 250,000 2 MILLION 1.5 MILLION 100,000 75,000 Social # of daily active wallets in 2022 # of daily active wallets in 2023 +9% -17% -25% -25% PAGE 17 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE (DappRadar, 2023) WEB3 GAMES ADOPTION IN Q2 APRIL 19 Square Enix Teams up with Elixir to bring Web3 Games to mainstream audeinces APRIL 26 NFL rivals launches on App Store MAY 17 Axie Infinity rolls out “Lite” version on App Store MAY 27 Grit officially live on Epic Games MAY 27 Illuvium Zero Live JUNE 16 SynergyLand Public Alpha Playtest JUNE 2O Magic Craft launches on Steam JUNE 22 Gods Unchained launches on Epic Games Store JUNE 29 Yuga Labs launches 1st season of HV-MTL Forge Web3 crafting game JUNE 29 My Pet Hooligan alpha on Epic Games JUNE 30 Ubisoft Jumps into Web3 with Champions tactics PAGE 9 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LANDSCAPE LONG-TERM STRATEGY: WEB3 GAME DEVELOPERS EMBRACE MULTICHAIN DEVELOPMENT FOR CROSS-CHAIN GAMEPLAY NUMBER OF WEB3 GAMES BUILDING ON-CHAIN VS. OFF-CHAIN VS. MULTICHAIN Web3 gaming is experiencing rapid growth, led by on-chain games, followed by multichain and off-chain games. On-chain games provide transparency and security but have high costs, while off-chain games are more cost-efficient but may risk fraud. The growth of multichain gaming is fueled by the rising popularity of blockchain technology and the demand for interoperability. Advancements in blockchain tech are reducing development challenges, with solutions like Cosmos, Polkadot, IBC, Matic, and Solana enhancing cross-chain interoperability and scalability. Affordable blockchains and Layer 2 solutions are lowering operational costs, promoting smoother and cost-effective operations in multichain games. These trends signal a transformative shift in the gaming industry, with multichain games becoming increasingly prominent. (DappRadar, 2023) On-Chain 644 Multichain 493 Off-Chain 172 TOTAL: 1,309 PAGE 19 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK | MENAP INVESTMENT LAND Our primary focus centers around the Play-to-Own (P2O) principle, as opposed to Play-to-Earn (P2E), ensuring that our players' dedication takes precedence above all else. The P2E concept is constructed around systems that naturally create opportunities for earning, often making income generation quite straightforward. However, this can sometimes shift the spotlight away from the pure enjoyment of the game, as the need to earn becomes a dominant factor. We are targeting committed core gamers who derive genuine pleasure from gaming itself, rather than attracting a flood of opportunistic players. Our mission is to create a gaming environment that not only harnesses the power of blockchain technology but also places paramount importance on gamers' rights. In this setup, in-game assets rightfully belong to the actual players, rather than being solely tied to the platform. Michael Lee Director of Corporate Development, Strategic Partnerships - Com2Us WHAT STRATEGIES HAS COM2US FOUND MOST EFFECTIVE IN SUSTAINING PLAYER INTEREST, ESPECIALLY DURING MARKET UNCERTAINTIES? In 1999, Com2uS Corp (CEO Jaejoon Song and Joohwan Lee) became the first company to develop and service a mobile game in South Korea. In 2000, it developed the first java based mobile game in the world and engaged in innovative and revolutionary challenges. In 2007, it became the first South Korean mobile game company to be listed on KOSDAQ (078340). Com2uS had been targeting the global market for almost 10 years, even before the introduction of smartphones. Based on the vast pool of know-hows gained from the establishment of foreign offices and entering the NA and EU markets, Com2uS has become a very competitive company. ABOUT COM2US The rights of these owners are treated with the utmost respect. Furthermore, our goal is to recognize and reward players who actively and wholeheartedly engage with the game. Within the P2O games we're developing, players who excel in rankings or consistently invest time into playing will have the opportunity to earn well-deserved rewards. PAGE 20 GAMETECH REPORT: GLOBAL OUTLOOK | GLOBAL INVESTMENT LANDSCAPE | MENEAP OUTLOOK