Large metaverse projects facing declining user counts

Metaverse projects struggle to retain users despite a large market cap. According to DappRadar, the largest metaverse project, Decentraland, only has 379 daily users, while The Sandbox has 616 and STEPN has one. The struggle exists despite blockchain games such as Axie Infinity and Alien Worlds reaching over 21,000 and 200,000 users, respectively.

The discrepancy can be explained by how DappRadar counts daily users and how the games work. DappRadar counts active users based on the number of people with connected wallets interacting with smart contracts. Therefore, projects that do not require frequent transactions, including Decentraland and The Sandbox, end up with lower user counts than games like Axie Infinity, which usually have players interact with the contracts more often. Decentraland has responded to the discussion on Twitter to clarify the matter.

“Lately, there has been a lot of misinformation on the number of active users of Decentraland. Some websites are tracking only specific smart contract transactions but reporting them as daily active users DAU, which is inaccurate,” wrote Decentraland on Twitter.

The company then published some statistics for September, claiming that it had 56,697 monthly active users,1074 smart contract interactions, 6,315 sold wearables and hosted 161 community events. Decentraland creative director Sam Hamilton said that there were 8,000 users per day on average. He also explained that player activities peaked in March, but the number of more casual “tourists and spectators” had been declining.

To address the decline, the projects announced partnerships with some big brands. Snapple recently launched a virtual bodega in Decentraland, allowing players to earn NFT and discounts on purchases. Meanwhile, skating icon Tony Hawk will open a virtual skatepark in The Sandbox starting October 19.

“I have been a fan of new technology all of my life, from the first video games and home computers with CGI capabilities. So I am fascinated by the metaverse, and excited to bring our culture into the virtual landscape of The Sandbox,” said Hawke in a promotional video.

Metaverse market caps and valuations

The numbers are relatively low for entertainment media as top Web2 games such as Counter-Strike: Global Offensive can have around 500,000-600,000 average monthly users. Despite the low user counts, the projects still retain high valuations at around $1.3 billion each. This is similar to Axie Infinity, which has a $1.16 billion market cap but many more daily active users. The lack of games or trading that GameFi projects like Axie Infinity or Alien Worlds offer could be another reason more open-ended metaverse projects see fewer users.

Sasha Fleyshman, a portfolio manager at the digital asset investment firm Arca, said that these low numbers were due to the platforms not operating according to plans. Fleyshman said the current state of open-ended metaverses did not have much appeal for Web3 users.

“Anyone telling you that there’s a metaverse today that has worked is lying through their teeth. In my opinion, we’re leaning towards a lack of product-market fit on that side…irrespective of their valuation,” Fleyshman said, as quoted by CoinDesk.