https://www.forbes.com/sites/zinnialee/2023/03/22/remember-neopets-this-hong-kong-company-is-trying-to-revitalize-the-nostalgic-game-with-web3-technology/

The heyday of Neopets has long gone. But Dominic Law, CEO of Neopets Meta, thinks the two decades-old virtual pet game has all the right ingredients to become a Web3 title. From a base in Hong Kong, Law is building a blockchain-based 3D virtual world for these fantasy creatures, even as the future of Web3 gaming is blurred amid a crypto winter.

Like tens of millions of preteens who got on the internet for the first time in the early 2000s, Dominic Law used to spend his free time on Neopets.com. He spent hours feeding jellies to his dragon-like digital pet (called a Shoyru, the most popular Neopet species), earning virtual currencies by playing mini-games like Extreme Potato Counter and exploring the website’s vast online world where a giant dinosaur egg omelet exists. Within a few years, however, Law’s virtual pets, like millions of others, were forgotten as he got busy with school exams.

After more than two decades later, Law, who is now 35 years old, got reacquainted with Neopets again when he joined Netdragon Websoft, a Chinese online gaming company that acquired the virtual pet game in 2017. The Harvard Business School graduate says he saw an opportunity to bring the nostalgic title back to its heyday after seeing the potential of combining Web3 technology with online games.

Law, a former management consultant at Bain & Co., joined Fuzhou-based Netdragon in 2020 as director of new markets. After seeing the buzz around Web3, Law persuaded chairman Liu Dejian, a former Forbes rich-lister, to start a company dedicated to adapting Neopets to the much-hyped technology. So in early 2021, Law spun off a company called Neopets Meta from Netdragon and set up shop across the border in Hong Kong.

At Neopets Meta, Law, who serves as CEO, is building a Web3 game based on the classic Neopets website. The game, dubbed Neopets Metaverse, will allow users to earn crypto tokens and digital items that can be used to mint NFTs through mini-games and battling other users’ pets. Law hopes the new game, which is slated to be launched as early as the first quarter next year, can evoke the fond memories of some 150 million Neopets users worldwide and help them to Web3, just like the website did with Web1.

“Neopets is one of the first online games that introduced the world of the internet to its players. That’s what we’re trying to replicate with Neopets Metaverse,” says Law. “We want to be one of the first fun games to introduce the world of Web3 to our previous user base and to users who are new to Neopets.”

While Netdragon’s investors didn’t share Law’s enthusiasm—the Hong Kong-listed company’s shares are down about 6% since the beginning of 2021—several tech-focused investors are hopeful about the success of Law’s Web3 game. In January, Neopets Meta announced that it raised $4 million from investors including blockchain funds Polygon Ventures and Blizzard Avalanche Ecosystem Fund and venture capital firms IDG Capital and Hashkey Capital.

Even with millions of dollars in funding and the backing of its $1.1 billion market-cap parent company, Law faces a tall task of making his Web3 vision into reality, especially amid an ongoing crypto winter.

One of the attractions of Web3 games is the ability for users to earn crypto tokens, also called play-to-earn. But the play-to-earn games were played mostly by speculators instead of traditional gamers. And as crypto winter descended following a string of corporate meltdowns, these financially incentivized players quit, leaving the games with sparse users and crypto coins that are worth almost nothing.

Axie Infinity is a case in point. The game was the poster child of the play-to-earn mechanic and saw its daily unique active wallets plummet more than 98% from its peak in November 2021 to about 12,000 as of March 22, according to blockchain analytics firm Dappradar. Both tokens of the Pokémon-like game, namely AXS and SLP, also plunged more than 90% after reaching their record-high around the same time, according to tracker Coingecko.

Law, who compares play-to-earn to a Ponzi scheme, has recently followed the footsteps of other Web3 games to shift to the mushier play-and-earn narrative. Law says his strategy to steer clear of speculation is to make Neopets Metaverse a fun and engaging game. In this way, Law hopes players will want to save up the tokens or digital collectibles to upgrade their gaming experience, instead of selling them in the open market.

“It’s actually no different from any Web2 games or Web1 games in which people genuinely enjoy spending time and having the desire to spend money inside the game,” Law says. “That should still be the model for Web3 gaming.”

The classic Neopets already has “all the right ingredients for Web3 gaming,” says Law. Operating since 1999, the browser-based game is anchored to caring and customizing virtual pets, with mini games, battles and quests that reward players with virtual currencies—called Neopoints—and items. Neopoints can be used to buy food, toys and fancy outfits for the pets, or furnish their homes. The fictional Neopets world has a thriving economy, thanks to player-run shops, an auction house, a bank that pays interest and even a fantasy stock market with fake companies like EEEEEURGH!!! Ltd. and Yippee!.

Neopets Metaverse, which is in alpha mode, will start with attracting players of the original Neopets and crypto enthusiasts before expanding its reach to traditional gamers, says Law. Among the roughly 150 million registered users Neopets.com has amassed over the past 24 years, some 90 million are from the U.S. and Canada, with about 10 million from Asia, according to Law.

Neopets Metaverse has already launched some trial runs to about 5,000 Neopets NFT holders and avid players on Neopets.com, says Law. Some of them, however, were not keen on staying in the 3D virtual world. “There’s nothing I’ve seen in the three alpha builds so far that indicate the final game will be a compelling time sink,” said @Herdy on the Discord chat app. The Neopets fan, who said he was drawn to Web3 for the first time because of Neopets Metaverse, added that it “feels like an unrelated game that has paid to insert the Neopets IP.”

“I’m only staying along for the ride because I want Neopets Meta to be more than that—a Neopets metaverse that is both fun and well-executed would be an incredible addition to Web3,” said @jaywilly, another veteran Neopets player, who also claimed to be a NFT investor. “But I have a lot of doubts about whether that will ever happen.”

These comments come on top of a backlash from the Neopets community, which strongly opposed the mix of NFTs with the nostalgic title when its Web3 pivot kicked off two years ago. The community cited concerns over a potential cash grab and environmental pollution.

But Law is unfazed and welcomes the feedback, positive or negative. “One of our advantages is that we have these community members who are willing to voice out their concerns, so we don’t have to spend years developing until we realize we’re not building the right product,” Law says in response to the criticisms. “We have learned some important lessons about building trust, communication, and transparency with our players and are dedicated to being a lot more upfront about our mission and what we’re building.”

It’s not uncommon for traditional gamers to push back on blockchain initiatives by online gaming companies. A job posting by the Pokémon Company International seeking a corporate development principal with Web3 expertise has disappointed some fans over the potential blockchain integration into the monster-battling game. Others such as Ubisoft Entertainment, the French maker of Assassin’s Creed, and Korean rich lister Chang Byung-gyu’s Krafton have either suspended or stumbled on their blockchain game launches after drumming up their Web3 branch-out during the crypto boom.

“Neopets is one of the first online games that introduced the world of the internet to its players. That’s what we’re trying to replicate with Neopets Metaverse.”

Andy Lee, partner at Hong Kong-based crypto fund Everest Ventures Group, predicts it will take at least another two years for Web3 games to go mainstream. He says one way to onboard traditional gamers is to lower the technology barrier by giving them free NFTs and centralized logins that are already connected to a crypto wallet. But retaining these gamers will require “strong social elements” including not just in-game chats but a platform that allows them to quickly share their gaming experience, Lee adds.

Other than visual upgrades and integration of crypto assets, Law says he will make in-game interactions among players possible in Neopets Metaverse. This could include real-time events in virtual pet homes, compared to emails and forums on Neopets.com. Meanwhile, Law also sets his sights on interoperability, a key idea in Web3 in which items bought in one game can be used in another. Neopets Meta is exploring the possibility to allow the 2D pets on Neopets.com to enter the 3D metaverse in the form of digital collectibles.

Even though the crypto contagion fears continue to spread following the bankruptcy of former billionaire Sam Bankman-Fried’s FTX exchange, Law believes that Web3 games will drive the next evolution of the gaming industry. “Sky’s the limit. There’s no reason why we can’t imagine a world where all three billion gamers are involved in Web3 gaming,” he says. “If we can achieve what Neopets.com was able to accomplish in Web1, that would be amazing.”