Category Archives: Social Games

August 3, 2011 · 12:02 pm

Zynga sued over a patent in dressing up avatars

Lots of noise in the patent world lately, especially in the realm of apps and social games. Lodsys is making headlines for suing a litany of small app developers, as well as super-successful game developer Rovio, for a rather broad patent. As of Monday, Zynga was officially added to the list of companies attacked by patent trolls, though not by Lodsys.

Segan LLC, a company with no website and no products aside from broad patents, is suing Zynga for infringement of a patent in a “System for viewing content over a network and method therefor”. The title of the patent is actually broader than the claims of the patent, though as you will see below, the claim is rather broad as well. In case you aren’t familiar with software patents, here is the pertinent claim, below. If your eyes glaze over and you can’t figure out what this means, that simply indicates that you are normal:

What is claimed is:

1. A system comprising: a user device having a processor and comprising: a browser program capable of being run on said processor for viewing website pages; a graphical user interface (GUI) application capable of being run on said processor, containing a proprietary communication protocol and providing a GUI for depicting a character icon; and a unique identifier for identifying the user of the user device; a service provider for maintaining a user record corresponding to said user, for communicating with said GUI application by means of said proprietary communication protocol, for authorizing the GUI application to depict the character icon, and for providing one or more previously enabled character enhancements for the user’s character icon depicted in the authorized GUI application, wherein said user record comprises identification of the user’s character icon, predetermined user preferences, and the one or more previously enabled character enhancements; and a target website for offering a new character enhancement for the user’s character icon, wherein the new character enhancement is capable of being enabled in the user’s record at the service provider without requiring user interaction with the service provider, and wherein the character enhancements are obtained per predefined authorization rules from the service provider and/or the target website in addition to the predetermined user references; and wherein, when the user visits the target website using the browser program, the target website uses the unique identifier on the user device to access the user’s record at the service provider without requiring user interaction with the service provider, whereby any new character enhancement offered to the user is appropriate for the user’s character icon.

To really boil that down, the patent covers the concept of putting a new item on an avatar in an online setting. The description is more illustrative of the purpose of the “invention”:

Illustratively, a user may be interested in acquiring fishing-theme enhancements for one character icon, and baseball-theme enhancements for another character icon.

For one, this patent covers something that seems completely obvious now, and almost every social game has some version of this incentive system. Just off the top of my head, I know Yahoo! does something similar with their avatars, Xbox Live uses avatars, every fashion-themed social game on Facebook uses avatars, and every cafe-themed game uses avatars. This could be an extremely damaging patent if asserted against every one of these companies.

The whole patent is pretty ridiculous; the idea of accessorizing a doll has been around forever, and the fact that you can use the concept to incentivize activity on a website isn’t much of a leap from early video games that did the same. Diablo is the earliest example I can think of off the top of my head – it incentivized further play by allowing you to change the appearance of your character through the acquisition of new items, and it still came out four years before the patent was filed. Moving that activity from a single computer to an online interaction between a user, a GUI, and a website ought not to create a patentable “invention”.

To get more technical, I’m not even certain I understand how the patent reads on what Zynga does in a game like Farmville. There’s lots of potential for the patent to be read in a way that doesn’t implicate what Zynga does, depending on the definition of some of the specific terms. But the problem with patent suits is that, even if Zynga decides it is worth it to fight the case rather than settle, the suit could go on for a very long time even after the district court chooses the definitions for those specific terms. An appeals court would get to redefine the same terms, and the entire district court decision could be irrelevant as a result. This is why patent trolling is so effective – big companies would rather pay a small settlement than risk years of legal fees. We will see what Zynga does, and we will see if Segan LLC goes after any of the other major game developers who do essentially the same thing.

Leave a comment

Filed under Law, Patent, Social Games

July 11, 2011 · 10:47 am

Internet imperialism – Every company makes a play for every other company’s territory

Over the last few months, there has been a rather unprecedented amount of competition for consumer attention in a couple spaces among the major players in the tech/consumer web industry. Companies respond to success in an industry by trying to compete immediately, and the same goes for space where they think consumer attention might shift to next, all in a giant game of follow the leader. To spice up this post, I’ll predict winners. Let’s start with music:

Entrants into the internet music space:

Pandora (old)

Grooveshark (old)

Spotify (old/new)

Amazon with Cloud Player (last 6 months)

Google with Music Beta (last 6 months)

Apple with iCloud (last 6 months)

turntable.fm (last 6 months)

Somebody forgot to tell all the tech companies that the music industry is dead. (note: Music isn’t dead, it’s probably more vibrant than ever. It’s just not gonna make people the kind of money it did in 2001.) It’s not a distribution problem just waiting to be solved either – it’s a price problem. People are now accustomed to paying $0 for music, and that will not change no matter how many social tweaks and ease of access manipulations tech companies throw in. Look at Pandora – unless the law actually changes (the DMCA specifically), Pandora utilizes every currently legal feature that a company can use streaming online music. Pandora is the pioneer of adaptive, social, internet music access, which is where all of the current tech companies getting into the space would like to head, and Pandora hasn’t yet turned a profit, and their IPO was less than a success, currently trading $2 dollars below what they opened at.

Despite this, news came that Facebook is looking to enter the internet music space, possibly as part of a collaboration with Spotify. This plan would make Facebook a competitor, presumably, to prior entrants Apple (iCloud), Amazon (Cloud player), Google (Music Beta), and, of course, the entrants with many months head start, Pandora and Grooveshark. Nobody has yet found a way to make this space profitable – It’s almost impossible, because record labels still demand extremely large licensing fees despite the year-to-year declines in revenue they’ve faced in the internet era. Eventually the labels may jump on board and try to replicate something like a how social games monetize, letting users access music for free and charging for content associated with the music rather than the music itself, but because the industry was so comfortable for a while there selling CDs for $15, it may take a while for the industry to adjust.

Who will come out on top? My winner: a tie between iCloud and TURNTABLE.FM. iCloud is what Mom will use to put music on her newest device, and what most consumers will use to get music. Apple just has too much of a lead in music to lose here – Apple has an established presence in the music industry with the ipod and itunes, and they already have partial licenses. Turntable.fm, though, could be wildly successful as the greatest music based social game ever (sorry, Night Club City). Imagine if Pandora got every user to pay $5 a month for sweet clothes for their avatar DJ, which the DJ knows everybody on their channel can see? They can sell ad space in the form of special chat rooms (clubs), and by giving out special promoted avatar gear. Zynga proved the virtual currency model works, and it’s Turntable.fm’s race to lose at this point.

Entrants into the app market space:

Apple with app store (old)

Google with Android (old)

Facebook with their Facebook applications, but no official “market” (old)

Blackberry with whatever they call their app store (old)

Amazon with app store (last 6 months)

Google with Chrome app store (last 6 months)

Microsoft with Kinect SDK (to come)

Facebook with “Spartan” (to come)

The app store entrants haven’t all been so fast, with Facebook and Microsoft still to come, but the competition is clearly there. Google’s running two app stores, sort of, with Android obviously being a huge hit and challenging Apple’s dominance. Apple is far in the lead at this point, with Amazon and Facebook looking to play catchup in the mobile space. Facebook has complete dominance on laptops and non-mobile computers, at least when it comes to games, which, as it turns out, is where a whole lot of the money is (see Zynga).

Who will come out on top? My pick: Apple and Facebook. Apple for mobile, where they already have a huge lead, and Facebook for non-mobile, where they also already have a huge lead. There is some chance Google+ will start to pressure Facebook for social games, and might even be able to work a bit of the Android apps into Google+, but that’s a ways off and Google might want to think twice before letting the unfiltered nightmare of Android loose on their tightly controlled social network.

Local Deals:

Groupon (old)

Living Social (oldish)

Google with Google Offers (new)

Amazon with Amazon Deals (new)

Facebook with Facebook Deals (new)

Movement into this market has been a bit slower for the tech giants, with Google and Facebook still basically in Beta versions of their deals platforms (Google only offering deals in Portland), despite the fact that the deals industry clearly makes money as compared to the music space. Groupon has a big lead, but it’s less important in this space, because businesses just have to say yes to one of or all of the other deals offerers for Groupon to start losing their market share. Groupon did a great job getting millions of people to sign up to receive their daily emails, but Groupon now isn’t getting much love in any mobile application I use, at least, and Amazon, Facebook, and Google won’t let their users see Groupon ads over their own Deal service ads if they can help it.

My pick: Amazon Deals. Sounds weird, but hear me out – a year ago, 90% of consumers only had their credit cards on file with 1 of the companies listed above, and it was Amazon. Amazon has a great history of reducing friction between the seller and the buyer (1-click checkout), they have established relationships with thousands of businesses who already use their infrastructure to sell full price items, and setting up deals can be easily integrated into that system. Of Google, Facebook, and Amazon, Amazon may have a smaller number of total users, but ALL of Amazon’s users are looking to buy something when they log in, compared to a small fraction of Google and Facebook users who are looking to do the same.

I’ll cut it off there. There’s probably a bunch more I could detail; I’ve already covered Google+ v Facebook in another post, everybody is making a move into photo sharing it seems, and mobile games is a topic I love and might touch on similarly in a future post. But mark my words on Amazon Deals, it’s gonna be HUGE.

1 Comment

Filed under Funding, Social Games

July 1, 2011 · 12:06 am

“when does zynga shares hit th market” – The link between the IPO market and the tech bubble

I laughed and rolled my eyes when I looked at the sentence above, a search term from Google that brought a reader to a post of mine referencing Zynga’s IPO. No offense to the innocent internet wanderer who stumbled upon my site through that horribly constructed sentence, but he/she highlights a problem with the IPO exits of many of these buzzworthy tech companies. I’ll discuss them in the popular lazy blogger format of “some bolded words as a means of generating structure”:

Everybody involved in the startup wants the company to exit, eventually.

Most people involved in young companies like being involved in young companies. Typically the talent at young companies got there in one of two ways – they always worked at young companies, or they left big companies to work with young companies. Both of those sorts of people end up wanting to work at young companies, which means that if the young company works out and becomes a tremendous hit, the company is no longer the sort that the person wants to work for. It’s ironic (I think, though after being peeved by other people when they incorrectly label something ironic for so long, I’m actually beginning to wonder if the word has any meaning whatsoever). Look at the co-founders of a startup you pay attention to, and it’s almost guaranteed that they jumped over to startups from a larger company in the space, or they’ve always been a startup person. Startups draw a sort of entrepreneurial spirit, which typically isn’t sated by the bureaucracy of an IPO-ready company.

Despite my personal turmoil over the uses of the word ‘ironic’, it is decidedly not ironic that venture capitalists want the companies they invest in to exit. VCs have two goals: invest money and make money on that investment. It’s hard to make money if the company never sells to anybody and never IPOs – the company must make an exit in 90% of circumstances, or the VCs delay reporting a success to their limited partners. Only with rare, super successful mega companies can a VC potentially get out of an investment with a gain, but that’s not ideal, as it forces the VCs to rely on inaccurate, non-free market pricing and the wiles of the secondary market for private stock, a market that probably shouldn’t exist and requires approval from the company for the institutional investor to access.

And we are now seeing a third group that clamors for an exit, though only through an IPO – the everyday investor. Mr. “when does zynga shares hit teh market” wants in on the big private companies he reads about, and wall street wants to get in on the action as well. Private companies can legally only be held by 500 people before the company must report to the SEC as if it were public, essentially forcing the company to go public when it reaches a certain capacity. If you aren’t in that lucky 500, Zynga, Facebook, and Groupon stock has been off-limits (largely, and in the US) despite the fact that half of the tech articles you read are about the three companies. So everything is lined up from the beginning to push startups towards an IPO exit, or a sale to another company.

Everybody involved in the success of the company is probably leaving when the company exits (aka when Ivonna Zyngastock buys her shares).

People get terrified at the slightest hint of news that Steve Jobs is ill. When Jobs coughs, Apple stock drops. Not that every founder is as valuable to their company as Jobs is to Apple, but there is a general consensus that the founders are pretty darn important, even when the company has years of institutional knowledge and thousands of employees. You could argue that the founder is even more important to a small company with less institutional knowledge and likely a smaller number of employees. Obviously not every founder leaves the company when the company exits, and often in acquisitions the key founders are contractually obligated or heavily incentivized to stay, but many upper level executives feel compelled to leave. For one, the desire to work with startups outlined above makes founders want to move on to their next venture. Upper level execs are also likely to be holding on to years worth of stock, and looking for a chance to finally make some money for those shares they’ve had for so long, and often divesting from the company financially means divesting personally. Employees at all levels can now also jump ship more easily, as the pressure to stay to make something off the stock is no longer there.

Success is also, in part, driven by the investors (at least, if you believe the investors). VCs have tangible connections and expertise in areas, often with insider knowledge of the going-ons at other companies they invest in. But once the company exits, the VCs are less likely to play an intimate role in the company’s direction and business decisions. VCs at least see their % ownership of the company decrease, especially as they begin pulling their own stock out to make money on their investment (which has, like the founders stock, been practically illiquid for years). Another odd part about this is, the VCs are the ones who set the price of the company closest to the IPO – take Pandora for example, which just had an IPO despite the fact that the company doesn’t make any profit. Or Groupon, who raised nearly a billion dollars from VCs, then paid most of it out to other investors, then reported a loss for the quarter before their IPO. How do you value a company with no profits? VCs set valuations in the most recent series round, and often the IPO price is, at least in part, based on that valuation. So VCs sort of cooperate to create the illusion that a company has an enormous amount of value, then they dump the company on the public and sell those shares to investors who’ve only heard about the company because of the reporting generated by the investments the VCs made in the first place. I’m not saying it’s crooked or anything – probably just basic marketing – but when the public hears about how valuable a company with no profits is, and then the guy who last invested is very excited to sell, some alarms should go off.

Public disappointment in the quality of companies in the IPO market is what drives the tech bubble cycles.

So all of the above is driving cycles where the public hears about awesome companies, but then gets to invest at a point in time where the company is probably undergoing its biggest transition in terms of culture, turnover, and makeup at the top. Sometimes it works out or the founders truly retain control (google), but often it doesn’t, and if the hype gets too big around a few success stories, its in the best interest of the founders, the VCs, and everybody “in” the bubble to keep pushing young companies to IPO, then jumping out to show a strong short-term gain on the financials or cash out the founders cheaply-bought stock. Eventually the public catches on, gets frustrated buying shares of hot young companies that aren’t businesses yet but are still valued in the millions, and the public stops buying. The fact that people who can’t even construct sentences are googling to find out when they can buy into Zynga is great in some ways – if the overall value of the companies coming out of sillicon valley is high, then the companies deserve the buzz and the valuations – but in other ways it’s bad – once the public starts getting carried away with IPOs, the next phase is discontent with the performance of the companies, followed by a quick burst of the bubble. So get your Groupon stock while you can, but remember that all the people who’ve believed in the company up til now will probably be doing the opposite. (Note: Zynga is great though, I’ll probably be a Zynga stockholder one day. Anybody who can make millions selling 50 x 50 pixel art is on to something.)

Leave a comment

Filed under Funding, Social Games

June 20, 2011 · 3:45 pm

Zynga, Vostu, and why social games don’t need copyright law

Forgive me the indulgence of continued discussion about the Zynga v Vostu lawsuit when so little has transpired since the filing of said lawsuit in the last week. If you didn’t hear, Zynga is suing Vostu for copying the art style and game flow of many of their titles. To catch you up, Vostu said Zynga is a copier as well, and that Vostu doesn’t copy anyway, a great standard lawyer-advised answer. But this case fascinates me:

Copyright law is generally justified like this: If we didn’t have it, people wouldn’t create things as often. It’s a right that we give out because we are afraid of what would happen to creativity in a world without it, and we want to encourage big cultural contributions through art and music and writing by letting the creators of that art make money. We have this idea that too little protection would stifle our cultural richness by disincentivizing creativity. But we worry about too much protection as well – we carve out space for modifications to existing art, and for criticism and educational use of such cultural materials through the fair use and first sale doctrines, along with free speech. So it really is a rather delicate balance, as ‘just enough’ protection should lead to the greatest gains for our culture, as well as the proper profit motive for artists.

Copyright law typically doesn’t do much in the realm of video games. Yes, if somebody makes copies of a game’s disc and distributes it, copyright is there to stop it. But that same result can be achieved through contract, as it is in other parts of software and with databases contained on software – simply by granting limited licenses to users, companies can effectively prevent unauthorized distribution, perhaps MORE effectively because the license can defeat the first sale right. So copyright law is pretty useless to video games in that regard, as its benefits as a piracy-preventer could be replicated using other legal doctrine. It is redundant at best, and actually somewhat limiting at worst (some video game developers would love to quash the used game marketplace by removing the first sale right through contract).

Now in terms of the original motivations for copyright law, does having it really encourage more games to be made than we would have otherwise? It’s pretty tough to say – unfortunately our forefathers weren’t particularly into using treatment and control groups when they theorized what impact strong IP rights would have, so we ended up with pretty crappy, flawed patent and copyright laws. So we just have to guess – if copying a video game could be done, would it work, and how hard would it be to build a strong enough business off of a copied game that future developers would be discouraged? Note that the question is far more straightforward when you consider the impact of copying on the market for a book or a piece of music: especially in the digital age, unauthorized reproduction of those (relatively simple) forms of entertainment kills the value of the original for the artist – If I copied a best selling novel and sent it to all my friends and sold it on the street for a dollar, I’d effectively displace the sales of that book to all of those people. If that sort of action was widespread, we would genuinely have fewer people taking the time to write books.

But can the same be said about video games? As noted above, video games are harder to copy. You can burn a disc and hand it to your friend, but that’s not really scalable and basic licensing rules can deal with that threat just as adequately as copyright can, albeit with a bit more effort. Computer games are pretty widely available via torrents, so obviously copyright isn’t doing a whole lot there, and as I mentioned, licensing could just as easily establish a legal basis for preventing that. Social games on facebook or the web are essentially impossible to distribute to your friends – they are usually free to access anyway, and the whole point of the games is to encourage users to invite their friends to join (Someday the music industry will figure out that this is the model they ought to be using, but that’s beside the point).

Back to the Zynga v Vostu case: Zynga makes games, and they are wildly successful thus far. Vostu is making very close copies of these games and marketing them in regions of the world where Zynga is not yet dominant. It’s not working very well (Vostu has only 500,000 users, compared to Zynga’s 267 million) – what makes social games effective are the viral mechanics and fine-tuning that incentivize you to invite friends, keep playing, and pay for virtual goods. Those sorts of things aren’t readily copied – unlike a book or a song, where it takes an army to create the work but just an individual to copy it, social games take an army to create and an army to copy. Free-riding is not the same in social games. As Vostu pointed out in their defense, they are a company of 500+, not a guy in a basement redistributing Zynga’s products. Social games don’t need copyright law, because the elements that make them successful (engagement mechanics, notification mechanics, tweaked progression, feedback loops, carefully chosen monetization points) aren’t subject to copyright protection.

It’s surprising Zynga even sued over the issue: Megacity, the most successful game in Vostu’s catalog, has just about 300,000 monthly users and only 30,000 daily users, while Cityville, the game it copied, has 90 million monthly and 30 million daily users. The DAU as a percentage of MAU paints an even uglier picture for Vostu compared to Zynga (only 10% of Megacity players return daily, compared to twice that for Cityville). I’m sure Zynga monetizes those users better as well, though there is no way to know. So while I’ll undoubtedly have a great time watching the Zynga lawsuit as an observer, Zynga doesn’t need copyright to protect it’s core business – it’s core business is a mastery of engagement, notification, progression, and monetization, not art style.

(Update: Based on Vostu’s response, it appears that they have a robust core of millions of users in Brazil which Appdata, the only real source on numbers for social games and the basis for my numbers above, didn’t capture. This doesn’t necessarily change my opinion, but it’s worth noting.)

Leave a comment

Filed under Copyright, Law, Social Games

June 17, 2011 · 12:08 am

Zynga sues Vostu for copyright infringement, will Zynga “win”? Zynga probably doesn’t care about the outcome.

Really, really fun news this week as Zynga filed a lawsuit against a copycat. The complaint is nothing short of entertaining ( at least five pages of screenshots), and the techcrunch article even has the accompanying video, which shows side-by-sides of players playing both games. Here’s a couple important things to think about when you chat about this over the watercooler:

Zynga has a reputation as a game stealer, but stealing games isn’t usually illegal. Notice I didn’t say they stole games: barring really extreme situations, you can’t “STEAL” a game and have an actionable right under copyright law. Copyright protects original expression fixed in a tangible medium. That part is easy, but when the copycat reproduces everything themselves, it’s hard to draw the line between inspiration and blatant ripoff. If you straight up rip the art pixel by pixel from a game and reproduce it without permission, then that’s copyright infringement. But short of that, nobody has really explored where the line is for copyright infringement in a video game/facebook game. Game mechanics aren’t usually subject to copyright law, so the fact that coins pop out when you click on a house in both Cityville and Vostu’s clone doesn’t mean a whole lot. And copying the art style of a game is close to accepted practice in the social game world, where Zynga rose to fame on the shoulders of other, extremely similar games by lifting the art styles of those games (Google “farmvillians” for more background if you don’t know). While people complained about Zynga’s art appropriation, and while they were sued by those games, those suits were mostly over trademark infringement, not copyright infringement, and they were settled before legal costs could ramp up. Zynga might have been able to win most of those suits had they wanted to fight them out.

Blatant copying doesn’t really WORK in social games. Copying allegations were a big part of Zynga’s early history, but most people recognize that copying wasn’t what made Zynga’s games popular. Social games spread through virality, through network effects, and through cross-promotions with other games in the developer’s network. Zynga realized this early on, and while they did borrow most of the mechanics from the early games from others, they also added all of the features that grew the game, and they tweaked it to make the user base into a revenue generating monster. Even copying these mechanics, Vostu hasn’t really made much off of it for many of these reasons (you can’t copy a critical mass of users). Has Vostu actually benefitted from this copying? Vostu has half a million users, monthly. Zynga has 264 Million. So I don’t think their copying is really helping that much.

The legal strategy is interesting. Zynga isn’t bringing out the big guns on this one (they are already spending A LOT on their IPO, to be sure). No offense whatsoever to Keats, McFarland and Wilson LLP, the firm handling the complaint, but it’s a six attorney boutique in Beverly Hills. Not exactly a traditional heavyweight in the copyright or startup world by any stretch, and google searches turn up nothing much on the lead attorney on the case, Dennis L. Wilson. A few complaints that he was aggressive in sending out notice letters when he was at Fox… Like I said, I’m sure he is great, but hiring that firm to take the case is, in my estimation, a slight reveal of what Zynga is thinking. I’ll elaborate:

Zynga probably doesn’t care if they win or not. Zynga doesn’t need to win. Zynga is FLUSH with money, and they literally don’t care if this lawsuit goes on forever. They may WANT it to go on forever. If this is a battle of attrition, Zynga just needs to not get brushed aside in a summary judgement, and then hope Vostu can’t afford to pay the bills for a drawn out fight. Maybe draining Vostu’s resources is enough. Maybe the lawsuit scares away future investments into Vostu. Maybe the lawsuit helps assure Zynga’s potential IPO investors that the company’s core business isn’t easily copyable (ahem groupon ahem). All of those outcomes are achieved by assuring that the lawsuit survives just a few months, so it really doesn’t matter if Zynga wins. Vostu isn’t really even a threat to Zynga: Vostu has half a million users across all of their games, compared to Zynga’s 264 MILLION.

It’ll be fun to watch the suit though, because if Vostu fights it, we may get a court to make some strong precedent on where the line is between copying and homage in a genre of entertainment where that line is blurred constantly.

Leave a comment

Filed under Copyright, Law, Social Games

June 16, 2011 · 11:11 am

Is Facebook’s Project Spartan/Microsoft’s Kinect SDK a sign that the application market wars have begun?

Mobile devices are the future. Whether it be iPads, smart phones, netbooks, or whatever device we will use to access “the cloud” in five years, and we probably won’t care as much about desktops or even laptops as we do now. That’s old news, but it’s yet to be seen what that news means for the traditional big hitters in the tech world, and how those big hitters will keep up with a rather dramatic market shift. Apple was the first to the market by a year or two, really, and they paved the way for the app market structure: an iphone on 3G showed the world how easily we could do without our desktops, and pointed software towards the grave. Soon the days of software developed by teams of engineers over multi-year development cycles, “mastered” and sent to a manufacturer to mass produce to send to physical stores around the world would be gone… Our mobile devices, of which it seems we can’t get enough right now, run on applications – they aren’t “finished”, but constantly and quickly updated. An excellent piece by Ben Horrowitz on the Economist website pointed out that advances in programming languages greatly reduce the number of hours it takes to create a strong piece of software, and along with a whole host of other reasons (faster wireless, cheaper phones/tablets, end of closed development platforms), applications are how 90% of consumers will get 90% of their content in the future.

This year will go down in history as the year where the big tech companies realized that the future was in application markets, and where every single one of them entered the fray. News came yesterday of “Project Spartan” (lame codename), a Facebook HTML5-based application market, designed to run on any web-capable device (aka the iphone). This joins Amazon’s app market, already running on a bunch of devices, and obviously Google’s Android market and the original “app market” by Apple. As we learned in the original computer boom, only one (or two) of these operating syst… I mean app markets… can survive. Every technological platform reduces to 1-2 main competitors eventually; just look at computers [mac/pc], operating systems [windows/OS], smartphones [iphone/android… sorry blackberry!], video game consoles [xbox/playstation]… It’ll happen in app markets too. Does Facebook’s inherent social advantage mean it can take on Apple and Google with their giant headstarts and hardware presence? Can Amazon do anything to parlay their advantage in moving physical goods and their relationships with distributors into something app users care about? Can Barnes and Noble turn a pretty solid device (the nook) into something that won’t be a historical relic in 2 years? Is Microsoft gonna uncharacteristically sit this round out, or is the Kinect their app market?

begun the app market wars has.

Leave a comment

Filed under Games, Misc, Social Games

May 31, 2011 · 11:21 pm

Social Game IPOs heating up, Zynga releases a new game tomorrow

News from the last couple days suggest that Zynga is planning to file for an IPO, following LinkedIn’s successful IPO move earlier in the month, and news from Popcap that they plan to IPO as early as November. So the big headlines all over the internet are that the IPO market is heating up, that social game IPOs are heating up, and that there is or is not another tech bubble (depending on who you ask). Kabam also raised $85 million last week, so a lot of money and hype is heading into the social game market right now.

In other/related news, Zynga is releasing their first game in many months tomorrow, and it DOESN’T end in ‘ville! Empires & Allies will launch tomorrow according to every technology site on the planet, and it’s a pretty big departure from the “mindlessly clicking on things and coming back tomorrow to click again” genre that Zynga has cornered so far. Apparently the game is something of a Risk/Settlers of Catan hybrid, though I’d be surprised to see the deeper strategy elements of either of those games appear in E&A.

Social games are clearly on the rise, and Zynga’s eventual IPO is probably going to surpass LinkedIn’s valuation by a mile and rile further claims of a bubble, but really the social games market isn’t close to finished growing. Here’s why:

The iphone has really only had one blockbuster game (Angry Birds), and it wasn’t even social – Social/mobile is the new hotness in the consumer web world, but it hasn’t hit it’s stride yet. There hasn’t been a big game yet that successfully connected a gaming experience with a social experience for a mobile device. Somebody will eventually figure out how to connect those dynamics and make a compelling user experience, but so far nobody has. And even besides that, Angry Birds showed that there is a large market for a game based on a single-player campaign with none of those social elements, and there are bound to be more hits the size of Angry Birds as developers become more sophisticated.

Nobody has made a good Facebook game yet – That’s right, as somebody who actually likes PLAYING games, I can confidently say that compared to the other things in the world that we consider games (board games, console games, classic games like chess), development for the Facebook platform has been rather pathetic. Compulsion loops are great for making money, and there’s no questioning that plenty of companies have made a living by satisfying people’s demand for mindless entertainment. But in terms of experiences that we could use in an argument about games as art, nothing from the major social game developers has really come close. Does every developer need to be trying for art when they make a social game? Of course not. But at least a few will, and whoever succeeds will probably have a sizable hit on their hands and gain a cult following for it.

Tablets (iPads) will probably be the next big development platform, and demand for tablets is not yet satisfied – Tablets, with their huge screen and more powerful hardware, present developers with the chance to make completely different sorts of games than we currently see on iphone and Facebook, but few have focused on the platform yet. As tablets continue to populate our planet at an increasing rate, more developers will gravitate towards it as a medium and eventually an Angry Birds-sized hit designed specifically for the iPad will launch a developer into the stratosphere. But as of now the biggest iPad game is Angry Birds, which wasn’t even designed with the tablet in mind.

So despite some of the negative bubble buzz, I don’t think these companies are overvalued or a sign of the impending apocalypse/bubble. People point to Zynga’s valuation as a sign of the bubble, but Zynga is making crazy money, and if you believe any of the three notes above, they’ll probably be able to make even more in the coming years. That’s a far cry from the bubble companies of yore, which went public before seeing any revenue or even developing a business plan.

Leave a comment

Filed under Funding, Games, Social Games

May 22, 2011 · 7:35 pm

How social games are like massages, and why anybody might care

The massage therapy market seems to be doing just fine in the recession, at least if you believe a google search on the topic. I’ve previously posted about how well the social games market has done growing up during the recession, and in some ways I think social games are a lot like massages. Think about it:

You can’t satisfy demand for them in just one purchase: There’s a reason you don’t see advertisements for 10 hour massages, and you can’t beat a social game in one sitting like you could a console game. The good is structured in a way that demand is fulfilled by experiencing the good in small intervals, with the goal of addicting you so that you come back later. Compare to something like chocolate: If I was offered 10 pieces of chocolate for $5, or 20 pieces for $5, I’d be economically irrational not to take the latter offer. But with massages, I’d take a 2 hour massage for $20, but probably wouldn’t want a 10 hour massage even for the same price. Similarly, I might want to play Mafia Wars for 20 minutes, but probably wouldn’t want to for an hour straight even if the value proposition of a normal good would suggest that to be irrational. (Turns out I won’t play Mafia Wars even with my developer friend begging me to play it, because the game isn’t much fun, but you get my point.)

Both goods defy the typical definition of a luxury good, apparently: Luxury goods are typically understood as goods with a high elasticity of demand; the more money people have, the more they want to buy, and vice versa. Apparently social games and massages aren’t really luxury goods, even though most of us would think of them as superfluous to our existence (rightly so, I’d say). My cursory google research has me believing that the massage/spa industry is doing quite well even during the country’s economic turmoil, and there were no such things as social games 2 years ago.

Maybe both goods are… replacement goods?: If they aren’t luxury goods, though, this raises an interesting question for social games: will the market continue to grow as the economy recovers? Social games might actually be a replacement good – I can’t afford a console game, so I spent 20 bucks on ~~Farmville~~ ~~Frontierville~~ Cityville. Hear that sound? That’s the sound of this post getting to it’s point – Maybe we should be realistic about the potential market for social games as the general economy recovers. Obviously it will grow, as it’s a young industry, and there’s only been one killer app on iphone/ipad (Angry Birds, which isn’t really even social). And the markets are somewhat different: Farmville was built on middle age women. But if social games are a replacement good rather than a luxury good, we might consider the possibility that at least some gamers will go back to console games, and at least some middle age women will go back to whatever middle age women used to entertain themselves with.

Leave a comment

Filed under Games, Misc, Social Games