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We’re all gamers now October 25, 2007

Posted by jeremyliew in advertising, business models, casual games, gaming.
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Sat through an interesting panel on casual gaming today at a Goldman Sachs event, with representatives from Oberon, Big Fish, Wild Tangent and Liberty Media. Alex St. John of Wild Tangent was his usual feisty self, throwing hand grenades in all directions and keeping the conversation lively.

A few interesting insights came from the discussion. A couple of the panelists pushed back on the Wikipedia definition of Casual Games:

The term casual game is used to refer to a category of electronic or computer games targeted at a mass audience — typically with very simple rules or play techniques, a very low degree of strategy, making them easy to learn and play as a pastime. They require no long-term time commitment or special skills to play, and there are comparatively low production and distribution costs for the producer. Casual games typically are played on a personal computer online in web browsers, although the Wii and Nintendo DS are also often referred to as a platforms catering to casual gamers. Casual gaming demographics also vary greatly from those of traditional computer games, as the typical casual gamer is older and more predominantly female.

Instead, Alex proposed that we’re all gamers now, and that this is a shift in media consumption comparable to the rise of TV. Whereas shrink-wrapped gaming can be compared to a movie – you don’t know how much you’ll enjoy the experience until after you’ve paid (reviews and recommendations notwithstanding), he compared casual gaming to TV – you try it for free, and it has to entertain you and earn the right for you to keep coming back. He says that no one refers to “TVers” as a group because everyone watches TV, and similarly no one will refer to “gamers” as a group because everyone will play games.

Another interesting claim from Alex was that Wild Tangent made 15c per game play (under a mix of purchased premium games and advertiser sponsored games). That implies a $150 CPM, which is extraordinary. He also said that they were sold out of advertising inventory, even at these CPMs, and implied that given these economics it almost always made more sense to offer casual games for free (increasing by 50-100x their usage) than depend on selling games to 1-2% of the audience who try the game. This was heavily disputed by other panelists, at least in part on the basis of the current size of the ad budgets being dedicated to online gaming.

Most interesting panel I’ve been to in a while.

Comments»

1. Lance Smith - October 25, 2007

I would tend to think John Welch of Playfirst might have a much different take then the boys over at Wild Tangent.

Total revenue being equal, I pose this: Would it be a sexier business ‘play’ to be generating your revenue via advertising/selling virtual items versus billing credit cards? What is the corresponding multiple one could apply to either model?

In 2001, I’d take the credit card business hands down. In 2007, I am not so sure.

What does a professional investor have to say?

Continue to enjoy all your blog posts BTW. Extremely insightful.

2. Alex St. John - October 25, 2007

Good post Jeremey. Panels are often difficult settings to make complex points. To be precise we generate .15 cents/play just in advertising alone not including retail. My point on advertising was that we have proved to ourselves that it is possible and practical to generate as much or more revenue taking premium retail games and giving them away with advertising sponsors as can be generated selling them for a credit card transaction to the same audience. I would actually recommend that anybody who does not support BOTH models together is leaving money on the table because what we found was than when presented together to a fixed audience the advertising free play only cannibalizes retail sales by about 20%, so you just make 180%+ more revenue from the same audience as either model alone.

3. foosy - October 26, 2007

if you consider forex as a MMOG, then there are really alot of gamers ard since the online forex site take off. Anyway, there are less than 5% of the forex transaction are underpin by real commerce. the rest are just pure game…

4. Jordan Mitchell - October 26, 2007

Very interesting the multiple of eCPM within casual gaming over social networking — $150 vs $.15 — when I would expect the user’s attention span (and related ad effectiveness) to be about the same. Even worse maybe … when I’m playing a game, I’m blocking a lot more out than if I’m on a social network.

I need to check out Wild Tangent. Wondering if it’s a house of cards, kinda like the spyware market was, where all the $ maybe come from other casual gaming companies.

5. Jason Vu - October 27, 2007

We’re all gamers now, sometimes in a day, a week, like we are fathers, mothers, brothers ….

6. jeremyliew - October 27, 2007

@ Lance – from an investment point of view, so long as the ad sales are scaleable, I would have no preference between sales of games and ad sales. If the ad sales are highly negotiated “sponsorships” and not standard ad units, then I’d prefer sales of games

@ Jordan – I believe many of the advertisers in casual games are big reputable brand advertisers

7. tomas zeman - November 3, 2007

I think casual games should be free to play. Thats the only way how to let the most people play it. In a long term, advertisements or sponsorship can be revenue model. If it would be based on download (mobile casual games) or subsctiption, there will be somebody else offereing the same stuff for free. Thats why we desided to do our mobile multiplayer casual game platform (www.cotopia.com) free for players.

8. Games 2.0: Asynchronous gaming « Lightspeed Venture Partners Blog - November 29, 2007

[…] not a hard core gamer by background; more of a casual gamer. But casual gaming is now widespread; we’re all gamers now. My interest in the area has grown out of my interest in social networks and social media. […]

9. Business, casual gaming « Executive Summary - February 12, 2008

[…] Current focus is on in-game advertising. CPMs are difficult to judge, Jeremy Liew posted awhile back that Wild Tangent was getting an eCPM of $150! Venturebeat interviewed Zynga and they […]

10. citypixel.com blog » Blog Archive » Business, casual gaming - February 12, 2008

[…] – Current focus is on in-game advertising. CPMs are difficult to judge, Jeremy Liew posted awhile back that Wild Tangent was getting an eCPM of $150, but this was a mix of revenue from both […]

11. Free to play arguments « Lightspeed Venture Partners Blog - February 28, 2008

[…] a recent panel on casual games, Alex St John said that he was able to sell advertising to support casual games monetizing at 15c/gameplay and that he was sold out of […]

12. Mobile J Games - August 6, 2008

When it comes to more fun in simple game play, gamers are attracted towards it. I dont think if gamers would love to pay for casual games. Making it free makes right sense for any casual game. It may be multiplayer game portals for mobile phones like the recent release http://m.smackall.com


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