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Fantasy sports as asynchronous casual MMO for men November 30, 2007

Posted by jeremyliew in asynchronous gaming, casual games, games, games 2.0, mmorpg.

I posted recently about my interest in asynchronous gaming. Andrew Chen posted in the comments that fantasy sports leagues were probably the best and most popular example of these – a very good point. That reminded me of a post that Charles Hudson put up recently, saying that Fantasy Football is casual games for men. He breaks down the reasons for Fantasy Football’s success as follows (summarized):

Simple game mechanics – If you understand how the NFL works, you can play fantasy football.
There is a good combination of luck, skill, and strategy. Skill comes in working the waiver wire, doing your homework before the draft, and staying on top of who’s emerging during the course of the season… However, there’s a lot of luck involved – you can’t control who gets injured and how long they’re out.
The time commitment is manageable (unlike other fantasy sports) – You can basically manage a fantasy football team in a few hours a week… The beauty of fantasy football is that almost all of the action takes place in about 24 hours per week.
Fantasy football is a social experience – Go to any sports bar on Sunday and make an offhand comment about one of the players on your team. Guaranteed you’ll get at least a few other folks at the bar who have a rooting interest in one player or team. Because the rules for fantasy football are fairly universal, two players in separate leagues can often have a good conversation around fantasy football in general.

I most often hear casual games described as games with relatively simple gameplay, manageable time commitments, and a good combination of luck, skill, and strategy. Fantasy football has all of these elements, even if they’re not obvious.

Worth reading the whole thing.

Games 2.0: Asynchronous gaming November 29, 2007

Posted by jeremyliew in asynchronous gaming, business models, casual games, facebook, game mechanics, games, games 2.0, gaming, user generated content, viral, viral marketing, web 2.0, widgets.

I am 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. I’ve long noted the increasing application of simple game mechanics to social web sites and how this can meaningfully increase the levels and types of interactions that users have with each other and the site.

As an investor in Flixster and Rockyou, both highly viral Facebook and Myspace “app” and “widget” makers, I’ve been tracking closely the spread of emergent user behaviors in these social networks. One Facebook app that really caught my attention is Scrabulous, an online scrabble game that can be played asynchronously, ie players don’t all have to be online at the same time.

Online multiplayer games have long been popular at all the big casual games portals. Multiplayer gaming can be viewed as user generated content for games, one of the drivers of Games 2.0. These games typically have a “lobby” where players can meet and match up before entering into a game against each other in real time.

Making the gameplay asynchronous fits better with the “continuous partial attention” world that we increasingly live in. The reason I never became a hard core gamer is that the serial monogamy requirements (one game at a time, total dedication, long periods of gameplay coordinated with others) doesn’t mesh well with my lifestyle. Scrabulous is a better match for the “play a little bit when you have some time, at various points throughout the day” life that many of us lead. Single player casual gaming (whether Bejeweled online or Brickbreaker on the Blackberry) has been filling that need for many players. These are fun, and at least have the “high score” dynamic, but they lack the social aspect that turn based asynchronous games offer.

Asynchronous games also make it easier to play against friends. You don’t have to coordinate to be online at the same time. Playing friends makes games more fun, and gives them a social aspect (the games have context if you have an ongoing relationship with an opponent). Playing with friends also offers an opportunity for true viral growth for the game, as players invite their friends to play.

Although these turn based multi-player games (especially those derived from boardgames) have some social dynamic, they lack the breadth of social interaction of synchronous MMOGs (not just the direct social interaction, but also the perfomative aspects of gameplay) that help make them such compelling experiences. Part of the appeal of MMOGs (whether World of Warcraft or Puzzle Pirates) is knowing that you’re “in game” with thousands of other people at the same time, each of them interacting with the same universe that you are.

So what would an asynchronous massively multi-player game look like? It can’t be turn based because most players would spend most of their time waiting for someone else to move. That’s not fun. It would have to be time based instead. Players would need to make their moves against a real world clock. Games like Duels.com (swords and sandals PvP fighting game), Manager Zone (soccer manager game) and Kings of Chaos (real time strategy game) all employ this dynamic. Massively multi-player games offer even more opportunity for viral growth because a players invitation ability is unbounded by the number of seats at a board game.

This led to me think about games using the framework below:

narrow games framework

I think that we’ll see a lot more innovation in the two sections of asynchronous multiplayer and massively multiplayer games over the next few years. I’m actively interested in investing in these areas. What are the most interesting such games that you see?

Games 2.0: User generated content in games November 28, 2007

Posted by jeremyliew in business models, gaming, user generated content.
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Following on from my last post about Games 2.0, I came across a great (old) post on Lost Garden about user generated content in games. Here are some choice quotes:

Games are slowly emerging from the land of custom coding into the world of data driven, standards-based application development. I love this trend for a number of reasons including faster development, more artist involvement in the design process and increased opportunities for innovation. What is the future of user created content and how will it effect our profession?

Echoes of web 2.0…

The third generation of titles treats user content as an integral part of the game experience. User content isn’t an extra; it is how you play the game. With this shift, I would easily expect 100% of players to partake of user content.

Consider the benefits of this third generation of mod friendly games.

* The game developer provides an inspirational sketch of a game and a well stocked tool box.
* Then, over many months of player activity, the game becomes fleshed out with content that the players desire.
* Players build the majority of game content and the game developers monetize their results.

Go underpants gnomes, go.

Sounds a lot like the platform approaches of social networks…

In the end, I’m most interested in production efficiency and making money. User content is a natural answer to both of these topics. Game developers can leverage their investment in data-driven development systems to empower their game player’s creative class. The end result is games with a much longer shelf life and only a marginally more expensive development cost.

Hear hear.

Worth reading the whole thing

Is games 2.0 just around the corner? November 27, 2007

Posted by jeremyliew in ad networks, business models, distribution, games, gaming.

Yesterday I put up a post claiming that Web 2.0 has been driven by variablization:

    Variablized Development Costs
    Variablized Content Costs
    Variablized Marketing Costs
    Variablized Distribution Costs
    Variablized Monetization

It struck me that many of the same dynamics are now starting to apply to the game industry as well.

Variablized Development Costs

While development costs haven’t become variable across the board, web based games are definitely becoming cheaper and easier to build. As new rich media technologies improve (Flash, Silverlight etc), development tools improve (Flex, Laszlo, etc), and reusable game engines become more widespread, it gets easier to for people to build games.

Variablized Content Costs

Just as with the web, user generated content allows for models with dramatically lower and more variable content creation costs. Gaia, Habbo, Second Life and other casual immersive worlds, while not really games, let users create content for each other, and in fact let users BE content for each other. PvP games such as Scrabulous and the Campaign Game are another way that “content” costs are variablized – instead of having to create more levels, a game becomes replayable because against live opponents each game plays differently.

Variablized Marketing Costs

Again, just as with the web, search marketing has created a completely variable channel for player acquisition. Web games and downloadable PC games benefit from this; console games still need to rely on more traditional marketing means.

Variablized Distribution Costs

The two mechanisms that have enabled variable/free distribution online are social network platforms and virality. We’re starting to see games taking advantage of both of these mechanisms, including Attack!, Warbook and Kings of Chaos.

Variablized Monetization

Ad networks and contextual advertising have driven the variable monetization model for web 2.0 companies. We’re still very early in the game for in game advertising networks, but Google is making its first forays in in-game-advertising, and startups like Mochi and Neoedge are also taking up the challenge. Kongregate is building a destination for online casual games where they share ad revenue with independent game designers, a more centralized approach to making monetization variable for game designers.

The other interesting emerging direction for monetization has been free-to-play games with digital goods. Games like Three Ring‘s Puzzle Pirates and K2‘s Knight Online have demonstrated the viability of this model.


I think we’re going to see an explosion in gaming over the next few years comparable to the web 2.0 phenomena; I plan on exploring this topic further over the next few weeks.

Web 2.0 has been driven by variablization November 26, 2007

Posted by jeremyliew in advertising, business models, distribution, platforms, viral, viral marketing, web 2.0.

The last couple of years have seen an explosion of innovation on the web that has broadly been labeled Web 2.0. There has been a lot of debate about what exactly constitutes web 2.0 but what hasn’t received as much attention has been what changes have enabled these Web 2.0 companies to arise – what is different now from the mid 90s and Web 1.0. I think the change can be summarized in one (somewhat clumsy) word: Variablization.

Variablized Development Costs

In the 90s we used software development models, primarily waterfall models, where a usable product wasn’t available until close to the end of the development period. Most code was written from scratch, with little reuse or public domain code, and large teams were necessary.

With the popularization of agile programming methodologies, widespread use of open source software, greater ability to use offshore development resources on a consulting basis, and a culture of “open beta”, the costs of developing a website or web service have become both lower and more variable. Ideas that look promising but fail to capture user interest in beta can be identified much earlier and at much lower cost, and resources can be shifted to more promising avenues.

Variablized Content Costs

In the 90s almost all content was created by professional editors and writers, employed by companies. To launch, they had to create a critical mass of content, which cost a certain amount.

Recently, with lower expectations out of beta products, the widespread adoption of user generated content and emerging best practices in how to use user generated content, the costs of content creation have dropped dramatically and become variable.

Variablized Marketing Costs

In the 90s, there were only two ways to get a large number of users. The first was offline marketing – the famous Pets.com superbowl ad approach. Expensive, and with a high minimum level of spend required to break through the clutter. We all know how that worked out.

Overture and Google have changed that landscape. Their CPC model means that you can spend as much as you choose to gain new users, and that your marketing spend can be completely variable.

Variablized Distribution Costs

The second way to get a large number of users in the 90s was to get a distribution deal with one of the big portals – AOL, Yahoo or MSN. In those days, this was the only way to reach a large number of internet users effectively, and you typically had to sign up for a multi year, multi million dollar deal to do it.

As social network platforms open up, and as the basic principles of viral marketing become better known, distribution has become variable, if not free.

Variablized Monetization

The vast majority of Web 2.0 companies rely on advertising as their business model. I think this is because advertising is the one business model that has become variable (relative to the 90s). Back then, to sell online advertising, you both needed to have substantial scale, and you needed to have your own sales force.

Today, thanks to ad networks and CPC contextual targeting (not just Google’s adsense, but also Quigo, Yahoo’s Publisher Network and others), even the smallest of websites can start earning advertising revenue.

There have not been equivalent innovations for subscription and ecommerce business models, and as a result, we’ve seen far fewer web 2.0 companies that use those models.


These changes in cost structure are a useful lens through which to view the current startup environment. It’s been said before that it is cheaper to build a company than ever before. While that is partially true, it is not the whole story. Digg has raised over $10m, Youtube over $12m, Photobucket and Rockyou (a Lightspeed company) over $15m, and Facebook has raised over $275m. (With the exception of Facebook) while these are lower than the amounts raised by companies in the 90s, they are still large numbers. Variablization of costs only makes costs go away when usage is low. In other words, while it still takes money to succeed, it is cheaper to fail than ever before.

Luckily for VCs like me, that means that successful companies will still need to raise money!

Lightweight self expression for the general public November 21, 2007

Posted by jeremyliew in blogging, communication, Consumer internet, product management, self espression.

MIT Technology Review has two good articles about microblogging in the November/December issue. (Both are behind a free registration wall.) The puff piece on Evan Williams and Twitter notes some of his thoughts on micbroblogging:

The criticism doesn’t seem to bother Williams, in part because he’s heard it before. “Actually, listening to people talk about Twitter over the last few months, you hear that almost all the arguments against it are the exact same arguments that people had against Blogger,” he says. “‘Why would anyone want to do this?’ ‘It’s pointless.’ ‘It’s trivial.’ ‘It’s self-aggrandizing bullshit.’ ‘It’s not technically interesting.’ ‘There’s nothing to it.’ ‘How is this different from X, Y, and Z that’s existed for the past 10 years?'” Indeed, there were blogging tools available when Blogger was released, and others have emerged since–including TypePad from Six Apart, which offers more features. But none has the simple appeal of Blogger, and none is as easy to use. These were the reasons Blogger was such an important force in the blogging revolution.

There is an interesting idea at the heart of all this, and that is the idea of innovation through removing features. By focusing on a subset of core functionality, both Blogger and Twitter (and the other microblogging startups, as well as Facebook’s status) have made the user interaction much lighter weight. In my experience at AOL, Netscape and IAC, lightweight interactions generally work better with the general public.

Last year Gartner predicted that blogging would peak in 2007:

The analysts said that during the middle of next year the number of blogs will level out at about 100 million. The firm has said that 200 million people have already stopped writing their blogs… Gartner analyst Daryl Plummer said the reason for the levelling off in blogging was due to the fact that most people who would ever start a web blog had already done so. He said those who loved blogging were committed to keeping it up, while others had become bored and moved on.
“A lot of people have been in and out of this thing,” Mr Plummer said. “Everyone thinks they have something to say, until they’re put on stage and asked to say it.”

Microblogging removes some of the pressure to write substantive posts, making it a lighter interaction that is easier to keep up.

The public’s preference for lightweight self expression is part of what has made widget providers (such as Rock You, a Lightspeed company), profile layout sites (such as Free Code Source) and quiz sites (such as Quizilla) so successful.

Meaning = Data + Structure: Inferring structure from user behavior November 19, 2007

Posted by jeremyliew in attention, data, semantic web, structure, user generated content.

A little while ago I started a series about the structured web where I claimed that Meaning = Data + Structure. I followed up with a couple of posts on ways that structure can be added to user generated content, through user generated structure, and through inferring structure from domain knowledge. The third way that structure can be inferred is from user behavior, otherwise known as attention. As Wikipedia notes:

Attention economics is an approach to the management of information that treats human attention as a scarce commodity, and applies economic theory to solve various information management problems.

Alex Iskold has a good overview of the attention economy elsewhere at ReadWriteWeb.

By watching user behavior, by inferring intent and importance from the gestures and detritus of actions taken for other purposes, you can sometimes also infer structure about unstructured data. Google does this with its PageRank algorithm, Del.icio.us uses individual bookmarking to build a structured directory to the web, and Xobni maps social networks through analysis of your emailing patterns. Behavioral targeted advertising is based on the assumption that users display their interests through the websites they visit.

Using implicit data to infer structure requires making some assumptions about what each behavior means, but it can be a useful supplement to the other two methods of inferring data. As with inferring structure from domain knowledge, it requires a well defined ontology so that people and things can be mapped against it

Would love to hear more examples of using attention data to infer structure.

Business models for apps and widgets November 16, 2007

Posted by jeremyliew in ad networks, advertising, business models, facebook, myspace, open social, platforms, self espression, social media, social networks, user generated content, widgets.

This afternoon I spoke to the Stanford class on Creating Engaging Facebook Apps.

As I said at Web 2.0 expo, building big businesses online is hard work. While it isn’t hard to start an app company, especially as a single developer ($250k in revenue) or even to support a small team ($2.5m in revenue), it gets quite hard to scale revenues to $25m/yr.

Assuming a 5% daily active rate and 3 pageviews per visit, an app developer with a $0.50 RPM would need to get to 926m installs to get to $25m run rate. Compare that to the app with the most installs on Facebook – Slide’s Superwall which has around 20-21m installs. Clearly, broad reach app developers need to develop (i) multiple (ii) high engagement apps [ie higher active rates and pageviews/visit than these assumptions] (iii) across multiple social networks to be able to get close to this revenue target. (RPMs will likely be higher for companies with a direct sales force as well, so the target isn’t quite as high, but you get the point).

Under the same activity and pageview assumptions, an app developer with a $10 RPM would need 46m installs to get to $25m in revenue. Apps with endemic advertising opportunities can easily realize this level of RPM but will still need to be in multiple social networks to get to those levels of installs. It doesn’t make sense to limit your world to being a Facebook app. Social network platforms are avenues for distribution, and app developers should be taking advantage of all of them.

One of Lightspeed‘s portfolio companies, Rockyou, is taking the former approach. Another, Flixster, is taking the latter. Both seem to be working so far.

I also did a similar analysis for digital goods business models in the presentation. Here is a link: Stanford Facebook Class presentation

Online video advertising takeaways November 15, 2007

Posted by jeremyliew in ad networks, advertising, branding, business models, video.

I moderated a panel today at NewTeeVee Live, which was one of the best conferences that I’ve attended this year. Kudos to Om and Liz for putting together a great show.

The four panelists were all CEOs of video ad networks. Jayant Kadambi of YuMe, Tod Sacerdoti of Brightroll, Matt Sanchez of VideoEgg and Matt Wasserlauf of Broadband Enterprises did a great job of discussing some of the challenges and opportunities in the industry.

Here are some takeaways from the discussion:

    Online video is a brand building medium, bought on a CPM basis.

    Ad buys today are coming from three buckets; TV budgets (the big opportunity, but further away), online budgets and experimental budgets. Video content coming from TV and other traditional video producers is most likely to win buys from TV budgets. Native online video content still coming from experimental budgets.

    To get to a scalable online video ad business, the key barriers are (i) standardization of ad units, (ii) standardization of ad serving infrastructure and (iii) standardization of measurement/metrics.

    There is tension between highly effective preroll ads and user friendly overlay ads (with a user initiated play), but these are the two most common ad units and most likely to become a standard. In-banner video is also popular.

    Big Media companies prefer point solutions for online video so that they can sell and control their own inventory; smaller online content owners want a packaged solution that delivers all elements of the value chain (ad sales, ad targeting, ad inventory management, ad serving, ad measurement) from a single provider. There is increasing pressure to create standards in ad serving from the large media companies so that multiple sales forces can sell ads without having to implement multiple serving solutions.

    Advertisers are buying content adjacencies today as a proxy to demographic targeting, but they would prefer to buy demos directly where they can

The four panelists really engaged; it was a pleasure to listen in to their conversation. You can read the transcript of the panel here.

Mass customization drives online-offline hybrid business models November 12, 2007

Posted by jeremyliew in business models, Ecommerce, media, offline, start-up, startups, user generated content.

I’ve noted in the past that some online and offline distinctions are starting to blur. Some companies are finding that the easiest way to monetize their content is to turn bits into atoms and sell the atoms – people are willing to pay for things in the real world that they would never pay for offline.

There seem to be three major approaches to combining online and offline:

1. Single order custom manufacture

Over the last ten years manufacturing processes and technology have improved to the level where it is now possible to make single items on a custom basis. This has spawned a lot of the convergence in online and offline business models.

There has been the most activity in the market for photo books, including Apple, Shutterfly, Picaboo, LuLu, Blurb, Mypublisher and many others.

Zazzle, Cafepress and Spreadshirt take a similar approach to selling custom printed T-shirts, coffee mugs, mousepads and more.

A more collaborative example is Tribbit. Tribbit mirrors offline behavior by allowing multiple users to build and “sign” a group online card, which can then get printed out and presented to the recipient – in effect a group contributed photobook.

All of these examples are focused on user generated content. But rather than using user content, Tastebook, backed by Conde Nast, lets you choose from an extensive collection of recipes to create a customized cookbook. Techcrunch says:

TasteBook is a service that lets users take their favorite recipes from partner sites (starting with Epicurious) and create printed cookbooks that are delivered to them and/or friends. Users can add their own recipes as well, and customize the book with their name and other information.

2. Small order custom manufacture

Occasionally, one of the problems that can occur with single item custom manufacture is that the processes used for single items can result in lower quality. This is definitely true of T-shirts – many of the custom T-shirt sellers mentioned above have an “iron on” quality to them. The only way to make a high quality T-shirt with a silk screened print at a reasonable cost is make a batch.

Threadless takes this approach to it’s T-shirts. They have done a great job of building a community online, soliciting T-shirt designs, winnowing out the best designs for production through community input, and making batches of these shirts. This way they keep quality up, keep costs under control, and minimize inventory risk by selecting only to make T-shirts that are likely to sell out.

JPG Magazine takes a similar approach to the issues of its magazine. JPG is a physical magazine focused on photography. It solicits all its photos and articles online and its online community helps determine what gets printed. In a world where a new magazine launch can cost $40m before breaking even, JPG got to profitability at vastly smaller scale. A sister magazine focused on travel, Everywhere, has its first publication on Nov 27th.

3. Tying an online experience to an offline purchase

Whereas many of these companies start with an online experience and drive to an offline transaction, Webkinz starts with the offline transaction, and drives to an online experience. They have been able to draw synergies from their online casual immersive world and their physical plush toys and have sold millions of their toys to date. Barbie has had similar success with it’s online casual immersive world Barbie Girls which hit 3 million users in the first 60 days.

Another example is Hidden City, which was recently funded for a a horse themed trading card game aimed at little girls; each card unlocks a digital horse avatar online that girls can play with. The founder was behind the megahit trading card games Pokemon and Magic: The Gathering; he is clearly evolving with the industry as casual gaming moves online.


I expect more innovation in this area of combining online and offline business models. I am actively interested in meeting companies taking this approach. Let me know if you know of more!