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Games 2.0: Lessons from Travian February 14, 2008

Posted by jeremyliew in asynchronous gaming, casual games, game mechanics, games, games 2.0, gaming, social gaming, user generated content.

Travian is a popular in-browser asynchronous massively multiplayer game; you build a village in “Roman” times and set off to expand your empire, raid others and form alliances. It has many of the games 2.0 characteristics that I’ve been blogging about and has been growing nicely, as Alexa shows:

alexa graph for travian

As a passive web game:

it’s persistent. it’s massively multiplayer. it’s competitive. it’s social. it’s portable. it’s passive.

passive web games are setup to permeate your life. they become habitual. they are inherently attractive to gamers with little time — whether that time is taken up with work or other games. they fit unobtrusively into the corners of your life, taking as much or as little time as you want to invest.

… it’s a game you’ve never heard of, but, it gets 225 million page views a day

Most game reviews are glowing, noting the appeal to both casual gamers and obsessive gamers. One review though notes that at heart this game is about negotiation and diplomacy:

Politics is the name of the game, as while there’s room for intelligence to make a difference in combat, in the end, if someone has enough troops (and the resources required to build them) they can crush anyone. So friends are important, or at least fellow wolves

The reviewer complains that the scale of the player base ultimately becomes a problem for a diplomacy based (ie social) game. With 20,000 or more players, it far exceeds Dunbar’s number.

I can’t help but think whether building such a social game on top of an existing social map might improve gameplay even further.

Inside Facebook on Social Games February 13, 2008

Posted by jeremyliew in facebook, games, games 2.0, gaming, social games, social gaming.

Inside Facebook has a nice story on social gaming (it’s going to be big!) and a run down of the major players. I even get a call out as a recommended read!

Two key graphs below; one of social games by installs:

Social Games by Installs

and one of social games by daily actives:

Social Games by Actives

The invisible hand of economics will make free to play the dominant gaming business model February 12, 2008

Posted by jeremyliew in business models, economics, games, games 2.0, gaming, mmorpg, subscription, virtual goods.

The latest charts of MMOG market share by business model show the free-to-play (F2P in green) model to be roughly neck and neck with the subscription (P2P in yellow) model, with buy to play (B2P in blue) making up just a small fraction of the total:

MMOGs by business model

However, I think that we’ll see the free-to-play model (monetizing through virtual goods and advertising) increasingly take share over the next few years and eventually become dominant.

In the last 18 months we’ve seen many more free-to-play MMOGs being launched in the West, joining pioneers like Runescape. K2 Network, IGG, Acclaim, Aeria and others have all come to market with westernized versions of asian MMOGs, and all are employing a free to play model. Other companies like Sparkplay and Conduit Labs are building their own free to play MMOGs for the western market. But this flood of MMOGs is not the cause of the increasing dominance of the free to play model, but rather the symptom of the underlying economics of the business.

Marginal cost pricing is the principle that the market will, over time, cause goods to be sold at their marginal cost of production. MMOGs, like all other software businesses, have effectively a zero marginal cost of production. This is particularly true when distribution is also online. As a result, you would expect that over time, prices will tend towards zero, i.e. a free to play model.

MMOGs are not special in this respect. We have seen a number of categories of consumer online/software products start out being able to charge a subscription, but eventually move to a free model. In online personals for example, the big story of the last few years has been the inexorable rise of plentyoffish.com, a free online personals site that is now one of the top online dating sites (with no marketing):

online dating sites

Anti spyware software used to be a premium service, and now it too is mostly free. Anti-virus software is the same story. And parental controls software. Now all are available for free.

In each case, it took a few years for the move from premium service to free, but in each case the marginal cost pricing principle eventually took hold. It is hard to hold the line against the invisible hand of the market.

MMOG publishers and developers should be factoring in a free to play environment into their business models.

EA and CAA building social games February 11, 2008

Posted by jeremyliew in casual games, facebook, games 2.0, gaming, social games, social gaming, social networks.

Gametap reports that EA has a stealth division to build social games:

Electronic Arts is putting some of its biggest brains behind what could turn out to be some of its smallest games.

The brains include former Electronic Arts Los Angeles general manager Neil Young and that studio’s director of artist and repertoire for Electronic Arts Alan Yu.

The two execs are leading a small team in what the company calls EA Blueprint, a new division that will ally with small-sized developers, assisting them with strategic funding and project management…

The products out of EA Blueprint will be both brand extensions of existing EA games as well as original IP. What differentiates Blueprint from any existing business model at EA is where Blueprint games are destined to end up–across various platforms, but with an emphasis on burgeoning social networks such as Facebook, for example.

EA is currently testing the waters with such a game–Facebook Smarty Pants, a repurposed version of last year’s Wii-exclusive trivia title Smarty Pants…

Sources say talent agency Creative Artists Agency is also participating in the efforts of Blueprint, contributing its substantial resources of talent as well as its connections with funding sources to ramp up the division’s output.

I’m impressed with the speed with which EA has reacted to the burgeoning social games opportunity. I’m also skeptical about how well they will be able to prosecute this opportunity. Social games are not regular games with some “viral marketing” bolted on. The best social games have viral mechanisms built into the game design directly. While EA well understands the gaming side, we’ll have to see how well they understand the social side.

I’m puzzled by the reports of CAA’s involvement. If this indicates that the social games will be built around celebrity power and franchise movie properties (as many EA games have been in the past, ranging from the Tony Hawk games to the James Bond games) then this might suggest a fundamental misunderstanding of how social games spread. Virality is driven by friend’s invitations and activities, not by big names.

Entrepreneurs who scale February 8, 2008

Posted by jeremyliew in Entrepreneur, management.

Furqan Nazeeri recently pointed to an old Harvard Business Review article by John Hamm that claims to explain why entrepreneurs don’t scale. Furqan summarizes:

…the traits that help an entrepreneur succeed in the early days actually work against them as the business grows. And worse yet, by the time the entrepreneur figures it out, they’ve either run their company into the ground or gotten themselves ejected by the board. The article gives some examples that will seem familiar to most of us.

The four traits are:

* Loyalty to team mates. A great trait while recruiting the early team, but as Hamm points out, “a potential liability when managing a large, complex organization.” Someone told me a few years ago that first time CEOs are quick to hire and slow to fire while seasoned CEOs are the opposite. There’s some truth to that.

* Task orientation. Getting things done is important in the early days, particularly when you are CEO and janitor at the same time. But as the company grows, it can lose its way without a focus on strategy and vision.

* Single mindedness. Think about how much stick-to-it-iveness is required in the early days but how that can turn into tunnel vision as the company grows.

* Working in isolation. Building a large organization is a team sport, however in the early days there may not be much of a team.

The article goes into much more detail about each trait. With respect to both John and Furqan, I deeply disagree with the premise that the successful traits in entrepreneurs turn into failure modes as their companies scale. Rather, I’d suggest that often good entrepreneurs turn into great CEOs as their companies grow. The traits listed above lead to failure modes at any stage of a company.

1. Founders need to be able to make hard decisions about when people are not working out. This is even more important in a small company than at a big company. There is no room for error in a small company. If someone isn’t pulling their weight, everyone knows about it. If poor performance is tolerated by the CEO and founders, it is demoralizing to the whole company. Founders need to be willing and able to let employees go when necessary.

2. Founders need to be able to focus. Sure, it is important that everyone rolls up their sleeves to get things done at a startup. But a startup is always resource constrained. A startup has to pick the small number of things that it can execute well on, and make sure that those are the things that move the needle for the company. Trying to do to much is a recipe for disaster at a startup, just as it is for a larger company.

3. Founders need to learn the whole business.
Perhaps in a systems company or an infrastructure company where there is real and deep technology to be built, founders can focus on the technology for a couple of years before surfacing again. But in the internet industry, where the technology is just one driver of success, and product, distribution, sales and marketing are also critical, a founder can’t focus on one area and ignore the others. As companies scale up they can afford to bring in experts, but early on the founders need to be able to address all the success factors for the company as there is no one else to pick up the slack.

4. Founders need to build a team. This is perhaps the most obvious failure model of all at any stage of an organization. There is a limit to how much any one person can do.

Many of the most successful companies that the partners at Lightspeed have funded have had founders that went “all the way”, including Jerry Kennelly of Riverbed, Mark Vadon of Blue Nile, Alain Rossmann of Phone.com (now part of Openwave), Jasvir Gill of Virsa (now part of SAP), Tom Riordan of QED (now part of PMC Sierra), Mike Turner of Waveset (now part of Sun) and Zaki Rakib of Terayon (now part of Motorola) to name just a few. Lightspeed believes in finding and funding entrepreneurs like these who have the capability to scale with their companies.

Using dual currency systems is the best way to sell virtual goods February 6, 2008

Posted by jeremyliew in business models, game design, game mechanics, games, games 2.0, gaming, mmorpg, virtual goods.

Today we’ve got a guest post from Matt Mihaly. Matt was the founder of Iron Realms Entertainment and CEO from 1996 to early 2008. He launched four successful text MUDs while at Iron Realms and pioneered the virtual goods business model in 1998 with its first MUD – Achaea, Dreams of Divine Lands – leading to 10 consecutive years of growth. Iron Realms spun off Sparkplay Media in late 2007 to develop casual MMOs and social media games, and has its first game – Earth Eternal – under development. Matt now serves as Sparkplay’s CEO and Creative Director.

Matt is truly a pioneer of the virtual goods business model in the West (vs Asia) and I have a great deal of respect for his experience in this area.

Jeremy asked me to talk a bit about the virtual goods business model, how to make it work, and what some best practices are when implementing it. There’s a broad area of subjects to cover there, from making microtransactions work in light of processing charges to protecting yourself from fraud to finding that balance between selling functionality in virtual items and not alienating the large proportion of your user base that will end up paying you little or nothing. I’m going to focus on one area of the subject matter: Unlocking the demand that’s latent inside your non-paying user base.

In a subscription or advertising-driven model, everyone using your service is generating revenue for you, barring exceptions like free trial periods. This provides a certain level of comfort to a publisher, who knows that costs like bandwidth aren’t going to be incurred without at least some revenue coming in to balance that out. In the virtual goods model, on the other hand, I’ve seen strong men grow weak in the knees when faced with the prospect of bucket-loads of non-paying users. Those operating costs add up quickly when you’ve got no incoming revenue to balance them out.

There are two points to touch on regarding that fear:

1. If you’ve created a context that people care about, some of them will pay you. In other words, if you have lots of users it’s because they care about what you’ve created. If they care, at least some proportion will buy virtual goods from you. I’m not going to spend any more time on this, as it’s pretty self-explanatory.

2. While it’s true that non-paying users are not directly generating revenue for you, there is almost certainly an enormous amount of untapped demand among that group of users. The trick is to unlock that demand in such a way as to effectively get those users to pay you indirectly. How? The key is a dual-currency system.

Flash back to 1998. My previous company, Iron Realms Entertainment, had pioneered selling virtual goods and was deriving 100% of its revenue from the sale of ‘credits’, which were used to purchase skills and virtual goods in-game (Iron Realms develops and runs niche MMOs called MUDs). Credits (as well as the goods you purchased with credits) were not transferable to other users, ensuring that if you wanted credits the only place to get them was from us, for real money or by winning various contests/competitions we ran. The result was that if you couldn’t afford to/weren’t willing to pay you were effectively locked out of the game after a certain point. Beyond a particular threshold, non-paying players were unable to raise their ‘skills’ (generic word for most of the combat-oriented abilities a character can gain) and thus were permanent second-class citizens. It was a very frustrating time to be a non-paying user, and we heard about it a lot.

At the same time as we were getting complaints from non-paying users about being unable to progress (since this required credits that they could not get), some of our credit-buying users were asking us to sell them gold (the in-game currency one gets from completing quests, killing monsters, etc). We steadfastly refused as we didn’t want to mandate an exchange rate and didn’t like the idea of the endless ‘faucet’ of gold that would flow into the game (potentially causing major inflation problems), though this was a little painful. In the short-term, clearly we’d have made money by selling gold to players ourselves. In the long-term, I think it would have severely damaged the game.

Then it occurred to me, in early ‘99: Everyone can get what he wants here. Simply turn credits into a currency and allow players to trade one currency (credits) for another (gold). Everybody wins!

* Paying User buys credits from Iron Realms, giving Iron Realms what it wants – revenue.

* Paying User sells those credits to Non-Paying User for gold, giving both Paying User and Non-Paying User what they want (the essence of healthy capitalism).

Effectively, what we did was allow non-paying players to sell the result of their time (through completing activities that require time, like quests and hunting) to the paying players, but only via a currency that had to be purchased from us to begin with. Suddenly, the teenager with lots of free time but not a lot of money could get anything in the game that paying players could get, and a busy professional who has disposable income but not nearly as much free time could gain large amounts of gold without having to spend the time in-game. (Of course, it’s important that paying players still have to play the game to achieve something that matters. There has to be some time investment on everybody’s part.) It was a win for everybody.

The end result of this kind of system, especially with as many frictions removed as possible is that you’ve unlocked a good deal of the pent-up demand that exists among your non-paying users. They aren’t paying you directly but they’re driving a healthy portion of purchases made by your paying users, which is nothing but good for the publisher.

Some tips for those implementing a dual currency system:

* As I said just above, remove as many frictions as you can from the currency trades. Create a simple currency exchange that lets people quickly and anonymously (to the other users at least) buy/sell the currencies.

* Make sure that there are very desirable things to be bought with both currencies. This system only works when people ultimately want to have some of both currencies. Keep an eye on the exchange rate. If it tilts too far one way or another you probably need to do some work on beefing up the value of currency that’s dropped. (The prevailing exchange rates are kind of fun to watch actually. For instance, when one of IRE’s text MUDs – Achaea – put in user-owned ships recently they priced ships in gold. Overnight the exchange rate changed somewhat dramatically as the value of gold went up substantially.)

* Let the market set the exchange rate. The non-paying users will always feel that credits cost too much gold. If you need to nudge the rate one way or another, put in something valuable priced in the lagging currency, as above. Never just mandate an exchange rate to make the nonpaying users temporarily happy as to do so is to effectively take ‘money’ out of the pocket of paying users (who are, on a 1:1 basis significantly more valuable than non-paying users on average). It can be hard, because you will have far more users interested in making credits cheaper to purchase than the other way around (most of your users won’t be spending much, at least in a game environment), and this will manifest itself in forum posts, emailed complaints, and so on. Be strong and trust in the proverbial invisible hand here.

Three ways that social networks are different from other forms of online communication February 4, 2008

Posted by jeremyliew in communication, email, performance, social games, social media, social networks.

Social Networks are widely accepted to be the latest evolution of online communications, tracing a line back through instant messaging, webmail, chat rooms and bulletin boards. Now that we’ve had a little more time and perspective on how they are used, we’re starting to see a few differences between how social networks are used for online communication and previous forms of online communication. I can think of three primary differences:

Stages for Performance.

As danah boyd has noted before, the public nature of many social network communications leads to performance aspects to communication. Users are simultaneously communicating with not just the recipient, but anyone else who happens to stumble across the recipient’s profile. An example I gave in a previous post is a helpful illustration:

Suppose it’s your birthday, and I know it. If I send you an email wishing you “Happy Birthday” then you’re happy that I remembered. This communication is part of the social lubricant on which relationships are built.

But supposed that I post “Happy Birthday” to your Facebook Wall instead. Then not only do you know that I remembered, but ALL OF YOUR FRIENDS know that I remembered as well. They may find out from the feed, or by visiting your page, but they will know that I’m a good enough friend of yours that I know when is your birthday. That is the performance element of the communication.

Lighter Weight Communications

Historically, an important part of communicating with someone is having something to say. Emails are not sent blank, calls are not spent silently. But as the quantity of one’s relationships increases over Dunbar’s number, it becomes impossible to maintain the full overhead of communication with each person. Put simply, for some of your weaker ties, you just don’t have the time to think of something original to say to each one of them. But you still want to maintain some “heartbeat” to the relationship with an occasional ping.

People have found lots of solutions to this problem. One is the Holiday card, often with an annual update letter enclosed. Another is the non verbal communication often seen between coworkers in an office or competitors at a conference. Smiles, nods, back slaps, high fives as you pass each other in the corridor are enough to keep a relationship acknowledged without having to stop and talk each time. A third is the chain email. Whether forwarding inspirational passages, funny videos or jokes, chain emails let people keep in touch with their friends without having to spend a lot of time thinking about what to say.

These lightweight communications are native to social networks. Whether they be exchanging pokes on Facebook or pasting a glittering “thanks for the add” .jpg into a Myspace comment, “content free” communications abound. The meta message is clear though “I’m thinking of you”, and that is often enough of a ping to keep the connection open. Many of the Facebook and Bebo apps fulfill exactly this lightweight communication function, including Hug Me, Zombies and Scrabulous. Many of the social games on facebook wrap this lightweight communication around a casual game.

Context for communications

Facebook’s innovation in the feed is now being widely imitated by the other social networks, and with good reason. As I mentioned earlier, two of the challenges of having a large number of relationships are (i) keeping on top of them all and (ii) being able to communicate often enough to keep the relationships alive. The Feed dramatically simplifies this process, especially when combined with Facebook’s birthday notification and the full status updates list. All three features provide triggers for communications with friends, whether commenting on their pictures, posting witty comments to their wall about what they are doing or wishing them a happy birthday. Facebook and other social networks are helping prompt more communications between their users by helping to surface topics for communication.

Yahoo, Google, AOL and Microsoft are all rumored to be revamping their communications products; it will be interesting to see if how they start to incorporate some of these social network native features into their email and messaging products.

Games 2.0: SMS offers an interesting channel for asynchronous MMOGs February 1, 2008

Posted by jeremyliew in asynchronous gaming, games, games 2.0, gaming, mmorpg, mobile, social games, social gaming.

I think asynchronous games are an interesting emerging trend as casual games meet multiplayer games to create social gaming opportunities. Many social games are taking off in Facebook as its platform allows social games to grow virally among groups of friends. These are largely text and asynchronous by nature.

One of the challenges in the mobile world has always been getting distribution, whether distribution of an app or placement in a mobile carriers deck. Increasingly, however, apps like Twitter and Facebook are taking advantage of SMS as the mechanism for lightweight text-based interactions (sometimes with a primary interaction mode through the PC). SMS has near universal availability, no distribution challenges (beyond getting an SMS shortcode), and the highest use rate among mobile phone users after calling:

Cell phone uses beyond calls

Given many social games’ text based, asynchronous nature, it will be interesting to see whether they can extend their reach via SMS into the mobile arena in the same way. This obviously allows a greater opportunity for subscription and premium digital goods revenue as consumers are more accustomed to paying for phone services than they are for web services. It also allows simplifies billing. WAP is another option.

Managerzone is one game that offers phone based services so that eager players can constantly stay in touch with what is happening “in game”. See a list of some of their WAP and SMS services as taken from their website below:

There are a number of mobile services that you can use to stay in touch and improve your game here at ManagerZone. This is a perfect complement for anybody that cannot always be in front of the computer or would like to immediately receive information as it is available.


You can subscribe to these services via our packages or you can simply pay as you go via money that you put in your account (see my home and your account). We offer both WAP services and SMS services (text messaging) and with our text messaging you can choose to receive the message via SMS to your mobile phone or via email to your mobile phone or computer. You thus simply enter your mobile phone number or your email address for your mobile phone.

Wap spy

This service immediately improves your manager skills. Well, the fact that you can check up on your opponent simply makes it one notch easier to know what to expect. You can follow their tactics and get recommendations as to whom to watch out for. You also get the formation of your opponent and of course some insight about the goalies strengths and weaknesses.

League standings

With a click you can see the updated standings in your league or other leages around the world and in your country. You can also directly from the standings click on a team to get more info about that team such as who the manager is and what kind of stadium they have. You can also easily challenge anybody via this page. All the things you do here is also updating the web and will be visible there the next time you log on via the web.

Youth and financial service

Would you like to increase the number of junior players your team has this week. Do you need to check up on your finances to make sure you have enough for that great player you want to bid on? Did your expenses come in as expected or do you need to make some changes? With this service you have total control of your finances all the time anywhere.
You can also check your financial situation up to 3 weeks back in time. Just like you can via the web.

Match statistics

In addition to the result you get to see all the details of the game. Who controlled the ball, who had the most free kicks and scoring chances. Do your own analysis straight from your mobile phone.
You can also read the full text review of the game from this page. There is nothing you want to know about the game that you don’t get from the wap function.

The functions above are just a few that you find in the WAP function. Other features include::

# Read all news
# Player watch
# Bidding on players
# Challenge and accepts friendlies
# Full training report
# Search for team and user info
# and much more……