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Best practices in MMOG metrics April 30, 2009

Posted by jeremyliew in games, games 2.0, gaming, metrics.
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I missed Daniel Jame’s presentation at GDC last month, but he has a great blogpost and slideshow about how to use data dashboards to run an online game. Go read it, and pay attention to the sample reports in the appendix.

How to build an eldergame April 28, 2009

Posted by jeremyliew in game design, games, games 2.0, mmorpg.

Via Raph, Richard Bartle’s IMGDC keynote on how to build an eldergame is very interesting. He notes one of the problems with many MMOGs today is that once players have leveled all the way up, many of them quit. There is essentially nothing new to do. In a packaged software business that isn’t a big deal. But in a services business (whether subscription or virtual goods) you want to keep your best players around as long as possible. Bartle’s analogy:

• When you start off in a new mmo it’s like arriving in a foreign railway station on a backpacking trip

• With classes and races, The designers have provided trains that are guaranteed to go to interesting places

–You want to shoot fireballs? Board the mage train!

• Quests are the enginesthat pull the carriages along?

• However, trains run on rails

• if you want to disembark and go elsewhere, Well, you can’t!

• The design philosophy is all about controlling the player experience

• The same philosophy is applied for newbies and oldbies alike

• It’s consistent –but players aren’t!

Oldbies (experienced players) get bored when they’ve reached the end of the trainline and they want more to do. That’s where an eldergame can help.

Bartle thinks that many of the elder game options aren’t good, including raiding:

Well, the raiding game isn’t that good…

• Like quests, raiding content is fixed

–There’s only so many times you can run naxx before it’s samey

• Once, in fact

• Other attempts at the elder game also flop

• RvR (Realm vs Realm) is never resolved

–and therefore pointless

• PvP (Player vs Player) isbetter – if you’re good at pvp

–but the results are also pointless

• They provide burst fun, but no fun overtime

He says that to keep oldbies around, you need to let them create history:

• History is the player’s retelling of interesting events

• This means there must have been some interesting events

• No history means nothing interesting happened

–Where’s the fun in that?

• Problem: “interesting” changes over time

Bartle’s suggestion to solve this problem:

• Alice worlds are newbie-unfriendly but provide the depth and freedom that oldbies crave

• Dorothy worlds are very newbie- friendly but oldbies, who don’t want their hands held, feel disenchanted

• So: start off as a dorothy world and switch to alice for the elder game

Dorothy worlds are based on players who are like Dorothy in the Wizard of Oz, much like newbies:

… Dorothy, upon arrival in Oz, said: “We will go to the emerald city and ask the great oz how to get back to

kansas again”

• Dorothy is wary of the new world she has arrived in

• She wants a path she can follow to get through it

• She represents the modern, game worlds like wow

Alice worlds are based on players who are like Alice in Wonderland, much like oldbies:

When alice arrived in wonderland, her first words were: “curiouser and curiouser”

• Alice finds merely being in another world interesting

• She’ll go wherever fortune and fancy may take her

• She represents the old, balanced worlds like mud1

Barlte presents Eve as an excellent example of an Alice World, and hence an excellent model for an “eldergame”:

• although “user-createdcontent” and “user-generatedcontent” are often used interachangeably, there is a difference

–User-created content is created explicitly by the actions of players

–User-generated content is content created implicitly by the actions of players

• User-generated content is emergent

•Eve’s environment is so rich that interesting things just happen

In other words, allowing oldbies to indulge in freeform play is the best form of eldergame.

Online video CPMs can’t hold up April 26, 2009

Posted by jeremyliew in advertising, video.

eMarketer has a couple of interesting charts on CPMs by media types.

First offline media:

Next online video:

Online video preroll CPMs are at $25-35.

TV CPMs are at $6-10.

Even granting some premium for preroll that has to be watched (vs TV which can get skipped), these CPMs can’t hold up.

Performance advertising success stories in social media April 24, 2009

Posted by jeremyliew in advertising, facebook, performance, social media, social networks.

On Wednesday I moderated a panel at ad:space (an ad:tech satellite conference centered on performance advertising) focused on how performance advertisers can be successful in social networks. The discussion from panelists Ro Choy (Chief Revenue Officer at Rock You, a Lightspeed portfolio company), Seth Goldstein (CEO of Social Media) and Tim Kendall (Director of Monetization at Facebook) was very enlightening.

Comscore recently noted that performance advertising adopts online media faster than brand advertising because it is easier to measure results over short time periods. The knock on social media ad inventory has been that CTRs are low. This is less relevant for performance advertisers who only pay on the click or the action anyway. We heard about some terrific success stories for performance advertisers in social media on the panel who are seeing ROI on their ad spend comparable to Google.

The panelists called out two particular examples of advertisers seeing real scale results. Seth highlighted mobile services as a category that has seen terrific success in customer acquisition in social networks (if you’ve seen the “crush” or “IQ test” ads on Facebook or Myspace you’ll know what he is referring to) and is generating hundred of millions in incremental revenue from this channel. Ro mentioned that Rockyou generated 1.5m new users for an online game advertiser in just one month. Although not represented on the panel, MySpace is selling hundred of millions of dollars worth of performance advertising per year. These are impressive numbers.

The panelists highlighted one key difference between social media performance advertising and Google AdSense style performance advertising. AdSense uses contextual targeting to improve performance. Social media uses demographic, behavioral and social targeting to improve performance.

In the open web much demographic targeting is inferred from behavior. For example a user who visits ESPN.com, Nascar.com and NFL.com might be inferred to be male. This is often, but not always, correct. Social networks take a different approach. On their profile pages, users declare many key aspects of their demographics, including age, gender and location, the three key elements for targeting. Targeting based on these self declared demographic elements can be very effective for performance advertisers within social media. Ro related the example of Rachel’s yoghurt, an advertiser that targeted coupons to women living within 5 miles of Whole Foods in 10 cities through Rock You. The campaign delivered 0.20% CTRs to the Rachel’s Yoghurt site, with a 35% coupon download rate. These are impressive numbers, and led the advertiser to renew the campaign for an additional 12 weeks. Doing such a high level of targeting can result in relatively small numbers of impressions, but this is one area in which social media excels. Because of the high reach and high number of pageviews, social media sites can still deliver sizable campaigns to even highly targeted campaigns.

Behavioral targeting also benefits from the scale of social networks as even tightly targeted campaigns can still deliver meaningful reach. Retargeting works well, as it does for the open web, but once again this can be combined with declared interests on user profile pages. Tim described a very detailed campaign that a politician, Patrick Mara, ran on Facebook to defeat a 16-year incumbent in a DC city council primary last year. Mara was in favor of allowing gay marriage, so he pushed information about his stance out to DC Facebook users who’d listed their sexual orientation as gay. If Facebookers had kids, he targeted them with ads about the school system, and if they were Republicans, he hit them with information about taxes, school vouchers and similar conservative favorites. Very clever! And apparently quite cheap for the results — Patrick found Facebook advertising to be a great way to recruit volunteers. Future local campaigns, take notice.

Social targeting is one area that is unique to social networks. Integrating knowledge of social ties into the creative of the ad can really lift response rates. Seth described one campaign that Social Media ran for Live Nation, the concert promoter. Seth himself saw an ad with the name and picture of a friend of his saying “Dan is going to see Cold Play at Shoreline this summer. Do you want to go with him?”. This is a great example of an ad that takes advantage of knowledge of behavior (Dan is going to see Coldplay), location (the concert is near where Seth is) and friendship ties (Dan is a friend of Seths) to build a very compelling piece of creative.

The theme of customizing ad creative for social media came up repeatedly during the panel. While good results could come from running standard web creative and using the targeting that social media provides, the best results came from building campaigns that appeal to behaviors that are native to social networks. Often this had to do with identifying friends (names and pictures) in the creative, as well as integrating a compelling social call to action. Ro described a campaign that Rockyou ran for Pentel Pens that asked users to enter “their smoothest (pickup) line” into a sweepstake. The rich media with video campaign led to real engagement with a 22.5% engagement rate (2x av performance for the category), a 0.6% CTR and 60% of users watching at least half of the video. The campaign drive over a million entries into the contest and worked well to drive high engagement with an “unsexy” CPG brand because it was well crafted for a social environment.

It is clear that social networks provide a real opportunity for performance advertisers. Smart targeting allows the first level of performance lift, and custom campaigns and creative that are “native” to social media can deliver even further lift. I think we’ll see much more adoption of this channel by performance advertisers over the coming months

Flinch based pricing April 23, 2009

Posted by jeremyliew in pricing.

I first heard this story at business school, I still love it today:

Steve Blank: Can I tell you a pricing story? When we starting Epiphany, I had no idea how to price enterprise software. There was one small problem, I had started an enterprise software company and never been in the business.

But, I had heard, and it actually was true, there was a woman named Sandy Kurtzig, who had started ASK Softwark. She was one of the first woman entrepreneurs, woman CEOs of a large corporation. And they were making software for IBM mainframes that was manufacturing software. Something called Manman, which I used in the late ’70s, early ’80s.

Since it was the first non-IBM enterprise software on IBM mainframes, [when] she got her first potential order, she didn’t know how to price it. It must have been back in the mid-’70s. She’s [with] this buyer, has a P.O. on his desk, negotiating pricing with Sandy.

The way she tells the story is, she didn’t know what to ask for it. But, the head of manufacturing told the buyer to go buy this damn thing. [He] didn’t care, [if] it was the world’s best piece of software. So, Sandy said she goes into the buyer who says, “How much is it?”

And Sandy gulped and picked the biggest number she thought anybody would ever rationally pay. And said, “$75,000″. And she said all the buyer did was write down $75,000.

And she realized, shit, she left money on the table. Sandy Kurtzig was awesome. And she said, “Per year.”

And the buyer wrote down, “Per year.”

And she went, oh, crap what else? She said, “There’s maintenance.”

He said, “How much?”

“25 percent per year.”

And he said, “That’s too much.”

She said, “15 percent.”

And he said, “OK.”

[Ed: This is called “flinch pricing.”]

So, enterprise software got priced at $75,000 per year, per module. Now, I have to tell you when I started at Epiphany I heard this story and someone said, “Steve, how much is your software?”

I said, “$75,000 per year, per module.”

This and two more great pricing anecdotes from Steve Blank as transcribed by VentureHacks are here.

There is no one formula to pricing anything, whether virtual goods or enterprise software. It is where willing buyer meets willing seller.

Crowdsourcing missions for MMOGs April 21, 2009

Posted by jeremyliew in game design, games, games 2.0, gaming, mmorpg, user generated content.

Really interesting post at Kotaku about City of Heroes experience with crowdsourcing story arcs.

In a letter to the community posted on the official City of Heroes website, Matt “Positron” Miller revealed that within the first 24 hours of the new updates’ existence, players in both hero and villain factions had created more than 3800 story arcs, each consisting of five missions a piece – more content than the development team had created during the game’s entire existence.

Players have been busy trying out missions and critiquing them in the forums as well. Out of the more that 20,000 arcs now available in game, 2,860 of them have been rated 5-stars by players, with only 582 rated at 1-star. Popular themes include the 5th Column, featured in 794 arcs; the super-heroic Statesman, starring in 134; and time travel, which is the subject of 112 arcs.

As an indication of volume, this is more story arcs that have been created by the game developers in five years!

One popular element was creating custom opponents notes the City of Heroes blog

70% of the arcs that are published use Custom Enemy groups. These are enemies created using our fantastic costume editor, coupled with a large sampling of the powersets that the game already uses. These unique enemies have proven to be extremely popular and sparked new life into the game. Players absolutely love fighting custom enemies for the simple fact that they no longer know what to expect. One of the biggest problems with MMOs is you eventually learn what all the critters you are fighting do, and the game can get pretty rote. Developers make new critters, but there can be months before you get new ones. Now players have the opportunity to be constantly making new enemies with new, interesting capabilities that can challenge and vex themselves and their friends, any time they want.:

I don’t play City Of Heroes, so I don’t know how directly applicable this idea is to web based social games. However, any of the social games currently available have very similar structures (e.g. the “wars” genre) which can get old over time. Perhaps this approach of crowdsourcing missions might add some interesting eldergame elements to these games.

One difference between VCs and Entrepreneurs April 20, 2009

Posted by jeremyliew in decision making, Entrepreneur, VC.

Steve Blank had a great post last week about speed and tempo in startup decision making recently where he says:

… think of decisions of having two states: those that are reversible and those that are irreversible. An example of a reversible decision could be adding a product feature, a new algorithm in the code, targeting a specific set of customers, etc. If the decision was a bad call you can unwind it in a reasonable period of time. An irreversible decision is firing an employee, launching your product, a five-year lease for an expensive new building, etc. These are usually difficult or impossible to reverse.

My advice was to start a policy of making reversible decisions before anyone left his office or before a meeting ended. In a startup it doesn’t matter if you’re 100% right 100% of the time. What matters is having forward momentum and a tight fact-based feedback loop (i.e. Customer Development) to help you quickly recognize and reverse any incorrect decisions. That’s why startups are agile. By the time a big company gets the committee to organize the subcommittee to pick a meeting date, your startup could have made 20 decisions, reversed five of them and implemented the fifteen that worked.

I think this is great advice.

Entrepreneurs will find that almost all of their decisions are reversible. As a result, good operators get into the habit of making decisions quickly even with incomplete information. Entrepreneurs make 1000s of reversible decisions per year.

On the other hand, VCs will find that almost all of their decisions are irreversible. You can’t really “ask for your money back” once you’ve made an investment. This is one reason that fundraising can take so much time and effort for entrepreneurs. VCs want to know as much as they can before making a decision. VCs make one or two irreversible decisions per year.

That’s a big difference in decision making style

Future of social payment platforms April 16, 2009

Posted by jeremyliew in payments, social games, social gaming, virtual goods.

Inside Facebook reports 35% quarter on quarter growth for social media payment provider platforms. Incentives social network offer platforms such as Offerpal, $uperRewards, Gambit and the like have enabled the phenomonal revenue growth in social games. Payments has always been the friction point for free to play games in the US, and these platforms significantly increase players ability to pay for virtual goods.

The future is bright for these platforms, but there are some clouds on the horixon. Andrew Chen’s blog has a terrific guest post from Jay Weintraub on the likely future of the incentivized social payment platforms. If you’re building games or otherwise monetizing virtual goods and using one of these platforms, go read this post and come back.

Jay points out that incentive marketing has been around a long time, and follows boom and bust cycles where initial advertiser enthusiasm for a new source of leads is dampened when lead quality ends up being poor. I agree with his prognosis that revenue through this channel will come under some pressure in the future but will not go away. Some points worth noting:

1. Because many of the leads are being filtered through at least one intermediary and mixed in with other lead sources, it will take a while before the advertisers figure out what these leads are really worth, so pricing should hold up for a couple of quarters yet.

2. Unlike the free ipod model, the value of the payoff has been reduced by 1-2 orders of magnitude, so far less actions need to be completed (usually only one) before a user gets a payoff. As a result there will be vastly less breakage and vastly fewer unhappy users, [so long as the offers are adequately explained] so the risk of state and federal investigation is much lower this time around.

3. There is a roughly 50:50 split for the payments platforms today between direct payments and offers. Even if the value of offers were to fall in half, this would still mean that revenues would hold up at the 75% level

4. Offers are the gateway drug towards virtual goods purchase. Typical new players split 30:70 direct payments to offers, but hard core players split 70:30. As a result, game publishers will have an incentive to support offers even if margins drop as it teaches players to pay for goods.

What do you think?

Best practices in contextual and performance advertising in social networks. April 15, 2009

Posted by jeremyliew in advertising, performance, social media, social networks.
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I’m moderating a panel at AdSpace 2009 next Wednesday. The conference is focused on contextual advertising and is in partnership with ad:tech at Mosconne in San Francisco.

My panel is at 5pm on social media strategies for contextual and performance advertisers;

Social Media Strategies
Social media sites are garnering billions of page views a month, yet many advertisers have yet to dip their toes into social media advertising. Find out how advertising on social media sites differs from contextual advertising and whether social media advertising will drive ROI for your business.

Jeremy Liew, Managing Director, US, Lightspeed VP

Ro Choy, Chief Revenue Officer, RockYou

Seth Goldstein, CEO, SocialMedia

Tim Kendall, Director of Monetization, Facebook

If you’d like to come, use the code 25ADSPACE to get a 25% discount at registration.

More ad networks or less? April 6, 2009

Posted by jeremyliew in ad networks, advertising.

In their most recent Razorfish digital outlook report, Razorfish (a leading interactive ad agency) found:

A closer look at the distribution of ad spend by Razorfish clients reveals several trends, including:
– An increasing reliance on ROI and proven channels like search
– A continued shift of budget away from portals
– Renewed fragmentation in the ad network space

More specifically:

Despite the drive towards increased efficiency because of the recession, ad networks as a category saw only a slight increase in share year-over-year. One trend reversal we saw was in the concentration of spend amongst the top five ad networks dropping to 62% from 76% in 2007. A few things contributed to this change in direction. The first is a rise in spend outside the U.S. and the development of branded networks such as Forbes, Turner Entertainment and Fox Audience Network, and the move of many premium advertisers away from general networks. Additionally, the rise of specialty vertical networks like the community sites BuzzLogic, Six Apart, Lotame and BlogHer has further fragmented this category and put a refocus on testing the emergent opportunities.

But at the same time as Razorfish is seeing more ad network diversification, they are predicting:

4. Online ad networks will contract;open ad exchanges will expand

In 2009, the online ad network world will see both contraction and expansion:

• The traditional ad network world will contract as competition for declining ad dollars increases. There are simply too many broad networks competing for the same inventory and not telling a new story.
• At the same time, branded networks will expand. Large publishers (e.g. the Fox Audience Network and Turner Entertainment) will continue to take back control of their inventory and monetize it themselves, or they will work with fewer ad networks to ensure quality and maximize value.
• Expansion will also come in the form of Ad Exchanges like Right Media, DoubleClick and AdECN, which are newer open markets for online ad inventory that increase buying efficiency by delivering unprecedented transparency in the process. Development of this ecosystem will put further pressure on small and mid-tier ad
networks to survive. If Ad Exchanges are widely adopted, it could revolutionize how online media is bought and sold.

So which will it be, more ad networks or less? Most pundits are predicting less. However, I believe that there will be more. The fourth generation of ad networks are living in an environment where access to inventory is getting commoditized (through ad exchanges), data for targeting is getting commoditized (albeit slower, through companies like Lookery and Blue Kai), and targeting algorithms are turning out to be not as effective as previously thought (more data usually beats better algorithms). In this instance, sales execution becomes the key differentiator. And sales teams typically work best when they can focus on a set of accounts with a lot of commonality, whether demographic, industry, or geography. This means that it will be easier (not harder) for smart small teams of sales people to start their own targeted ad networks. We’re already seeing some of this as Razorfish notes above.

I think we’ll see more ad networks, not less.

What do readers think?