Skyfire Launches v1.0 of Mobile Browser May 28, 2009
Posted by jseid in mobile.Tags: mobile, skyfire
2 comments
In the device form factor wars, the mobile phone has emerged as the unquestioned winner. It’s always on and always on you. There are more mobile phone users than PC users and the market is not close to saturation.
Some game design considerations for a free form eldergame May 21, 2009
Posted by jeremyliew in game design, game mechanics, games.1 comment so far
Last month I posted about Bartle’s thoughts on how to build an eldergame, principally, to allow for free form play following the Eve model.
Jame Portnow recently posted in GameSetWatch about some of the elements of game design that you should bear in mind when thinking about such a free form world, or as he describes it, a single server MMOG. It’s long but worth the read.
How to use popularity lists to influence your users behavior May 20, 2009
Posted by jeremyliew in Consumer internet, product management, social media, user generated content.10 comments
Two years ago I asked if crowds generated wisdom, or simply crowdiness. Today’s WSJ has a really interesting article on the same topic, concluding that popularity is self fulfilling and that arbitrary top 10 lists can meaningfully increase the popularity of the items on that list:
A more-recent study demonstrates that popularity in the music world, even unearned, breeds more popularity. Researchers enlisted more than 12,000 volunteers to rate and download songs from among 48 chosen for their relative obscurity. Some of these volunteers were lied to: At a certain stage in the experiment, popularity rankings for this group were reversed, so the least-downloaded songs were made to appear most-downloaded.
Suddenly, everything changed. The prior No. 1 began making a comeback on the new top dog, but the former No. 47 maintained its comfortable lead on the old No. 2, buoyed by its apparent popularity. Overall, the study showed that popularity is both unstable and malleable.
I think music and other entertainment sources are an interesting case study because in these industries the problem of discovery is quite difficult to solve for many bands/movies/writers etc, as well as for consumers, and these top 10 lists can help solve that problem. However, it isn’t just improving discoverability that is important, but also the perception of popularity of the discovered items as another study found:
Another group of researchers demonstrated this with restaurant diners in Beijing. Table cards at Mei Zhou Dong Po, a Szechuan restaurant chain, touting the five most popular items boosted ordering of these items by 13% to 20%, according to a forthcoming paper by a team from Peking University and Duke University. “Part of it is reassurance that something is good and worth buying,” says Bill Paul, a restaurant-menu designer.
Calling these items popular is crucial, the researchers found, because other table cards that highlighted five sample items but made no claim on their popularity had little effect on sales. And the diners liked following the pack: “Diners who were exposed to the popularity information treatment are more satisfied,” says co-author Hanming Fang, a Duke economist.
These findings are consistent with one of Cialdini’s principles of persuasion, social proof.
The WSJ article mentions another study where a hotel tried to get customers to reuse towels. Claiming that 75% of people who stayed in the same room as the customer reused their towels increase towel reuse rates by 300% over the control message as you can see in the left hand column of the chart below.
Like the hotel, social media sites, e-tailers and other companies that are trying to influence their users’ click paths can use claimed or actual popularity to get their users to do more of what they want.
Apple has made no more than $20-45m in revenue from the app store May 13, 2009
Posted by jeremyliew in apps, iphone.172 comments
About a month ago Apple announced that one billion iphone apps have been downloaded in the first nine months. That’s an amazing number. I wondered how much money Apple was making from the app store.
Although it’s hard to come by the definitive ratio of free to paid paid to free apps, talking to industry participants I got estimates in the 1:15 to 1:40 range. So that suggests that between 25-60m paid apps have been sold.
O’Reilly recent did a survey of iphone apps and noted that the mean price for paid apps is $2.65:
The weighted average price for paid apps is probably lower than this as the median is $1.99 and there is significant price elasticity for iphone apps, but let’s go with the $2.65.
Multiplying this by 25-50m paid apps, that suggests that the cumulative revenue from iphone apps is around $70-$160m. Apple gets 30% of this so Apple has probably made around $20-45m from the billion iPhone apps downloaded. (Note that if you use an assumption closer to $1.50 for weighted average app price, then this estimate drops to around $12-27m).
Now it’s worth noting that it took 6 months to hit 500m app downloads, and only three months for the next 500m app downloads, so Apple’s revenue run rate is higher than this.
Given that Apple sold 13.7m iPhones in 2008, the app store is not a meaningful direct contributor to their overall revenue. Much like iTunes, Apple is using the App Store to drive demand for their hardware.
The biggest assumption here is the ratio of free to paid apps, so if any readers have better data on this, please comment.
If onling gaming is growing so fast, why are the companies not valued more highly? May 6, 2009
Posted by jeremyliew in games, games 2.0, gaming.20 comments
Asia is significantly ahead of the US in the development of the free to play MMOG market. If China’s market is an indication, the future certainly looks bright. Says GamesIndustry.biz:
China’s online games market will exceed USD 5.5 billion by 2012, according to Pearl Research, which estimated that the market grew more than 63 per cent to USD 2.8 billion in 2008.
The study, entitled “Games Market in China”, reported that six online game operators, including Tencent, Changyou, The9, Netease, Shanda and Giant each brought in more than USD 200 million in revenue last year.
Peak concurrent user rates are phenomonal, especially when you consider that free to play MMO publishers in the west consider a game successful if they get more than 50k PCUs:
China’s most popular online games were named, with Netease’s Fantasy Westward Journey leading the pack at 1.8 million peak concurrent users, followed by Giant’s Zhengtu Online at 1.5 million.
Tencent’s Dungeon and Fighter hit 1.2 million concurrent users, while Blizzard’s World of Warcraft, operated in the region by The9, came in at 1 million users.
But a rising tide does not raise all boats. 70% of Chinese Gaming companies are operating at a loss according to iResearch Consulting Group:
There are about 200 online games in the Chinese market presently, said insiders. But only several developers can make a profit on their games, such as NetEase.com, Inc. (NASDAQ: NTES), Shanda Interactive Entertainment Ltd. (NASDAQ: SNDA) and The9 Ltd. (NASDAQ: NCTY).
Such estimates may stun those people who believe that the business generates huge profits. But from analysts’ points of view, the huge profits, if existing, have been killed by costs on human resources, hardware, promotion and after-services firstly.
T2 Entertainment Co., Ltd., a Chinese online game operator, invested about CNY 30 million in the South Korean game Freestyle before the open beta testing in China, including over USD 1 million on the operating rights and CNY 20 million on promotion.
Besides, the R&D of an ordinary three-dimension online game often costs CNY 10 million, insiders said, adding that of ten online games, only one is profitable.
Because of the hit driven nature of gaming, if the cost of a “shot on goal” is high (as the examples above suggest) then most launched games will not be profitable. Also each game is a “project” with an end-of-life, rather than having ongoing enterprise value. Some hits have the ability to build sequels, but in many cases a company that created a hit game in the past doesn’t have a guarantee that their next game will be a hit.
As a result, some of the nominally successful online games companies are not that highly valued. Shanda, NetEase, Changyou and Giant are all valued at over a billion dollars. However The9, noted above, currently has negative enterprise value. (See Avista Partner’s video game industry April Briefing – page 6 for online games.) This means that The9 is valued by the market at less than the amount of net cash that they have. (The9 recently lost it’s World of Warcraft license in China to NetEase. WoW represents 75% of The9’s revenue and they have not had a true hit of their own outside of WoW.)
The9 is an extreme case, but in general the median multiple for the online gaming category is just 7.0x 2008 EBITDA. Even for the four online gaming companies with more than a billion dollars in market cap noted above, 2008 EBITDA multiples average just 10x. Given the high growth rate of this industry, that is a surprisingly low multiple. As an online MMOG typically has a 4-6 year life, there isn’t much credit being given for companies being able to launch new hit games.
These relatively low multiple are being driven by three factors:
1) High cost to launch a new game
2) Low number of new games launched each year
3) Low probability of each game being a “hit”
In order to unlock the much higher multiples that a market growing as fast as online gaming should allow, companies will need to figure out a way to address one or more of these factors. I think a few of the free to play “social gaming” companies that are starting to figure out how to do this
Lightspeed Venture Partners Blog 
