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How to Build the Next Huge Mobile App April 19, 2012

Posted by Bipul Sinha in discovery, distribution, location, mobile.
4 comments

The advent and growth of social networks such as Facebook, Twitter, Tumblr and, now, Pinterest has heralded a new era in the Internet where people are connected to one another to share, discover, curate, and collaborate. The mobile applications are fast becoming the primary vehicle to access what I call “connected services” to discover people, information and entertainment. However unlike the intent oriented desktop Internet search, the mobile platform is about discovery. Thus the application developers would have to think differently about getting user attention and engagement.

User Time Slices

I view smart phones as bite-size infotainment consumption devices. Users launch different applications for short spurts during the day to interact live, get updates, transact, share experiences, and generally play. I call these 2-5 minute spurts “time slices” and examples of these time slices include waiting for a coffee, a short break from work, waiting for everyone to gather for a meeting etc. Users typically don’t have any fixed plans for these time slices and they like to discover infotainment through their applications. To build a mass market application, developers should consider two core factors: a unique discovery oriented infotainment experience and a bite-size time slice filler. An application that fits this paradigm would get huge user attention and engagement. Pulse News* is a great example of such an application. It allows users to discover news and information in a bite-size consumption format – you launch your Pulse when you have a few minutes and would like to be in the know.

How do you think about building the next large scale mobile app? I’m all ears.

* Lightspeed Portfolio Company

One in seven video games downloaded rather than bought at retail August 12, 2008

Posted by jeremyliew in distribution, games, games 2.0, gaming.
1 comment so far

NPD released its latest report on the gaming industry yesterday. While the headline is that Extreme Gamers (just 3%) play an average of 45 hours per week and bought 24 titles in the last three months , i was also interested to see the inroads that digital distribution has made:

The Advent of Digital Purchases
In total, gaming consumers indicated approximately 14 percent of games purchased in the past 3 months were digital downloads. Avid PC Gamers had the highest incidence with 27 percent of their purchases being digital. In terms of content, more than half of Extreme Gamers and just over a third of Avid PC Gamers stated they would definitely download a feature to enhance a specific game that they own.

This is partly a function of the increased importance of the PC as a gaming platform, and the growing number of casual gamers:

Of the 174 million gamers who personally play games on PC/Mac or video game systems, 3 percent are Extreme Gamers, 9 percent are Avid PC Gamers, 17 percent are Console Gamers, 14 percent Online PC Gamers, 15 percent are Offline PC Gamers, 22 percent are Young Heavy Gamers and 20 percent are Secondary Gamers.

The rise of free to play games, almost all of which are downloaded, is another driver of this trend.

Digital distribution, and hence the ability to variablize marketing and distribution costs is one of the key drivers of games 2.0.

Implications of “Convenience Beats Quality” June 2, 2008

Posted by jeremyliew in Consumer internet, distribution, product management.
Tags: ,
3 comments

Fred Wilson says that convenience beats quality. In his post he is talking about video and photography. The amazing story of the limited featured Flip Camera, which captured 13% share of the video camera market in its first year on sale, bears testimony to this truism.

I think this maxim, that convenience beats quality, is true not just for video and photography, but also for most consumer internet services. It is one of the reasons that many of the apps that have been most successful on Facebook have been lightweight “just for fun” apps:

Some corollaries of this are:

1. The best product is neither necessary nor sufficient
2. Distribution can be more important than functionality
3. Lightweight interactions beat more involved interactions
4. Defaults matter as many people won’t change them
5. Use implicit information whenever you can to avoid asking users for data.

Do readers agree that convenience beats quality? If so, what are other corollaries?

Saving us from the games industry March 7, 2008

Posted by jeremyliew in business models, distribution, games, games 2.0, gaming.
5 comments

This is a guest post from John Szeder. John has been kicking around the gaming industry for a ten years now and is a frequent speaker at GDC and other gaming conferences. In his words:

John Szeder is an enthusiastic digital content creator and evangelist. He is presently working on a project in stealth mode, but ran two of his own companies successfully and profitably for most of the past eight years. He was a founding staff member at Digital Chocolate and early employee at Research In Motion. He holds a Bachelor of Mathematics degree from the University of Waterloo.

__________________________________________

I have been attending GDC for 10 years now and every year I am happy to say that I learn something new. I don’t think that everyone gets the same benefit from the tradeshow, and I have a little story to tell you about the importance of learning the lessons of history.

I recall back in 2000 when I first started doing mobile development sitting with a room of bright developers who said “Hey let’s go into the mobile marketplace! The mobile platform will save us from the games industry!” We all downloaded the various SDKs, bought some phones. We called Qualcomm, JAMDAT, and Verizon. Some of us started direct distribution of our own content, some of us did projects with publishers. I made a game in roughly four hours that paid over $100k in royalties over 3 years. These were good times.

In 2003, the bloom was coming off the rose. A lot of companies were making games and the carriers were getting overwhelmed. Fewer titles were getting placed. 10 new handsets, all rife with bugs, started coming out every month, and suddenly what started off as nice little cottage marketplace was full of people in business casual going “Here is our co-marketing agreement”.

So a group of developers at that point saw that there was opportunity to make downloadable games. I was not one of them but I heard a business pitch where someone was going “Hey let’s go make downloadable casual games! The casual games marketplace will save us from the games industry!” We won’t describe what happened next, it bears some remarkable similarities to what happened in mobile.

A short few years and 20 match-3 clones later, those same people gathered at the bar (bringing us to 2005) and realized that adding a set of smashing pumps to a match 3 engine and calling it “be-shoe-eled” was not going to buy clean diapers and beer anymore, but one of them had great news. “Hey I just got off the phone with Microsoft, and I can put my game on XBLA Marketplace!
Microsoft’s XBLA platform is going to save us from the games industry!”

It was a nice idea. They started off paying more than half the royalties to developers. Then it went to an even royalty split. And from what I hear, now the developer gets less than half, pretty much the same as in every channel.
It is sad to see people’s misguided monopolist instincts hard at work.
The same could probably be said for the Wii, but I didn’t bother getting one to put in my closet to gather dust after showing Tennis to my wife and her mother, I only buy hardware that I can play games on that I enjoy and Italian plumber games are *so* 1987.

The final nail in the coffin for me came when two of the people I respect for their artistic talent and creativity both said to me this
year: “John, I have an idea. Let’s go pitch this project to Sony. Their new PSN marketplace will be awesome

[wait for it]

AND IT WILL SAVE US FROM THE GAMES INDUSTRY”. You need to drop your voice a few octaves and say that last part aloud to someone near you in slow motion, because that’s what happened to me. I dropped into slowtime as though I was in the matrix and people were shooting at me. The echoes of developer’s ideas from the past several years hit a strange resonance and harmonic that was almost physical, even though half the conversations happened at the Fairmont Hotel in San Jose and the other half were in the W lobby in San Francisco.

I have some shocking news for you.

Nobody will save you from the games industry.

You will need to do it yourself.

You need to stop signing bad deals. Retain control of your IP. Seek alternative financing for your game development dreams. Find channels where you can participate in distribution (and revenues) and move up the food chain. Most importantly, understand that the people who you think will save you from the games industry are the very ones you need saving from.

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

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

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.

Conclusion

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.
3 comments

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.

Conclusion

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!

Why did Myspace join OpenSocial? November 2, 2007

Posted by jeremyliew in business models, distribution, facebook, myspace, open social, platforms, social media, social networks, startup, strategy.
6 comments

Yesterday was a very good day for app developers with the official launch of Open Social. A particularly good day for Flixster (a Lightspeed company) which was on stage with MySpace, Google, Ning and others for the launch, and was the sample app used in many of the demos.

With so many platforms opening up, resource constraints are the key problem for many app developers. There are plenty of great opportunities, but they don’t have enough people to pursue them all. They are forced to make choices and prioritize.

Open Social helps a lot in that you can “learn once, run anywhere”. While it isn’t “write once, run anywhere”, the resource commitments required to support multiple social networks are much lower. As Andreessen notes:

As an app developer, you have three options:

* You can write purely to the Open Social API. If you do this cleanly enough, your app will run unchanged in any compliant Open Social container. (Google is actually not making this claim — they’re calling Open Social “learn once, write anywhere”, which is not the same as “write once, run anywhere”. But in practice, the API is simple enough that “write once, run anywhere” should work just fine.)

* You can write an app that is specific to one container. For example, there may be some apps that make sense only in LinkedIn — business-related apps, say. There may be other apps that make sense only in Ning — apps that presume that users are creating their own social networks, say. And there may be yet other apps that only make sense in Salesforce.com, which will also be an Open Social container. In those cases, you are targeting your app to one specific container, and so using whatever additional APIs that particular container provides, in addition to the Open Social APIs, is a no-brainer.

* Finally, you can write an app that behaves differently depending on which of several containers it’s running in. Your app just discovers which container it’s running in, and then does whatever it wants on a per-container basis.

No standard can possibly anticipate all of the different use cases and scenarios people will think up. Standards that try to anticipate all of the different use cases fail, because they are too complex and generally impossible to implement. Standards that standardize behavior that is clearly standard, while leaving open the ability to innovate on top, succeed. The history of this kind of thing is quite clear, and Open Social is on the right side.

For smaller social networks, joining Open Social is a no brainer. But MySpace is big enough that app developers would have written for its platform regardless of whether or not it was part of Open Social. So why did they join?

It comes down to the competition for app developer’s time and resources. In the few months since Facebook opened up its platform, Myspace has seen its lead eroded from being 3x as big to just 2x as big. Facebook was winning more users, and more share of user time, because app developers were adding new features to the Facebook experience much faster than Myspace could do on its own.

If Myspace had stayed out of Open Social, there would have been three platforms competing for developer time. By joining, there are now only two, and one (Open Social) provides potential access to far more users than the other. More developer time would be spent on Open Social, and MySpace would benefit more from the improved rate of innovation.

MySpace also knows that it can win more developer mindshare relative to other participants in Open Social if they help the developers make more money. It has a better developed sales force and ad network than many of the other participants, and if it opens up access to that salesforce to app developers, then you’ll see even more developers focusing even more of their time on Myspace (at the expense of Facebook and the other Open Social participants). If they were to go so far as to guarantee a minimum CPM for “canvas pages” on Myspace, then they’d see a surge of developer interest.

This will require a significant mindshift for Myspace which has traditionally not wanted other companies to monetize pageviews within Myspace, let alone helping them monetize. If they make the shift, MySpace will not have given anything up by joining Open Social. Rather, they will have gained something. They will be the place that app developers can make the most money, and hence be their first priority. The increased stickiness and loyalty to Myspace will accrue to Myspace alone.

In late stage consumer markets, brand matters more than product September 14, 2007

Posted by jeremyliew in branding, business models, Consumer internet, distribution, product management, start-up, startups.
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The WSJ today has an article about how hard it is for US auto makers to get “import intenders” to add domestic cars to the consideration set:

Just about every month, CNW Market Research meets with a group of would-be car buyers and plays a trick on them.

Sometimes the company, which specializes in auto sales trends, takes a Toyota Camry, removes any identifying logos, and tells them it’s a new model from one of the U.S.-based auto makers. Or it takes a domestic car and tells them it’s a Toyota or another import make.

Either way, the result is the same. “If they think it’s an American car, the perception of the vehicle falls dramatically,” said Art Spinella, vice president of the Bandon, Ore.-based firm. “Detroit really gets a bum rap in the U.S.”

When I was at AOL we did a similar experiment for search. We took search results from multiple search engines, stripped branding and UI, and asked users what they thought. The marks were pretty even across the board, but when branding was put back, Google was thought to have the best results ever time. PC World found similar results in April.

As I’ve mentioned in the past, there are three phases of adoption for a new consumer technology. In the first phase distribution is paramount, in the second product is paramount, and in the third branding is paramount. Competing on the wrong dimension at the wrong time may not move the needle, as Detroit is discovering.

Social Media: Facebook commoditizing the social map June 13, 2007

Posted by jeremyliew in business models, Consumer internet, distribution, facebook, social media, social networks, user generated content, viral, viral marketing, web 2.0, widgets.
21 comments

Facebook is transforming a lot of social media companies right now with its platform release, and its getting a lot of well deserved coverage.

Marc Andreessen put up a good post yesterday analyzing the facebook platform . He comes up with a few interesting conclusions which I paraphrase below but you should read the whole thing.

1. (Open) Platforms always beat (closed) applications, therefore Facebook platform is a winner and an advantage over Myspace

2. Facebook did a pretty good job of it.
– Its technically sound
– Its highly viral
– Third party widget/app developers have economic freedom to keep 100% of revenues

3. If you’re not large or careful success can beget failure as usage volume overwhelms your servers

4. Underground apps are being released outside the Facebook application directory (due to issues or bottlenecks with application approval)

and they need to find an alternative way to seed their growth

On 1. and 2. I agree, but with a quibble. As Seth Goldstein points out:

In 1999 I sat down with Brad Silverberg of Ignition VC who Microsoft recruited out of Borland in the early 90’s to become the lead developer and project manager of Windows 95. Never has there been a more valuable platform. He described 3 things that platforms needed to have:

* wide distribution
* application developers making money
* good tools

Let’s test those three axioms against the preeminent platform play of our time, Google:

* Wide distribution? YES
* Application developers making money? YES (if you count all the adsense publishers)
* Good tools? YES (all the adwords and adsense self-service goodness)

Now let’s test these axioms against Facebook:

* Wide distribution? YES
* Application developers making money? NO (at least not yet, I will comment on 3rd party Facebook developers such as Slide, Rockyou, and AttentionSoft)
* Good tools? YES

Marc is right that app developers can keep 100% of the revenue that they make, but today that revenue isn’t much. As I’ve commented before, we need a standard for social network advertising, and until that standard emerges, ad revenue growth will be slower. But this will come in time, and so we can expect the Facebook platform to grow as well.

Unsurprisingly, the other big social networks (not just Myspace) have been rocked by the success of the platform and are all racing to build competitive responses.

On 3., where Marc seems to primarily base his conclusion on iLike’s experience, I side with James Hong who says:

I disagree with this. iLike’s application may have been particularly heavy, but it is not inconceivable (in fact I think it is more likely than not) that people will come up with massively popular apps that are not as machine intensive as ilike’s particular application might have been. Combine that with the fact that facebook allows advertising, and the fact that managed hosting companies exist, and i think it is quite feasible for 2 guys and an idea to scale.

Two of the companies I’m invovled in, Flixster and Rockyou, combined have four of the top twelve apps on Facebook. They have certainly worked hard to keep up with load issues, but none of them have struggled as much as iLike, partly because iLike has so many users, partly because they were already scaling outside of Facebook, and partly because their apps are lighter weight.

On 4. I think Marc overemphasizes the importance of being in the application directory. While we techcrunch readers obsess over the directory (I reload it at least once an hour when I’m at my PC!), the data I’ve seen suggests that the key drivers of virality are (i) profile virality (ii) invite virality and (iii) feed virality, with very little growth coming from the application directory at all.

However, to me, the most important part of the Facebook platform is that it commoditizes the social map. A lot of social media companies have built their value in creating a social map. For many broad based social networks, where communication and self expression are the key activities, the social map largely IS the value. When I was at AOL a few years ago and social networking was just beginning, we considered opening up the AIM friends list as an API to commoditize the social map and allow others to build on top of it (we didn’t do it in the end… sigh…). These companies are most threatened by a world of commoditized social maps.

What this forces social media companies to do is to build value on TOP of the social map. Yelp does a great job of this – the byproducts of their members communication are rated merchant reviews, information that has lasting value. For Flixster it’s movie reviews and ratings. For Rockyou, its photos. For iLike, music preferences and affinities.

Not all facebook apps build value on top of the map, and despite their virality, they are the ones that may be the most business model challenged on a standalone basis. Examples here include Slide’s Fortune Cookie, Rockyou’s “x me” and Graffiti. While these may have value for distribution or user acquisition, they don’t add much value on top of the social map, despite their popularity.

I’d be interested in hearing from readers examples of other apps that both DO and DO NOT add value on top of the social map.

x_me is aweso_me June 1, 2007

Posted by jeremyliew in Consumer internet, distribution, facebook, Internet, social media, social networks, user generated content, viral, viral marketing, web 2.0, widgets.
3 comments

I’ve been obsessing over the Facebook platform since it launched last week. As has been extensively covered, its an incredible distribution platform for other companies. The most popular apps in the platform early on were existing companies like iLike, Rockyou (a Lightspeed company), HotorNot and Flixster (a Lightspeed company) who quickly ported their preexisting functionality to Facebook from other social media environments.

When I congratulated James Hong on HotorNot’s great growth in the platform yesterday, he responded:

We haven’t yet seen the native apps in Facebook. When they come they’ll grow even faster.

It’s taken less than 24 hours for him to be proved right. For the last 12-18 hours or so, the top recently popular app in the Facebook directory has been X me.

X Me
By Timothy Green
Tired of just poking? X me opens up a whole new world of action-based communication, for example ‘Hug Her, Slap Him, Tickle Them!’
346,696 users (15 friends) – 627 reviews

As I’ve posted about in the past, users can quickly adopt and understand new behaviors if they mirror current behaviors. It makes these new behaviors “easy to learn“. By mirroring the “poking” behavior that is well understood and native in Facebook, X Me has been able to quickly catapult to widespread adoption. The author, Tim Green, a freshman at Cambridge university, had done an outstanding job of building an incredibly viral app.

The Rockyou team was quick to spot the growth and has now brought Tim on board. Happily for them, they now have all three of the top three recently popular apps on Facebook. Congrats to both Tim and Rockyou!

Facebook most popular applications as of june 1st 2007