Blogging Break!

First, I want to thank all the people who congratulated my on the new gig at Zynga. I really appreciate the support.

Second, Happy Holidays. I'm taking a blog vacation until next year, when I will resume with regular updates. I have quite a few ideas brewing, I promise it'll be worth the wait.

Bret

Zynga Hires Biz Dev Gold, Pt. 2

So earlier this year, I wrote a post about former Pogo employee, Hugh De Loayza being hired by Zynga as VP of Biz Dev. I entitled it: Zynga hires Biz Dev Gold. I mentioned how he was a great person, a shining example of humanity.

Boy, was I wrong. :)

Six months later, the jerk hires me to be Zynga's new director of biz dev thus shattering the last vestiges of hope that I could make a living at blogging.

Thursday, at the Casual Games Association's Minna Mingle, I came out publicly. Revealed to the world that I'm now employed by Zynga.

So will I continue blogging?

Yes. But only 2-3 times a week. You'll notice that my blogging frequency has already slowed considerably. Sorry about that, Zynga's been keeping me busy for the last two weeks.

One of the things I cherish about my blog is that I have the complete freedom to talk about anything I want. Amazingly, Zynga is cool with me running my mouth off about whatever happens to come into my head at 3 in the morning. They're brave.

Having said that, I decided to not talk about Zynga in the blog. Once you're part of a company it's very hard to be objective about it.

However, since you may be interested, here are the main reasons I decided to join Zynga (over some other options):

1. Hugh. The guy's a rockstar and I want to learn whatever I can from him. (wow, do I feel like a suckup, I'm going to get so much crap about this post at the office.)

2. The job. In many ways, I'm getting paid to do what I had been doing already for the last year. Tracking the industry, identifying trends, and conversing with guys making cool games (so please keep emailing me, I'm still happy to offer free advice).

3. Zynga's vision. After a long chat with Mark Pincus, Zynga's CEO, I decided that I liked him (the most important factor for me) and that he had a smart long-term vision for Zynga (also pretty important). Fact is, it took a lot for me to link myself to someone else's vision rather than my own. A lot. So believe me when I say this: Zynga is going to kill it.

Less Than 2% of Adult Gamers have Visited a Virtual World, and Other Tidbits from the Pew Charitable Trust

That's right, folks, only 2% of American gamers have visited a virtual world. However, if you're just looking at teenagers, around 10% have visited a virtual world.

Meanwhile 43% of all adult gamers (or 23% of all adults) play online games. For teens: 76% of ALL teens play online games.

Here's what the newly released Pew Internet and American Life Report: Adults and Videogames says about online gamers:

Just under a quarter (23%) of all adults play games online. Put another way, some 43% of adult gamers play online games. Adults are much less likely to play games online than teens, as about 76% of all teens play games online and 79% of teen gamers play games online.

As with all games, younger adults are more likely to report playing games online than their older counterparts. Fully 43% of adults ages 18-29 play games online, compared with 26% of people ages 30-49, 13% of people ages 50-64, and 5% of those 65 and older.

Respondents who report playing games online tend to play more often than gamers who do not play games online. The majority (59%) of online gamers play at least a few times a week, significantly more than the 41% of strictly offline gamers who play that often. Those who play massive multiplayer online games (MMOGs),5 such as World of Warcraft, are even more likely to play frequently, as 89% play at least a few times a week.6 Nearly half (49%) of MMOG players play everyday or almost everyday, while just one in four online gamers (26%) and 17% of offline gamers play as often.

Here's the demographic breakdown of adult videogame players in the US:

How a Normal User Finds Games on Facebook

I was in a cafe in San Francisco Sunday and I saw a girl playing a Facebook game on a computer. By girl, I mean a college-aged woman, the core demographic of social networks.

The game she was playing was Twirl, an SGN game. I asked her how she discovered the game. On a friend's profile.

I asked if she played any other games. Only one other. Texas Holdem Poker by Zynga. She found about this game via an invite from a friend. A friend that she happened to be with who found out about it via an invite from another friend. Neither played any other games, but only as they explained because they hadn't seen any others.

Both girls had been on Facebook for about two months.

I asked one of the girls how she'd go about finding a game. "I guess I type games in the search box". She did. Only three games came up.

The top one: Mindjolt Games - the app from my friend Richard Fields (yeah baby!).

The Point

Game discovery on Facebook and Myspace sucks. Horribly. If either social network improved the app discovery experience, I think we'd see a lot more players in our games.

The sad thing is right now if you want users to discover your games, you can't rely on quality alone, you have to leverage virality (i.e. send a crapload of invites), or no one will even see your game. As of today there's just over 4000 games on Facebook. More than a few of them are great games and would get more exposure on your average flash game portal then they do in the Facebook app directory.

Chinese Games Market Evolves to a Mixed Revenue Model

The Asian markets are often considered a guidepost for how online games will evolve in the West. In particular, observers of the Asian market point to the success of the free to play business model. In the free to play model, users get free access to games and usually have to pay for virtual items or game enhancements via microtransactions. Traditional Western MMOs such as World of Warcraft use a subscription-based revenue model.

In a recent paper, researchers from Bournemouth University, Professor Philip Hardwick and Jessie Ren noted that online game companies are re-adopting a time-based revenue model (i.e. subscription or pay-by-minute, I'm assuming).

In correspondence, Mr. Ren said that the readoption of a time-based model indicates a quick reaction to the changing preferences of the market. Evidently, some people are getting tired of microtransactions. Before you all get too worried, Ren also said that he believed the item-based model would continue to be the dominant business model. Collective sigh of relief.

The following chart (excerpted from the paper) shows the evolution of the revenue model in the Chinese market:

	Revenue model changes	Revenue Model Change Procedures
Stage 1: (2004-early 2008) Revolutionary revenue model innovation	Time-based revenue model (TBRM) ↓ Item-based revenue model (IBRM)	Period 1: IBRM was Adopted by 3 less dominant companies without much notice. oGamania (Game:Jushang), Sept 01, 2004; oHappydigi (Game:Tantra), Dec 15, 2004; oCDC (Game:Yulgang) , May 13, 2005;
		Period 2: Top 1 company Shanda adopted IBRM for its 3 games in Nov 2005, and followed by most less dominant game companies (2006-2007)
		Period 3: The last 2 dominant companies who adopted IBRM oThe9, May 2007; oNetEase, Early 2008
Stage 2 (early 2008- Present) Evolutionary revenue model innovation	Mixed revenue models (MRM) ( Item-based + Time-based + possible other models)	Top 10 dominant companies who adopted MRM oPerfect World (April, 2008); oKingSoft (May 2008); oShanda (July 2008); oGiant (July 2008); Less dominant company who adopted DRM oIyoyo.com (July 2007)

Good News for the Games Industry Week: Black Friday Edition

Below is a list of the top 10 most searched-for consumer electronics in the UK courtesy of Hitwise.

Eight of 10 are gaming platforms, one is a gaming peripheral (Wii Fit), and one is the iPod Nano. Yes, the iPod plays games and so does the Nokia N96.

Happy Thanksgiving!

Just wanted to give thanks that I'm in an awesome industry with fantastic people. And in particular the great friends I've made since I started in this biz.

Note: image found on a random Myspace page. I think it's hilarious. Must be an L-Tryptophan overdose.

Good News for the Games Industry Week: Celebrity Edition

In this weekend's New York Times Magazine, Jennifer Aniston was asked about Facebook.

Here's her response:

It's not for me. I'd be opening myself up too much. I don't want to sound like a computer innocent - I've looked at things, of course....And I like to play Scrabble. And poker. I discovered Wii this weekend. I'm a late bloomer.

Think about it this way. Female, early 40s. Plays online social games (poker, Scrabble), though not on Facebook. Considers herself behind the curve because she just discovered the Wii.

Sounds to me like games are the new mainstream. (Thanks, Wii!) I mean think about it, Rachel from Friends plays videogames. Twenty bucks says Sarah Jessica Parker has played a set of Wii Tennis.

Good News for the Games Industry Week: UK Edition

According to UK market research firm Verdict, videogames sales will outpace music and video sales in the UK this year. Sales of videogames is expected to grow 42%, to $7.5 billion, while sales of music and video combined will total $7.06 billion. (Thanks Digital Media Wire!)

Big trend: videogames sales have doubled over the past five years.

Hmm...so videogames are bigger than music and video combined.

There are some nuances here to extract.

1. Those projections include consoles sales. However, according the Entertainment Retailers Association, even taking that into account, videogames will still surpass video sales.

2. These projections only account for retail sales, so revenue from online games subscriptions and microtransactions are not counted.

Videogames are big people, aren't you glad you chose the right industry to be in during a recession. :)

Good News for the Games Industry Week: Retail Edition

A couple weeks ago I highlighted some bad financial reports from EA and THQ. Since then I've seen a few stories that cast a positive light. This week I'll highlight some of the positive trends. Today's post features insights in the traditional retail games sector courtesy of Acitivision most recent earnings call.

1. Activision projecting 2.2 billion in revenue for 4th quarter. Largely on the back of three franchises, World of Warcraft, Guitar Hero, and Call of Duty.

Here's a quote from their earnings call where Activision discusses their view of the holiday season in light of the current economic conditions (interesting bits bolded by me):

First, retailers are continuing to increase shelf-space allocated to the videogame sector, as games begin to take a larger share of consumer spending versus other forms of entertainment, and are viewed as a growth driver. Over the past year, global retailers have allocated up to 40% more in-store space to the videogame category at the expense of other categories.

Most of this increase has been dedicated to the music genre and Activision Blizzard of course is the largest beneficiary of the increase, given our strong market share in this category.

Second, we’ve all heard that foot traffic at retail is down but actually, the increased share of store in videogames appears to be mitigating this risk. Our survey samples at key retailers suggest that in September and October, while other categories were challenged, videogame software and hardware showed sell-through growth in the high-single-digits, helping to validate our market expectations.

And third, the cost per hour of entertainment of videogames provides a great return on investment for the consumer as they seek value. To illustrate this, last month NPD conducted a holiday shopping survey that found for most shopping categories, consumers’ intent to purchase were flat or slightly lower than in 2007. The most notable exception again was videogaming systems and games, where consumers’ intent to purchase rose seven points over the prior year, putting videogames in the top five holiday purchases for the first time ever.

With respect to retailer purchasing behavior, what we have heard is that retailers are ordering less up-front and are focusing on chasing the winners, and they are being more cautious with their open-to-buy dollars on second-tier titles. We do see some of this but much less so with top-performing titles where expectations remain high.

What this means is that publishers with top-selling titles will likely benefit disproportionately this holiday quarter. For the last three holiday seasons, on average 90% of the top 10 titles were based on proven properties and we couldn’t be better positioned with our strong lineup of proven properties like Call of Duty, Guitar Hero, James Bond, and Madagascar.

So to summarize, proven franchises win (shocker). Music games are growing the market (awesome). People are going to be buying videogames systems this year despite the bad economy (yay!).

How does this affect social games? Not at all directly. Social games aren't exposed to the retail sector. However, the fact that retailers are devoting more shelf space to digital games is a pretty strong indicator that games are becoming more mass-market. Excellent news for social games which offer the lowest friction vector of adoption by non-gamers (free, invited by friends, low tech requirement).

EA Shuts Down Social Games Division, EA Blueprint

According to Edge Online, as part of its recent cuts, EA has shut down EA Blueprint.

From what I've read, EA Blueprint was set up to publish games on top of social networks, or as we like to call them, social games.

In its time, EA Blueprint released a Facebook version of Smarty Pants, developed by Context Optional, the apps-for hire company. It currently has a respectable 40,000 monthly users. For perspective, the cut-off for a hit game on Facebook is 1 million monthly users.

I'm guessing that EA will opt to focus on the other new games platform, the iPhone. It's already seeing success there, unsuprising since the iPhone is much closer to the traditional retail game environment to which larger players are accustomed.

Here's the big picture.

I learned recently from a brilliant guy that when companies fail to build something internally they usually opt to acquire a company with whom they have an existing relationship.

Social games are going to be huge. Eventually, EA is going to need to acquire a large social games company. They're going to want to either acquire the #1 or #2 player in the space, because that what big acquirers tend to do. Right now, that's Zynga and Playfish. I don't see anyone else challenging either company's dominance at the moment, but anything could happen. If nothing changes in the next 18-24 months, when EA is ready to acquire, I think they'll be TRYING to buy Zynga. Why? Cuz Bing Gordon, former Chief Creative Officer of EA is on Zynga's board and a key adviser. Relationships matter.

Note: while SGN is still a player, they've opted to turn their focus on iPhone games , a space in which EA is already competitive. An acquisition of SGN would be primarily to expand EA's mobile games portfolio - feels unlikely at the moment.

Let me know if I'm crazy or overlooking something in the comments.

UPDATE: Awesome Comments Aplenty. Lots of insight. Read them.

Virtual Goods Summit 2008 Video Now Available.

I'm sure many of my out of town readers missed the Virtual Goods Summit 2008 in San Francisco a month or so ago. I was there and missed most of the sessions due to intensely interesting lobby convos. So I suggest we both watch them. Believe me, no matter what it'll be more entertaining then this season of Heroes.

Check out the Virtual Goods Summit videos here.

And my notes from the summit (previously published) here.

BTW, just found out my parents finally discovered that I have a blog (I blame Google).

Hi Mom! Hi Dad!

Play Conference: Coverage of the Games Panel

A special treat today, I actually liveblogged (kinda) the Level Up: What's Next for Gaming? session at the >Play conference on Saturday. It's not word for word, because frankly some discussion points weren't interesting enough for me to write down. You'll notice that Mitch Lasky is quoted a lot. It's basically because I developed a mancrush on him as the session went on. You'll see why. What follows is a best-of. Enjoy.

Moderator: Dean Takahashi - Lead Writer on Digital Media, Venturebeat

Panelists:

Rajat Paharia - Bunchball - Founder, CEO Frederic Deschamp - Trion - Marketing Guy Mitch Lasky - Benchmark Capital - General Partner Manuel Bronstein - Microsoft Interactive Entertainment Business - Director, Xbox LIVE Primetime Kevin Bruner - Telltale Games - CTO, Co-founder

Q: Where is innovation happening in games?

Bronstein - integration between media, i.e. game show on TV but contestants can play along via Xbox.

Lasky. Distribution. Retail model decline. Service likes Steam from Valve.

Paharia. Gameification - applying game mechanics to other types of online experiences.

Note: Paharia did not use the term gameification. It's a term I coined to describe what he was speaking about.

Deschamp. Dynamic content. Rather than static content like in World of Warcraft. Imagine an online world that changed while the player was present.

Bruner. Distribution. Internet makes it possible for small teams to thrive.

Q. Why is there so much investment in game right now?

Lasky. Because the internet has changed distribution. Games can now scale like a web service.

Bruner. Internet allows experiments impossible in retail.

Lasky. Also, because VCs are lemmings. World of Warcraft proved you can make a billion dollar business. VCs making me-too investments to be next Warcraft. Further example: $200 million was invested in mobile games between 1999-2004. In the six months after JAMDAT (Lasky's mobile content company) filed to go public, $250 million was invested in the space.

Lasky. Casual games is an overfunded space.

Q. Should VCs invest in content businesses?

Bronstein. Better tools will make content cheaper to make and less risky. At some point, 50,000 units sold will be a viable business. (My note: but not one VC's would be interested in investing in.)

Q. UGC games. Will they be big or not?

Lasky. Making a game is hard. Making a video is easy. Anyone will a camcorder can make a video or their dog rolling over. Games will not be democratized like video. Games are a fascist business. You need millions of Paul Preece (creator of Desktop Tower Defense - best Flash game ever) to have a Youtube of games.

(Note: I couldn't agree more. Companies focused on UGC tools are barking up the wrong tree.)

Bronstein. UGC doesn't have to be full games. Can be avatars, levels, recordings of gameplay, i.e. Halo videos.

Takahashi. It's interesting to me that XNA toolkit (to create games for xbox live arcade) has been downloaded over a million times.

Takahashi. 22,000 questions answered voluntarily by one user on dell's support site so he could earn a badge. (BT: the power of gameification, baby!)

Q.Why does innovation come from startups rather than big companies?

Lasky: When the budget for a game hit around $10-15 million, publishers require that developers either use existing game engines (same gameplay) or existing franchise (with new gameplay).

Bronstein. Big companies do innovate. Some bets too expensive for small comapnies. Example: only Nintendo could have created a system based around the Wii mote.

Lasky. Historically, most money lost in the games industry on failed peripherals. Exceptions: steering wheels, yokes (for flight simulators). Only succeed when tied to specific content.

Lasky: 16% of console games sales from Rockband or Guitar Hero.

Bruner: Establishment can't react to paradign shifts. Example. Broadcast TV lost to cable.

Lasky: EA and Activision will become little more than hedge funds.

Lasky: EA and Activision do not innovate. I worked at EA as an executive. EA does not innovate.

Bruner: NPD sales report only show one side of the games industry.

Q. Games: Silicon Valley vs. the World?

Lasky. Gaming is a monoculture. Terminator poster and heavy metal in game dev studio whether in Palo Alto or Vietnam. (BT: perhaps that's why traditional game are so focused on teenage boys. It's made by men in prolonged adolescence.)

Predictions

Takahashi. Good November for games sale will lead to more investment.

Lasky. Xmas will be terrible. Talked to retailers. Cutting games orders by 30-40%.

Deschamp. Free 2 play biz model will be good fro Europe and Asia.

Audience Question: Mobile games. How do you get through the noise to the consumer?

Lasky. Needs to be free.

Takahashi. Don't rating solve the problem of finding good content?

Bronstein. Quality matters. Most expensive XBLA games often sell most units. Lack of price sensitivity.

THE END

Monetization: How Much Can I Make From Advertising With My Facebook App?

Another question I get from developers all the time: how much money can I make on Facebook?

Shocking, I know that some people care about money when it comes to Facebook apps. <cynicism>Wait...I think that's all most developers care about. </cynicism>

At the moment, there's only one publicly traded app developer, SNAP Interactive. <cynicism>Keep your fingers Max Levchin (Slide), it'll happen for you too one day, I'm sure of it!</cynicism>

Fortunately for us, SNAP Interactive has to publish their revenues, which currently comes exclusively from advertising on the dating apps on Facebook. Those apps: Are You Interested? (#1 dating app on Facebook), Meet New People, and Flirt With Me.

Here's the numbers from the SEC filing:

Revenue increased from $286 for the six months ended June 30, 2007 to $1,053,159 for the six months ended June 30, 2008, an increase of $1,052,873.

That's right, zero to a million in revenue in one year. Not bad. Especially, if you look at the expense side.

Operating Expenses for the six months ended June 30, 2008 increased to $717,349 from $277,634 for the six months ended June 30, 2007, representing an increase of $439,715.

That's ~$300,000 in profit. A 30% profit margin. And it looks like that doesn't include the founder's salary. Nice.

Hosting costs, <cynicism>for all you STILL writing business plans...poor bastards</cynicism>are as follows:

Hosting Expense for the six months ended June 30, 2008 increased to $87,512 from $0, representing an increase of $87,512. These increases are attributable to the need for substantial hosting infrastructure and server capacity to handle the high volume of traffic that our applications receive. Our need for a customized hosting solution was minimal at this time last year.

Read the rest of their filing here. Trust me, if you haven't learned to enjoy reading SEC filings yet, you will.

By the way, SNAP Interactive's money comes from ad revenue. The real money is in virtual goods.

Super Awesome Resource For Games Industry Info

David Perry, super awesome developer and games industry thought leader, and if you ask me the most honest panelist ever, has a great site compiling data on the games industry.

Here's some highlights:

A list of every known MMO out there. Around 650 MMOs and counting.

A list of all games industry acquisitions and investments.

And the venerable games industry map, which shows the location of 1000+ game development studios worldwide.

It's fueled by users, so if you notice some missing info, submit it.

Zynga's Live Poker Bridges the Gap Between Mobile and Social

I'm excited. It doesn't happen much any more, perhaps I've been in the social gaming space for too long to be impressed by the new entrants rehashing the same game mechanics over and over again. And for business models, we've settled into virtual currency sales via CPA offers from companies like Offerpal and Superrewards for monetization.

Since I got into social games about two years ago, my vision has always been this:

Play. Anywhere.

It's what I was trying to do with my failed company, and to me, it's still the greatest opportunity for social gaming.

Imagine being able to play a game with a friend while you're waiting in line at McDonalds and they're halfway across the country sitting on their parent's couch with their laptop.

Think about this: tens of millions of people play social games every day. They all have mobile phones. It's going to be huge market.

And Zynga is going to be the first company to really capitalize on it.

Today, Zynga released Live Poker, which is the first iPhone game to use Facebook Connect, giving it access to Facebook user info, so they can display user photos and such. It's a real-time game fully integrated with their Facebook version of Texas Holdem Poker.

It's a significant move and part of a larger trend of social gaming companies moving onto a mobile platform.

Social games company, SGN has already had some successful iPhone games and are working on integrating them with Facebook but has yet to do so. New market entrant, Socialdeck managed to have a iPhone connected to friends, but did not use Facebook Connect.

I actually expected social games company, Mytopia, to be the first company to launch a mobile social version of Poker for iPhone. They currently have a Poker app that runs on Windows Mobile that lets people play in real-time with their friends playing on Facebook. However, they've opted to be a platform company rather than a games company.

I've decided to coin a new term to describe games like Zynga's Live Poker: mobile social.

Sample usage:
BIZ DEV GUY: Hey, looks like Zynga really ripping it up in mobile social.
BLOGGER: Yeah, the mobile-social industry is at the nexus of three major trends...blah...blah...blah. (we bloggers tend to pontificate.)

Anyway, here's the press release (so you can see who the lazy bloggers are who just regurgitate it - I'm so mean.):

Zynga Launches "Live Poker" for the iPhone; First Live Game Turns iPhone into a Social Gaming Platform

San Francisco – Nov. 13, 2008 – Zynga, the largest social gaming network, announced today the launch of "Live Poker," the first truly live game on the iPhone. The game, a mobile version of Zynga's popular Texas Hold'Em game, turns the iPhone into an always-on social gaming device.


"Live Poker" allows iPhone users to compete with 1.4 million daily players in the web's largest free poker game. The game makes it easy for users to play with their real friends from Facebook, MySpace, Bebo and Hi5 as well as make new poker buddies. Players can easily see which of their friends are online, and join them with just one click. Since the casino is always open, users have people to play with at all levels.


Zynga's new application turns the iPhone into a social gaming platform. "Live Poker" is the first application to leverage Facebook Connect, delivering the first social game to the platform. Using Facebook Connect, "Live Poker" allows social information such as real photos to be displayed.


"We have just seen the creation of the next important social gaming platform, thanks to 'Live Poker,'" said Mark Pincus, CEO, Zynga. "Delivering the first social game on the iPhone is a logical extension for us. Social gaming continues to grow, and this is another giant step towards taking it to the mass market."


"Live Poker" is available on any iPhone with 3G or Wi-Fi access, and will also work on the iPod Touch. "Live Poker" is free, and an upgraded version giving players a larger chip package and access to tournaments is also available for $9.99. The application is offered in the iTunes store at: http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewSoftware?id=295913419.


About Zynga

Zynga is the largest social gaming network with more than 5.4 million daily users. Zynga's games are available on Facebook, MySpace, Bebo, Hi5 and Friendster and include Texas Hold'em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group and Avalon Ventures. Zynga is headquartered at the Chip Factory in San Francisco . For more information, please visit www.zynga.com .



# # #

Is Myspace Games Cannibalizing the Audience From Social Games in the Myspace App Directory?

So what if I told you the following:

• Myspace and World Poker Tour announced that they had partnered to launch a real-time poker game on Myspace, and
• World Poker Tour would get prime placement in the Myspace Games directory.

Do you think it would cannibalize players from successful poker apps, like Zynga's dominant Texas Holdem Poker?

Now, if I told you Texas Holdem Poker had 80,000 people playing right this second, how many people do you think would be playing World Poker Tour at the same time?

80. That's right. Eight-zero. Or 1/1000th of the people playing Zynga's version in the app gallery. Games in the App Gallery have nothing to worry about.

I'd always assumed that Myspace Games would compete with games in the app gallery to the advantange of Myspace Games. Turns out, they have no apparent effect on each other. They serve different userbases.

I took a look at the growth curves. Myspace Games was around before the App Gallery, so it seems reasonable to expect that the launch of games in the App gallery would cannibalize traffic from Myspace Games. Nope, traffic remained flat. As the months wore on, traffic to the App Gallery grew steadily. Meanwhile, Myspace Games growth remained flat.

It looks to me that rather than serving the existing market of casual gamers (which Myspace Games does very well - it's powered by Oberon Media, a powerhouse in casual games distribution), social games in the App Gallery are creating a new market of gamers.

I'll say that again for emphasis: social games is opening up an entirely new audience for games. A massive audience. A mass-market audience.

For the curious, according to Quantcast (whose data is always a bit suspect), the Apps Gallery has 5.2M monthly visitors (about 8% of Myspace's total traffic), and Myspace Games gets about 688k monthly visitors (less than 1% of Myspace's total traffic).

Flash or Java - Which One Should I Use?

One of the most frequent questions I get is whether to build games in Java or Flash. It's a debate that's been going for some time. The early entrants into the casual games biz opted for Java, which overall was a better language for quality game development. Back then, Flash was pretty terrible for game development.

Since then, Flash has improved significantly with the most recent version Flash 10 offering improved 3D support (whether it's any good for 3D games, you'll have to tell me, I haven't played with it yet).

I think Flash is the clear winner, and I'm not the only one. Sharendipity, a company that's spend over a year building a game creation tools platform for user-created games recently announced that they're abandoning the Java for Flash. It's a significant move that's requiring them to port over 60,000 lines of code.

Here's their reasoning (from their blog):

Up front, I’ll say that the reason we are moving to Flash is because of Java’s adoption rates. It is not, in fact, because of the language itself but because of Java’s deployment model. We suspect that we lose somewhere between thirty and fifty percent of users due simply to the fact that we are in Java.

This isn’t pure speculation, but backed up by a significant amount of internal data. There are also other game companies that have experienced the same thing.

Daniel James, CEO of Three Rings, has been advocating the move to Flash for years now. He estimated that Puzzle Pirates, his company's Java-based casual MMO, while successful, suffered from an extremely low conversion mainly because it was in Java.

Fact is, Flash has ~95% penetration among Internet users. If want people to play your game, Flash is the only option.

BTW, if you're interested the technical aspects of moving from Java to Flash, Sharendipity is doing a series of blog posts on their experience. Check it out here.

Slide Turns Popular Facebook App Top Friends into a Game

Screenshot from Slide's Top Friends app

This weekend (or earlier - hard to tell since I don't use Top Friends regularly), Slide added a game element to Top Friends. It's called Ownd. The name might sound familiar, since it's one letter off from the name of a very successful game on Facebook called Owned. Like Owned, Ownd is a game where you call buy and sell friends.

I think gameifying Top Friends is a great move on Slide's part. They've finally jumped on the games bandwagon after sitting on the sidelines for the last year. However, I don't think this signals a major push into social games by Slide. It feels more like an experiment.

And I don't think it will impact the popularity of existing friend exchange games on Facebook, Owned! and Friends For Sale. Ownd will simply makes existing users of Top Friends more engaged.

Looking at Top Friends for the first time in a while, I realized that had recreated the old Facebook profile design. Perhaps that's why Top Friends grew 13% since the redesign, according to Developer Analytics.

I've always thought that Slide's strategy with Top Friends was to create a social network within Facebook under Slide's control so Slide could collect data on users.

Ownd doesn't help with that goal as far as I can see. But Ownd does open up another avenue for monetization. After all, for the moment games do monetization better than anyone, and Slide famously needs help with that. Hey, we might see them end up in social games, after all. :)

Recession-proof? Game Industry Giants THQ and EA Layoff Hundreds

Many, including myself, have touted the fact that games are a recession-proof industry.

Together, THQ and EA have posted hundreds of millions of dollars in losses and laid off over 750 people in the last two weeks.

Doesn't sound very recession-proof.

Meanwhile Zynga is still hiring like mad (check out their open jobs here).

I'm not surprised. I expect social games companies to do better than traditional games companies in the recession.

Here's why:

Traditional games - $30-80 upfront.
Social Games - $0 upfront.

If you don't have a job, which one is more appealing to you?

Recent Fundings in the Social Gaming Industry - November 4

Rockyou. $17 million. From Softbank (Japan) and SK Telecom (Korea). While Rockyou is not a social gaming company, they are a social entertainment company with quite a few gaming properties. Apparently, the fresh cash is for expansion into the Asian markets, most notably the Chinese socnet, Xiaonei, which btw, already has a virtual currency system. Since China already has a robust virtual goods market, it will be interesting to see how Rockyou fares. Oh, and Xiaonei already has clones of the most successful games on Facebook, so don't get too excited.

Playfish. $17 million. Series B. From Accel Partners and Index Ventures. With 10 million monthly actives, 4 of the top ten games on Facebook, and this round of funding, Playfish has cemented their place as the number 2 social gaming company behind Zynga. According to Playfish CEO, Kristian Segerstrale, the cash is to be used to expand into other platforms, notably Myspace. I suspect they'll be launching mobile games sooner than later, Kristian did run a successful mobile games company for six years, after all.

Crispy Gamer. $8.5 million. Series A. From Constellation Ventures. For a Games Review site. Yes, a games review site. That had 1 million uniques AT LAUNCH. I mention this funding because it's further evidence that games are HOT.

My Favorite Commentary on the Virtual Goods Summit

I've been following Adam Martin's commentary over at his blog T-Machine for a long time. He covered the Virtual Goods Summit for Free to Play and his insights are awesome. Unadulterated, opinionated goodness. His posts came a week after the initial burst of coverage, so if you missed them, here they are.

Virtual Goods and Social Networks

Making Virtual Economies Work

Branded and User-Generated Virtual Goods

Here's some choice quotes from the coverage (bolding by me):

Outspark - Susan Choe
At the end of the day the gameplay will keep some of the users, but not all of them. Half the gamers in our ecosystem come because of social interactions; the gameplay is good, but really the events and social activities is what gets them to come back, even in monster-killing games.

Meez - Sean Ryan
we start with the holiday theme. Then look at what the advertisers want to see. Then we look at the upcoming features, and make sure we have compelling items there. A lot of our prod dev driven by trends/fads in the userbase - pop culture influences etc.

Meez - Sean Ryan - what is a VG? We all talk about it like they’re just clothes, but that’s just one third. Another third is world-features (can I levitate, can I glow like a lightbulb), and final third is privileges, access - “can I sit in a special seat in a public space?” etc. [Adam Martin - think this is the future - VGs that open up new activities, as opposed to merely being about status etc.]

I agree with Sean and Adam. When we designed our virtual goods economy at Tenuki, it was based on Legend of Zelda, i.e. acquiring items that unlocked abilities that opened new areas of the world or new functionality. Players could customize those special items, so functional was tied to decorative. (We had the problem of trying to innovate everything we touched - don't make that mistake. Honestly though, basing all our game design decisions on Nintendo games is probably the smartest thing we could have done.)

Why Game Developers Should Vote For Obama

Obama has already invested in the games industry.

According to Gamespot, he's spent $44,465.78 on in-game advertising. Meanwhile, John McCain passed on the chance to advertise in games. Here's the text of the article:

For weeks now, Obama has been running in-game ads in games such as Burnout Paradise for the Xbox 360 across 10 battleground states. The full campaign started on October 6, runs through November 3, and spans a reported 18 games. According to the Obama campaign's pre-general-election filing with the Federal Election Commission, the Democratic challenger paid Massive Incorporated $44,465.78 for online advertising in early October.

Massive has previously said that it also approached Republican presidential candidate John McCain about advertising in games, but the senator from Arizona passed on the offer. As of press time, Massive representatives had not returned GameSpot's request for clarification as to how much of the ad campaign that payment covered.

Honestly, I'm more impressive with Obama's grasp of the startup ecosystem and its importance to the U.S. than a nominal ad spent on games, but hey at least some money is coming our way. :)

Does Facebook Consider Social Games to be "Trivial" and Why?

"Facebook itself fully understood the pain the redesign would cause third parties. It consciously made painful-to-app changes, like pushing apps off of user profile pages and onto a sub-tab called “Boxes” that users have had a hard time finding. The changes, it believes, reward the most meaningful apps while punishing the trivial ones."

- Eric Eldon, Venturebeat

If you agree with Eric, and I do, then here's the question: does Facebook consider social games to be trivial?

As Mark Pincus, CEO of Zynga, reminded app developers at the most recent SNAP Summit: the app platform is not a revenue center for Facebook. If we don't align ourselves with Facebook's interests, then it's reasonable to expect more punitive measures.

If social games are trivial or even counterproductive to Facebook's goals, then as a group we should be looking to become independent of Facebook ASAP. Perhaps, this is why Shervin Pishevar, CEO of SGN, believes the future of social gaming lies off of social networks (@ VG Summit).

Here's the problem that social games present to Facebook. For Facebook, the most important thing is the social graph, particularly, an ACCURATE representation of the social graph. For an accuracy, the social graph requires you to only "friend" people with whom you're actually friends. Many games, such as Mob Wars (and its many clones that incentize invites) passively encourage Facebook users to befriend strangers as a consequence of gameplay. Check out the forums on Friends For Sale, Zombies, or Mob Wars and counts the thousands and thousands of friend requests. Anecdotally, these "friends" do not become real friends or even acquaintances as some wish to assert.

Fake friends are a serious dent in Facebook's goal of an accurate social graph. They can attempt to algorithmly address this problem, and I'm sure they do, but I suspect it's easier to remove the problem at its root.

I'd say the fake friend problem is at the core of Facebook's apparent hate of trivial apps. It's a reason why a company would try and suppress features that their userbase clearly enjoy, an action that otherwise makes little sense. I think it's also the primary reason that Facebook created a policy against incentivized invites, rather than their argument that it hurt user experience.

So as game developers if we want to avoid being "trivial" and thus the wrath of Facebook in the future, we should be avoid incentize fake friending.

Zynga has addressed the fake friend problem in their Texas Holdem Poker game, by adding a meta-friend layer called Poker Buddies, where people can friend with whom they enjoy playing poker but do not want to Facebook friend. I'd encourage other developers to take similar measures, if they haven't already, so we don't risk angering the beast.

Games That are Useful: Political Sentiment Quiz

In anticipation of the election next week, I decided to write about something political. Enjoy.

Games can do more than entertain, they can also harness the collective intelligence of millions of players to solve problems.

Researcher Luis von Ahn, inventor of the CAPTCHA, coined the term "useful games" to describe this type of game. For the most part, these useful games have been used to solved computing problems.

One popular example of a useful game is Google's Image Labeler, which uses a game-like interface to get people to tag images with labels that accurately describe the image.

A group of German researchers have applied a similar technique to determine media bias in the coverage of the 2008 presidential election.

Their game (on Facebook), US '08 Sentiment Quiz, asks players to determine if a given soundbite is positive, neutral or negative towards a particular candidate. A player is matched with a partner. If both players answer the same, they are awarded points. If the players disagree, neither earns anything. These matches are tested repeatedly with other sets of players until the game can confidently say whether any given comment contains a bias.

The researchers are not ready to release results yet, but it will be very interesting to find out if Fox News was more biased against Hillary Clinton or Barack Obama.

If you're interested in furthering the research, play the game here.

And if you're curious, this blog is completely biased. Go vote for Barack!

Sick Day

Sorry guys, feeling horrible...will try and get a post up tomorrow. Until then, bed and episodes of Dexter.

Want a Guaranteed Hit Game on a New Platform?

Answer: Publish Pacman.

At launch, Pacman was the top game on Facebook and remained so until the rights owner Namco sued to have it taken down.

As a widget on Myspace (before they had apps), Pacman was the most popular game widget.

And now, on Android, Pacman is the top game according to Medialets.

Alas, I couldn't find any data on Pacman for the Iphone, but I'm guessing it did pretty well.

So what accounts for the success? I think it comes down to the power of familiarity. Everybody knows Pacman, while at 94% of Americans do according to the Davie Brown Brand Awareness Index.

Think about it. If you're looking through a long list of games then you're naturally going to pick the game that you know and like. Of course, whether you play it more than once is an open question...

A Case for Cloning Games

Many people are angered by companies who clone other people's games. It considered unethical, or cheating, or lacking creative. Or simply evil.

In conversation, people often empathize with Serious Business, the creators Friends For Sale, who pioneered the extremely successful genre of friend-exchange games. They were copied by many others. They lost their dominate position of Facebook to a clone, Owned! On Myspace, they never got traction because other clones had launched earlier.

Those in the know, don't feel too bad for Serious Business, since Friends For Sale was a clone of the earlier Facebook game, Human Pets. But to their credit, Serious Business executed much better on the core game design.

Recent variations on friend-exchange games have innovated. My favorite, Harem, allows you to buy and sell members of the opposite sex to be your sex slave, which just brings to the fore the sometimes creepy sexual component of friend-exchange games.

Of course, the more recent cloning frenzy has focused around Mob Wars, the uber-successful text-based role-playing adventure game on Facebook that pulls in huge revenues. Clones of Mob Wars have often stepped out of the mobster paradigm into other genres, mainly into fantasy.

As a group, Mob Wars clones have been incredibly successful. It appears that as in casual games, players are happy to play more than one game that is nearly the same.

Players Like Clones

In casual games, cloning is the rule. Take for example, the extremely popular game, Diner Dash. It's a game that puts the player in the role of Flo, a woman trying to run a small diner. Gameplay is essentially running from place to place trying to keep control of multiple timed events.

It was a novel concept that its game publisher, Playfirst, has since turned into a multimillion dollar franchise. Well, not completely novel since its gameplay comes from the old 80s arcade game, Tapper.

Since Diner Dash was initally released, every major publisher and most indie developers has released a nearly exact clone of Diner Dash. And most have been very successful.

It turns out that players like to play the same game over and over again provided it offer slight variations.

The desire for a familiar experience isn't unique to casual games. It applies to role-playing games, first person shooting games, musics movies, television shows, books. Every form of media, in fact.

It seems that novelty is overrated.

Clones Make Sense in Big Markets

Between Myspace and Facebook, there's nearly 200 million people potentially playing social games. Even if a given game has 10 million installed users, it's very likely that most people on the social networks haven't seen it yet.

If the original game wasn't able to reach the entire market, then it's not harmful to the originator to bring the concept to players the original would have never reached. It's an unserved market.

Having said that, it's clear that clones severely affect the traction of the original if the clone enters a new platform or market before the original does. From what I've seen, the traction of the original game is barely affected by clones on the same platform.

To sum up: cloning is necessary to serve the audience. In large markets, clones enlarge the served market, rather than cannibalize it. So to not clone, would not only be stupid, it'd be a disservice to the market.

Sunday Startup: Don't Believe the Recession Hype

Note: my earlier version of this post said Sequoia raised a 26 billion fund. Clearly, that's absurd. They raised 725 million. I put 26 billion in as a placeholder so I wouldn't forget to check the actual number...and then I forgot. Doh.

First, yes there's a recession. It will probably be bad.

You've all probably heard about the Sequoia end of the world presentation.

Yes, funding has dried up for existing companies.

But there's still a crapload of money, billions in fact, in funds that HAS to be invested in new startups because its part of those fund's charter.

In fact, Sequoia has a 725 million dollar fund that they just raised.

You probably keep hearing that you won't be able to get good valuations any more because of the credit crisis.

Who's saying it? Venture Firms. Why are they saying it? Because they see an opportunity to justify taking a larger percentage for less money.

It's a brilliant negotiation tactic. But it's crap.

Venture firms still need you. Their entire purpose is to fund start-ups. While it's entirely reasonable to fund fewer startups because times are bad. It does not follow that a company that is worth funding should receive a lower valuation because of a bad economy. If one doesn't think that a company will thrive in the current economic climate that you shouldn't be investing in them. Penalizing a company merely because one can is short-sighted and greedy.

In fact, a good startup's value may actually rise. Good startups may become scarcer because of entrepreneurs throwing in the towel because of fear that they won't get funded. As result, less companies in which to invest. Yay!

The flipside is that lower-tier venture firms may not be able to raise capital so there'll be less buyers. That's what Sequoia hopes. Less competition for the good companies.

But that hasn't happened yet.

For more inspiration check out: Paul Graham and Dave McClure

The Art of Gifting, Challenges, and Notifications

My friend Hiten Shah's company, KISSmetrics has recently done a series on how popular Facebook apps use notifications effectively. It's an excellent introduction and there's some good insights.

The real value of the posts come from KISSmetrics detailed diagrams of the notification flows from popular games, mostly from Playfish. Check it out.

The Art of Gifting

The Art of Challenges

The Art of Notifications

The Rock Band Effect and the Historical Value of Musical Performance

IMAGE: My friend Alexis Ohanian performing with his band Breadpig (a band that only plays with Rock Band controllers) at San Francisco's Pier 39.

I read three interesting things this week: an old essay by Ooga Labs founder, James Currier, and a brand-new slide presentation by LoudCrowd founder Nabeel Hyatt, and a news item from Digital Media Wire. Taken together, they've lead me to some interesting thoughts about how music is emerging as a powerful virtual good.

First, the news which I call the Rock Band effect: 3.8 million music downloads for music games per month sold on Xbox Live, which according to Microsoft is 80% of all music downloads for music games.

Second, Nabeel's presentation suggests that the declining value of recorded music is due, not to piracy, but because it's a passive media in a world of active media. I think he's wrong, particularly since he's suggesting live performance is active media, which I don't buy. However, his overall point about digital media being a virtual good is one that you should all take to heart. In the presentation is a graph showing recorded music sales (passive media) declined by 10% as concert ticket sales increased by 15% in 2007.

James' essay is about the economics of creativity, specifically how the value of any creative endeavor changes according to a society's perception of that value. He uses the history of musical performance to demonstrate his point, specifically how the value of live virtuoso performance dropped in status once recorded music emerges, at which point society rewarded the talent of recording music. He's the relevant part of the essay:

People who played in the orchestra were rock stars of their day, and the conductor too. Even the conductor’s son was part of the creative elite. Royalty lavished big bucks on musicians and, I guess sometimes, fell in love with them. That was the technology of the day, and it happened to favor the particular bundle of talents my great great great grandfather had.

Fast forward to 1925 when my grandfather was trying to make it as a cellist in Boston. He got paid for playing his cello at dinner at the Chatam Inn on Cape Cod but he could barely support himself and his bride. When the kids came, he became a machinist and a fork lift driver at a brewery. His creative endeavor no longer paid the bills because radio was availble and the transition was underway in the 20’s from rewarding live music to rewarding recorded music. Later in his life, my grandfather would practice and play the cello for free.

Forward to the 1940’s when my grandfather’s sister, Florence, 20 years younger than my grandfather, loved to sing from the time she was three years old. It was in her nature and she would do it for free. She recorded 8 albums in the 1950’s which were distributed on vinyl and played on radio stations around the U.S. She’s loaded! The technology available to distribute creative endeavors richly rewarded the talent for recording music.

Forward to the 1990’s, when a friend from college who won the Julliard Prize for playing piano, tried to make it as a concert pianist. She was much more talented than my grandfather, but by the 1990’s, the economics of live music had deteriorated to $50 stipend for an hour performance. And it takes her 80 hours to prepare for that hour. She still performs every chance she gets. She’s willing to do it for free today, while my ancestor got to marry royalty 150 years ago for a similar talent.

And now, according to Nabeel's graph, the value of recorded music is dropping as the value of live performance rises (provided it's performed by someone who's talented at recording music).

The news article suggests that music downloads for music games is an incredibly success new vector of music sales.

It's seems that the value music that can be performed by others is on the rise. I'm sure Nabeel would agree, his newest project, LoudCrowd is a music-based game world (Rock Band meets Habbo Hotel).

New musical artists should be thinking about how to optimize their music to be played in a music games. According to my reading of James' analysis, then that's where the new music royalty is going to emerge.

But wait...how does this affect social games.... It doesn't directly. Though as Nabeel suggests, music is a highly valuable virtual good. Now, consider that the music one listens to is one of the key differentiator between social groups. I'm guessing a few of you can come up with a creative way to apply these insights and make some decent money. I know I have some ideas...

BTW, if you want to know if you fit into my social group or Fred Wilson's, check this old post of mine (and the comment from Fred).

Recent Fundings in the Social Gaming Industry

Ray Flame Inc., $800,000. Series A. InnoBridge Ventures. Makers of web-based (and client-based) MMOs. Their MMO, Lords of Evil is currently active.

Booyah. $4.5 million from Kleiner, Perkins and Caulfield. Formed by three games industry vets, they are in stealth, but I suspect they'll be applying game mechanics to helping people do good, something that Akoha is also trying to do. Here's their about statement: Booyahs are topnotch industry vets from a wide range of entertainment, media, and technology fields who have made it their mission to do good, to help other people do good, and to change the world.

Kirkland North. $225,000. Seed Round. Harrison Metal Capital. Runs Turf, an online Risk type game that turns real-world neighborhoods into zones to be battled over.

Game Design Lessons From Evolutionary Psychology: Social Status, Pt. 3 - Bling

IMAGE: Mattel's MyScene Bling Dolls. What every little girl aspires to?

In my last two posts, I've been talking about human's insatiable desire for status and how to leverage it in your social game design. Yesterday, I promised I'd discuss status mechanisms that appeal to women.

Here's a few ways women show status in the offline world:

Objects. In the real world, women show status primarily through objects. Particularly, accessories. Handbags, shoes, jewelry. Men do, as well, but to a lesser degree. The status value of an object is directly related to its cost. When an object costs a lot, only people with sufficient resources can acquire it. Generally, only people with high status have sufficient resources to purchase high-cost items.

Gifts. An expensive gift is an indicator of status. To afford to be able to give away resources is a huge indicator of status. It implies that I have so many resources that I can afford to give them away. Some cultures take this to the logical extreme of destroying resources, literally burning their stuff, to show others how much they possess and its correlative, how much status they have.

Physical Appearance. Beauty attracts high-status mates, and therefore in the eyes of others, particularly other women, beauty is an indicator of status. Sit with a group of women and listen to how they evaluate other women. Or better yet, watch how a normal woman will slightly wilt when a very beautiful woman enters a room.

There are more, but in my mind these loom larger than others.

By now, I'm sure your brains are spinning on way that these mechanisms can be or are already incorporated into games.

Objects. It's all about profile bling. Give your female players an opportunity to earn decorations for their profile, or avatar, or whatever way they are personally represented in your game. Expensive and/or rare objects indicate more status. You should definitely optimize for these in your virtual economy. It needs to be clear what objects are worth more. World of Warcraft does this brilliantly, by associating colors with an object to indicate its value. It's a clear, but not vulgar way of indicating value. I'd argue that you could be A LOT more vulgar about indicating value, for instance, showing the cost of an object when you mouse-over it. After all, an object does not effectively indicate status unless everyone else knows its value.

Gifts. I've written about gifting before, so I'll direct you to my previous post for a more detailed essay of the power of gifting. I would d like to see someone play with the idea of showing the gifts that someone has sent instead of focusing on gifts a person has received. I suspect, it'll increase the amount and value of gifts send if prominently displayed.

Physical Appearance. It's been noted that people tend to make their avatars more attractive then they appear in real life. Perhaps, you could charge more from features that make avatars more attractive. I believe some people may be doing this already but not systematically. It's pretty straightforward, every time a feature is chosen make that feature a little more expensive for the next person who chooses it. Regularly introduce new features to allow new players to have somethng to buy.

Beyond avatars, I'm stumped on this one. Ideas welcome in the comments.

Game Design Lessons From Evolutionary Psychology: Social Status, Pt. 2 - Leaderboards

Competing for social status is the core activity of all humans, even if we often do it in incredibly indirect ways.

Social games, by their virtue of being embedded in a social environment, offer players the opportunity to compete for social status.

How a designer chooses to display status is a massively important choice. Mainly, status is represented simply in the form of a leaderboard. A leaderboard being a list of the top-ranked players of a game, usually the top ten players.

Leaderboards have been around forever in sports, and videogames borrowed them, first in arcade games like Space Invaders where a player could enter their initials and it would display them on the game's screen for those who passed by. And for the most part, leaderboards haven't evolved much since then.

Social networks offered an innovation, a leaderboard based on your friends' performance. You could now compare your performance not only to all players, but to just your friends, as well. How well you're doing in relation to your friends is much more important than with strangers. Humans tend to compete with people in their immediate social status bracket. Humans also tend to befriend people in their social bracket or the social bracket just above, interestingly enough.

As a social game design tool, leaderboards fail in one critical way, they appeal much more to men than women. Men are driven to compete for social status. Women on the other hand, tend to pursue social status through strategic cooperation. By these standards, we'd expect leaderboards to be dominated by men.

And they are. To confirm my theory, I looked at the Top Ten All-Time Players for four Playfish titles. Here's the percentage of the players that were men.

Geo Challenge: 100%
Bowling Buddies: 80%
Who's Got the Biggest Brain: 90%
Word Challenge: 70%

I'd love to look at the top 1000 players for each game to make a more conclusive statement, but regardless it's pretty compelling evidence that men compete harder to be on top of the leaderboard.

You might be saying, so what if men like leaderboards more, why is that bad? It's not bad, but it's not optimal. We want women to be as motivated to play our games as men. In fact, we want them more. Social games live and die on virality. And women are more likely to spread games to others, then men.

Tomorrow, I'll discuss some alternatives to leaderboards that display status and appeal to women. Until then, I just wanted to tell you, dear reader, that you're currently #2 on my list of top ten readers. All you need to do is come back every day for the next month, and you could be #1.

Game Design Lessons From Evolutionary Psychology: Social Status, Pt. 1

Anyone who's talked to me for more than 30 seconds already knows outside of social games, my main area of interest is evolutionary psychology, the application of Darwinian evolutionary theory to understanding human social behavior.

Fortunately, there's a lot of crossover between the two fields, especially with game design. Here's the first of some insights that might be useful to you.

Humans are obsessed with social status. Higher status equals better mating opportunities for males. Mating with high status males, means more foods and resources for females. Before anyone accuses me of sexism, I'll simply state that this pattern holds true for all known human societies from ancient to modern, so don't blame me, blame human evolution.

In social networks, it's (very) roughly represented by the number of friends on has. A rough estimate, because there's no way of knowing where a person stands in relative social status to other in that group of friends.

This need was quickly met by developers and led to some of the most popular apps on Facebook. Top Friends let people knew who your top friends were, as did Entourage. Friend Wheel showed connections between friends.

Then a wave of ranking apps appeared: Who's the Hottest?, Sexy Friends, and Compare People. These apps allowed people to determine their social status in their friend group and one Facebook as a whole. Unfortunately for these apps, social status doesn't change rapidly and so there isn't much need to return to these apps once you've determined your social status.

Then, Friend Exchange games like Friends For Sale! and Owned! created an explicit connection between a numerical value and social status. These games literally told you what you were worth in relation to your friends and the Facebook community. Best yet, these values always increased so you could watch your perceived social status increase and you could bestow that status on to your friends.

The status values created by the friend exchange games were artificial, and more and more reflected the game environment rather than real life. As a social status indicator, they became less valuable, but nonetheless satisfying for validation.

At the moment, I think there's a huge opportunity for another game/app to emerge that caters to human's obsession with social status. Something that innovates on the friend exchange model and more accurately reflects offline social status. If people can compete for status in a game that gives them real social benefits in their offline community, it will mint money.

Or you can just clone Who's the Hottest? and call it The Coolest Person Contest. Oh wait, that's been done (very successfully).

On Monday, I'll talk about how games traditionally use social status, so hold your comments about leaderboards and Warcraft armor until then.

CPA Offers: A Safe Harbor in an Advertising Recession?

Many, if not most, of the successful social games are using CPA offers tied to in-game virtual currency to monetize, in addition to advertising.

However, while advertising spending is expected to slow in a recession, particularly brand advertising, performance-based CPA offers are expected to do well.

Or STRENGTHEN. According to a good friend of mine who works for a company that provides the CPA offer inventory to companies such as SuperRewards and Offerpal, the last two months have been his company's BEST EVER.

That bodes well for social games companies. We have a core revenue stream that not only will survive a recession, but possibly improve. Awesome.

However, there is a flipside. Daniel James, CEO of Three Rings (maker of social gaming worlds, Puzzle Pirates and Whirled) mentioned in his presentation that his cost per acquisition using CPA offers had dropped over the last few months as he experimented with different advertising techniques. He could buy the same amount of CPA traffic for half the price, which he attributed to a softness in the ad market.

So a provider of CPA offers sees his best months ever and a buyer of CPA offers is seeing cheaper inventory. One possible explanation: increased volume of CPA inventory so that even as the price of CPA drops, the amount makes up for it.

Other explanation welcome in the comments.

My Thoughts on the Virtual Goods Summit

Mea Culpa: I'll be perfectly honest, I only managed to sit through one full session(Daniel James and Andrew Chen's case study on Using Metrics). Not that they were bad sessions, in fact, most of them were very informative. Real data was offered. Unfortunately, as at most conferences, I spend most of my time in the lobby chatting with people. To be fair, I learn a lot of things I can't share on this blog that way, so it doesn't benefit any of you. Sorry about that.

Having said that, I did notice a few things:

• A LOT of payment infrastructure companies were in attendance. You can always tell an industry is maturing when a tidal wave of infrastructure companies descend. It means money is being made, or at least people think money is being made. To be fair, payment is a huge problem. For some reason, I always find it amusing that we haven't mastered the point where money actually is being received from the consumer. You'd think it's be the most important thing to get right.
• As an industry, games still rock. We have an amazing amount of brilliant, friendly, open people in this industry.

Best quote(remember this):

“If you broaden past vanity items and talk about status, because really it’s about status and showing personalization, how you then do that through virtual goods or branded goods is a part of that, but always come back to status.” -- Sean Ryan, Meez

Best Datapoints

Andrew Trader, Zynga: Yoville(virtual world on Facebook), earns in the neighborhood of $4,000-$5,000 a day in revenues across CPMs and micropayments. It's about 50/50 male/female and 2/3 international." NOTE: 2/3 international (question: does that apply to revenues or userbase?)

Daniel James, Three Rings: "Puzzle Pirates (casual MMO) earns $4 per registered user annually. Top 10% of users account for 50% of revenue".

John Hwang, Rockyou: "$20-30 revenue per thousand active daily user on Speed Racing (Facebook social game)." I assume that's per day.

David King, (lil) Green Patch(Facebook gifting game):"very limited percentage of users want to pay, so it avgs out to less than penny per user." Makes sense to me, since the design (lil) Green Patch is not optimized to encourage virtual currency sales.

Daniel James, Three Rings: "CPA leads are not worth it." Reason: unqualified leads don't convert.

Final Thought

Everybody is still quoting Susan Wu's estimated value of the virtual goods marketplace from last year as gospel. That value: $1.5 billion annually worldwide. Keep in mind that value includes secondary market sales of MMO items. Most people quoting that numbers have nothing to do with secondary MMO markets, but focus on decorative virtual goods for virtual worlds or Facebook apps.

I think it's about time somebody created a new estimate of the virtual goods market.