As a follow up to my post on Friday (Social Game Opportunities in Africa), here’s a link to great piece on TechCrunch about how most Africans will have Smartphones within five years.
Category: International Issues with Social Games
International issues related to social gaming
Social game opportunities in Africa
This is a topic I did not expect to be writing about but a recent article in The Economist got me thinking about opportunities for social game companies in Africa. To be perfectly open, this is not a region I have focused on professionally since the late 1980s and I have no first-hand experience with monetization opportunities there. That said, I am going to be exploring the region further and think it may hold potential.
Here are the reasons I am giving Africa a look and ones you may want to consider:
Planning for a Euro breakdown
I recently read about Lloyd’s of London’s (no relation) contingency planning in case of a full Euro collapse and realized social game companies should be doing the same. There is a real possibility that by the end of June Greece will leave the Euro and bring back the drachma, I would peg this scenario at greater than 50 percent, but as I believe few of you have significant Greek exposure the greater risk is that a Greek withdrawal of the Euro either brings down the entire currency or forces other at-risk economies (Spain, Portugal, Italy and Ireland) also out of the Euro. If it happened, and economists peg the possibility at between 10 and 25 percent, it would happen quite quickly, possibly over a weekend, leaving game companies little time to react. Rather than reacting to what happens in Brussels and potentially losing key revenue for weeks, it is better to plan now. There are several key issues you should consider. Continue reading “Planning for a Euro breakdown”
And the markets where I am optimistic
After last week’s post on the two countries I do not feel are worth the attention of social game companies , I received more emails than after any other post, with many asking what territories I felt positive about. I now know how the writers of 24 felt as people clamored to know what was going to happen next. So next week, I will post about the countries I think deserve your attention.
Just kidding! The countries that I am most optimistic about are Poland, Turkey and Colombia.
A couple countries to avoid
As most of you know, this blog started with a focus on helping social game companies increase their international business, largely reflecting my role at Disney/Playdom leading the EMEA/LATAM/Russia/India team. As my career has evolved, so has the blog, though my strongest passion remains international opportunities in social gaming. Thus, I am really happy to have a chance to blog about an international topic, two emerging market countries where recent developments suggest you should avoid or pull back.
Meetings at Social Gaming Summit
I have been lucky enough to be invited to speak at the Social Gaming Summit in Berlin next month. If you are going to be at the show, please let me know if you would like to get together; I will be joined by our CRO and VP Operations.
Thoughts from GDC
This is probably my twelfth or thirteenth GDC, so there is going to be little that surprises me anymore. That said, the shift to social over the last two years has been interesting and sharper than I expected. This year, there are some other interesting developments that I wanted to share.
There is great development talent in Col0mbia
Colombia seems like the next force in game development. For almost twenty years, I have been working with international game development teams either for contract work or licensing products and have found great talent in eastern Europe, the former Soviet Union, Brazil, etc. At GDC this year I was amazed that some of the best development teams are coming from Colombia, a territory that previously was not even on my radar. I met with multiple Colombian companies and they showed a great combination of technical competence, design flair and an understanding of the current market for social and mobile games. It is exciting to see this talent enter our space. Takeaway: Look at Colombia for development and art resources.
There will be a big consolidation and shakeout in the user acquisition space
I was amazed at how many different companies are playing in the mobile user acquisition space. There are ad networks, seller mediation levels, buyer mediation levels, agencies, traffic holders looking to monetize their users, social gaming networks, etc. It is also amusing that every single meeting begins with we will give you better users for lower CPI. I guess I was lucky not to schedule any meetings with companies offering bad users for more money. Comparing all these layers to the advertising industry in more mature industries it is clear there will need to be consolidation and a shake out. I expect to see vertical integration, where a few vendors offer complete services to ad buyers and to publishers monetizing their inventory and those companies that do not end up with one of these vertical roll-ups cannot survive. Takeaway: Be careful who you partner with as they may not be around when you most need them.
Overall, more companies need exits than will get them
There are a lot of social game companies, as well as ancillary support companies, that have received one or two rounds of financing but have little opportunity to raise another round. Many of these companies raised money two or three years ago and their investors are now more focused on an exit than injecting more growth capital. I came across a lot of companies “raising” a round and only one that just completed its raise. Takeaway: There is going to be an increasing emphasis on profitability, as companies will actually need to make more money than they spend to survive.
HTML5 is gaining traction
I was surprised at how many developers were pitching projects or development capabilities using HTML5. I am still not sold on it for immediate use, nobody was able to show me a great game developed in HTML5, but given all the development resources being thrown at HTML5 it is only a matter of time. It reminds me of the adage, which I believe was from Bill Gates, that people underestimate how long it will take for a technology to be adopted but also do not realize how wide spread that adaption will be once it happens. Takeaway: Carefully evaluate HTML5 opportunities for your development and be ready to leverage this platform when it is right for your games.
The publishing model is gaining traction in social
I blogged about it a few weeks ago (my post on the publishing model in the social space) and saw this week that the emergence of the publishing model in the social and mobile space is speeding up. A year ago, 6Waves on the social web side and Chillingo on the mobile side were really the only options available and most developers wanted to self-publish. At GDC this year, the ratio was probably reversed, with more than half the developers looking for a publishing partner (probably also tied to the lack of financing available). Takeaway: The social space is evolving to a model much like the traditional game space.
What I Expect in 2012
I recently wrote about how little I believe “expert” predictions of the future and how stupid I think it is for people to follow them. So, of course, I felt it was appropriate for me to now give my predictions for 2012 Actually, I still feel predictions are not worth the paper they are written on and if I (or anyone) could predict the future we would go public this week and be worth billions. But by looking just at 2012, I think you can extrapolate some current trends to anticipate how the upcoming year will shake out.
You will see more cross-platform
Regardless of the institutional hurdles to creating social games that work across platforms (Facebook and iOS for example) the huge value it provides to players will drive a solution. By the end of next year, more and more games will be enjoyable wherever they player might be playing.
A new social gaming genre will emerge
This is an argument that Facebook has been making since at least this summer and I totally agree. There are a lot of great gameplay mechanics that are not yet available on social. Just like Playdom created a huge new space in social with Gardens of Time, someone will create a hit by finding a way to bring a proven mechanic to social.
Investment and M&A activity will decrease
I mentioned in several blog posts that post-Zynga IPO, investors and potential acquirers will look differently at social gaming company. Valuations will be based less on a company’s potential and more on how its numbers compare with Zynga (i.e. comparable price-revenue ratios). As a lot of companies do not have the numbers to justify a deal, the type of dumb money deals we have seen the past few years will dry up.
There will be industry consolidation
With less money out there, companies that do not have a strong business model won’t survive. They won’t be able to finance themselves through cash flow and won’t be able to raise new capital. Overall, this will be great for the industry, as the remaining companies will be the ones with strong management, a good business concept and ability to execute.
International will become a key revenue driver
This started as a blog about international opportunities for social game companies and in the past year I have seen that many firms in the space are starting to realize the same thing. While the US social market, both mobile and Facebook, is increasingly saturated, many European and Latin American markets are still wide open. The competition is lower and in some cases the revenue potential per user is higher. With the cost of user acquisition ever increasing in the US, social game companies will also have no choice but to look elsewhere for new players. Also, as companies scramble to maintain their growth, in 2012 they will find Europe and other foreign markets the low hanging fruit.
But Greece and others will default and everyone will feel it
Since this is about predictions, I would bet Mitt Romney $10,000 that Greece defaults; and its affects will be felt by social gaming companies. First, it will further drive down the value of the Euro, depressing current state EU revenue. It will also have a strong effect on the buying power of the countries that default, though most of these (and I predict defaults by Greece, Italy, Spain, Portugal and Ireland all in 2012) do not generate significant revenue for most social game companies.
Windows Mobile will become a viable social platform
Regardless of what happens in the US with Windows Mobile, it will be a winner in Europe. With Nokia’s launch of its line of Windows Mobile phones, the platform will become a viable contender given Nokia’s reach and reputation in Europe. Given the issues with monetizing Android, I actually expect revenue opportunities on Windows Mobile to exceed Android (on the mobile, not tablet, space) next year. Also, if you haven’t played around with a Windows phone, it is actually a great opportunity system. Given MS and Nokia’s muscle, I just can’t see it fail (and Microsoft did not pay me to say that). I think revenue wise Windows Mobile will be more important to social companies than Android.
Kindle Fire will become a key mobile platform
This is not really much of a prediction given the initial sales numbers (over 3 million sold in a few weeks), but Fire is getting a large installed base of people willing to pay for content. And Amazon is as good, or better, than Apple at creating a customer experience that moves people to monetization.
Traditional marketing will become more important
Another topic I have discussed on this blog and at trade shows is how performance marketing will no longer be the only, or preferred, way to acquire users. With the cost of performance marketing increasing and sophisticated entertainment companies entering the social game space, more publishers will see the benefits of a traditional marketing mix to grow games.
Undifferentiated companies will fade away
As I mentioned earlier, it will be increasingly difficult to raise money in 2012. Thus, the companies who are just doing what other social game companies are doing, but not as well, will not survive. They will have no way of acquiring users and even if they get people to their games, they will not be able to retain (or monetize) the players.
Two new companies will break the top-10
One of the things I most strongly believe is that the top-5 and top-10 on Facebook is still very dynamic and that innovative, well-run companies can still make the top-10. Who last year would of predicted that Wooga and King.com would be in the top-5 (okay, probably Jens from Wooga but who else)? While the copycat companies will have trouble getting any traction, a few companies that approach the space from a different angle will see considerable success.
And one non-social gaming prediction that I feel I need to include
A Republican will win the White House
This is a nod to my belief in analytics over gut, not any personal inclinations. If you look at the current US economic metrics and compare that with virtually any previous election, it bodes very, very poorly for the incumbent. While a lot of pundits argue that this year will be different because of the Republican field or the antipathy to Congress, I always feel it is very, very hard to disagree with the numbers. We’ll see.
Happy holidays to everyone!
What Social Game Companies Can Learn from Organized Crime
There was a very interesting, and entertaining article in the November 2011 issue of the Harvard Business Review about what businesses can learn from organized crime. Without restating the article (I recommend you read it), I thought it would useful to apply the lessons for the benefit of social gaming companies.
Use the news to create opportunity
In the HBR article, they point out that criminal groups are very effective at scanning the macro-environment and capitalizing on what they find. Major events, both locally and globally, are great opportunities to build interest in a social game, create new monetization opportunities or improve virality. By tying into news events, a social game company can leverage all the interest and buzz around a current event. These events can range from a big sporting event (e.g., World Cup or Super Bowl) to a big news item (a lost drone, the European debt crisis) to a natural disaster (the Japanese tsunami). With a big positive event, there are opportunities to sell special limited edition virtual goods or creating particularly compelling wall posts and other virals. In the case of a disaster, social game companies in the past have increased engagement (and benefitted victims) by donating the proceeds of special virtual items. For some reason, this practice seems to have ebbed recently.
Outsource to specialists
Rather than doing everything internally as in the “Godfather” days, modern organized crime has created a loosely affiliated cooperative network (think freelance thugs or hackers). For social game companies, there is a great opportunity to move their user acquisition to agencies (such as TBG), to have contractors help analyze their data, to generate more revenue by using international publishers (such as Plinga and Pixonic), etc. Rather than find a team of several hundred, with (at least) some of them not being the best in the field, you can outsource multiple functions to great partners.
Cash isn’t the only incentive
Although criminal organizations pay well (or at least that is what I hear), one of their strongest recruiting tools is the thrill tied to their activities. While deploying a new content pack may not release as much testosterone as robbing a bank, by creating a challenging environment for your employees where they feel they belong goes a long way to retaining your top performers and attract others.
Exploit the long tail
Global criminals reap big profits by executing small operations repeatedly. Rather than trying to create the next Cityville, think about building an iOS app that can repeatedly reskinned (maybe capitalizing on a current event). Another option would be a niche Facebook title that can then be launched in territory after territory, social network after social network. The point is that rather than going for the huge win, look at creating a series of small successes that may be easier and in the long term more profitable.
Collaborate across borders
Think of Al-Qaeda and how it works with splinter groups across Asia and Africa. In the social gaming ecosystem, there are many opportunities to partner with other companies to increase global revenue. You can find a French, German or Chinese game company and generate revenue by licensing your game to them for their territory. Conversely, you can look to foreign companies to acquire content you can then publish in your home market to augment your product line-up (and generate more revenue and traffic). You can even partner with a competitor who may have a presence in a market that is not in your focus to bring your product there. Organized crime, and organized business, is littered with entities that compete in one region while cooperating in others.
As I mentioned, the underlying article in HBR is really eye-opening and provides a great framework for building a social game company. I hope some of the opportunities I highlighted above help social game companies build their business (without knee capping anyone).
My Favorite Posts
My Favorite Posts
Given the Thanksgiving Holiday, I will not be putting up a new blog post today. Instead, I went through and found my personal favorite posts (yes, pretty egotistical that I have favorites, but again, it’s my blog; I can do what I want ☺). Here goes, from the first one being the one I felt was the most insightful:
- The Platform Challenge for Social Game Companies (post on how to optimize ROI when choosing what social networks and platforms to develop for)
- No Winner Yet in the Social Gaming Space (although a relatively short post, I am sure we are going to continue to se a lot of leadership changes in the short- and mid-term)
- The Need to Move Beyond Performance Marketing in Social Games
- My Definition of Distance (a framework for social game companies to create an international strategy)
- Collaboration Part 2 (how to use collaboration to grow your social game company)
- The Answer to the Talent Shortage (How Social Game companies can overcome the difficulties in finding good talent)
Also, although I do not feel these were great posts, they seem to be the two people visit most:
The Business of Social Games and Casino 