Thoughts from Mobile World Congress

I wanted to pass on my thoughts from my first Mobile World Congress. A few things this week particularly struck me.

MWC 2012

The mobile sector is much larger than the game sector

As I mentioned, this is my first Mobile World Congress and I was expecting something comparable to E3 or GDC. What I got instead is a tradeshow an order of magnitude larger. Without looking at “official” numbers from either show (and I don’t much credence in those numbers), MWC is probably 2-5 times larger in terms of attendees and probably 10X larger in terms of floor space. This shows that mobile industry is huge (GSMA estimates a US$3.5 trillion mobile industry by 2020), dwarfing the game industry. Takeaway: The sheer size of the mobile space will make it a key, if not the key, future platform for social games (sorry Facebook and Google +).

The big buzz word is “cloud”

Cloud solutions are the greatest driver of buzz and activity in the mobile space. It was hard to go more than ten meters without seeing a service or product tied to the mobile cloud. It was by far the most talked about new “technology.” It was so prevalent I could swear I saw at the snack stand cloud donuts and coke cloud zero. Takeaway: Say cloud at least ten times during your next investor pitch.

The dead buzz phrase is “augmented reality”

While the cloud was everywhere, augmented reality generated virtually no interest. I think at the entire show, spanning eight halls, I saw at most three exhibits that even touched augmented reality. Takeaway: If you are seeking investment based on an augmented reality offering or building a product around it, pivot as soon as possible.

Microsoft and Nokia are giving Windows Mobile a fighting chance

I have always been a fan of Windows Mobile and love my Samsung Focus Flash, so I probably am a little biased but it is clear here that Microsoft and Nokia are throwing their substantial resources at making Windows a relevant mobile platform (and keeping Nokia a relevant handset manufacturer). Not only does Nokia have the largest exhibit at the show with presentation after presentation but you can’t go two feet without seeing a banner for a Windows Phone device. That said, almost everyone I talked to is dubious at best about the chances of Windows Phone becoming a relevant platform. I have not met a company yet making money on the platform. More importantly, Nokia’s decision to position its phone with a 41 megapixel (the Lumia 9000) at the forefront of its MWC publicity campaign shows a lack of understanding of the smartphone market. Virtually no consumer wants a phone with that powerful a camera, they want apps.Takeway: Keep Windows Phone on your radar but don’t bet the company on it.

Facebook is not the force in the mobile space

Given Facebook’s expected valuation and the fact it had two key executives speak at Mobile World Congress, I expected Facebook to be more top of mind and incorporated in other offerings. Instead, it was virtually non-existent. You can argue that since it did not exhibit here its presence was muted but Apple did not have an official presence and iOS was omnipresent. Takeaway: Do not assume Facebook will be as dominant in the mobile world as it is in the web world. For social game companies, you may need to find new ways to make your games social and generate virality.

The tablet market will become increasingly fragmented

The number of tablet offerings is exploding, with different features, sizes and form factors. Although none will probably come close to overtaking Apple individually, I expect they will continue to erode the iPad’s share. It reminds me of an interesting theme from Chris Anderson’s book The Long Tail, the big hit initially will never be replicated (while people always predict that if X sold 1 million units, the next X will sell two million) because there will be more niche offerings that have strong appeal to certain sectors. I have seen this in the game space repeatedly, with Bejeweled in the casual sector and Farmville in the social space (yes, I know Cityville had more DAU, but that was inflated by marketing and my guess is never approached Farmville’s profitability). Takeaway: If you are developing social games for tablets, at some point it is not going to make sense only to focus on the iPad despite the costs of optimizing for multiple devices and OSs.

The mobile industry is more global than the game industry

I am amazed at how international Mobile World Congress is, much more so than the traditional game industry. On a bus, I was chatting with someone from Gambia, and I have run into people from everywhere, including Nigeria, Egypt, Israel, Malaysia, New Zealand, UAE and scores of other countries. You might think this is because I am at a European show, but I have been to Gamescon (and previously Games Convention), Milia, Tokyo Game Show, ECTS, Casual Connect, etc., and none of these shows had the same breadth of nationalities; they usually were dominated by two or three markets. There is also buzz that the smartphone market will become increasingly important in emerging markets once there is a $50 product. Takeaway: While international markets have always been a great opportunity for social game companies (the original topic of this blog), it is even more important in the mobile social gaming space. Rather than potentially being 50% of your revenue, eventually I could see non-US revenue exceeding 75 percent.

How Social Game Companies Can Create Viral Video Ads

I have argued in this blog for months and at tradeshows that social game companies need to create robust marketing strategies (not simply rely on performance marketing) to survive and prosper. Today, I will talk about how you can create effective video ads (either for YouTube, television, or something in between). I was inspired to create this post by a recent Harvard Business Review article, The New Science of Viral Ads. In fact, this post largely summarizes that article and discusses how it could be applied to social game marketing.

Do not force your brand or product down the user’s throat

The first principle in creating ads that will go viral is not to make the branding or product name too prominent. Consumers are very sophisticated and this practice will turn them off immediately. Instead, subtly show your game, via screenshots or people playing it, repeatedly without the big logo popping up every five seconds.

Avoid boring viewers

Consumers have many alternatives, even when viewing ads, and can quickly get bored if the ad is not entertaining. To keep viewers, you need to introduce joy and surprise quickly; you need to generate at least one of these responses early on. What is also interesting about the research that points to the need to build quickly joy and surprise is that it is very similar to good social game design.

Users will watch for a while but then stop

A video ad that creates joy quickly and delivers it at the same pace have been shown to be ineffective at engaging consumers for long periods. Instead, an effective video ad will create an emotional roller coaster; ie. joy-no joy-joy again-no joy again-etc.

Even popular ads are often not viral

The HBR article showed that even ads that people liked are often not shared. Given that the goal of your video is probably is to persuade as many potential players as possible to try your game, virally spreading the ad is one of the most important means to achieving this goal. To increase your odds of going viral, the authors of the article suggest surprising the game players without shocking them (no naked videos of the CEO ).

Even perfectly done videos often are not viral

The final point that the authors of the article make is that only a small subset of perfectly tailored videos ever go viral. The way around this problem is to target the viewers who will share the video. The people who are most likely to share videos are ones who demonstrate extroversion and egocentricity. Obviously, you can just target your ads to those who are egocentric (at least I have not seen that checkbox on the Facebook Ads submission form) but you can be creative in finding these people. Twitter is a great resource to try to identify the appropriate targets. Even in Facebook, companies are placing ads on the pages of users who often post links.

Putting it together

If you follow the hints above while creating promotional videos, you are much more likely to build cost effective marketing for your games. You may not get it right the first time (you probably will not), but you will be building the skills needed to market your social games in the years ahead.

Gambling and Social Gaming

One of the more interesting developments in the social gaming space is the buzz around gambling. There are rumors and “hints” that the US government at some point will weaken or remove the restrictions on online gambling. I give credence to these rumors for three reasons

  • Zynga’s stock initially broke through its IPO price because of rumors it might move into gambling (the stock subsequently rose because of the projected Facebook valuation). I still believe in the efficient market so do not think the stock would of moved so much if there was no basis to the rumors
  • Caesar’s acquired Playtika for over $150 million. There are few companies that understand the US legal environment for gambling better than Caesar’s and they would not have spent $150 million just to sell virtual goods
  • IGT spent over $500 million for DoubleDown. IGT is the leading manufacturer of gaming (gambling) machines, so like Caesar’s has a great feel for the regulatory environment. And, as above, I doubt they have much interest in the social space without real gambling

The impact of legalized online gambling on the social gaming industry is a little gray. Some of my closest friends, who I strongly respect and are often right, feel it could destroy the non-gambling part of our industry. They believe a Zynga move to gambling and other big players pouring billions into gambling social games would overwhelm the social game ecosystem. Consumers would then equate social games to gambling games and those who are not interested in a gambling experience would feel there is nothing for them in the social space.

I have more positive expectations on the impact of legalized gambling on the social game space. First, I do believe it will draw Zynga’s attention as well as that of some other existing social game companies. I do not see EA or Disney going down that route but many of the others, especially some of the struggling second tier players, are likely to pursue it as a possible panacea. This move will decrease the glut of quality games available to players seeking a traditional social gaming experience (I do not think these players will be scared away by Casinoville), allowing the remaining social game companies to launch and run games in a less competitive environment. Also, with less competition for these players (and I am assuming they are primarily different users than those who will play gambling titles), the cost of performance marketing to these players should stabilize or even fall.

Second, as I mentioned in several other posts, the valuation of social game companies will be largely contingent on the metrics of the industry leaders. As we saw, even the hint of gambling had a strong positive impact on Zynga’s valuation. I also remember the huge valuations of the UK based online gambling companies prior to the US crackdown. If Zynga and other social gaming companies enter the gambling space and start experiencing great revenue growth and strong valuations, it will positively impact the valuations across our industry (and access to capital).

My guess is that it is still awhile away before online gambling is legalized again in the US, especially in an election year, but for the three reasons outlined above I do think it will happen. I also feel it will end up being a great boon for our industry, even those companies not involved in the gambling side.