brinking - nabeel hyatt

Speaking at Virtual Goods Summit, and a discount code

If yesterdays post interested you, you're probably a sure-fire target for the Virtual Goods Summit which is coming up next week. Last year I moderated a panel (video available) on Why Virtual Goods Matter, and this year I'll be chatting about Music as a virtual good. Last year it was a great day where they managed to get together just about everyone who had direct experience selling virtual goods, I've got high hopes this year as well.

I hope you can join, and drop me a line if you want to chat. You can save 10% on the cost of registration by using the code "NABEEL" at checkout.

Conference Website: http://www.vgsummit2008.com
Registration: http://vgsummit2008-nabeel.eventbrite.com

Casual MMOs get between 10-25% of users to pay

There's been some good number crunching going on at conferences and on the blogosphere to find out the basic economics of casual mmo / free to play companies. From a post a few months ago Jeremy Liew figured that successful MMOGs can expect around $1-2 per unique monthly user. A few of the figures from that post below:

• Club Penguin: $1.62/mthly user/mo
• Habbo: $1.30/mthly user/mo
• Runescape: $0.84/mthly user/mo
  
  others from outside that article:
• Puzzle Pirates: $1.50/mthly user/mo
• IMVU: $1.66/mthly user/mo (from GigaOM)

Those numbers are remarkably consistent across very different types of properties. Habbo hotel is so different from Runescape, one being non-combat and virtual goods based, the other being subscription and heavily combat oriented, that it's surprising to not see a massive variation between products. We certainly don't see that kind of ARPU consistency between, say, subscription based music products like Rhapsody and transaction based one's like Amazon MP3. That made me a little curious to dig in deeper.

Slicing this a different way, let's look at the ARPU of the paying userbase. From public numbers we can get that Club Penguin had 700k paying users, 2.6m Unique Users/mo, or 25% paying a $5 arpu. Runescape, also from earlier numbers, is 1m paying at 6m players/mo, that means 16.6% paying. According to an email exchange with Sulka over the weekend, Habbo says 10% of its monthly userbase is paying. And checking in with Daniel James, it looks like Puzzle Pirates has 22% of its active monthly registered playbase paying. Boiling that all together with past figures, we get:

• Club Penguin: 25% monthly uniques pay, $5/mo per paying user
• Habbo: 10% monthly players pay, $10.30/mo per paying user
• Runescape: 16.6% monthly uniques pay, $5/mo per paying user
• Puzzle Pirates: 22% monthly players pay, $7.95/mo per paying user

Ah, there's some of the disparity we'd expect. A few things to note here:

• All of these percentages seem amazingly good compared to other markets. Think about the 2% of the casual downloadable game market that pays, or a 3-5% that a lot of "penny gap" free trial web startups get.
• The relative percentages-to-arpu ratio start to suggest how you might shape a product to match your goals, but we'd need a few more samples to start to see real patterns. Throw up your numbers if you got 'em.
• One reason why Club Penguin probably gets such a high relative percentage paying is that you hit the content wall very quickly in CP when you are a non-paying user. Habbo, by contrast, has a much longer shelf life of exploring before you really need to pay up. The real interesting comparison that would help everyone build better products would be to see this comparison after a 90-day cohort. I imagine Habbo's percentage at that point would be quite similar or possibly better than CP. If any folks want to share cohort numbers we'd be happy to share as well (you know, as soon as we got being around for 90 days).

Note that some of the figures say "uniques" and some say "players" -- this is not by accident. One thing I noticed looking through the numbers was that some were counting uniques as "active players", and then others were using Compete.com/Quantcast numbers - which are "total uniques". The difference between these two can be anywhere from 20-80%, depending whether the site requires registration to play and what the bounce rate is (% of folks who hit the first page and never go further). If anyone had bounce rates for CP then we could normalize, but lacking that we'll just have to ballpark it.

What makes a Social Game, a social game?

It's been a little frustrating to watch as the term Social Gaming is being applied to practically everything on a social network - so much so that even single player games on Facebook are now "social games." The folks at GigaOm have been pinging me about writing an editorial for a while, and this topic seemed worth starting a wider dialog about, so here it is:

What makes games social? (GigaOm)

Are online games going to kill themselves at retail?

Yesterday Raph Koster posted the photo on the right of a full rack of Target gift cards for online games, from Puzzle Pirates to Zwinky. That led Jeremy Liew to talk about the power of gift cards to allow young players who do not have credit cards to pay for virtual goods. And while I share Jeremy's enthusiasm that gift cards are an excellent monetization method, I am also worried about what it means for the next wave of online gaming startups.

It's no secret that monetization is one of the areas where virtual worlds and gaming can teach a thing or two to the web folks. From Maplestory gift cards to Rock Band tracks, consumers have shown they are willing and able to pay for digital gaming content. Even if the techniques are unique, including everything from virtual goods, gifting, dual-currency (time & cash) based economies, and level-based subscriptions, the culture is one of paying for playing. Which is good for those of us trying to keep the lights on.

Despite this willingness, virtual goods still have the penny gap. It is never easy to get someone, especially a teenager, to type in a credit card online. Which is why walking down a Target or CVS nowadays means easily finding cards hawking virtual 8bit furniture from Habbo, virtual DKNY gear from Stardoll, or a new sword for Nexon's Maple Story.

RE-INTRODUCING THE RETAIL PROBLEM

In all, there are now over 25 digital content cards being sold at retail. I've been tracking this and that's over double what it was six months ago. That means that at least a dozen online communities, and probably a dozen more in the next six months, are going to be submitting themselves to the vagaries of the retail shelf-space business. That's a business the online web folks have little to no experience in, and one that a lot of traditional gaming vets were excited to get out of.

This is creating a funnel problem that every creator or player should be a little worried about. It means that anyone can create an online game, but there is going to be scarcity around who can make money at it. Big media companies, communities that are already at critical mass, and big-hype start-ups get shelf space - while the next big thing in a garage doesn't get a shot in hell at monetizing.

In was a long hard slog at Ambient Devices getting our products into everywhere from Radioshack to the Museum of Modern Art store. It was even harder keeping them there despite strong sales as the hot new thing came out. That background will serve Conduit well when the time comes, but I'm still worried about what it will do the overall market. The last thing any of us wants to see is for monetization to be only held to the precious few so that everyone else is forced to go to completely free. That could collapse the market for everyone.

THE TARGET: THE ONLINE GIFT CARD?

How do you allow for monetization through retail to help with the credit card problem, but without introducing the shelf space problem that could hurt everyone? Perhaps there needs to be a standard

Real life, what would Metacritic say?

Game design is being applied to all manner of online life these days, from former game designers Catarina Fake and Stewart Butterfield designing Flickr, to Amy Jo Kim's talk on bringing the mechanics to the web, to Eric Marcoullier's MyBlogLog, to Jane McGonigal's great keynote at SXSW this year about how games are better than real life.

So with that in mind, and tongue firmly in cheek, Boing Boing tagged a piece from Metafilter that reviewed real life as a MMORPG. Remember being told to put down mario bros and go play Outside?

In terms of the traditional target age content metrics, Outside is remarkably high in sex, violence and challenges to traditional values, despite the strong child-focussed marketing it receives. Many would go so far as to say that for a child to develop the ability to cope with Outside is essential, as long as the harm incurred is not too debilitating. Children injured playing Outside are usually comforted by parents, and soon encouraged to go Outside again; this leads to the conclusion that somehow Outside has escaped any and all of the usual moralizing that surrounds the videogaming industry. One might say that Outside gets a free pass from the Jack Thompsons of this world...

Other players choose to focus on accumulation of personal abilities, the variety of which greatly exceeds the capacity of any individual to accumulate; again, the game requires players to engage in years of grinding to achieve any notable standard with a skill or ability. Players are issued abilities and characteristics largely at random, and it is entirely possible for a player to be nerfed beyond any reasonable expectation of being able to play the game, or to be buffed to the point where anything he or she does is markedly easier. Unfortunately over time, player abilities tend to degrade, unless significant effort is made to keep skills up. This reviewer cannot emphasise this enough: Outside requires a huge time investment to build up player abilities, exceeding any other massively multiplayer game on the market by some three orders of magnitude.

Players are encouraged to focus on social interaction, which can be engaged in in a variety of ways. In fact it's extraordinarily difficult to solo anything whatsoever in Outside, apart from basic skill and knowledge accumulation quests. One of the major forms of social interaction in the game is based largely around the addition of new players to Outside, and is both complex and, in comparison to the storyline-driven romance quests of, say, Baldur's Gate or Mass Effect, they are immensely difficult. Dedicated players of Outside, however, report that the romance quests are among the most rewarding the game has to offer.

(from Boing Boing)

 

Big Fish Games steps into Casual MMOs big time

Congrats! The news is out that Seattle-based casual MMO Thinglefin has been acquired by casual games publisher Big Fish Games. Thinglefin was founded early this year by Asheron's Call Lead Designer Toby Ragaini, Jeremy Friesen and Ryan O’Rourke. Big Fish is a casual games publisher, and their President Jeremy Lewis runs it as one of those quiet companies that kicks ass month after month without having to scream about it at every conference.

They are still in stealth mode, but are working on a web-based casual MMO that obviously Big Fish thought highly of. With the huge number of casual MMOs in development right now, getting distribution is key to rise above the noise. With combination of the development team at Thinglefin, and the distribution muscle of casual games publisher Big Fish, they should be someone to closely watch.

I met Toby about a year ago as he was starting up Thinglefin, and he was nice enough to give me a couple-hour headstart in announcing their VC funding to the blogosphere. I will claim my very insignificant part in all of this, as I introduced Toby and Jeremy a few months back. Clearly, they got along. :)

See you at Virtual Worlds, Widget Summit, Web 2.0, and more

October is definitely the month for conferences I'm leaving today for San Francisco and I'll be at a couple of events, so here's a little update on this month.

Virtual Worlds 2007 - Oct 10-11, San Jose, CA. Thursday, 3:00pm - 4:00pm

Web-based Virtual Worlds
This session of leading web-based virtual worlds experts will discuss the finer points of developing web-based virtual worlds. Attendees will gain valuable insight into best practices, techniques and technologies for implementing web-based virtual worlds. Find out why web-based virtual worlds are here to stay and how the technology roadmap will develop over time.

- Daniel James, CEO, Three Rings
- Nabeel Hyatt, Founder & CEO, Conduit Labs
- Teemu Huuhtanen, President N.A., Sulake
- Toshitaka Jiku, EVP and CTO, 3Di Inc.

also I'll be in San Francisco next week at the Widget Summit and Web 2.0 Summit (Summit is the new conference, apparently). Then later in the month I'll be doing an event that is hosted by Scott Kirsner of the Boston Globe.

How are Blogs Changing the Way Technology is Covered?

Entrepreneurs, CEOs, VCs, journalists, and PR professionals are increasingly cranking out blogs, podcasts, and video dispatches. How does this change the way the tech sector gets covered? What does it mean for CEOs trying to get their stories out, PR firms trying to get coverage for their clients, VC firms touting their investments, journalists trying to cover important news, and customers tracking the market? (Not to mention the relationships between all of these players.)

We'll bring together representatives from all four camps for a wide-ranging conversation (definitely *not* a panel) about the way blogs are changing the game in the tech world.

- Don Dodge, Director of Business Development, Microsoft
- Jimmy Guterman, Editor of Release 2.0, O'Reilly Radar
- Barbara Heffner, partner at CHEN PR 
- Nabeel Hyatt, CEO at Conduit Labs
- Scott Kirsner, Boston Globe "Innovation Economy" columnist
- Bijan Sabet, venture capitalist at Spark Capital

there are only a few place left for this, and you can RSVP here. Hope to see you at one of these spots.
 

NY Times writes about Virtual Goods and misses the entire industry

The NY Times did a piece on virtual goods, only it's actually just another damn piece about Second Life. I posted before about why Second Life gets so much coverage, but this is really going far past that point. This is a piece focused on the buying and selling of virtual items, yet there is no mention of Maplestory, Habbo, or even Facebook and Hot or Not. For the press to remain ignorant of this being an industry and not simply a single product is now journalistic irresponsibility and they should be ashamed.

This is a member of the mainstream press that has not even managed to type "virtual goods" into Google. If they did, they would see the first three stories currently point to:

1) Sony getting into the game.
2) Susan Wu's article on Techcrunch about Virtual Goods being the next big business model for the web.
3) A link to the friggin' Virtual Goods conference, which would have mentioned all the above companies and many more.

Instead we get a completely miopic puff piece about one person selling crap on Second Life. No context of how this might effect the reader as they navigate their digital lives. No background on the history of virtual transactions, their popularity in Asia, or the fact that the #2 prepaid content card in Target behind iTunes is the Nexon card. Not even a brief mention of the RMT market, despite the fact that there was piece on it in the (much better quality) NY Times Magazine a few weeks ago.

This is not a love affair with Second Life, this is journalism that is abdicating its responsibility to inform the public. This is the same as talking about the future of Blackberry's stock and neglecting to mention the iPhone or Google Phone. Or talking about the social networking phenomena and only focusing on one teenager on MySpace without even hinting that their might be an entire industry of competitors. Just to be clear, this was an article in the New York Times Business section.

This is lazyness that borders on a lie.

[Note: The original title of this article was, "Idiots at NY Times write about virtual goods and miss the entire industry." After calming down a bit I felt that the use of idiots warranted a personal attack, which wasn't really my intent. I have left the rest of the article exactly as it was, as I think it accurately captures how viscerally I feel about this issue.]

8 Snapshots of Austin GDC '07

Virtual Worlds News has good liveblogging coverage of the talks at the Austin Game Developers Conference, including the panel I was on, Startup Lessons from Recent Online Games (audio is available here, for a fee). There's also stuff at Gamasutra and Raph's site. AGDC didn't have many overall themes, other than it feeling a bit like a bunch of MMO folks trying to ignore the social web crowd in their midst. So instead of a summary I'll do the same thing I did for GDC and give some snapshots of the last couple days.

On how teenagers live their lives online, and take that for granted.

"Fourteen year-olds playing our game were born in 1994, they've never not known the Internet. Pictures of them as a fetus could have been posted online before they were even born." - Sulka Haro (Habbo Hotel)

On user generated content, player control, and the feeling a player can effect the world.

"It turns out that a sense of autonomy is the single strongest relationship to sustained subscriptions [in an MMOG]." - Scott Rigby (Immersyve, Inc.)

On the dangers of not paying attention to the small percentage of hackers.

"Hacking is like a drug. If your whole guild is using it, you'll be pressured to use it too. Then, once our users try a hack tool they actually find it hard to get back into the game." - Minho Kim (Nexon America)

Austin speaking schedule & the start of the fall conference season

The end of August every year brings the descent of new Harvard and MIT students to Cambridge, the email inbox getting filled by VCs returning from vacation, and the start of the fall conference season. I don't particular like 90% of conferences, but every once and a while you get something like last year's Austin Games Conference and it makes it worth it. This year I'm a little more skeptical with the line-up but who knows.

Anyway, tomorrow I'm off to the Austin Game Developers Conference, below is info on the panel I'm on, drop me a line if you want to meet up.

Sept 5-7 - Austin Game Developer Conference, Austin TX. This has become the defacto massive multiplayer developer conference, with everyone from Bioware to Habbo Hotel showing up. Last year it was really great, small enough to be intimate, but large enough for variety. But they sold to CMP, so we'll see if that means it's on the same unfortunate trajectory as GDC.

Startup Lessons from Recent Online Games
Speaker/s: Daniel James, Raph Koster, Anthony Castoro and Nabeel Hyatt
Day / Time / Location: Thursday, Sept  6, 4:30 - 5:30 Room 1
Track / Format: Online Games - Business & Management / Panel
Overview: This august panel of the founders of recent hot MMO startups will get down and dirty with the details of how to do (and how not to do) the startup thing. Topics discussed will include: -Financing - how and where to get it, VC or publishing; -Licensing and IPs - build or buy? -Web 2oh - Bubble or basics? -Distribution -Revenue models -and trying to hire and recruit in boom times.

The rest of the fall sees the Flash Forward Conference in Boston Sept 19-20, Virtual Worlds 2007 in San Jose Oct 10-11, and the Web 2.0 Summit in San Francisco Oct 17-19. I'll post my speaking gigs as the events get a little closer, and I always keep upcoming.org updated. Let me know if there are any conferences you're looking forward to that I might be missing.