"Money can't buy you love, but love can bring you money. In software the only sustainable way to earn money is by first creating love."
Amen brother James.
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.
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:
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:
Ah, there's some of the disparity we'd expect. A few things to note here:
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.
The Echo Nest is a damn cool company. Last week David Rusenko of Weebly wrote some nice thoughts on Loudcrowd on his blog (thanks David!). That led me to read some of his older posts, including one on Echo Nest. I don't know how I missed the announcement from the Echo Nest about their music intelligence APIs, considering how much we've been doing with music lately, but I'm making up for it here. Using thisismyjam I built this quick mix:
While that demo alone is probably enough to get you into some startup contests, there is a lot more going on here. Echo Nest is taking a platform approach, building a bevy of music-based APIs available to anyone trying to create new music tools for the web. You can watch some of the other demos they built (don't miss the "More Cowbell" demo) by watching the video from their launch at Demo a few weeks ago:
Oh, and don't miss David's thisismyjam mix, and his excellent blog..
It was a 2006 Pew Internet & American Life project that first confirmed some thoughts for me that led to Conduit, so I like to keep a close eye on what they are saying. Today they revealed a new study, this time on gaming, and here are some highlights:
In general, I was impressed to see that not only is gaming absolutely ubiquitous in this age group, it is also at this point a predominantly social activity. Gaming also seemed to have no causal effect on a person's social life, but were simply a part of it. Basically, if you are social then you are more likely to be involved in school clubs, online social activities, and play games with friends. If you are already anti-social, you are more inclined to play single player. But there was no correlation between hours of play and type of play.
More interesting stuff I'm sure, let me know if you find anything.
(The following is consolidated notes from the talk at the Startup meetup put on by the YCombinator folks, which I found to be a very enjoyable event and hope they put on again soon)
Conduit Labs had the longest incubation period (eg. no outside users) of any of the dozen or so product launches that I've been a part of in my still relatively early career in startups. Although we still erred on the side of releasing as early as possible, this long incubation period left me with a couple of thoughts on the old mantra of releasing early and often.
Suffice to say that you have likely heard that releasing early and often is a good idea. I first read this in writing somewhere in the mid 90s in The Cathedral and the Bazaar, and still believe it is perhaps one of the more eloquent explanations of why it is important. Eric Raymond described Linus treating his users as co-developers with a voice in the growth of the product. Or has he put it,
"keeping his hacker/users constantly stimulated and rewarded - stimulated by the prospect of having an ego-satisfying piece of the action, rewarded by the sight of constant (even daily) improvement in their work."
But I think there is an equally important reason for releasing early that folks don't talk about very often, namely the effect of positive user feedback on the culture of your development team.
The best way I can explain this is to tell a short anecdote about Mark Spitz (which seemed relevant considering the recent Olympics). Spitz went into the 1968 Olympics holding 10 world records in swimming, so think of him in the Larry and Sergey world of talent. After brashly predicting he would win ten golds, he messed up the start of his very first swim which caused him to finish dead last. This killed his confidence leading to him getting "just" two golds.
After bombing at the '68 Olympics, Spitz got gold in his first event at the '72 Munich games. As he tells it, this early win lifted his confidence and was the catalyst for him to go on take seven gold medals, a record that stood for 36 years until Michael Phelps just broke it. This is the relative importance of that first release of your product, and points to the problems that can arise in taking an early release too casually. Positive feedback loops snowball, but so do negative feedback loops. And a world class group of start-up talent, on the order of Spitz, can get derailed for years or even permanently if they mess up that first release.
Startups, like most things, are a head game. It's best you set the culture of your company up for success.
Paul Graham cites these twin problems in his essay, The 18 Mistakes that Kill a Startup, where his #8 is about launching to slow, and #9 is about launching too fast. We hear a bunch about not launching too slow, and maybe not enough about making sure the first step out is going to be a solid one. It is indeed important, even critical, to allow yourself the ability to "fail quickly" so you can move on and improve the product. But a complete failure (no traction, no positive feedback, no real way for users to engage and understand your service) is not only bad for self esteem, it gives them nothing to attach to and build from.
This is just a friendly bit of counter-pressure to the constant drum beat of releasing early. All startups are riddled with failures, so you can't be afraid of releasing because of failure. But if there is a great instinct I constantly see in entrepreneurs it's the ability to look at the primordial goo of an early product and see the little nugget that is working well enough to sprout 100 new ideas. I'll talk a little more about what it means to see that bit next week.
I'm late in getting this up, so I'll need all the help I can get from you guys.
I love how SXSW lets attendees vote on the panels they want to see, so I decided to take it one step further and I sent an email to 10 friends to get their votes on which topic I should submit. I eliminated anything on virtual goods, since I was part of a panel on that at last year's SXSW, and instead focused on things like music games, synchronous social network design, and what it's like to have web developers and game developers working together.
There's only a couple weeks left to vote for the SXSW panels you actually want to see, so head on over to vote. The first link is my talk, as chosen by friends, followed by some others I found interesting:
What else should I be voting for?
In case you haven't already read on the internet, some intrepid bloggers have been having fun in our private alpha and decided to write a bit about it. There's more over at the Conduit blog, including the coverage in this weekend's Boston Globe.
And I'll be speaking at the YCombinator Cambridge/Boston Startup Meetup on Monday night along with some area founders and likely a bunch of YCombinator companies. Paul Graham will be answering questions, Kevin Merritt will be telling his story, and they asked me to say something. Since so many people give dire post mortems of how they screwed up their startups, I thought I'd talk about how you know if your startup is actually working.
See you there, or at Loudcrowd.
You never get a meal. I've been twittering, tumblring, friend feeding, and having great long talks with co-workers about the industry. I haven't been having enough on my blog. Has it really been two months? I've got to do something about that.
In my defense, I have a new kid, and a product that just went into private alpha. So I have been keeping busy. Still, more to come.