Massive, XFire, what’s next?
CNet says that the Wall Street Journal says that Microsoft is going to buy Massive, the in-game ad people.
This mere days after we learn that Viacom is buying XFire for $102 million.
Obviously, it’s great to see Chris Kirmse, one of the pioneers of MMORPGs, get his fair share of all the riches that are being earned. (For those who don’t know, the Kirmse brothers were the original Meridian59 guys).
On the other hand, it’s also interesting to see the way in which it’s the ancillary businesses that are piling up the cash offers. I imagine that if IGE were for sale and a little more legit in the eyes of the industry, we might see a lot of money offered for them as well.
Certainly, there’s a lot of money floating around the industry right now. For the first time in ages, there’s venture capitalists funding things that are related to games. There’s deals like these and the one with News Corp buying IGN. The big media conglomerates are paying attention. More and more media licenses are jumping into the fray: Star Trek, Lord of the Rings, Cartoon Network, Stargate…
The thing that is interesting about these two more recent deals is that they speak to virtual worlds as an ecology of businesses rather than as just one business, a subscription service. It’s a sign of maturation that business models premised on the success of the online game services even exist. It’s interesting to ponder what other sorts of ancillary biz models might be viable. The ones that exist so far involve helping people play the game, connecting players, and advertising to them.
What we’re seeing here is the beginnings of online-gaming-as-lifestyle business practices. It’s a mindset of seeing the online gamer as an addressable audience in its own right. Once you adjust to that mindset, you realize that there’s a whole host of things that fit within the online gamer’s lifestyle that offer opportunities for revenue streams. I don’t know how many times I have pitched ideas like giving every ORPG subscriber in your service a free Science Fiction Book Club membership, for example.
The danger is that online gaming, demographically, is still in its infancy in the West, and even in Korea is somewhat underdeveloped. The sooner the market locks in on a psychographic profile, the more likely it is to stick to that. Then it’ll take something really disruptive to break out — and it could be years (or months — you never know).
I mentioned this idea of lifestyle marketing recently on Quarter to Three and by and large, it got a negative response; people don’t like being bucketed up into these segments, even though advertisers and marketers have devised a jillion classification schemes. I think that these purchases are clear signs that, whatever we might think about being labelled (and goodness knows we’ve been labelled all sorts of ways in the past), serious money has concluded that we’re an addressable segment.
Serious money tends to be unimaginative. So now the job falls on us, players and developers, to confound their expectations.
It’s a bit saddening to think that a daring, innovative and creative developer only got to the money doing something other than actually making cool games. Makes me as a developer feel like the guy who serves Big Macs.
Well, you know what they say about art and artist’s …
*artists…
grrrr
Jare,
Why is that sad? It seems to me that Chris Kirmse just got rich because he was a daring, creative, and innovative developer of Xfire.
–matt
Didn’t I read somewhere (maybe here) that WoW is becoming the new businessman’s “golf”?
Personally, I don’t mind the big guys buying it up like this. We’re only at the start of something much bigger than any of realize and I’m not sure we can get to where we’re heading without some stuff like this happening.
I see game clients becoming like browers (in that they’re distributed for free) and whoever wants to setup a server can do so. I see online gaming having the potential of becoming the “metaverse”. If this is going to happen, we need to get over the communication mechanism and start realizing it’s just a way to interact. Once we get to that point, all sorts of amazing things will start to happen.
Chris really enjoys what he’s doing with XFire and really believes in the product. When he talks about what it does and what they’re going to make it do he gets just as excited as someone talking game design. Personally I’d like to see Chris making games again but like Matt said, it was pretty daring to challenge established IM competitors with an innovative twist that ties it into gaming. I’m very happy he’s found success with it.
… and why’s it always come to money around here. Seems pretty restrictive on creativity from my experience.
And yet, they line up to classify themselves. Show me a single forum which doesn’t have at least Online Personality Test thread. There’s a clue for any marketeers out there….
Lifestyle marketing is nothing new. Advertising practitioners use the terms lifestyle technique and lifestyle advertising. (Advertising is a function of marketing.)
While advertising is an effective brand management tool, building a brand is the responsibility of public relations. Al Ries, a widely respected marketing strategist and "thought leader", wrote the book The Fall of Advertising & The Rise of PR, which describes my view of advertising quite accurately. Building a lifestyle brand using PR is feasible on various scales. The effects of a lifestyle brand built using PR would likely return more per dollar spent building, managing, and defending the brand than a lifestyle brand built using advertising. Plus, the budget would be smaller! 🙂
These acquistions speak to the mindset of avoiding “hit driven” businesses (which is also true for initial VC funding). In many investor’s minds, any creative product, whether it is a movie or an MMO, has a chance of being a “hit” or a “miss” and therefore is to risky for most portfolios. While there are huge differences between a movie and an MMO in terms of shelf life, these differences are largely not grokked.
In the case of Massive, or Xfire, or a casual game backend system like GameTrust, or even an MMO creation tool like Multiverse, the view is that these acquistions are a “safer” bet because they don’t require the success on any one creative product to make money. I think it will still be exceedingly hard to raise money for a creative idea like a game.
These sales really appear more about buying channels of advertising than anything else. Massive is still pretty niche, so Microsoft probably got it for a relative song. XFire is fairly well-known, but is more of a catch-any-eye-you-can sort of advertisement system, so still relatively young in terms of measurable effectiveness. I basically link both of these to things like Time Warner’s GameTap (obvious channel for advertising). Games and the support systems (portals, forums, misc community tools) are the new captive-audience target for advertising.
Nobody likes thinking they’re like anyone else in the U.S. 🙂 But psychographics and demographics are effective. We’re all unique, but there are things that bring us all together in some way.
/heavy
A sure sign of genre/lifestyle maturation to me is when the business folks get here. When the focus is less on innovation and more on monetization (DRMs over games, portals over experiences, market-driven title rotation, etc), we know things have finally “arrived.” Business is not about throwing money at something and hoping for the best. It’s about most efficiently capitalizing on a prior innovation until it can no longer keep up with changing times. To the jaded, it sounds a bit like leech activity. To the rest, it’s the natural course of things. Creative people are always out front, being followed by a core group of trend setters. But it’s a successful business that can bring that creativity to the masses.
Thought leaders and top practitioners in marketing have recognized that advertising is largely cost-inefficient and ineffective as a brand-building tool. Critical marketers use advertising as part of their brand management strategy, to supplement efforts to increase brand awareness, etc.
The two primary forms of innovation in business are incremental and radical. Larger companies focus on incremental innovation since existing business opportunities appear to have less risk due to records of feasibility and market behavior. Smaller companies are provided more freedom to experiment with radical innovation since there is little to no competition in markets that have yet to be created, and less obligations to constrict business development. As a marketing strategist, I — along with the various thought leaders and top practitioners in strategic business management and marketing — agree that executives need to pursue incremental and radical innovation to sustain operations and growth. What’s the difference between incremental and radical innovation? The difference can be illustrated by categorizing companies as either "market-driving" or "market-driven". Strategic branding professionals have long held that successful branding creates new markets in which a brand can achieve brand leadership. There is difficulty in convincing upper management to agree to "boldly go where no competitor has gone before", especially those managers who are not strategic thinkers. The problem is one of management: the right people are in charge of finance, yet they are also the wrong people in charge of approving business development.
The history of business is heavily populated with examples of market-driving companies. Simply devise a list of companies who considered yet resisted opportunities considered "no-brainers" today. Sample case studies: IBM and the PC; Ford and colored automobiles; Nintendo and connectivity.
Business is certainly not concerned with only incremental innovation. I call that limited focus "bad business".
This is one of the better definitions I’ve read, and exactly matches my experiences. It takes a very specific time of leadership body to properly manage both incremental and radical growth (not just “innovation” in my opinion).
Ultimately what seems to happen is a constant swinging of the pendulum between both ends, which like a 401(k) fund, balances out in the long term as a result. Almost in spite of itself 🙂
ug… so much for it being free in the future huh…
I use Xfire.. I like it.