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Paul Heydon on casual gamesJuly 25th, 2007 |
Investors look for the “Holy Grail” of casual gaming is an interesting article over at Ars Technica, about a talk at the Casual Games Association’s conference last week, given by a managing director at an investment bank. Basically, he outlines the key things that investors are looking for in the space:
- diverse portfolio, but not mere aggregators: “companies that offer game portals, in-game advertising, and casual MMOs”
- not hardcore: “lasting appeal and a strong casual base along with a strong monetization potential”
- ad-friendly: “in-game and on-site with banners”
- Web 2.0-ish: “user-created content, and a simplicity of design that allows making and inviting friends a painless process”
Why the interest? Because it looks like these are games that draw recurring revenue from mass audiences, as opposed to drawing recurring revenue from hardcore audiences or no revenue from mass audiences. And costs are low. He specifically says that the Holy Grail is not World of Warcraft, because it’s too small and based on subscriptions.
Heydon’s slides are available here (PDF). One slide claims that in 2007 there were over $135m raised for this sort of project, and he lists some of the ones that raised the most money. Even scarier, he projects almost a half a billion dollars in acquisitions happening in 2007. Yikes.
So what’s the Holy Grail in his opinion?
MySpace + YouTube + Maple Story + Skype + Habbo Hotel = 100 million users.
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[...] For added perspective, WoW has 9 Million users, or twice the PS3’s user base. One game is within reach of the XBox and the Wii. And some people are still saying it’s small time. [...]
Abalieno, they make tons of money (Google and MySpace do, dunno about YouTube alone).
But, this is why consolidation figures big into this: to make any money you have to be huge.
Google makes lots on advertising, which first appears on the search engine people use, and then appears on the sites people go to after finding them on Google. Then in their gmail, and again on their news reader, and some more with any of Google’s other bundle of goodies. It’s just not worth it to advertise most anywhere else.
It may even be that the price they paid to be MySpace’s search engine or the amount they paid for YouTube were more than either was worth, just for what they are. But what they’re really paying for is to maintain their place (as THE place to advertise online).
Anyway, this sort of thing strikes me as inevitable. It’s probably going to be Yahoo, Google, Amazon or the like (well, AND the like) to deliver it – rather than any game company, big or small.
Those could even push the game industry itself back offline. I mean, if publishing your online game is pointless because everyone in WhateverWeb is playing WhateverGame there – interest in an MMO of today doesn’t live beyond “Which social network is this for?”.
Also because they’re paying attention and we’re mostly not; Or whatever little outliers of the game industry are paying attention don’t have their ability to, say, buy every freaking thing.
Know how many game developers Google could buy for what it paid to be MySpace’s search engine?
Anyway, yeh.
I think there’ll be more than one permutation of this, consoles will figure into it heavily soon as they decide that they want to, and at least one version’s going to be more like Yahoo’s instant messenger already is (if a sense of place-n-space tied everything together rather than an IM client), and the sorts of MMO’s you like won’t exactly vanish overnight.
But I do think we’re in for a pants-down spanking.
Name recognition is huge in advertising, and banner ads really don’t reflect that. I can see their point of view in this.
A developer has to decide if they are making a game or an advetising space with game features to attract people. But I can see both in one game, and being quite acceptable to the players if it’s done right. It would have to be a modern or futuristic game, likely sci-fi and maybe with fantasy elements. Then ads could be splashed all over and if the game itself is good enough and complete enough it could really be effective.
I mean, imagine a game world that’s made “worldly” and with lots of world interaction in a near future scenario, with space stuff due to alien interaction and fantasy stuff due to magical time/dimension warps, with NPCs dressed a bit futuristic to give the needed divide from modern day realism.
This game could sell contracts to restaurant/food corporations, i.e. Pepsi or Coke, to add their products in normal ways as well as futuristic/magical means. So, you are in a fight and need some healing, and stop at that vending machine on the corner to stock up on “Coka Cola Healthnut Soda”, or “Pepsi Strong”. Getting there fast using your “Adidas Speed Feet”, or course.
But I still think that pure fantasy is where it’s at for MMORPGs, and advertising just doesn’t fit there. (And I hope you developers don’t fall into the “I’m tired of orcs” trap being passed around. People still want Elves, Orcs, Dragons and magic.)
Google is very rich. Their main source of income is advertising.
How do MySpace and YouTube make money? Through advertising? Do they actually make money?
We are back at the new economy bubble. Where everyone was convinced that clicking on an ad banner brought in your pockets millions dollars at no effort.
It just seemed to be an amalgam of every catchword and meme currently in vogue, versus any real analysis.
Really, do I need an analyst to tell me that if someone effectively mixes MySpace + YouTube + Maple Story + Skype + Habbo Hotel it will be big?
Although what Paul Hayden says does jive with my (and your) general worldview Raph, I don’t know that it’s even worth posting since the particulars were so lacking in real consideration and depth as to question their value.
Oh.. and World of Warcraft is not small by anyone’s measurement. It may not be the biggest compared to some of the properties on the Internet, TV, or Radio, but it would never be considered small in any of those.
Not really surprising regarding the ‘too small’ comment when coming from someone looking to just make money. Kind of like how TV shows get canceled because they bring in ‘only 7 million viewers’. Big business doesn’t like having niche markets.
Raph, how far off are Areae to making something like…
“MySpace + YouTube + Maple Story + Skype + Habbo Hotel” with Web 2.0-ish features?
Incidentally, what I’m working on is MySpace + YouTube + Maple Story + Skype + Habbo Hotel = 100 million users – so thats good.
[...] Paul Heydon is MD of Avista Partners, a London based Investment Bank founded earlier this year, solely focused on the media sector. His presentation at last weeks Casual Games Association in Seattle has sparked a number of conversations. With Casual Games coming of age Paul’s strategic review of the sector is recommended reading as are commentary from Ben Kuchera and Raph Koster. [...]
Hey Ralph,
I’ve never been one to post on the forums or really interact with you but I’ve followed your thoughts and games for 10 years now. And you are so right on many aspects. I have since left SWG because after I reached the final level, with no PvP, i became bored quickly and left.
But my reason for posting is another. I want to show you what you’ve created, in a good way. I left SWG to return to UO, 4 years later because the Siege Perilous shard was the last game in all of the MMORPGs that still instilled the values of risk vs reward. That risk makes us all value what we have that much more than any other game out there.
It also has created bonds. A member of the Siege shard passed away on Tuesday, from a heart attack. He was 45 and started playing UO when he was 35. He was on Siege the 1st day it went live.
http://boards.stratics.com/php-bin/uo/showflat.php?Cat=4&Number=7340927&page=0&view=collapsed&sb=5&o=&fpart=1&vc=1&what2=postlist&selv=&vwhich=
I thought you really might like to see it. It stems from all the work you’ve done over the years. a Real risk vs reward community.
failed handheld’ has 22M. Or twice the numbers of either the Wii or the 360. For added perspective, WoW has 9 Million users, or twice the PS3’s user base. One game is within reach of the XBox and the Wii. And some people are still saying it’s small time. For more perspective, an American Idol finale clocks in about 25-30M viewers. (It’s non-finale weeks score much lower). Last week’s top show, the finale of America’s Got Talent, had a share of 6.7, with an estimated 10.7M viewers
failed handheld’ has 22M. Or twice the numbers of either the Wii or the 360. For added perspective, WoW has 9 Million users, or twice the PS3’s user base. One game is within reach of the XBox and the Wii. And some people are still saying it’s small time. For more perspective, an American Idol finale clocks in about 25-30M viewers. (It’s non-finale weeks score much lower). Last week’s top show, the finale of America’s Got Talent, had a share of 6.7, with an estimated 10.7M viewers
so I’m changing the blog to discussing purely indie game dev topics and random technical issues. Kid MMO stats Voice vs. Text argument NPD gamer study My favourite web game – Kingdom of Loathing! Casual games from investor POVs