Massive, XFire, what’s next?

 Posted by (Visited 10627 times)  Game talk
Apr 262006
 

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.

  21 Responses to “Massive, XFire, what’s next?”

  1. it’s really just about living in this easy-to-check alternate life as it crossfades through your own real life. intertwine that with the business model we’re planning and you guys can get a pretty in-depth glimpse of whwere my head is living thesedays. m3mnoch.

  2. 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.

  3. Well, you know what they say about art and artist’s …

  4. *artists…

    grrrr

  5. 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

  6. 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.

  7. 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.

  8. […] I had more to say on the subject, but to be honest, Raph beat me to almost exactly what I was going to say. • • • […]

  9. people don’t like being bucketed up into these segments, even though advertisers and marketers have devised a jillion classification schemes.

    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….

  10. […] Comments […]

  11. Lifestyle marketing is nothing new. Advertising practitioners use the terms lifestyle technique and lifestyle advertising. (Advertising is a function of marketing.)

    A lifestyle ad shows the product as an integral part of the life that advertisers assume the target audience would like to lead. The appeal to imitation comes into play as the audience would l ike to imitate the behavior or lifestyle shown in the ad. Since the product is shown as an integral part of the lifestyle, the consumer may buy the product on the assumption that the purchase will produce the lifestyle. Please note that lifestyle ads us ually show people enjoying themselves; thus imitation is combined with personal enjoyment. This type of ad is often used for such products as soft drinks, beer, tobacco products, and other parity items.

    Parity items use the lifestyle ad in particular since there is often little else they have as a unique selling point, as their products are similar if not equal to other products of their type. If they can establish themselves as providing a better (in the eyes of their target audience) lifestyle than other products of their type, then they are more likely to attract, and perhaps sell to, that target audience.

    — Dr. Richard F. Taflinger, Imitation and Advertising

    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! 🙂

  12. 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.

  13. 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.

    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.

    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.

  14. 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.

    Business is … about most efficiently capitalizing on a prior innovation until it can no longer keep up with changing times.

    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".

  15. Morgan wrote:

    The difference can be illustrated by categorizing companies as either “market-driving” or “market-driven”.

    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 🙂

  16. ug… so much for it being free in the future huh…

    I use Xfire.. I like it.

  17. […] In what I thought was going to be my last entry about it, I was wondering if ingame advertising in the short term was mostly going to be something developers and publishers used on a game that needed to be saved through the incorporation of a new revenue stream. But with this entry by Raph on Wednesday, I’m now wondering if we’re moving beyond just ingame advertising, into a broader field. The entry, and the comments that follow, started focusing on what Raph referred to as “the online gamer as an addressable audience in its own right". We know this audience has long existed, but the point now is that large companies, as in a whole bunch of non gaming specialists, also see this audience. I am no expert on research, but it seems to me that the online gamer is not so much a demographic as they are a psychographic group capable of sampling. We think a certain way, act a certain way, travel in certain places and do so differently across many sub-groups. There are many people who do not like being categorized, who meet such thinking with revulsion. But the truth is that there are commonalities between everyone, or we wouldn’t have societies and all the trappings. It’s up to companies to understand who their target audience is, and to deliver stuff that audience wants or can be made to want. To me, these moves by Microsoft and Viacom are the surest signs that online gaming has matured as a business arena. These companies are not buying Massive nor XFire because they want to get into ingame advertising or forum sig-line banner advertising. They’re doing so to add these channels of advertising to their already considerable base of options. They’ve recognized the installed base of individuals already interested in these types of things, or willing to accept them, as a specific target for messaging. As providers, Microsoft and Viacom (and Time Warner’s GameTap) can offer advertisement services traditional advertising companies don’t have. And they wouldn’t have bothered getting into this arena if they didn’t think there were growth opportunities for it. To me, this is the surest sign that online game has “arrived". Any new thing always has the cutting-edge thinkers and their cadre of followers. Massive online games have been like for this for awhile now, with industry idols followed by groupies through a long series of titles released more because they could be done at all than whether they were the right things to do from the standpoint of generic business rationale. Now we’re in the business rationale period. Games just cost so much money they can’t really be released without significant backing. Since there’s very few self-made autonomous zillionaires out there, everyone has to get money from somewhere else. Being a competitive field, it’s not like leading companies developing AAA titles can leech off of the monetary success other leading companies have had. There’s no way Mythic is going to ask Blizzard for a loan. So each company is forced to look outside the industry, even beyond ancillary industries, into the vast unknown of entities that exist mostly for money, regardless of where it comes. Or, into the arena of non-gaming specialists. Success is a double-edged sword. When an idea becomes successful, the creators want to maintain their hold on it. But the more successful it becomes, the more likely it’ll draw the attention of others, people who want to draw from that success for their own separate purposes. Inevitably, the latter group, the non-specialist momentarily-interested profit seekers become the larger group, either in terms of raw size, or in terms of financial weight. Ultimately, they drive the decision making. It’s not about the experience anymore, but about driving higher margins on it, capitalizing on previous innovation, monetizing the creativity in new ways. Creativity itself, unfortunately, is expensive. It’s not just the money though. It’s the fact that there’s really no way to measure it. In largish companies, what isn’t measured is constantly argued. In smallish companies, they have to be able to continually justify their funding. This is one of the main reasons the vast majority of conversations in the entertainment industry is not about what someone is thinking. It’s about what they are doing. Oh sure, people will argue that when a game is on paper, in Alpha or in Beta, developers are constantly airing their thoughts to their fanbase, gaining feedback in a collaborative lovefest of hive mind creativity. But that’s nowhere near the full story. Players, fans, anyone who pays to play an end product is an end user. The developers, and the publishers, are on the front line, building this stuff while managing other inputs as well. Gamers can mock Focus Groups, other forms of qualitative and quantitative research, press coverage from mass media and all that. But these are the tools of the non-specialist. They represent methods by which a vast array of people can talk a common language. They are critical in many fields, including those where the average person doesn’t see their presence. There’s been many discussions in the last few years about how Gaming has no common language. My concern with such thinking is that with the creation of a common language, “reviews" become the purview of people who created that language. Formalized critique can benefit mediums of expression because it allows for more focused thinking. Unfortunately, one downside associated with focused thinking is that the dialect of Thinkers doesn’t always translate to the vernacular of Doing. This is why there’s such an expression as “Ivory Tower". When Thinking does not take into account the realities of Doing, the result is the loss of any common evolution. A good example is Movie Reviews. There’s a growing trend that the arguably “b-rate" movies (ie, movies that target a teen-audience with formulaic spagetti-esque toilet-humour comedy) are not even sending their screeners to the professional movie reviewers anymore. The reviews are a foregone conclusion. Pull out a Mad Libs book and insert all sorts of high mucky muck commentary about a movie not designed for the middle aged movie reviewer two generations off from the demographic. Some could point to this as an example of the movie reviewing “industry" being out of touch with certain aspects of the public. Nobody is a beautiful snowflake. Success requires execution. Even people who get onto the pure speech/pontification circuit had to start somewhere. Yet, with the rise of Thinking can come the rise of such people or groups who think they’re “above" it all, above the “masses", above the very people who are their constituency. Heck, I see this thinking just from gamers, some who think there’s a natural progression from learning a game to discussing a game to discussing games in general to becoming jaded about them and discussing their hate. But that just moves this group beyond relevance as a demographic and psychographic. They are not the target. They do not fit profiles of the mass audience. They are not worth designing games for because they’re not happy, not big enough, whatever. In the end, their role as an important member of a paying subscription base is minimized. When companies buy up other companies to increase their channels of advertising, they’re not doing so to talk to small groups of veterans. They’re doing so because they either see a huge mass market already, or see the trends that result in that mass market. It’s normal advertising across a lot of spectrums with enough connections between them to form a specific target. So in the end, I see these moves as meaning online gaming has matured. There are more people who haven’t played UO, EQ1 and AC1 than are currently playing WoW and GW. There are so many new people to this genre the very definition of “massive" has changed. “Online gaming" is a vague umbrella for everything from Flight of the Hamsters to Second Life, from the contrived single player lightly competitive game to worlds that require players build them, on cellphones, PSPs, consoles and PCs. The next step in evolution is for sub-groups within “online games" to redefine themselves, yet again. Will MMORPGs be a sub-group unto itself? I don’t know. For years I’ve wondered how people could say ATITD is in the same genre as Air Warrior. How is that possible? They’re completely different experiences, both mentally and physically. But I do know that commonalities do exist. Maybe it’s obvious. Maybe it’s just that there’s online communities at all, vast arenas for massive conversations about the very breadth of titles available for play. Maybe it’s everything from Vault to Guild boards, from instant messaging to text messaging. Maybe that’s the appeal of something like XFire to Viacom, where a tool that can work across so many games has been used by so many types of gamers. This is not my specialty. I do not understand market forces nor sociology beyond the immediate. But I think it’s important to understand this trend, particularly for those who aren’t being talked to anymore._________________Darniaq Verbosity unleashed […]

  18. […] I’ve been arguing for considering the market as lifestyle for a while now, but as I mentioned back then, many players are reluctant to see their lives so clearly laid bare upon an examination table. […]

  19. […] This week’s (and last’s) links Oops. Forgot to do this last week. Here’s stuff I flagged as interesting for a variety of reasons over the past two weeks:TechEBlog » Top 10 Strangest Lego CreationsThe title says it all. Some crazy lego creations … (tags: Lego Art) GameDaily BIZ: Report: China’s Video Game Market to Reach $2.1 Billion in 2010″Casual predicted to account for 40% of online revenue”. See, there’s a reason I switched to this part of the business! … (tags: CasualGames China OnlineGaming MarketResearch)BitTorrent, YouTube, and Google Video (kottke.org)A good case example of disruptive technology and biz models at work. Like the author, I too have noticed a lot less mention of BitTorrent in my online circles lately. A testament to the fact that in the fast moving online world, you should have no illusio … (tags: Google YouTube BitTorrent BizModels DisruptiveTechnologies)Raph’s Website » Massive, XFire, what’s next?Another Raphtastic set of insights into the online gaming world. This time, a perspective on Big Media’s recent online gaming acquisition spree, and what it implies in terms of the medium’s maturity … (tags: OnlineGaming Web20 VentureCapital Business GameBiz MMO Games GameDevelopment)Publishing 2.0 » What If Media 2.0 Is Less Profitable Than Media 1.0?The title says it all. An interesting essay from a somewhat ‘sky is falling’ POV. I thought Gaping Void’s take on it was the best: “Wrong Question. Right Answer: Who cares?” … (tags: Marketing MySpace Web20 Publishing Media Advertising)David Seah : The Printable CEOA good tool to help you be efficient – whether you are a CEO or not … (tags: Business Efficiency TimeManagement)The Networked Book » [email protected] » Blog ArchiveInteresting model for ePublishing a book. “serialized feeed” is a neat concept … (tags: BusinessModels Publishing Books RSS)Signum sine tinnitu–by Guy Kawasaki: The 120 Day Wonder: How to Evangelize a BlogGuy gives us the shitake about blog evangelism and what he’s learned about blogging and evangelizing your blog in his 120 days doing so … (tags: Blogging business Marketing VentureCapital)Lip-Sticking: 5 Questions You Should Ask YourselfLIp-Sticking the “smart marketing to women online” blog talks about things you should consider if your website caters to the ladies. Applicable to those in casual-games-portal land… … (tags: Marketing CasualGames Women Portals)Vinography: a wine blog: Celebrating The Design of The Wine LabelA dated post (references a museum exhibition that has passed), it talks about the design of wine labels, having to sell customers and make your bottle stand out with limited real estate in a crowded market. Interesting comment thread afterward. I think th … (tags: CasualGames Merchadising Marketing Wine Retail GameBiz)Fire Someone Today: Carnival of MarketingAs usual, a host of links to interesting marketing reads … (tags: CarnivalOfMarketing)An Inconvenient Truth – Google VideoPerhaps overdramatic, but considering the subject, perhaps not. A frightening trailer for an upcoming movie about global warming. Al Gore is the central figure and man, do I wish he’d been elected. … (tags: Environment AlGore GlobalWarming Movies)Up With Grups – The Ascendant Breed of Grown-Ups Who Are Redefining Adulthood — New York MagazineVia Souris (self-professed fit for the article’s subject), an article talking about ‘grups’ a.k.a. yupsters … (tags: HusterOfCulture yupster culture business trends)Raph’s Website » Wonderland: On public service gamingRaph posts a good follow-up to Alice’s piece on ‘public service games’. His point on the fight for visibility with increasingly choice-innundated consumers is a good one. … (tags: gamebiz games Culture publishing funding)Serious Games SourceDavid Rejeski kicks of a meme about government as potential funding source for games ‘in the public good … (tags: GameBiz Games game-development Culture)Wonderland: On public service gamingAlice posts some thoughts that are, well, thought provoking, on the ‘public service games’ meme. … (tags: games gamebiz game-development funding publishing) […]

  20. […] I had more to say on the subject, but to be honest, Raph beat me to almost exactly what I was going to say. […]

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