Useful stuff on Facebook

My big prediction for 2010. This will be the year that really useful applications are launched on Facebook or using Facebook connect.

Some of them may still contain fluffy animals, cows, pets etc. However, the fluff will be supplemented with ecommerce or collaborative tools that serve a purpose other than wasting time.

Right now I'm only aware of 1 company who have such an application on Facebook - Bonvoy. I predict that there will be a new wave of similar ecommerce applications that blend ecommerce with the social graph. Perhaps even games that sell the real thing as well as the virtual good.

Radical thinking indeed. I'm looking forward to seeing what the latest generation of would be entrepreneurs are cooking up.

What Happens to all those Clicks in Mafia Wars and Farmville?

On Friday, Michael Arrington (Techcrunch founder) asked a deliberately provocative question to a monetization panel at GDC. The panel consisted of representatives from 4 of the largest social game developers - Zynga, Playfish, Playdom, Crowdstar. The question was 'why do Facebook games suck?'

The question was somewhat tongue in cheek. Zynga's games (Mafia Wars, Poker, Farmville) alone have around 50 million daily actives on Facebook and growing. Not bad for shallow games with little if any animation.

I don't think Zynga really cares that their games are not considered groundbreaking within the video game industry. For me Zynga is not a game development company. If we are looking for a parallel I think Zynga is closer to Google than EA.

Zynga is renowned for copying successful mass market game formats, e.g. Poker and Mafia Wars. For Zynga the important thing is reach. The games it develops need to have broad based appeal. They minimize the cost of collecting data by adapting proven game formats from other industries or other games companies. The goal is a large audience and hence more data rather than prizes at gaming awards.

Zynga collects vast amounts of behavioural data about its gaming customers. It then analyses this data to optimise game play, virality, sales of virtual goods and increasingly to drive targeted advertising. This becomes a positive feedback loop that drives usage and increases the data available to analyse. Google works in a very similar way with search data.

My prediction is that we will see more advertising related products coming out of Zynga in the near future. Perhaps a social media equivalent of Google Adwords and Adsense. The growth of Facebook connects will allow Zynga to leverage its vast database to provide targeted advertising across the Internet, not just on Facebook.

Cantor Bets on the Movies

Cantor Fitzgerald has announced a futures trading product linked to Hollywood box-office revenues. Cantor already owns a successful play for fun prediction market site based on box-office revenues - HSX.

This is a new legal form of mass market online gambling for the US. What is interesting is that the futures market is regulated by the Commodity Futures Trading Commission. This is the regulator responsible for futures markets in oil, metals and grains. Will the CFTC go one step further and begin regulating futures on sports markets?

St John Destroys The Church of Facebook

Day 2 at GDC 10 was dominated by the exuberant Alex St John. The recently recruited President and CTO of social networking site Hi5. St John was stirring things up to promote the launch of Hi5's developer program.

 


In a carefully choreographed presentation, St John managed to verbally destroy Zynga and Facebook. With a supporting cast of executives from large game publishers, the presentation was clearly aimed at positioning Hi5 as the savior of mass market online gaming. Dismissing popular social games from Zynga for their shallow game dynamics and spam like use of viral channels, St John described Facebook as the church next to Hi5s nightclub. Hi5 will almost certainly be marketed as an edgier alternative to Facebook. The presentation was pure entertainment, unless you were representing Facebook or Zynga.

St John was masterful at switching on a dime from castigating Facebook to befriending game developers in the audience with his encyclopedic knowledge of gaming that stretches back to the origins of the industry. The audience were extremely receptive to his wooing.

St John was a pioneer in the gaming industry and his last website WildTangent is apparently the largest private gaming site in the world with 30 million monthly uniques. Quite impressive considering that until today I had not heard of St John, WildTangent and had very little knowledge of Hi5.

A couple of important platform features were announced. St John wants the ability for users to have private personas, e.g. avatars. This approach is fundamentally different to Facebook's open, public profile. According to St John Facebook's approach is driven by their need to feed advertisers with it's customers profile data. St John is determined to monetize from gaming and not ads. This approach to privacy is much better suited to supporting gambling related applications than Facebook.

Whether or not you believe the hype you can't argue with St John's experience and that of the seasoned executive team he has assembled. I'm sure we will be hearing a lot about Hi5 in the near future.

Play Video Games, Earn Cash

I came across an interesting site yesterday call bringit. The site offers gamers the opportunity to bet against each over the outcome of video games. The supported games cover all the major sporting titles like Fifa 10 and PGA tour. Head to head or tournament structures are also supported.

You could ask the question, what does bringit bring to the table? Is it not possible for friends to wager offline on the same outcome? True, but increasingly our friends are distributed around the globe. Also, the increasingly networked nature of these video games means that players are competing in tournaments with people they don't know. The connection comes from their shared interest rather than actually knowing each other at a personal level. Consequently, there is a need for a trusted middle man to handle the cash.

Social Game Learnings Part 1

Day 1 of the Game Developers Conference is over and what did I learn? The social gaming world is in excellent health. The sessions were oversubscribed and at times it was difficult to move around the conference due to the number of participants.

My key takeaways from the first day:

1. The big are getting bigger and the industry is consolidating. New entrants are still entering the market but it seems like the barriers to entry are rising, e.g. cost of building an audience, cost of developing and maintaining games.  In the medium term, the top tier will continue to dominate - Zynga, Playdom and Playfish.

2. Next generation social games will take graphics and game play to another level. Social games are moving up in terms of quality and consequently investment required to build them. The novelty value of a Mafia or Farm games will wear thin and game publishers will need new ways to wow people. 

3. Virtual goods is the monetization strategy of choice. Although in-game advertising, or product placement, is also showing good results for publishers and advertisers. The imperative to monetize games quickly has spawned a whole new sub-industry of virtual currency providers and monetization platforms.   

4. Gambling has a role to play in the social games space. Both in terms of engaging customers in the game and potentially in terms of monetizing the games. Zynga Texas Holdem is still the best of example of this on Facebook. Others are Roulette Madness, Blackjack Madness and Poker Madness.

5. Operating as a publisher in the social games industry requires special capabilities. 3 month development cycles for new games. 3-5 release per week to update content, add new features, promotions etc. Localisation of content and promotions. Constant demand for more levels, more advanced features and novel game play from high activity players. Near real-time data analysis and content optimisation.  

Then there are the statistics:

• Facebook is dominant (400 million registered users), except in Russia, China, India and Brazil. 
• Virtual goods is a large and growing industry ($8bn in Asia, $1bn in US). 
• Zynga is a big, fast growing company (800-900 employees, $200M revenue)
• Without Facebook notifications, the split between paid acquisitions and organic growth will be 80/20
• 97% of people are willing to engage with a brand in a game if they get something for it, e.g. levelling up. 

Defining social media

Last week, I was asked for my definition of social media. The context was a team meeting where we all shared our definitions.

The first takeaway was that everybody has a different definition of social media. There were some common themes but the scope of the collective definitions was extreme.

I found it very useful for us to understand each others perspective and to debate the various themes that arose during the conversation. We rarely make time to have these high level discussions on trends and definitions.

Below, I've attempted to distill our discussion into a more compact set of definitions for social media. The common themes were people, technology and revenue.
Definition of social media:

• People using technology to interact with each other and with your brand
• Enabling new ways for people to communicate and form relationships on a global scale
• Applications, services and tools to communicate, create and share content
• Community oriented activities – content creation, games, education, fun
  

This led me to an equation that defines social media. The premise is that social media is predominantly about people interacting. The technology facilitates the interaction but too much technology is bad for the overall monetization of social media.

The social media equation:

People * Interactions
----------------------- = Revenue
Technology