emerging trends in gaming ccs 2011
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Tim ChangPartner
Norwest Venture Partnerswww.nvp.com
[email protected]+1-650-321-8000
Casual Connect 2011:Emerging Trends
@timechange
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Gaming-related Investments
5/5/2012 NVP Confidential 3
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Recapping 2010-1H2011 Highlights/Lowlights
Highlights:
- First Big Exits in Social Gaming: Playdom($763M), ngmoco($403M)
- First Big Midcore Exit: Riot Games ($400M)
- Yes, Casual Studios Can Have Massive Outcomes Too! (Popcap)
- Payments/V-goods Infra Exits: Playspan, Zong, Jambool
- Rise of Midcore: Kabam, Kixeye raising massive rounds
- Mobile Social Gaming funding frenzy: TinyCo, Rovio, PocketGems
- Copycat Social 1.0 Memes
- MoSoLo & ARG
- Android Launches IAP (finally!)
- International Platforms Open Up Addl Distro & Monetization:
5/5/2012 NVP Confidential 4
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Recapping 2010-1H2011 Highlights/Lowlights
Lowlights:
- Social Gaming 1.0 consolidation: game over?
- Facebook Standardizing FB Credit Tax
- Facebook Overrunning Overseas Incumbent Networks? (Orkut)
- Distribution Bottlenecks: Less Virality = More $$ Needed
- Sudden Death of CPI Model for Mobile Distro on iOS: Tapjoy
- Android IAP aint working that great yet
- Frothy Valuations vs. Pending Consolidation
- Cloud Gaming: still not ready yet- HTML5: still not ready yet
- War for Talent: Analytics, Backend, Designers, Mobile Developers
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Global Snapshot
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Global Trends Overview:
The Social Gaming Warfront and Landgrab has Expanded Beyond the US
Players Battling for Distribution Power, New Revenue Streams, Talent
Acquisition
Mobile is the New Hope for Social Gaming
New Publishing Models Emerging Across Regions
Facebook Global Growth vs. Incumbent Networks
New Genres Emerging Beyond Copycat x-Ville Games
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Global Snapshot: Whats Everyone Fighting Over?
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New Revenue Streams:- US Facebook market dominated by Zynga easier to launch elsewhere?
- US iOS market is extremely noisyhard to cut above the noise
Distribution Power:- If Content is King, then Distribution Power is God Almighty
- 3 Original Pillars of Facebook Social Gaming: Virality, Cross-Promotion, Facebook Advertising
- With Virality gone, Zynga has won the US online Facebook social 1.0 wars GAME OVER (Round 1)- Distribution Power = cross-promotion ability across a loyal network of DAUs: X-Box Live Layer +
Game Cross-Promotion
- Social networks in other regions are opening up their app platforms less crowded territories to
exploit and build distribution power?
- Mobile has never had virality opportunity to create a Zynga and X-box Live style network?
Talent Acquisition:- Getting more expensive to build Social Games, as they scale into micro MMOs and Games as a
Service
- Too expensive to engage in hiring (acquisition) wars with Zynga, etc. in the US
- Need to hire/acquire/partner with overseas studios and teams to lower costs and grow capacity
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Global Battleground Snapshot:
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Japan: (New Revenue Streams)- Small market (DAUs), high ARPU- Players used to freemium + MTX model, and paying via mobile)
- 80% mobile (Flash-supported on legacy phones = no app builds needed)
- 3 different networks: DeNA, GREE, Mixi opening app platforms and expanding into
US, China, etc
China: (Talent Acquisition; Distribution and Revenues Still Challenging)
- Large market (DAUs), low ARPU
- Familiarity with freemium + MTX via MMO games + virtual goods on QQ
- Primarily online play; smartphone apps still on the come
- 1 dominant network (Tencent QQ), 3 challengers (Kaixin001, RenRen, 51) not fully
open platforms yet, poor revenue splits- Lower cost labor pool
- MMO companies and Tencent entering US for IP and talent acquisition, as well as
international publishing
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Global Battleground Snapshot:
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Korea:
- Traditionally a hardcore/midcore gaming market: MMO RPGs, client downloads- NHN, Nexon aggressively expanding overseas
- Best-suited for midcore if free to play MMO companies go browser-based and leverage social
networks for publishing
Brazil:
- VERY social player base: Orkut is dominant network, with Facebook growing quickly- Payment methods remain challenging, but on the rise with healthy ARPU
- Native players like Mentez and Vostu looking to dominate distribution before Zynga and others
can enter via Facebook
Russia:- Kontakti is incumbent social network leader
- Importer Publishers like i-Jet often critical for market entry
- Tricky region to operate in
India:- Still nascent big potential for mobile social gaming as grey market Android smartphones gain
adoption
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Emerging Trends 2011-2012
Whats Next?
- Social Gaming Distribution 2.0: Life in the Post-Viral Era
- More Midcore: Online + Mobile
- Proof of Real Gamification?
- Healthy Gaming / Quantified Self
- Next-gen Platforms: Cloud Gaming, 3D-in-Browser, HTML5
- New Genres: Music, Physical/Gesture, Youth Edutainment
(Club Penguin 2.0 on Tablet)
- Evolution of Business Models + Mechanics
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Life in the Post-Viral Era
The original social gaming tri-pod of distro is dead:
FB Credits: more convenient peanut butter w/ 30% tax!
Shift towards building own destination sites w/ own
XboxLive-style layerUse FB as new retail storeshelf?
FB Ads FB Installs; non-FB Ads non-FB Players, but nolink between FB Ads and non-FB Players yet
No link between FB online notifications & mobile app installs!
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Virality
Cross-promotion
Facebook
Ads
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That Darned G-word
Gamification Hype & Backlash:
Cant just bolt-on or retrofit Gamification as an afterthought
Not just about slapping on badges or leaderboards
Toolkit for Loyalty & CRM 2.0, behavioral analytics?
Agency / Consulting Project-Based Model vs. Saas Platform?
Renewal and Upsellbased on ROI will be the Ultimate Test
Weve seen this movie before: white-label social networking,
branded Facebook app & fanpagebuildseven Omniture
7 Deadly Sins Motivation Design Framework
3 Phases of Gamification:
1) New User Onboarding (Levels 0-5)
2) User Engagement (Levels 5-50)
3) User Retention & Power User Cultivation (Levels 50 100)
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Healthy Gaming example: Lumosity
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Music Edutainment example: Rock Prodigy
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Social 1.0 -> Midcore: Gaming Archaeology
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Untapped Models & Mechanics?
Freemium + MTX + Subscription: Lumosity, Youth, Edutaiment More Innovation on the Earn It Side of Buy It or Earn It: CPE, CPI, Viral Work
MoSoLo: Foursquare w/ Real-Life Missions? (To-dos, Fitness, Nutrition,
Education, etc.)
Offline Actions + Online Rewards (and Vice Versa): Earning Virtual Currency
through Retail Transactions? Check-in + Loyalty & Leveling
Winsters multiplayer synchronous collaborative gameplay
Turn-based phase-matched PvP (Steambirds; oldschool games like Starfleet
Battles) ex: Magic-style card games; RockScissorPaper Combo Sequences
Whale-hunting & cultivating
End-game / Epic Win in Social Games (vs. attrition / burn-out / saturation)
Reputation & Referral-based social mechanics: Linked-in meets Social Gaming
for Guilds, Alliances, etc?
Social Q&A (Quora, Formspring, Friend.ly, OpinionAided)
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Recommendations for Entrepreneurs
Zynga IPO + PopCap M&A = continued frothiness for the next 6-12 months
but these valuations are unsustainable
and distribution is consolidating
and marketing is getting tougher and more expensive
and players (+investors?) are hitting saturation and fatigue points
So either:
A) Raise a ginormous warchest at a crazy valuation, sit on it, and then buy up your
competitors on the cheap once the market crashes
B) Sell out in the short term while the market is hot! (Zynga, Publisher1.0, Media, Intl)
C) If youre just starting out, put together the best possible talent and build to flip as a
talent acquisitionD) yes, its possible to raise a high-priced Series A or Bbut you better not run out of
gas before hitting major traction or milestones!
AND ALWAYS THINK ABOUT HOW YOURE BUILDING YOUR OWN
DISTRIBUTION MUSCLE ALONG THE WAY!
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Tim Chang
http://www.nvp.com
Twitter.com/timechange
mailto:[email protected]:[email protected]