games 2.0 web 2.0 expo april 25, 2008 jeremy liew md, lightspeed venture partners ...

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Games 2.0 Web 2.0 Expo April 25, 2008 Jeremy Liew MD, Lightspeed Venture Partners www.lightspeedvp.com lsvp.wordpress.com [email protected]

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Games 2.0Web 2.0 ExpoApril 25, 2008

Jeremy LiewMD, Lightspeed Venture Partnerswww.lightspeedvp.comlsvp.wordpress.comjeremy@lightspeedvp.com

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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Birth of Web 2.0 has been driven by making costs variable

Web 1.0 Web 2.0

Development Build everything from scratch

Open Source

Outsourcing

Marketing Superbowl ads CPC and CPA

Distribution Multi year, multi million dollar portal deals

Social network platforms

Viral growth

Content Teams of writers and editors

User Generated Content

Monetization Internal sales teams Ad networks

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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The games industry is starting to feel the same dynamics

Games “1.0” Games “2.0”

Development Massive development projections

Fat clients

In browser gaming

Flash and other rich media improving

Marketing Offline advertising driving players to retail

CPC and CPA online advertising driving online play

Distribution Controlled by retail and big game portals

Social network platforms

Viral growth

Content Teams of level designers

Multi player is user generated content for games

Monetization Selling games in jewel cases

Digital download

Free to play supported by subscription and digital goods

Advertising

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

4

Development: “Low fi” games gathering more users

30

<1

<1

<1

<8

Sources: Lazard Capital Markets, Adonomics, Press Releases, LSVP Estimates

3

7

8

1

10Halo 3

Power Challenge

Zynga’s Texas Hold’em

Friends for Sale

SGN’s Jetman

Development Costs ($M) Players (M)

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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Marketing: Online distribution allows CPC and CPA advertising

$30M in marketing - Primarily offline10M copies sold - 90+% through retail

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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Distribution: Viral growth and social networks allow games to grow virally

* Not to scale

TYPICAL AAA GAME

New user growth (illustrative)

Marketing campaign supports big launch, with sales declining thereafter

SOCIAL GAMES

Friend invitations drive increasing growth curve as user base grows

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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Content: Multiplayer is user gen content for games

Source: Ian Bogost, Lightspeed analysis

Single-player games-Need new levels to keep player interest-AI for NPCs to maintain challenge

-vs.

Multiplayer Games-Each game is different, keeping player interest-Other players have real intelligence, not AI

Asynchronous Play- Large pool of other players- Easier to play against friends- Players playing in sequence, not in tandem.- Requires persistent state which all players affect, and which in turn affects all players.- Breaks between players are the organizing principle

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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Monetization: Online games market growing as revenue sources become more variable

Sale of downloads

Advertising

Digital goods Self expression In-game power Extra levels/content Attention Convenience

$3.8B

$5.2B

$6.9B

$8.8B

$10.6B$11.7B

2006 2007 2008 2009 2010 2011

ONLINE GAME REVENUES

Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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If Web 2.0 is the social web, then Games 2.0 is social gaming

Jeremy Liew: MD,

Lightspeed Venture Partners

Mark Pincus:CEO, Zynga Game

Network

Shervin Pishevar:CEO, Social

Games Network

Johan Christenson:CEO, Power Challenge

Siqi Chen:CEO, Serious

Business (Friends for Sale)

MODERATOR

PANELISTS