Category Archives: Games

Who’s Making Money in Mobile

After listening to Paul Jacobs of Qualcomm talk about where they are focusing, which unsurprisingly includes health care  and remote patient monitoring, the panel at the AlwaysOn Stanford Summit on who is making money in the mobile space went off into much more  interesting business models. They convinced me we have only begun to see money made on mobile platforms — ANY mobile platforms.

Moderated by Mark Newhall, co-founder of IdeaWave Solutions and INmobile.org, the panel consisted of Bart Decrem, CEO of Tapulous,, which develops social games for the iPhone;  Simon Khalaf, CEO of Flurry, a mobile analytics firm; Matt Murphy, a KPCB partner in the space; Dorian Porter, CEO of Mozes, a text company; and Purnima Kochikar, a VP at Nokia.  Yes, I knew mobile was coming, and has been coming for a decade, but a lot of my assumptions were outdated.

First of all, as you may have expected, the iPhone changed everything. People now pay for things they wouldn’t pay for before on the web. Music was obviously first, but Bart Decrem said that although he thought a million users in a year was an audacious goal, Tapulous is now in its second year and has 15 million unique installs and about 10 million users. Its revenue has doubled every twelve months. And that’s “just” a gaming application–TapTap Revenge. He thinks he will get to be a $100m company.

He also noted an amazing engagement on the Apple platform, which means people actually keep the apps on the phone and interact with them. That’s important because it makes way for in-application ecommerce and advertising. And every time he releases a new product now, his revenue spikes.

So clearly mobile is a disruptive platform, and application developers are already making money. There are 64,000 apps in the App store now, and $.99 can be a profitable price point. The app store is actually growing at 25x the rate of iTunes, and even the paid apps part is growing at 7X ITunes. A lot of money will be made in software.

Who is not making money right now? Carriers. Formerly in control of the show, they are now buying business, hoping to make it up in volume later, as big brands enable online marketing strategies and they can take a piece of the revenue. That kind of direct marketing through mobile devices is still in its infancy.

After all the talk about iPhones, it was fascinating to hear Purinima talk about Nokia.  She’s got the global view outside of smart phones, and she said Nokia has realized two areas that people will pay for, even in developing countries whose populations do not have smart phones.
1) Complete indulgences – games, efarts, etc.  Ads work here, on premium game content.  Video ads inside gaming content are much better targeted, and pull good CPMs and different CPMs. So different that the Army uses in-game ads for recruiting tools and find them extremely effective. The Army’s entire business process has been altered by its use of mobile gaming applications.
2)Self-improvement – the bottom of the pyramid really wants to pay for this, and they are the long tail. There are entire
populations discovering things on the phone instead of the PC. Their three high priority needs: Get ahead in life, get more money, get a wife.  They will pay for this, usually on a cash subscription model. Smart phones are only 10% of the market globally,  the rest still being feature phones. Feature phones can be enabled to give access to lots of apps through proxy browsing, and that will teach many young people in developing countries to move up to smart phones, which are aspirational to them today.

FCarriers, out of power in the new environment, are now interested in supporting multiple app stores. Similar business interests around mobile ads, mobile marketing, mobile payments will encourage carriers to move fast and participate in direct-to-consumer economy. They can participate by setting up open stores. They can’t control anything. (Decrem: For iPhone, Apple controls the carriers and app developers don’t even have to deal with carriers anymore.)

Final words of advice to would-be successors to Tapulous: develop first for the iPhone, and then for Android. Blackberry’s a distant third that needs to get its act together, and for Palm, it’s too early to tell. It is, however, a land grab right now in the mobile space.photo-6

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Craig Sherman of Gaia Online

Craig Sherman on social networks v. virtual worlds. A social network is a place where you connect with your friends and talk about the real world. World of Warcraft is a total fantasy.  And in between, there are "hangouts," like Gaia. the teen hangout that has 2.7 monthly unique visitors, and 100k simultaneous users. They spend 2 hours a day.

Craig Sherman’s short talk before the virtual worlds panel explains why virtual worlds will succeed. He went well beyond Second Life into the less complicated worlds for kids.

Three reasons they will succeed, according to Sherman:

They empower and connect people in ways that social networks can’t, and they engage people. Why? Because there’s a huge attraction to explore, experiment, and expand your identity. This is a core need for human beings. The core feeling that you get from a virtual space is to feel like you have made it. Avatars are very real to the people who express through them.

You can connect through entertainment. Movies shown on Gaia are watched in the virtual world for nothing, and you can watch with your friends. In Habbo, you can become your own disc jockey and make your own entertainment. Virtual worlds also take advantage of games, like in Club Penguin or Neopets.

In virtual worlds, you can get rich, you can enjoy your social status with other people.

The third core element is the sense of shared ownership. Because users create content, hangouts engender creativity, encourage teamwork and connections. Gaia users created a theatre company, chose a play and performed it. The company created the tools, but inside the space the users created a theatre district and a theatre company.

Core story is that virtual worlds are the end evolution of games, which are too hard to get into and require too much time.

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The Future of the Virtual World

What am I doing sitting in a panel on the future of the virtual world? Have I lost my mind?

But the gaming industry has come to view itself as part of the social media movement; it is looking at applications that have to do with connecting people. And that’s a segment I am truly interested in.

The CEO of Digital Chocolate makes games for the mobile phone in which you get to go to a virtual cafe and play a bunch of games with your friends — like Starbucks for the virtual world. He wants people to look forward to his virtual cafe for the mobile market. The first generation of mobile content was prefabricated, like ringtones, he says, but the 2.0 includes interactive features.

Millions of Us connects companies in the real world to customers in the virtual world. Its CEO used to work for Linden Labs, the creators of Second Life. He thinks Second Life’s community is the virtual equivalent to “Bowling Alone.” The primary urges that drive people to spend time in virtual spaces are those that have to do with community.

Doppelganger is a virtual world on the PC and Mac. Very immersive, rich, city environment. They have taken a lot of the ideas of social interaction and brought them into architecture of the virtual world. Virtual worlds allow segmented communities of people to come closer together. Their twist is on social entertainment: movies, TV, music and fashion. Teenagers get a chance on Doppelganger to live a virtual lifestyle.

And IGA Worldwide provides in-game advertising networks now. Ads are dynamically delivered at the side of the page as if they were billboards at a football game. There are also virtual worlds of advertising in the games.

While the press wrings its hands at the amount of time people are spending alone at the computer, the makers of these virtual worlds believe this time is spent in authentic social interaction — not alone. The users form friendships that go beyond geographical distance to true commonality of interests. Friendships and bonds formed in the virtual world are every bit as emotional as those in the real world.

People who are having a difficult time making their real social life work have these worlds to fall back on to practice their social skills. They actually look for love and find it in the virtual world, and some can extend it to the real world.

Data from the early days of Second Life indicates that the average age of a registrant is higher than you would think (33) and pretty gender-balanced (60%men-40%women). However, when it comes to usage, the balance is reversed; women actually use Second Life more than men.

Because the early users of Second Life were escapists, the bulk of the early growth in real estate was in rural areas, not city environments. Second Life was the place where you could afford to buy your own desert island. But increasingly the population has been tending toward “augmentists” – people who use Second Life as an extension of their first lives. They make their avatars look like themselves. They originate friendships in the virtual world and then start having physical meetups and conventions.

The CEOs of these games know that people in these online environments get bored quickly unless they develop friends. 3D content is very expensive to author, but users burn through it very fast. Users have to generate the content, build the community, in order to find it interesting — even though what they build is not as attractive as a community built for them, like Sony Home.

The CEOs of these gaming companies-cum-social networks of course see their segments as growing huge. The mobile guy sees mobile gaming growing like SMS did. SMS wasn’t even developed as a product for consumers originally, but just as a test to see if the telephone network was there. And the ad network guy sees wonderful new platforms to serve ads. And the Millions of US CEO will connect the advertisers to the virual environments.

Be careful, reality: these guys view real life as virtual and themselves as avatars.

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