Uncategorized

GIC chairs panel on VR games at the Interactive Entertainment Summit

8 December 2016

Rick Gibson from GIC chaired a panel on VR Games at the Osborne Clarke IES in London. The Summit is run on Chatham House rules so we cannot tell you who said what, but a panel of 2 experienced VR games developers and a games angel. The main findings were that the angel did not believe the hype about VR, but sees a real opportunity in Mixed Reality. The developers were generally bullish about the state of the current and future VR games market, positive about exclusives funded by the VR platform and were split on the potential of MR in games.

Gamification, Uncategorized

Learning to love gamification

July 2011

After nearly 3 years working on a large scale gamification project, Rick Gibson shares his thoughts on this widespread trend.

To find an example of how deeply games are influencing our culture, look no further than gamification, which is rapidly spreading into multiple, highly disparate industries. Gamification is being used to persuade us to watch more television, drink more coffee, brush our teeth more frequently, join the army, even educate our kids more effectively. Is there a real market there or is it just hype?

 

Surely the clumsiest and least appropriate of recently minted industry words is gamification, which doesn’t describe the actual practice. Gamification is patently not about turning something non-games related into an entire game – that’s the domain of Serious Games (and, as I’ll argue, its fatal flaw). Gamification cherry-picks discrete elements of games – gameplay mechanisms, community-building principles, marketing methods, analytics – and applies them outside of games.

 

This vibrant new sub-sector of games would not exist without the disciplined genius of designers, who have defined the market to date and loudly debate extrinsic and intrinsic rewards, the evils and impending doom of pointsification (snap), and the proper / improper use of games design. This noisy debate sometimes looks equally about ownership as design principles, perhaps the consequence of gamification slipping from the control of designers (who are essential for gamification to be compelling) and into the hands of the marketers (who are arguably essential for gamification to spread far and wide). The marketers are best characterised by gamification companies like Bunchball and Bigdoor, around a score of whom have sold white label gamification layers to blue chip giants like FMCG and food manufacturers, TV and mobile networks.

 

While the marketers can be accused of short-termism, rinsing and repeating off-the-shelf systems based on points, rewards and leaderboards, they have introduced disciplines essential for the growth and commercial success of gamification. They’ve taken tips from casual games communities, which have evolved highly sophisticated marketing methodology and incubated huge games communities targeting specific demographics. They have learned from social network gaming, utilising social graphs, iterative development and virtual goods. The best embed the analytics that underpin many online games to ensure they deliver stuff audiences actually use.

 

This magpie-like approach is one reason why gamification is not simply the latest incarnation of the serious games industry, which typically builds whole games (engines, art, physics, the whole shooting match) for non-entertainment purposes. Serious games have failed when bolted onto completely inappropriate subject matter. No worse example is the UK Department of Transport’s ill-judged $4m bet on a fully-loaded fantasy MMORPG designed to encourage – pause for comic effect – crossing the road safely. That car crash was predictable.

 

The other crucial difference is that gamification can scale when, arguably, most Serious Games cannot. Serious Games have been about to boom for decades but, excluding brain training, fitness games and some military applications, most have not progressed from academic case studies with a few thousand users to large scale usage. The ‘whole game’ approach with its roots in boxed product development may be to blame. When pitching entire, substantial games on single subjects to non-games clients like governments, serious games companies are effectively asking deeply risk-averse organisations to bet on potentially short-term hits as if they were risk-aware games publishers. With apparently few willing to repeatedly fund such punts, this has resulted in a consistently low-value market. Gamification has reached much larger numbers of players and companies faster and with more tangible results. Tell broadcasters that gamification has increased viewing figures by 40%, e-commerce websites that it has reduced friction in the acquisition funnel by 90% or driven up user registrations on community sites by millions for fairly modest expenditure, and clients have proven more likely to pay up.

 

But beware analysts telling you that gamification is worth $XXXm. These are simply guesses based not on hard data but instead on hyped-up sales projections of the aforementioned marketers. See our recent tweets on the subject but no-one will ever scale this market accurately because it is impossible to track so many different industries trying gamification.

 

Nevertheless, gamification has demonstrated that it can scale, and generate substantial value. As gamification appears on every device (i.e. FourSquare on mobile), the mother load of all gamification projects could finally arrive – education. To date governments have failed to use children’s favourite entertainment mechanism for teaching, but the gamification of an entire school’s syllabus has taken place in New York, funded by the state, with fascinating results. Games designers, who are fundamentally tutors as well as entertainers, could yet play an even more central role in our culture.

 

[Rick Gibson is a director at Games Investor Consulting, which provides strategy and research consulting services for games, media and finance companies, plus commercial check-ups and online game optimisation for studios.]

Games as services, games monetisation, Mobile games, Uncategorized

Hardcore social: Kabam

June 2011

This month, I’m returning to our series of profiles of games companies achieving great commercial success with innovative and rule-breaking business strategies. This time US social network games company Kabam comes under the spotlight, a studio that has grown phenomenally fast by  targeting what many have considered a non-existent and non-viable audience: hard-core Facebook gamers.

A few months back we analysed opportunities in hard-core social network games development, arguing this was a sizeable but under-served market. Kabam recognised this potential as early as 2009, taking a significantly risky but highly prescient gamble to move away from nurturing mass-market sports communities online and into niche browser-based strategy games. A quick peak at their changing user base suggests disaster. Before the 2009 launch of its first strategy title, Kingdoms of Camelot, Kabam (then called Watercooler) had 25 employees and its sports communities peaked at 26 million monthly active users. 15 months later and with the sports communities now largely gone, it has a quarter of the number of monthly users (7.2m MAU). Such a decline would be the kiss of death for many social games companies but Kabam now has 16 times the number of employees (over 400 and still growing).

What makes Kabam special is that this remarkable headcount growth has been underpinned by equally strong revenue growth, with the company remaining profitable throughout this hiring spree. Like most top social network games companies, Kabam wisely took advantage of the VC interest in all things social to raise around $40m in three rounds giving it a war chest to acquire and invest in new teams and games. These funding rounds graphically demonstrate the benefits of its strategic volte-face. Its valuation rose from$20m in October 2009 to reportedly a few hundred million dollars just 13 months later.

So how has Kabam achieved such a meteoric rise? Put simply, it has deliberately gone after an unfashionable audience largely ignored by other social network games companies, creating games specifically for them and nurturing a community around them. Where the average age of social network gamers overall is early-mid 40s and a comfortable majority are female, 70% of Kabam’s user base are male and aged 18-35. This demographic plays more (Kabam’s average session lengths are a multiple of Zynga’s) and, most importantly of all, pays more (Kabam boasts that its monetisation is market leading). Kabam has borrowed the best of multiple worlds: the heavily localised browser-based gameplay appeal of off-Facebook games like Travian; the viral propagation features of Facebook games like FarmVille; the commercial benefits of the aggressive freemium microtransaction business models used by companies such as Aeria Games.

The result is a portfolio of games offering deep, collaborative and competitive gameplay based on common hard-core strategy themes (fantasy, ancient Rome) whose communities are richly cultivated through regular content updates and special events. The games generate revenue through microtransactions which are used to buy largely gameplay-enhancing and frustration-reducing items and services. Premium cosmetic items are comparatively limited and Kabam makes use of lucky dip sinks (e.g. randomised item purchases), an increasingly common, if blatantly commercial, technique used by games companies to inject gambling elements into their game. Unlike most Facebook games developers, Kabam caters extensively to international users and most of its recent new users have come from outside the USA.

Interestingly, despite the success of its formula, Kabam sees its future increasingly lying outside of Facebook: on other social networks, mobile devices, its standalone portal and eventually console. Kabam’s new IP plans therefore now revolve around developing multiple SKUs and the resulting business model (and audience) diversification will clearly present it with a new set of risks.

Kabam’s success to date teaches us multiple lessons although two stand out for me. Firstly, developers should not be afraid to take a dramatic new strategic direction if the new direction has sound commercial footing. Secondly, a contrarian point of view is not necessarily an incorrect point of view; if you think there is an untapped market out there, why not go for it and prove everyone wrong? Kabam certainly did.

 

 

 

Development, Games as services, games monetisation, Uncategorized

Science friction – how friction could be killing your game

December 2010

How many steps does it take for an average customer to choose, buy and consume a retail game? 5? 10? 15? With so many opportunities to be put off or distracted by other games, entertainment or activities, it’s a tough job steering players towards purchase. This month, I’m going to graze the surface of a vast new discipline for self-publishing games companies: managing friction. Friction means anything that gets between your game’s promotion and its purchase and enjoyment by your customers. Over decades, retail marketers have honed their skills at smoothing this inherently high friction path towards the till. Managing friction is a very different science for network businesses, and one which today defines some of the industry’s most successful companies.

Selling games direct to players over networks clearly reduces some kinds of friction but certainly does not eliminate them all. In fact, our sensitivity to friction is amplified online. Whether it’s a download delay, a registration process, a poorly-crafted marketing message or a credit card form, friction can dramatically reduce your sales. Friction = lost customers and thus revenues. Many online gaming companies invest significantly in processes to guide players from initial interest to spending money as smoothly as possible. Optimising that funnel is a highly granular, iterative and data-heavy process aimed at converting players to the next stage of their engagement with a game.

Friction has long been an environmental hazard for online marketers – the venerable click-through rate is just one friction metric. Every budding online marketer soon discovers you need to test which “call to action” works best. Social games companies reduce friction by testing phrasing, landing pages and all graphical aspects of their marketing, homing in from multiple variations to those that work best. Each call to action is optimised for different kinds of target customer and marketing channel. Trial and error will reveal what works for AdWords may fail as copy for an affiliate promotion, for example. Analytics underpin this discipline, allowing practitioners to dice marketing, customers and on-site activity into segments which are then analysed for return on investment. Each of the many channels and campaigns will perform at different levels depending on the target audience and one major driver behind the success of social networks is that they can dramatically reduce the friction of shopping from a catalogue of multiple products by getting players to recruit friends. However, finding staff skilled at the continual process of evaluating the data is challenging.

The friction generated by people’s stunning impatience online requires a range of technical solutions. Amazon reportedly discovered that a 100 microsecond increase in load time decreased sales by 1%. Google is said to have found that a half second delay in loading a page resulted in a 20% fall in traffic. With load speed fundamentally affecting sales of all online products, most online games companies dealing with high traffic volumes have turned to the cloud to decrease response time. Streaming games services are built on technology designed to reduce the friction of low bandwidths and slow game downloads. Flash’s 95%+ (i.e. low friction) installed base is today driving a significant proportion of online gaming whereas games dependent on plug-ins can force 99% of web users to download and install clients over multiple clicks which most will fail to complete. Plug-in and other download-based online games clearly can work but they do so only for the most motivated players, often the hard-core minority who will tolerate the higher friction.

The bad news is that your work is not finished once someone arrives on your site and accesses your game. In fact, your work’s only just started. We’ve seen data from companies that have won or purchased massive traffic only to lose almost all of it before people even start playing. Some are basic errors in design. How many people clicking on a ‘Play Now’ button are actually forced to endure multiple screens and forms before getting to the Fun? Canny operators manage this by delaying the necessary points of highest friction. Although SOE’s Free Realms requires a client download, new players can immediately start creating and customising their characters in browser, initiating but subsequently hiding the download process. Thus the friction of the installation process is delayed until players are incentivised to continue only after they have made something of value to them in the game. Each individual game will have points of high and low friction. Identifying and subsequently fixing them will require solid analytics to monitor most interactions between player and game for the entire customer lifetime, as well as design flexibility to provide solutions.

There are many other types of friction, some of them more deadly but others that are, counter-intuitively, beneficial; but here we can only scratch the surface of the data and knowledge we have accumulated on this huge subject. The bottom line is that minimising friction means increasing revenues for many types of game service, and companies that successfully manage friction are being snapped up. One good example is Playdom, whose expertise in the many ways to reduce friction was a driver behind its acquisition by Disney. Another is ngmoco, whose development methodology using analytics to guide continuous game improvements has resulted in one of the highest valuation multiples of recent years. However, failing to manage friction can kill network games businesses just as easily as failing to get customers in the first place.

Games as services, Uncategorized, video games

Developing a service ethos: Services and microtransactions to transform games industry

November 2007

Ask Nexon, the Korean providers of drive-away hit Kart Rider, about the challenge of online games development; their response is telling: “we’re not games developers, we’re service providers”.

With no monolithic games reliant on retail releases, Nexon appear to have very different business models to most western studios. Their games are free to play, making money from selling items which allow players to look cool, express themselves, play better, win competitive advantage, or meet people. 4m daily players and $9m monthly profit from virtual racing goggles and Santa hats is no mean feat.

As developer, publisher, marketer and distributor of their own games, Nexon interfaces directly with its customers daily. Optimised for broadband, their games break little new ground in design or graphics. Their business model dictates that games production is secondary to managing their customers, creating a platform that allows them to sell more cool stuff to players, who move their avatars between games, customising their identities as they go.

If you’re thinking this is hardly relevant to you, think again. While you may not build a massively multiplayer casual games platform anytime soon, chances are your games are all being dragged online by your friendly console manufacturer partners. Episodic and incremental content is coming – like it or not.

Microsoft announced recently that Xbox Live had sold roughly $25m worth of Points to users on Arcade and Marketplace, including several games that grossed $1m+ from post-launch content alone. In the same breath, Microsoft cautioned that uptake of this kind of content was below expectations. Hence the sales pitch about how splicing discrete bits from your game costs little and delivers a hefty margin from less price-sensitive consumers.

Sony too repeatedly preaches that moving to online services represents a fundamental change in how games are made, delivered, played and supported. It’s not simply a case of breaking games into chunks, or even changing or extending your pipeline to encompass frequent releases. I’d argue that the fundamental change is in how the developer manages and responds to consumers, which has huge impact on developers who are rarely structured to do that.

This challenge is visible in companies testing item sales on Marketplace. Finding the right items for the right price has involved much trial and error. Bethesda faced loud gamer disapproval when it tested pricing for incremental content in Oblivion, but sales are now impressive.

Well before launch, Sony too has come under fire for item sales plans in Gran Turismo 5, in which formerly free cars must be purchased via their online store. It may cost hundreds of dollars to drive them all, although some argue that matching price more accurately to usage is fairer since the most gamers fail to finish their games.

These are studios struggling to evolve from being production companies who fired and forgot their games to being service companies who must respond rapidly to what their customers want. It might help to take a leaf out of the Asian handbook.

The leaf in question isn’t technological or gameplay-related. It’s about how you work with your customer. Nexon’s items sell because it watches and listens carefully to its customers, endeavouring to satisfy their needs. For all but a few with online experience, most developers’ sum experience of live customers is providing patches, technical support, and solving installation problems. Rapid response to consumers is a matter of months not days.

Inevitably studios will be shoved into direct contact with consumers – how else to find out what has sufficient perceived value to sell for £1.50? Answers to these questions are ultimately in your consumer’s hands – in what they, and not your studio’s creative director, perceive the value to be.

So, instead of simply planning how to build Santa hats, you also need to know who will buy them for how much. That means a change in mindset to develop direct and permanently open links to the consumers themselves.