Posted tagged ‘casualgames’

Casual Connect Seattle 2009 coverage

July 22, 2009

I couldn’t make Social Games Summit 2009 and I’m totally bummed I missing out on Casual Connect Seattle 2009 too (it has an superb line-up of speakers in the social games track). So once again, I’m left observing the event from afar. Like I did for the Social Games Summit, I’m collecting misc tidbits and blog posting about social games from the event into this blog entry. I will update the entry as more stuff comes thru as the Casual Connect is still going on (until the 23rd of July).

Jessica Tams and the team behind the events do a fantastic job on also sharing the information post the event. All slides and audio recordings will be available free of charge (like they are here for the previous events). Jessica is absolutely right that the value of the Casual Games Association is measured by how much they can do for the industry as a whole and sharing information is key part on expanding the industry.

Misc tidbits from tweets (#casualconnect)

  • @gamersvu_abi Playfish/Zynga/Playdom say social games $1.5B industry in 3 years
  • @mikesego: “love is the most important metric” says @sebdeh from Playfish… best answer of the conference
  • @tadej Zynga: games services rather than products. Number of returning players (not play time) correlates with monetization.
  • @katelollar: There are more than 55 million unique [game] players on Facebook every month
  • @amyjokim: why have >1 currencies in a virtual economy? CONTROL. Too risky to have only 1 currency
  • @noahkagan @ what women want panel, #casualconnectwomen focused on collection, keeping active and socializing. 1 knew exact point count on king.com
  • @amyjokim offer your players LOTS of diff ways to spend money (and diff price pts)
  • @danielleleslie Q: How can game monetization models offer scalable engagement and attract branded dollars? A: Anu from Offerpal: Soon, fb app user will watch movie trailer, listen to music clip, etc. in return for virtual currency.
  • @NPDFrazier: Tom Prata – three pillars of successful games: 1) accessibility 2) sense of newness 3) consumer reaction
  • @bonder Trend 1 Virtual Worlds – YoVille, Pet Society
  • @bonder Trend 2 – Customization & Personalization – Farm Town, Sorority Life
  • @bonder Trend 3 – Collections & Wish Lists – Mafia Wars
  • @bonder Trend 4 – Simulations – Farm Town, Farmville, Barn Buddy, Restaurant City (Realtime sim)
  • @bonder Trend 5 – Narrative – Hammerfall, Bloodlines
  • @bonder Trend 6 – Interesting Missions – Street Racing, Mafia Wars, Mobsters 2, Hero World, Sorority Life (mini games)
  • @bonder Trend 7 – Gift Invites – Green Patch, Farm Town, Farmville, Mafia Wars, YoVille, Sorority Wars etc (it works!)
  • @bonder Trend 8 – Donations – Mouse Hunt
  • @bonder Trend 9 – Virtual Items – Mafia Wars, Street Racing, Vampire Wars, Pet Society – lots of opps to innovate here &gift invites
  • @bonder Trend 10 – Friends – Crazy Planets, Mafia Wars
  • @bonder Trend 11 – Social Games and iPhone – Word Fu (Twitter, email, FB Connect), Drop 7
  • @bonder Trend 12 – Using Social Net Data – Photo Grab
  • @hirson tips for fb game success – pt 1 1. Make it fun 2.make it social 3. Think Service, not product 4. Measure everything
  • @hirson tips for fb games success pt 2 – 5. Design for sharing 6. Build your footprint 7. Tailor monetization mix. 8. No spam.
  • @hirson last tips for fb games. 9 use fb resources (verified game and dev garage) and 10. Be a good citizen.
  • @mikesego Over 9.7 million users played a farm sim game (Farmville, Farm Town, Barn Buddy) yesterday on Facebook
  • @mikesego At Gareth’s talk – More people play games on Facebook than any other site on the web. True.
  • @jewlish Wii Mii’s came from Japanese wooden Kokeshi dolls.
  • @NicoleLazzaro Instead of modeling breeds Nintendogs modeled the most important relationship: btwn the owner and dog.
  • @NicoleLazzaro Nintendo keynote: In 2.5 yrs console and handheld market increased by 30 million players.
  • @jmwhite2: 300 new games released per day on the iPhone – 20% of all apps are games – dean takahashi

From 2009-07-22

  • @albertsupdates: “3 min user experiences are too long, 90 seconds (engagement cycles) is more optimal (on iphone)”
  • @albertsupdates Episodic content the future of iPhone games — are there parallels on Facebook?
  • @Jeff Shervin’s stats: Saturday peak days for installs, 25K to $40K daily installs for top paid games (= $250K/day for a $10 game)
  • @GameAddict Interesting numbers about ipod touch making up 30% – 50% of game sales from the panel sales
  • @katelollar 25% of all iPhone games are updated each month
  • @Jeff Bart shares a couple of updated stats on Tapulous: 15M users after a year, half a billion Tap Tap Revenge games played
  • @Jeff AppStore: 68,000 apps, 1.5 billion downloads, 20% of apps = games. Bart points out that apps’ installed base is typically 40/50% iPod Touch
  • @GameAddict Dave Roberts of Popcap: “13% of the market is paying for 65% of the games sales.” 13% = 14 – 24 y.o. Males
  • @gamesdotcom 13% of the population (14-34 men) drives the retail game business. Casual games are after the other 87%
  • brodiegames Day 2 #casualconnect. Enjoyed Arthur’s (@LastDayOfWork) talk. Takeaway: brand building around innovation can win vs high output/low quality.
  • @GameAddict 300 game submissions for mochi coins since yesterday’s announcement by Mochi Media.
  • @johnhcook: Is advertising dead as a business model for games? “No it just sucks right now,” says RealNetworks’ Dan Prigg
  • @johnhcook MSFT’s Hegenderfer at#casualconnect: No Zune phone coming.
  • albertsupdates FB Game Templates Poke/WallApps > MobGames > FarmeGames — What is the next template? Are template going to keep working?
  • johnhcook Hegenderfer of MSFT’s Windows Mobile on app stores: “Anyone who thinks Apple is going to run this thing is sadly mistaken.”
  • albertsupdates “v1.0 of marketplace launching nxt week”-steve/group manager, windows mobile| does anyone care? or is it a greenfield?
  • @lisaopolion Trends in casual online game – Thibaut from Gametap, “casual could become the #1 game genre within 6 mos”
  • gamesdotcom Metaboli.com is learning what casual game portals always knew. The audience plays a HELL of a lot! Casual most played
  • @albertsupdates: “Apple iTunes/Appstore is the new carrier deck” -still sucks w/o strong alternative (social) distribution
  • Kontagent Mindjolt is #7 app: aggregation of games w/ a social wrapper.Whos next to ship something similar from casual game pubs?
  • albertsupdates Thought: 5 stages of game distribution/evolution: box>downloads>flash>social>social/mobile; Can all survive/prosper?
  • @GameAddict: Greg Ballard , CEO Glu Mobile: “there are too many games in the App store and may follow the Atari disaster.

From 2009-07-23

  • @albertsupdates Focus on 2 Numbers – “Avg. Revenue Per User,” and “Avg. Revenue Per PAYING User
  • @RealTweeter Is wellness gaming the next big casual games trend
  • @dwlt NPD: “33% upgrade from free to paid games on iPhone”
  • @georgebray NPD: Gamers spend avg $7 on iPhone games in last 3 months
  • @Kontagent: IMO: 3 metrics: 1. ARPU, 2. Churn & also 3. (v)CAC: (viral) Customer Acqusition Costs
  • @Kontagent 2 years it took Zynga to get to ~$100M+ from $0; How many years does it take traditional co’s to build a MMO?
  • albertsupdates EngagedConf is now going to be hosted next to toyfair – Why? Because VirtualWorlds+BrandedToys = BigTime; Webkins=#1 toy
  • ElaineChase Casual mmos as loss leaders when used as marketing for a bigger property = tough market place for making them a business
  • albertsupdates “MTV has been the most prolific publisher of casual MMOs of anyone in the industry” – Ralph Koster
  • dwlt Koster – Casual & VWs should learn from AAA industry and avoid becoming too enamored with tech
  • georgebray NPD: 25% of online game players use a console. 59% of gamers use a console, 39% on PC and 35% use game websites
  • GameAddict NPD: The most notable changes are increase in women console gamers and decrease amount willing to pay for microtransactions
  • jmwhite2 NPD session – more people playing online educational games than online shooters. (26 pc vs 23 pc).
  • GameAddict NPD: Card/puzzle/arcade/word games are dominating the casual space with 56% of the market for online gaming.
  • GameAddict NPD: $701 mill in Retail PC, $740 mill in subscriptions, and $425 mill in PC Digitial dl’s in 2008.
  • GameAddict NPD Video games sector is the ony category of entertainment to grow in 08′, 33% of entertainment dollars towards gaming
  • GameAddict NPD: Kids lesiure time. Video Gaming and computer use have increased but only by 1 or 2 percent in 2 years
  • @GameAddict 90% of the revenue comes from virtual goods at QQ
  • GameAddict 6 million users on the casual side of QQ. (me: I totally wish more devs looked at asia for advice and tips. They’re on fire.)
  • @albertsupdates Game industry has always been highly fragmented, any market leader (i.e EA) has less than 20% marketshare
  • albertsupdates Game Publishers Focused on “Launch” and “Pushing Users Over $50 Barrier” vs. Social: Virality opt.&commnity building
  • ElaineChase “When NEuropean business does’t know if they can do something they say “no, we can’t” US defaults to “sure, we can do that”
  • albertsupdates Mobile Games 1.0 = BizDev Competitive Advantage; Mobile 2.0 = Content; Mobile Games 3.0 = Social Distribution IMO
  • chriscummings01 Think about this: Tencent in China has 6M simultaneous players at peak; in Q1’09 did $360M gross rev (90% from virtual goods)
  • ElaineChase Swoopo has a ridiculously brillant & evil buisness model based on the premise that humans as a group act stupidly
  • getgambit The ideal competitive model = users who win want to keep playing, and users who lose want to keep playing (until they win)
  • MargaretWallace Nuff said: (Tim) Chang: VC’s are devil-avoid us at all cost. Make it so they call you and want to invest in you.
  • lisaopolion Tim Chang “Content is king, but distribution will be God”
  • GameAddict Chang: Casual 3.0 will be 3d, streaming gaming, cloud gaming (same game on different devices), virtual currency exchange.
  • GameAddict Chang is using the analogy of dance clubs as game business models. Velvet ropped areas easy to see and people pay to get in
  • chriscummings01 “Pitching a VC today? No faster track to the recycle bin than anchoring your business model to advertising.” – Tim Chang
  • @chriscummings01 “From a VC perspective, survival is the new growth.” – Tim Chang, Norwest

Blog coverage

From 2009-07-22

From 2009-07-23 and later

Casual Connect Europe presentations online

March 13, 2009

casual-connect-no-date

Quick note: the presentations from Casual Connect Europe are now online among all of the great Casual Games Assocation presentations and articles.  My personal favourites from the show include:

I had a great time in Hamburg, and Casual Connect Europe 2010 will definitely be on my calendar.

P.S. I will be speaking at Nordic Game held in Malmö from 19th to 20th of May. I will be reprising my “How to start a game business” presentation with more lessons learned since.

Speaking at Casual Connect Europe 2009

January 27, 2009

casual-connect-no-date

I have a very special relationship with the Casual Connect conferences. Back in early 2006 I was totally within the  core console games “reality bubble” and I thought I should learn something about the emerging casual games market, so I took the plunge and headed to the lovely Amsterdam for the Casual Connect conference.

It totally bursted that “reality bubble”. There was a completely amazing new sub-industry being born, where new game genres were created and new business models explored. Not only did I discover the downloadable casual games segment, but also the totally rule-bending Korean virtual goods driven online games segment.

In particular one session stood out: the “Hype or Real Deal” panel. Four CEOs and founders of diverse companies on the stage holding two large sign cards: Hype and Real Deal. The moderator would ask a question and each one of the panelists had to reveal their opinions simultaneously. It was a great format that stimulated a lot of heated discussion as the panelists had to defend their positions.

erikbethkeTwo questions that the moderator asked struck me: “Will virtual goods ever work in the western world?” and “Will casual games go online and become more like MMOs?”. Just about everybody in the panel called these “Hype” while Erik Bethke, the founder of GoPets, vigorously defended them being the “Real Deal”. Erik lost out then as the whole conference really didn’t think much of these trends. But I did. The opportunities were mind-boggling. I scampered immediately after the panel ended and waylaid Erik as fast as I could for a further chat.

I have to really hand it to Erik for single handedly blowing away my ignorance (BTW, you should read his excellent blog which he updates all too infrequently =)).

As we all know, those trends become the “Real deal” already in year 2008 and they are going a lot stronger this year.

casual-connect-no-date

casual-connect

Speaking about how to start a new game business

It is an honor to be invited to speak at Casual Connect and I’m delighted I can be giving back a little as I received so much at the 2006 event. I will be speaking about how to start a new game business – something that I have gotten a bit of hands on experience during the past 6 months =). The session is on Thursday 12th of February at 11:00.

If you are at the event, I’d love to meet!

Virtual worlds & social games investments defy downturn in October 2008, peak in July 2008

November 18, 2008

Note: this is part 2 of  blog post on VC investments into “Online games and Related Entertainment” segment. See also part 1.

The $1,7 billion top-line figure for “online game-like entertainment” VC investments in years 2007-2008 is a stupendous figure, and more analysis is needed to make sense of it and to see trends within the huge aggregate sum. The analysis on this post focuses almost solely on the Virtual worlds, Casual MMO, social games and casual games sector, as this is the sector in which my company Everyplay operates. My earlier post on this sector was titled “$350 million invested this year“, and with latest data that figure needs to be upped to $481 million.

The doom & gloom of the past month sure to get to any entrepreneur. Luckily, there is one sector that at least can claim to be counter-cyclical (see e.g. Lazard Capital’s and John Doerr’s comments, and NPD reporting 17% year-on-year increase in video game sales in October). There is further proof as this sector attracted ten VC investments in October to the tune of $53 million. Naturally these deals have been set in motion already before the financial crisis, but it’s very encouraging to see these deals close in the face of “R.I.P Good Times“.

Contents

Key findings

July 2008 was the biggest “organic” month so far for venture capital investments into virtual worlds, casual MMOs and casual & social games to date. Altogether 11 deals were announced in July totaling $71 million. The month’s investments were led by Zynga’s $29 million and Gaia’s $11 million funding rounds. July was the biggest “organic” month in terms of deals concluded as well as the total size of deals so far. There have been months dominated by huge deals (e.g. $100 million into 9You and $83 million into Big Fish Games), but those are one-offs and need to be excluded when looking at the bigger picture.

The investments in this sector have averaged around $20 million per month for 2007-2008. The investments into the sector continued strongly in October, which was led by $20 million funding for Oberon and $17 million funding for Playfish. The big question is what happens now. The first half of November has been very quiet on VC funding deals. It is likely that July 2008 will keep its peak month status for at least next 12-18 months, but we’ll eventually see larger months because the sector is young. New entrants will continue to flow in and the best growth companies will need further funding to reach their goals.

In the years 2007-2008 most of the VC money flowed into Virtual Worlds (39 deals, $171 million), followed quite closely by casual games and social games/apps. The average deal size at Series A is around $3-4 million, which matches the common wisdom for Series A.

The VCs investing into this sector read like the VC all star list (Benchmark, Accel, Kleiner Perkins, Draper Fisher Jurvetson, Balderton, Sequoia). Accel Partners is the top dog when considering both the number of deals and the size of deals participated in.

Investment rate

The Virtual worlds, Casual MMO and Casual & Social games sector that I’ve analysed in more detail in this post has been very attractive to VCs. The sector investments total an amazing $625 million in years 2007 and 2008 as shown in the diagram:

investment-rate

The $100 million 9You and $83 million Big Fish Games funding rounds skew the investment rate diagram a lot. By excluding them we get to a more “organic” investment rate, that has been averaging around $20 million per month in years 2007 and 2008 as shown in the diagram below:

investment-rate-excluding-9you-bfg

In this “organic investment rate” diagram there are two major peaks:

  • July 2008: 11 investments totaling $71 million, led by Zynga’s $29 million and Gaia’s $11 million funding rounds
  • October 2008: 10 investments totaling $53 million, led by Oberon’s $20 million and Playfish’ $17 million funding rounds

July 2008 shows the peak of investments with most deals and largest sum of money invested. On the face of the current market turmoil, it is very encouraging to see October 2008 to be a very strong month. One reason for October’s strong performance could be that companies are following the advice to “raise money NOW if you can”. If so, we should see a rapid drop off in investments in the coming months.  Given that November 2008 is starting to look like a dry month, this might be more true than us entrepreneurs would like it to be. Given the economic downturn I expect July 2008 to remain the biggest organic month for the next 12 months.

Most active VCs

The usual suspects populate the TOP10 lists of the most active VCs and the most heavily investing VCs. When you combine these two TOP10 lists, the most prominent VCs in this space read like the who’s who of venture capital (for comparison, see Fortune’s Midas list and Entrepreneur.com’s TOP100 early stage VC list). The diagram below shows the VC with largest fundings participated in (bars) and largest number of deals (line graph). When reading the table, please bear in mind that the investment bar graph shows the total value of deals the VC company participated in, not the actual amount a particular VC company has invested. So if two VC companies participated in a 5 M$ deal, then both companies are credited in this analysis with 5 M$ as there is no data available on how the investments are split between VC companies.

vc-company-activity

I’ve shown in the figure above also deals in the related sectors to showcase the VC company’s participation in the total $1,7 billion invested in years 2007-2008. Please note that investments in the related categories (MMORPG and technology etc) are only shown on the table above if the VC company also has made investments in the Virtual Worlds, Casual MMO, Social games and Casual games sector. Thus e.g. Providence Equity Partners that provided $300 million to Zenimax Media (MMORPG) has been omitted.

Accel Partners leads the pack when considering both the number of deals completed and the total value of deals participated in. Accel has been very active investing into developer-operators (e.g. Playfish and GameForge), but has also investments in related sectors (Mochi Media, a game advetising network and Raptr, a social network for gamers). Benchmark Capital is a close second with a large number of deals and almost as high total deal size. Benchmark has also been investing into developer-operators (e.g. Gaia, WeeWorld, Sulake, Grockit).

The figure below shows a selection of the most active VCs and their portfolio companies.

vc-portfolios

Overall it is clear that the sector has been very attractive to all of the most profilic VC funds in Silicon Valley and London. The companies that are able to attract investment from this all star cast of VCs are definitely on the top of their game.

Note: Balderton Capital is the former European office of Benchmark Capital. Certain deals may be listed under Benchmark, when they might have been done by Balderton (Benchmark Europe).

Distribution of investments by company category

My sector definition encompasses virtual worlds and casual MMOs (persistent, online worlds) as well as social and casual games, which makes the category quite broad. The sub-category that clearly dominates the investments in Virtual Worlds, that has taken the biggest number of deals as well as the largest total sum. Casual games are a close second on deal size thanks to the huge investment (83 M$) into Big Fish Games.

investment-category-dollarsinvestment-category-deals

Note: Please see my category definitions to understand how companies have been grouped and important caveats to the methodology.

Social games have been funded very seriously compared to the costs it takes to develop these games. The key reason I can think for the investments of this magnitude that there is a “landgrab” going on. The development costs of social games are neglible compared to the costs of developing a full-blown virtual world or a casual MMO, so the money is going into growing the businesses thru acquisitions and erecting barriers to entry (e.g. by investing into higher game quality). The competition between Zynga and Social Games Network is looking very much like the widget wars between Slide and RockYou. That duel has recently been turned into a three party free-for-all, as PlayFish has in one years time emerged as a very serious contender. With the most recent funding from Accel Playfish has the checkbook to play ball with Zynga and Social Games Network.

Unlike Zynga and SGN, Playfish hasn’t so far purchased any third party games or developers. It’ll be interesting to see who is going to be their first acquisition target, although with several titles in TOP10 on Facebook, they aren’t probably in a huge hurry to go a buying spree.

Average deal size

The average investment size in Series A is around 3-5 M$, which is exactly as you’d expect it to be. The seed rounds are quite large (averages even close to 1 M$ in certain categories), which is probably due to the fact that only high value fundings get the press spotlight, and thus the dataset doesn’t include many of the smaller deals.

average-investment

Distribution of investments by stage

The Virtual worlds, Casual MMOs and Casual & Social games sector is a young one. The majority of deals (# of deals and value of deals) are made in the Seed and Series A phase.

The list below summaries the deals from years 2007 and 2008 (to October):

  • Seed: 13 deals, worth 12 M$
  • Series A: 42 deals, worth 249 M$
  • Series B: 16 deals, worth 128 M$
  • Series C & later: 4 deals, worth 44 M$
  • Undisclosed stage: 27 deals, worth 193 M4

Here are timeline breakouts of the investments per funding stage.

investment-timeline-stages-dollarsinvestment-timeline-stages-deals

Data spreadsheet

The data on VC investments has been collected from publicly available sources including but not limited to

The data was gathered by Jussi Laakkonen and Adam Martin.The data is most accurate for year 2008. Year 2006 and earlier years have been only covered sporadically and typically only for companies that have received follow-up funding in year 2008. The data is provided AS IS and the authors make no warranties about its accuracy.

Download the full spreadsheet with categorizations:

cc-by-nc The data is licensed under the Creative Commons Attribution, Non-Commercial license.

Summary list of VC investments

A summary list of VC investments in the Virtual worlds, Casual MMO, Social games and Casual games sector is shown below:

Date Company Invested Category
Oct-08 Playfish $17,0 Social games
Oct-08 Metaplace $6,7 Casual MMO
Oct-08 Second Interest $0,5 Virtual world
Oct-08 Kirkland North $0,2 Social games
Oct-08 Booyah $4,5 Other
Oct-08 Ray Flame Entertainment $0,8 Casual MMO
Oct-08 Oberon $20,0 Casual games
Oct-08 Farbflut Entertainment undis Casual MMO
Oct-08 MindFuse $1,0 Casual MMO
Oct-08 Taatu $2,5 Virtual world
Sep-08 Challenge Games $10,0 Casual MMO
Sep-08 Big Fish Games $83,0 Casual games
Sep-08 RobotGalaxy $5,0 Virtual world
Sep-08 Hollywood Interactive $5,0 Virtual world
Sep-08 RobotGalaxy $7,0 Virtual world
Aug-08 Nonoba $1,7 Casual games
Aug-08 LOLapps $4,5 Other
Aug-08 Webcarrz $4,0 Virtual world
Aug-08 Knowledge Adventure $5,0 Virtual world
Aug-08 Dizzywood $1,0 Virtual world
Jul-08 Challenge Games $4,5 Casual MMO
Jul-08 Zynga $29,0 Social games
Jul-08 Virtual Tweens $1,0 Virtual world
Jul-08 Monte Cristo Games $7,0 Casual MMO
Jul-08 Playfish $1,0 Social games
Jul-08 Gaia Interactive $11,0 Virtual world
Jul-08 Six Degrees Games $7,0 Casual MMO
Jul-08 Social Gaming Network $3,0 Social games
Jul-08 Young Internet $4,7 Virtual world
Jul-08 Riot Games $7,0 Casual MMO
Jul-08 Atomic Moguls $1,0 Casual MMO
Jul-08 8D World $1,0 Casual MMO
Jun-08 Erepublik $0,7 Casual MMO
Jun-08 I’m in like with you $1,5 Social games
Jun-08
Lumos Labs $3,0 Other
May-08 Social Gaming Network $15,0 Social games
May-08
Grockit $8,0 Other
May-08
Caspian Learning $2,8 Other
Apr-08 Serious Business Inc $4,0 Social games
Apr-08 Kongregate $3,0 Casual games
Apr-08 Northworks undis Casual games
Apr-08 Club Cooee undis Virtual world
Apr-08 Akoha $2,0 Other
Apr-08 Metaversum several m€ Virtual world
Apr-08
Nurien Software $15,0 Virtual world
Apr-08
Bunchball $4,0 Social games
Apr-08
Play Hard Sports $5,0 Casual MMO
Apr-08
Numedeon $1,0 Virtual world
Apr-08
Eximion Undis Casual games
Mar-08
Hangout Industries $6,0 Virtual world
Mar-08
Playfish $3,0 Social games
Mar-08
9You $100,0 Other
Mar-08
Simmersion Holdings $1,9 Virtual world
Mar-08
Chapatiz $0,5 Virtual world
Mar-08
EveryScape $7,0 Virtual world
Mar-08
Fluid Entertainment $3,2 Virtual world
Mar-08
Gamook $1,5 Casual games
Mar-08
Handipoints $0,8 Virtual world
Mar-08
Alamofire $2,0 Social games
Mar-08 PopJax $4,7 Casual games
Feb-08 Dizzywood $1,0 Virtual world
Feb-08 Sparkplay Media $4,3 Casual MMO
Feb-08 Flowplay $3,7 Casual MMO
Feb-08 Atomic Moguls $1,0 Casual MMO
Feb-08 RocketOn $5,0 Other
Jan-08 C3L3B Digital $3,0 Virtual world
Jan-08 Zynga $10,0 Social games
Jan-08 Rebel Monkey $1,0 Casual MMO
Dec-07 Playfirst $16,5 Casual games
Dec-07 WildTangent $20,0 Casual games
Nov-07 Hidden City Games $15,0 Virtual world
Nov-07 Zweitgeist undis Other
Nov-07 Apaja Online $2,3 Casual games
Oct-07 Numedeon Undis Virtual world
Oct-07 Star in Me Undis Virtual world
Oct-07 GameLayers $0,5 Other
Sep-07 Emote $8,0 Casual games
Sep-07 Watercooler $4,0 Other
Sep-07 RocketOn $0,8 Social games
Aug-07 Spill Group undis Casual games
Aug-07 GameForge undis Casual MMO
Aug-07 Kongregate $5,0 Casual games
Aug-07 D2C $6,0 Casual games
Aug-07 Conduit Labs $5,5 Social games
Aug-07 Doppelganger $11,0 Virtual world
Jul-07
Weblo $3,2 Casual MMO
Jul-07
Grockit $2,7 Other
Jul-07 Geewa $2,0 Casual games
Jul-07 WatAgame $4,0 Virtual world
Jul-07 Three Rings $3,5 Casual MMO
Jun-07 Metaversum several m€ Virtual world
May-07 Frenzoo undis Virtual world
May-07 Multiverse $4,2 Virtual world
May-07 Avaloop Undis Virtual world
May-07 World Golf Tour several m$ Casual MMO
May-07 Two Way Media $10,6 Other
Mar-07 Kongregate $1,0 Casual games
Mar-07 Flowplay $0,5 Casual MMO
Mar-07 Gaia Interactive $12,0 Virtual world
Feb-07 Zweitgeist $0,6 Other
Feb-07 Virtual Air Guitar $0,2 Casual games
Feb-07 Doppelganger $5,0 Virtual world
Dec-06 Metaplace $5,0 Casual MMO
Dec-06 D2C $1,5 Casual games
Nov-06 WatAgame Undis Virtual world
Nov-06 Bunchball $2,0 Social games
Oct-06 Mind Candy $7,4 Virtual world
Aug-06 WildTangent $13,0 Casual games
Jul-06 Sulake $8,0 Virtual world
Jun-06 Stardoll $6,0 Virtual world
Jun-06 WeeWorld $15,5 Virtual world
Feb-06 Stardoll $4,0 Virtual world
Dec-05 Doppelganger $8,5 Virtual world
May-05 WeeWorld $5,5 Virtual world
Apr-05 Doppelganger $2,5 Virtual world
Jan-05 Big Fish Games $8,7 Casual games
Jan-05 Sulake $24,0 Virtual world
? Sulake undis Virtual world
May-04 WildTangent $16,5 Casual games

See the full table with details for this sector.

Category definitions

Much of the analysis done in this blog post is based on assigning companies to the categories. The companies are assigned to categories subjectively and only using publicly available info (i.e. no research has been done into actual user experience to validate the companies’ claims). Category assignment has been done solely by Jussi Laakkonen and doesn’t represent the opinions of Adam Martin. The categorization part is the weakest and most subjective part of my analysis, so you should take it with a ton of salt.

The categorization uses the terms Virtual worlds, Casual MMO, Social games and Casual games as defined loosely below:

Virtual world

  • free form play, not a lot of rules
  • large scale multiplayer, concurrent
  • some sense of world/place (e.g. rooms, gathering areas)
  • avatars
  • persistent world
  • typical example: Habbo Hotel, Second Life

Casual MMO

  • gameplay with defined ruleset
  • shorter sessions, more accessible than full-fledged MMORPG
  • more mainstream topics (e.g. sports, dance) than typical MMORPG
  • large scale multiplayer, concurrent or asynch
  • some sense of world/place (e.g. rooms, gathering areas)
  • avatars
  • persistent world
  • typical example: Maple Story, World Tour Golf

Social game

  • gameplay with defined ruleset
  • asynch multiplayer or small scale concurrent multiplayer
  • utilizes social graph and/or only available on a SocNet
  • limited or no use of avatars
  • typically persistent world
  • typical example: Friend for Sale, Who has the biggest brain

Casual game

  • gameplay with defined ruleset
  • single player or very limited asynch/concurrent multiplayer
  • no use of social graph
  • no use of avatars
  • non-persistent world (with the exception of leaderboards)
  • typical example: Bejeweled, Desktop Tower Defense

What this helpful? Where to dig in?

If you found this data and analysis to be helpful, feel free to shout out in the comments ;-). Also I’d be happy to hear about ideas on further analysis on the data. Any corrections (errors, omissions etc) are more than welcome!

$1,7 billion invested into Online Games and Related Entertainment in years 2007-2008

November 17, 2008

Note: This is Part 1 of a two part post. Part 2 with detailed analysis is also available. Cross-posted also at T=Machine.

Roughly a month ago I published a list of $350 million invested in year 2008 into virtual worlds, casual MMOs, and casual & social games. The blog post got a lot of coverage when it was published and Adam Martin of T=Machine contributed to the discussion and posted his own list which had a lot of European deals. We decided that the right thing to do would be to put those lists together. I also continued to search for further data and uncovered more deals from e.g. Avista Partners’ monthly video game briefing. I wanted to also see what the total “game-like” segment looked like, so I expanded my criteria to include core gaming MMORPGs, relevant technology providers and ecosystem players (e.g. payment processors). When I had all the data in and summed it up, I was totally and utterly amazed at the massive scale of investments.

Investments total $1,7 billion in years 2007-2008

The Online games and Related Entertainment segment has amassed a truly astounding $1,7 billion of VC investments in years 2007-2008. Of this staggering figure $625 million was invested into the “Virtual Worlds, Casual MMO, Social games and Casual games” sector, $712 million was invested into core gaming MMORPG sector and a further $326 million into related companies (e.g. technology and payment providers).

The diagram below shows the distribution of investments over the years 2007-2008 and the three sectors:

total-category

The $712 million invested into MMORPG developers/publishers reflects the high cost to play in this space. The cost of the development of a Triple A core gaming MMORPG starts at $50 million, but can easily skyrocket. The reason these high risk investments continue to be made are the 11 million subscribers of World of Warcraft. WoW’s revenues in year 2007 were $1100 million of which $517 million was pure profit. The lackluster success of recent entrants such as Age of Conan and Warhammer Online underlines how risky taking on WoW is, but despite this the lure of WoW-scale profits will definitely continue to draw entrants.

The biggest deals of venture funding in MMORPG sector were:

The biggest deals of venture funding in the Virtual Worlds, Casual MMO, Social and Casual games sector were:

Detailed analysis of this sector is available in Part 2 of this post.

Finally, the biggest VC fundings in the Other related sector were:

The data

The data on VC investments has been collected from publicly available sources including but not limited to

The data was gathered by Jussi Laakkonen and Adam Martin. The data is most accurate for year 2008. Year 2006 and earlier years have been only covered sporadically and typically only for companies that have received follow-up funding in years 2007-2008. The data is provided AS IS and the authors make no warranties or guarantees about its accuracy.

Download the spreadsheet:

Note: a spreadsheet with categorizations is available in Part 2.

cc-by-nc The data is licensed under the Creative Commons Attribution, Non-Commercial license.

The analysis – tomorrow

A deeper analysis of the VC activity in this segment is available in Part 2 of this blog post. My analysis focuses on the Virtual Worlds, Casual MMO, Social and Casual games sector, as this is the sector in which my company Everyplay operates. Topics covered on Part 2 include:

  • Monthly investment rates (peak months, current activity)
  • Most active VCs uncovered
  • Analysis on investments on company categories, deals stages and deal sizes
  • Updated data spreadsheet with company categorizations (subjectively assigned)

WOW epic mounts vs. Friends for sale

October 12, 2008

The game industry used to be packaged goods industry. We spent anything between six months to several years in product development mode trying to guess what the customers would want to buy, what we could do better than our competitors do, building technology, tools and content. When all was done, the ready game was shipped to the manufacturing plant and out would pour truckloads of shrink wrapped boxes ready to be hoisted on the shelves of GameStop, EBGames or at Amazon’s virtual shelfs.

For all its technological and media breakthrus, the games industry in the 1990s was following a business model borrowed from cereal manufacturers. We even didn’t have the long tail of movies , which have first box office sales, then pay-per-view TV, then premium channels, hotel channels, DVD sales, network TV, soundtracks… Well, you get the picture. All we had was a a couple of months to get the game sold at brick’n’mortar stores, and if we were lucky, the store would restock our title. The luckiest titles could see a release as a Bestseller title a year or two later at a discounted price.

Not terribly exciting is it.

Luckily broadband entered into the picture in late 1990s, and became prevalent in the early 2000s. Games could be delivered electronically as downloads, but a lot more importantly, games could be online services. MMOs like Lineage, Everquest and finally World of Warcraft (11 million users at last count) came to the market and attracted millions. Virtual worlds like Habbo Hotel (108 million registered, 9,5 million monthly users), casual MMOs like Maple Story and social playing sites like Stardoll (20 million registered users) appealed to audiences outside of the traditional gamer market.

But there’s no hiding the trouble.

PC single player market is dying

Max Payne, multi-million seller in early 2000s. Best known as a PC game, but sold vastly more on PS2.

Max Payne, multi-million seller in 2001 & 2003. Best known as a PC game, but already five years ago sold vastly more on consoles, especially on PS2.

As a mainstream market the PC single player market is dying. The main culprits are rampant piracy and the success of video game consoles. The situation is so bad, that releasing a PC version simultaneously to a console version of a game, you are pretty much guaranteed to loose out on a lot of sales. The PC version will be pirated typically before the game is available at retail, and many console gamers will get the pirated PC version and forgo buying the console version. We can argue the reasons, but the proof is indisputable. Game publishers are increasingly postponing the PC versions or cutting them completely, even if the added cost of developing a PC version can be relatively low.

You can still succeed with PC single player titles targeted at niche audiences (e.g. hard core strategy games). Downloadable PC casual games (see e.g. Big Fish Games) are doing quite well and The Sims are also doing quite well. The reason is simple: their demographic is less likely to pirate the game and increasingly these titles use some kind of online persistence to add fun to the game and prevent piracy.

PC online market is thriving

The solution to this PC problem is clearly evident. All PC titles need some type of online persistence and preferably online multiplayer support. It doesn’t have to be a full fledged MMO. You can start with relatively simple things like

  • Leaderboards, cups, challenges
  • Shared content
  • Shared actions (something I do has some effect on your gameplay)

Full-on, persistent world, massively multiplayer environments naturally are most resistant to piracy as well provide highly compelling reasons to play. WoW having 11 million great reasons (=users) going for it.

Core vs. social & casual markets

The core gaming market (PC single player, MMO, console games) is huge market. Its revenues from the vast majority of the $37 billion global games software sales (year 2007). This market is predicted to grow steadily at around 10% compounded average growth rate. The revenues are huge, but the audience size isn’t nearly as impressive when compared to what the social and casual gaming segments have been able to attract is just a few years.

Casual games, to which I include also casual console games like Guitar Hero, Singstar, Wii Sports, Brain Training and the like, sell in overall in the billions of dollars, and are the industry’s primary growth driver. It’s been two years since the launch of Nintendo Wii, and it still selling out. Guitar Hero launched a huge music game segment, that almost single handedly raised Activision as the world’s second largest games publisher (after merging with Vivendi’s game unit, the combined Activision-Blizzard is now neck and neck with Electronic Arts). These titles have expanded the definition of games, made the much more socially acceptable, and attracted millions after millions of new players. They’ve converted diehard opponents of digital games into fun-loving players. I can overstate how amazing this has been.

At the same time social games on social networks like Facebook and MySpace are the second largest category after “just for fun” apps like Funwall and Superpoke. These simple, addictive and often outrageously viral games attract at best over million monthly average users. The monetization has been primarily advertisement based, but new Cost Per Action (CPA) methods (Offerpal, Super rewards) as well as the sales of virtual goods are starting to make a difference. It has been claimed that Mob Wars is the best monetizing game application on Facebook and allegedly makes over $20 000 a day, which would mean well over a one million US dollars in yearly revenues.

I’ve tried to summarize my thinking about the core, casual and social markets in the diagram below as well as make some predictions on where the market is headed.

Please note that the diagram is a generalization and I’ve purposefully omitted all figures. You should take it is an opinion, not as a market research data.

Presentation

I did a 20 minute presentation on this topic recently at the Mindtrek conference. You can find my slides at Slideshare along with an audio track.

I blogged earlier about the excellent panel that followed the three presentations in the “Business of playing together” track.

So, what do you think? Is the PC single player market as doomed as I think it is? Are there going to be big returns on the huge investments VCs are making in the market as we speak?

Bigpoint exits for 70 M€

September 30, 2008

This is old news from June, but it completely has escaped my attention. Bigpoint, which is one of the largest developers and operators of Free To Play games has been sold to private equity funds GMT Communications Partners and the Peacock Equity Fund (part of the General Electric / NBC Universal family) .

The price tag: a sweet 70 million euros. Bigpoint had at the closing of the deal 23 million registered users (price=3 € / user), but that figure has already risen to 35 million users. They have roughly 100-130k daily average users and are active in at least 17 countries. Some of country operations are directly by Bigpoint, while some are partnerships with local operators. The Finnish site is operated under the label Topkani, in co-operation with Finland’s largest commercial TV channel MTV3.

Bigpoint also announced a co-op with NBC Universal to promote their games thru SCI FI and USA Network websites.


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