Tuesday, September 30, 2008

The currency of online social networks, and the new evolutionary paradigm

You should definitely read this post from Daniel James, on Penny Arcade news. He is the CEO of Three Rings, the company that brought us the highly popular Puzzle Pirates online puzzle game.

Daniel touches a good number of points regarding what I personally call "the new evolutionary paradigm of the internet." Here is a small taste if you are not yet convinced that you should read it:

"The cheddary 'Free to Play' is not just a cheesy marketing slogan, but a shift in assumptions; it costs approaching nothing to give away some bits, or let people play Puzzle Pirates for free. Every player, free or paid, adds value to the community and excitement for other players. Free players are the content, context and society that encourages a small fraction of the audience to willingly pay more than enough to subsidize the rest."
It is a proof of concept for a business model that uses a currency most unimaginable for the traditional business mind: love.

I may be getting ahead of myself here, but this has reminded me of my favourite scene from the movie The Waking Life. In the below scene Dr. Eamonn F. Healy discusses his prediction of a radical shift in human evolution in a very near future, a point of singularity if you will. The traditional evolutionary paradigm that is based on war, predation, and survival will be replaced, he claims, by a new paradigm that is based on neo-human values of freedom, justice, loyalty, and -I would add to the list- love.

Daniel James' post made me wonder if the success of his game could be a manifestation or a sign of this impending revolution. Another obvious example is Google and the value of transparency.

Unlikely, you say? Here is another question then: what has been the mankind's most constant demand throughout history, if not a better world?

I have to admit that I may be predisposed to optimism in this. Still, it makes me all warm and fuzzy inside to think the interwebs might be channeling the collective will of mankind to tell the evolution itself, the most powerful force of nature, what really matters.

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Monday, September 29, 2008

Game developers define success

The question I asked on LinkedIn was:

What is your primary measure of success for a title you have worked on? Is it the number of sales, the reviews, direct fan feedback or something else that matters to you?
Among those that answered were devs from Rockstar Games, Sony Computer Entertainment, EA, Gas Powered Games and more. What did they say?

"...sales figures. It's always nice to see good reviews, and it's great when you get a lot of positive feedback from fans, but if the sales figures are really bad, it's going to have serious consequences for the company you work for." (Eric Gooch, Insomniac Games)
After a couple answers like this, I thought this was all I was gonna get. But then there came more balanced answers like this:

"As an artist, this success comes from the satisfaction of seeing your work excel, and being acknowledged by the masses, and your colleagues. Success is not only measured in terms of numbers, but in terms of personal goals being met, and hopefully surpassed. The industry has shifted in the past 5 years to a pure monetary gain standpoint. Somewhere in that attitude the main point is lost, great games. Artists and designers alike, tend to not be equated in the overall completion factor of high profile AAA titles. If more development studios acknowledged their key and striving talent, the sales would increase and the turnover rate would decrease. It takes people to make great work and drive sales, sales don't necessarily dictate success." (Tom De La Garza, Rockstar Games)

And these:

"Now certainly, sales, earnings & client/fan approval are always a part of any design goal, and you absolutely strive for financial success every time, but I've found that if the dollar is the driving force, the game ultimately suffers. As a designer, I always prefer to stay focused on the game & game play, and let others worry about the best way to sell it."(Brian Colin, Game Refuge)

"A mix of sales figures, brand identity, reviews, and first hand accolades are all contributing factors to what I deem successful accomplishments for a studio title." (Robert Baxter, Blue Castle Games)
My question was inspired by an interview with Michael de Plater (on GamesIndustry.biz) saying that first party titles had a better chance of success compared to third party titles. It made me question the definition of success. The first question that appeared on my mind was: "If a poorly designed, poorly built game still manages to sell well, exactly whose success would that be? Dev team or the marketing team?" That is why I felt a developer's understanding of success would have to differ somewhat from a publisher's understanding of success.

Looking at the answers, I am glad people are still aware of the distinction.

P.S. Interested in joining the discussion? Visit the Game Developers group on LinkedIn.com

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Wednesday, September 24, 2008

Video games and business - Part III

Back in the 1950s Peter Drucker had pegged it down very nicely: "... any business enterprise has only two basic functions: marketing and innovation. All else is detail." This was the subject of a debate in my class, more than half raising the objection that devil was in the details. I, too, thought one could not reduce a whole business to a single functional unit. But now as I write more about the video games industry, I get a whole new appreciation for that quote.

Drucker did not mean the details were unimportant. What is of the utmost importance, though, is not to let the details run your business. Once the details get in charge, rest assured you are on a spiral of decay and eventual demise, waiting to be dealt the death blow by a competitor who knows what business is all about.

For those of you who are allergic to the word 'marketing' (thanks to Grover and Kermit), let me rephrase the original quote: "Any business enterprise has only two basic functions: creation and delivery of value, and innovation." I like this version better because it shows well that whatever the games industry is currently doing is anything but that. Predictability wins over creativity, and under-delivery has become the norm of the industry.

Even though I am trying to have a different business approach to games in this blog, I've had quite a few people tell me that any business talk is a turn-off to them. Recently I have begun thinking that this might be the root of the problem.

Could it be that in our avoidance of business-related issues (because we are all burnt-out and distrustful), we have been delegating our responsibility over to people who could not have cared less about all the things the industry should stand for? It is very simple: when one refuses to drive, somebody else will get behind the wheel. After that point you will have very little say in where you are going.

Hence the reason I have been going on and on about how internet has changed everything, and how it has reduced the barriers to innovation. But it is not just the internet, of course.

The mentality needs to change too: from passive observation to passionate entrepreneurship.

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Monday, September 22, 2008

A brief intermission

This post was meant to be a comment on a blog written by a friend of mine. Then it became too long to be a comment so I decided to put it up here instead. It is about the paradox of choice: the theory saying that having too much freedom in our lives may be leading to unhappiness and depression.

My friend's article is more about what this means from a marketing point of view, and I left my comments there on that angle. This one here is a more personal comment on the idea.

I think the problem of choice is a good one to have, perhaps even a necessary transition phase in human evolution. If the first amphibian creature back in time got scared by the paralysis of choice and went straight back to the ocean for the safety of the old, we wouldn't exist now. What we need as individuals is not giving up our options. We merely need to redefine our sense of purpose, we need to redefine what really matters in our lives. Without that, there will always be a disconnect between our expectations and the benefits we receive from our choices.

About two years ago my mentor asked me the question, "What is your goal?" It is not an easy question to answer, and certainly not one we readily know. Finding a job? Living in a nice house? Leading a good life? How do you define 'good?' Will you have attained your life's ultimate goal with a house, a car, a job, or anything material at all? It took me quite a few tries to find the answer, and I was very surprised at the time that it did not immediately occur to me. But once I found it, the first decision I made after that brought me here to where I live today, without an ounce of regret despite all the things that were at stake and all the things I left behind.

I know Mr. Schwartz is not necessarily calling for a throwback to some oppressive regime, but I am sure there will be many people reaching the conclusion that less freedom brings more happiness. If any policy makers are reading my blog, know this please: I never asked you to make me happy. That is my job. My responsibility. Your job is to make sure I am educated and informed enough to perform well at that job.

It is informational asymmetry that causes the problem, not freedom of choice.

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Internet as a socialist revolution (Part II of Internet, socialism and marketing)

Is there anyone who has not heard of the article "Is Google making us stupid?" by Nicholas Carr? I read a review of the article by Jill Dahlstrom recently and it partly inspired me to write this series you are reading now. The one part that drew my attention was the claimed economic model of the internet:
"Carr explains how the economic model of the Internet is based on the volume of clicks and page views. ..... New media ads are strategically placed in and around articles, and some are animated so that they draw the eye away from the primary page content. The more we click, the more money Google and other search marketers make."
After reading this I thought, "Is this really all that there is to Internet? Is this what has become of one of the greatest inventions of mankind, just another ad-yard?" Or is it leading us in an entirely new direction that we are just beginning to realize?

As for what direction that might be, Stefan Kolle from Futurelab describes it pretty well in his "ideal" (although he does not necessarily attribute it to internet):
"...a world without the need for advertising. A world where products and services are based on true customer insights and executed in perfection. A world where both customers and employees are so satisfied, motivated, enabled and empowered to spread the gospel that brands don’t have to be an annoyance anymore."

Admittedly, the first time I read it I could not help reacting with skepticism. We have been living with brands and ads for so long that it is really hard to imagine a world without them. Hard but not impossible. Especially when you realize that it is beginning to happen; slowly maybe but it is happening.

The power of pull
If you are sick of me referring to the Mount&Blade example again and again, check out Ideastorm.com from Dell computers. It is a site created specifically for direct communication with the customer. Customers can post ideas and feedback on the site about the products, and other users can promote or demote those ideas. The higher the popularity of the idea, the higher the priority it gets on Dell's list of things to do. Does it sound familiar? It is that dialogue again, between designer and customer, the ultimate disintermediation. It is an early version of a utopia where customers get exactly what they want, and manufacturers know what they should produce.

Now back to Part I: Why push yourself, or your product, or your service on people who don't need them when you can easily find those that do? When they can find you and tell you exactly what they want?

We have nothing to lose but our ads
At the core of the socialist philosophy is the idea that it should be the working class who seizes and owns the means to production. The critical flaw in that ideology (which eventually led to its tragedies) was that nobody questioned how meaningful the production was: i.e. producing widgets endlessly when people were starving.

The Internet has potential to empower the individual (both as a producer and a consumer) in a way that the socialism of old could never imagine to do. It is the means to production, to distribution, to research and development, but the best of all, it is the means to validation (which has always happened to be the strongest argument for free markets of capitalism against state controlled markets of socialism: traffic signals of a healthy economy).

In that regard, what we see might just be the paving of the way to an economic ideology never seen before. Internet is the revolution.

(To be continued in Part III: "But how does this all apply to games?" A brilliant climax - TK Times. Don't miss it!)

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Saturday, September 20, 2008

Internet, socialism and marketing (video games too) - Part I

We dislike marketing and marketeers. We may laugh or be impressed with this ad and that, but deep down we do not trust them. Even the marketing professionals, who seem to be passionate about their jobs, are quite cynical when it comes to being on the receiving end. Even as we push our products and services to the masses with marketing (because we all want to get rich), as responsible people we teach our nearest and dearest to be distrustful.

Click on the above picture, and you will see Grover and Kermit (Sesame Street) putting a perfect portrayal of what marketing supposedly stands for in our society: selling things to people who don't need them. If you have read my previous post, you will remember the senior milkman's keen observation to be a good testimony on this fact.

Before you sigh and nod your head in agreement from the vantage point of your moral high ground, take a moment to think if you might be responsible for doing the very same thing. How many of you tried to make yourselves look like the perfect candidate for a job you knew you were ill-suited for, just because you were desperate to get the bills paid? How many of you feigned (or denied) interest in this musician or that ideology just to get in someone's pants? How many of you dressed (packaged) yourselves differently than you normally would, in order to leave a good impression on people (customers) that could have lasting influence (profits) on your lives?

This is why our understanding and practice of marketing is warped. For most people, marketing and advertising are interchangeable terms. We push things at people. This is far from an ideal practice of marketing, which should have been finding the right product/customer for the right customer/product.

Rotten old days

Back in the old days, we could not possibly have been blamed for this. For what choice did we have, if we were not blessed with the good fortunes of being in the same geographical proximity as our perfect customers? If you did not have the perfect product, you made it look like the perfect product as much as possible, for finding instead the perfect customer for your product would be a costly adventure. We considered very little, if at all fathomed, the possibility of pull marketing; simply because as individuals and customers ourselves, we had very little means of pulling.

But things have changed.

(To be continued in: "Internet as a socialist revolution." Coming soon to a blog near you!)

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Thursday, September 18, 2008

From sad to happy

The level of quality in your product or service is a direct contributor to sales and profits. This goes without saying. But when it actually needs saying, you know something is definitely wrong with your industry. This is from Michael de Plater, creative director on Ubisoft's forthcoming strategy title EndWar, quoted by Phil Elliott:

"...so there is a relationship between the quality of the games you make and the sales," he said, although he did concede that other factors, such as marketing, were also likely to ultimately influence the sales figures.

In order to convey the ridiculousness that this state of affairs corresponds to, allow me to reconstruct this statement as if it were spoken by some other expert from some other industry:

"Milk bottles that are actually filled with milk tend to sell better in the milk market, compared to those filled with water," the senior milkman said, although he did concede that they were regularly able to sell large quantities of water to consumers, under the guise of milk, thanks to marketing.

You developed what?
Earlier today I was looking at the R&D expenditures of EA and Ubisoft, wondering just how much of that was actually value-added for the gamer. Someone tell me if I am wrong, but I am assuming a large portion of their R&D goes for graphics/physics engines. This is the conclusion one reaches after seeing no major innovation in gaming experience when the total R&D spending of these two companies reach almost $1.5 billion together.

While some people might count the sheer graphical prowess of these game engines as major innovations, the question that stands out in my mind is this: have they run out of all other less costly venues of value innovation?

Some people know the fact to be far from that. In my previous post I gave the Taleworlds example, but there is more. Introversion Software in the UK claim to be the last of the bedroom programmers. I will dare say they are, instead, one of the first of a new generation in gaming.

PC gaming is dead
PC gaming as we knew is dying. Console gaming owes much of its success to the fact that many PC gamers were simply burnt out by the crazy hardware race that made you upgrade - if not buy an entirely new computer - almost every year in order to get the most out of the titles you purchased. When you pay $60 dollars for a console title, on the other hand, you know it will work seamlessly on your machine. You know this will be the case for any title for the entire life span of the console which can be up to four or five years depending on your time of purchase. With the PC, there are no guarantees for tomorrow.

Although many companies are on the transition to the console market these days, their mentalities are still locked on to that arms race. It is as if they have been running for so long that running is all they know now.

Long live PC gaming
The exodus leaves a lot of room, however, for independent developers who are sweeping the remaining venues of innovation left unexplored by the biggies - and they have left a lot in their crazy run.

The immensely positive response shown to games like Mount&Blade, Uplink, Darwinia and others, proves the demand for originality in games. This is a demand that does not need billions of dollars to meet. All it needs is creativity. The internet has helped with the big hurdle of distribution for the indies. For the gamers it might just be the cause of preference over consoles where the only content digitally delivered to your drive is the one that pays the royalty fees. Devs and publishers who can realize their new options and advantages may have a good chance of enjoying a second golden age in PC gaming.

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Wednesday, September 17, 2008

What social media marketing can do for you

As I was perusing the LinkedIn discussions this morning, I came across a post referring to this blog article by Peter Kim. The small article (articlette?) discusses how the principles of game design may apply in creating engaging social media networks.

Bryan Elliott on LinkedIn was reversing the argument and asking the question what game marketing can learn from other brands in this field. As it happens, I have another suggestion: let's look at what big game marketing can learn from the indies.

Mount & Blade is a video game for the PC, developed by Taleworlds (an independent developer). The original design team consisted of Armağan Yavuz and Ipek Yavuz, husband and wife, with a shoestring dev budget and no advertising. The route they took was to cultivate an active player community and rely on word of mouth advertising. They managed to achieve sales of over 40,000 units and dozens on player created mods for the game before the game came out of beta testing. Recently it has been picked up by the publisher Paradox Interactive.

I think this example leads back to the distinction in the original blog post from Peter Kim. It is questionable how good social media networks are at advertising, particularly in gaming. After all, most of the participants are fans who had already bought your content and I am not sure how much brand loyalty counts for unless you are going for a franchise like Sims. Even considering Mount & Blade, although it is pretty impressive to get that many sales with one's first ever game, I doubt it could generate results impressive enough for blockbuster titles with sales figures measured in million units.

It is, however, an undeniably strong marketing tool.

If you check out the forums on Taleworlds website (and I encourage you to do that) what you would see is not just masses of fans telling how much they love the game. What you see there is a dialogue, where the users are providing constant input into the design process, where the developer actively participates in the discussion (as opposed to PR mediation), and where the new ideas and additions to the game get immediate feedback.

Add to that the brilliant sales model where users can pay for the modest beta price and get all the future updates (including the final version) for free, and you end up with a fanatical following that tells you exactly what they want to see in the game, and exactly what other people like themselves will pay for.

End result = future sales forecast of half a million units under the Paradox banner. For scale, take a look at the top selling PC games. Imagine the dollars went into production, support, and advertising for, let's say, Neverwinter Nights. Now compare that to Mount and Blade, and contemplate the words Return On Investment.

If this is not marketing in its fullest, finest, shiniest glory, I don't know what is.

Just like Peter Kim says, social media marketing is great as long as you remember why you are doing it. Creating buzz for your brand is the least you can do with it, compared to how much you can learn from it.

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Tuesday, September 16, 2008

To boldly go noone knows where

As I said previously, my goal in this blog is to combine a business perspective with a passion for games. Truth is, though, a year ago from now I only had the latter and not so much of the former. This is why an article by William Vitka, dated 2005, was still news to me when I first read it this year. The title read “In-Game Advertising” and was discussing the trends in this new and exciting marketing frontier. Sitting in class and reading this article three years after its publishing, I thought I must have missed a lot in the meantime.

The perpetually new frontier

Or have I?

Here is a quote from an article by Phil Elliott (Advertiser’s Context, 2008):

In-game advertising is set to be one of the hottest subjects of 2008 and while most people seem to agree that there's a lot of potential new money to be made for videogames publishers, quite how that will be realised is still debated.”

This debate stems from another important question; what is the most effective way of employing in-game advertising? Much of the research undertaken in this field in the last three years comes from the agencies themselves, and therefore gives cause to skepticism about the true potential of the medium.

Another reason, Elliott proposes, is that the video games industry is moving at an intimidating speed for advertisers, changing at much higher rates than traditional channels such as TV and radio. Even though this makes sense when you compare games to television, the explanation is somewhat less convincing when you hold comparison to a more similar medium. The internet is not so slow moving at all, yet it is already thoroughly infested by all kinds of advertisers.

What is the difference then?

There are opposing forces at play here. On one side companies are trying to avoid the first mover disadvantage by watching the others first and learning from their mistakes before launching their own in-game campaigns. On the other side, there is the pressure of the possibility that your competitor might just get it right before you do. When Nike reaches out to the masses of 18-34 year olds through in-game advertising, how long can Adidas afford to leave them completely unchallenged and unchecked? Or think Coke and Pepsi. Not so surprisingly, the answer is ‘not very long.’ An article on Gamasutra.com ( back in 2006) proves the point perfectly. Traditional brand rivalries are strong propulsion for in-game advertising.

There is no huge difference between general internet advertising and in-game advertising in this regard. The latter is simply at the beginning of its life cycle and is on a very healthy growth rate to maturity in the future. Innovators and early adopters of the medium will eventually provide the critical mass of good and bad examples necessary to make the leap to wide adoption.

The one big difference lies in the structures of the two media. The internet has a great multitude of channels to reach the consumer with advertisements. The conditions are close to perfect competition and the dynamism allows for quick experimentation. This is not so much the case in the video games industry dominated by two big publishers such as EA and Activision, where the number of PC and console titles at one time is limited. Add to that the long (and sometimes unpredictable) development cycles of blockbusters, as well as the complexity of advertiser-agency-publisher-developer relations in developing of advertisement capabilities. Looking from that perspective, advertising in big PC and console titles may be more similar to ads in movies.

In-game advertising is not limited to the cutting edge of hi-tech gaming, however. Research from eMarketer shows ad spending in web based games has a growth rate of nearly 40%, compared to 30% in PC and consoles, between the years 2007 and 2008. This is more in line with the “Do It Wrong Quickly” philosophy of internet marketing, for the flexibility the web provides.

The suggested offset to this lack of flexibility in big titles is the use of dynamic ads, placed on billboards or other in-game surfaces, which can be changed in real-time. In theory this sounds pretty sweet. In practice, however, what you can change in real-time is the content of your advertisement. The context (the game in which it appears and the method of interaction) remains largely the same. Compared to web advertising where you have greater control over both content and context, there is still a considerable disadvantage.

Frag or Coke?

The original article from Vitka does not mention the issue of metrics, but a good deal of the debate boils down to that point. Again, Elliott explains the situation:

“…the three big sellers of aggregated in-game ad space don't even have the same measure for what constitutes an 'impression' (the oft-used number on which the advertiser gets billed).”

The problem with in-game billboard ads is that it is almost impossible to identify and formulate the instances where the interaction with the user is meaningful and the message is properly delivered. While the ad may show up on your screen when you are playing a game, your attention could be highly focused on anything (such as the enemies trying to kill you) but the ad at that specific time. A good study on the issue is the report on advertising effectiveness in ‘Battlefield 2142’ (Mindshare, 2007). It seems a big challenge for the sector will be inventing new ways of creating dynamic ad space that allows for meaningful, measurable, in-depth interactions with the brand that is being advertised.

Only it's not always a pleasant walk in the battlefield

This argument then leads to the two big components of in-game advertising: gamers and developers. The sentiment has pretty much been the same in the two articles with three years between them; if the consumer will not be getting anything out of this deal, then nobody will. The acceptance of advertising in games depends largely on winning over the gamer and operating in a way that will not disturb their entertainment experience. This is very critical considering how outspoken the gaming community can be. An aggressive strategy could cost both the publisher and the advertiser dearly.

I would suggest that the best way to explore new techniques and ways of non-intrusive in-game advertising lies in collaboration with developers. In that respect, the exact size of the cut that the devs will get out of this trend probably depends largely on how much of this opportunity they can realize and incorporate into their business models.

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Wednesday, September 3, 2008

Selling? Game? What?

With this first post, I will simply try to explain the purpose of this blog and what one might expect to see within.

My main goal here is bringing together two big interests of mine: computer games and marketing. Oddly enough, I am an expert neither in one nor the other. Why then?

Why computer games?
Because they are fun and exciting. In the way that movies were exciting when cinema emerged. In the way that radio was exciting in the early days of wireless broadcasting. One might go on with this list, adding things like the classical theatre or even the advent of writing.

Simply put, video games are a new and revolutionary medium for artistic expression and storytelling, if not the most advanced one at our disposal. The potential for immersion, expression and interaction is almost limitless. Yet if so, why are we not already seeing content that rivals classical literary works? Why is it not dubbed the 8th Art (the number is negotiable) yet? How come one of the biggest companies in the industry owes its success to publishing the same sports games over and over again every year? How did we lose the values of originality and creativity, and ended up with 'tried and beaten to death formulas' like RTS, FPS, and whathaveyou?

Why marketing?
Because things are not as limitless as they seem. A video game is a commercial product like any other. It needs people to use it, play it. It has to meet a need, and it has to find the right person with the right need. Otherwise? It is meaningless. It does not sell and it does not get played. It gives its developers little reason and provides even less means to achieve consistency in creation of great new works.

Thus the future of the medium is largely determined by what is commercially successful. This is why we have been playing the endless iterations of the same soccer title for the last decade. Because it has found its niche, and its commercial fortunes are, more or less, predictable and safe for the business-mind.

On the other side of the spectrum we see games, developed with amazing talent and production value, which somehow fail to achieve a commercial success. The game 'Planescape: Torment' is probably the best example to this. Sadly, each consecutive failure of originality (aided by each consecutive commercial success of the tried and beaten-to-death) delays the medium from achieving its true potential.

So it is my vision and goal to find the grounds where profitability and quality (with originality and creativity being its primary metrics) do not have to be competing goals. As a MBA candidate and gamer who is trying to get into the industry, my goal in this blog is to explore the dynamics between the content and business sides of the medium. Hopefully my writings will help me (and possibly others) in framing, analyzing and solving this challenge.

In short:
The Selling Game - How to sell games that deserve to be played.
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