Ralph Barbagallo's Self Indulgent Blog

Let’s Keep Dying

Remember when Bill Gates was the enemy? Ahhh the 1990s–It’s almost like they never happened. Yet, Microsoft still carries with it the Evil Empire reputation it gained from 20 some odd years of suspect business practices and ultimately being declared a monopoly by the FTC…sort of.

Since software broke free from boxes in the Web 2.0 era, Microsoft’s power has waned and Bill Gates put himself out to pasture as a philanthropist. I suspect Bill Gates discovered what we all do–he’s going to die. Perhaps even more depressing, he’s not going to be able to spend all his money before he kicks the bucket. So, Bill Gates has admirably chosen to spend the rest of his life giving away his vast wealth to charitable causes of personal interest: malaria, polio, that sort of thing.

This is in direct contrast to the new generation of rich tech elite. Recently I read this article about Peter Thiel–billionaire venture capitalist and one of the earliest investors in Facebook. Many of his new investments are in biotech–in particular, investing in companies that are trying to cure death.

Bill Gates’ sense of his own mortality is so old school. The Silicon Valley investor class has also realized they can’t live long enough to enjoy all of their wealth. However, instead of spending their fortune on bed nets they are trying to become immortal. The cokeheads will live forever. Time enough at last.

In the same interview, Peter Thiel criticizes modern investors for building trivial technologies that don’t move humanity forward. He waxes nostalgic about the 1960s Space Program and contrasts it with today’s meaningless web 2.0 developments (many of which he is personally responsible for).

I think Peter Thiel is trying to eliminate one of the greatest innovators of all time: death. Just imagine if you could become immortal, but it was really expensive. We’d still be living under the yoke of 16th century kings who want to burn you at the stake for believing in heliocentric orbits.

Plus, your unpredictable expiration date is great motivation for getting stuff done. Steve Jobs’ premature death was a wake-up call to a lot of people putting off things they want to do until some nebulous future date.

It’s not all bad. I’m sure the advancements biotech companies create while slaving away to discover the fountain of youth for their overlords will trickle down into medicine for the rest of us. After all, we’re just now starting to see the benefits of a few decades of stem cell research.

Still, I can’t help but think the human lifespan is in a sweet spot for innovation. Live too short and you’ll never accomplish enough to evolve (fruit flies)–live too long and you’ll put off accomplishing anything for generations (whales–a bunch of slackers). Let’s keep dying, it’s good for the human race.

VCs, Welcome to the Game Industry

After my post about how Zynga seemed to have hit peak soccer mom, news broke that their profit took a nosedive by %95 this quarter. Some may say this is the bubble bursting on social, but it’s probably not. It’s just the maturing of the social game industry.

Zynga’s active users are down by about 3 million. Growth is flat, this is true. However, Zynga has attributed their falling revenues to the lack of major releases generating new revenue. I’m likely to believe it.

This is a familiar pattern to anyone who follows the dinopubs–companies such as Take 2 have wildly gyrating stock prices due to the release patterns of tent pole games like Grand Theft Auto. With AAA console titles taking 3-5 years to develop, you can go many costly quarters without any decent revenue coming in. This is especially scary when you are spending $50 million to develop a title and $100 million to market it.

Remember the early days of social games? Think back to 2008 when Jetman was hot. It was a crude Flash action title that was probably whipped together in a weekend. SGN bought it as one of the first acquisitions in the space. Contrast that with Adventure World–a lush, rich adventure in…uh…clicking on lots of stuff to generate spam. Ok, not my cup of tea–but the amount of work put into this generation of social games is deceptively large.

Zynga has been spending a lot of money acquiring companies and massive amounts of staff. I’m sure their 2,000 or so employees aren’t sitting around filling out Netflix trial subscriptions for free FarmVille Bucks. There’s a lot of development going on. Social games are taking longer to make and fickle audiences are saturated with compelling content. Naturally, if you don’t have anything new out there your usage and revenue will drop off.

The thing is, this hit-driven pattern was part of what made games totally off-limits to investors until the social revolution. No longer can you throw a heap of money at a bunch of pizza-eating Stanford CS grads in a SOMA loft to crank out code and buy millions of users until you supernova into an acquisition by the greater fool. VCs wanted to invest in so-called ‘game factories’ but now you actually have to produce quality games and work hard for your users. Scary stuff.

I’m not quite sure the crop of VCs that heavily invested in social gaming are ready for slow growth and a revenue chart that looks more like a string of al dente spaghetti than a hockey stick. Will social gaming become as unattractive to VCs as the traditional dinopub industry is? Zynga better not delay their IPO much longer–or time it to coincide with the release of a major title.

The New Era of Virality

A few weeks back I saw this post covering a lecture about the current trends in gaming by Tim Chang during GamesBeat 2011. Now, if you read a lot of VC blogs, please stop. VCs are very good about telling you what the trends are last year. You’re likely to crash your car doing too much rear-view mirror driving. In this case, during a bunch of stating the obvious, he claims we are in the “post-viral era.”

This may not be the case.

In social gaming 1.0, it was all about spam. Social game developers prided themselves on their secret knowledge of the so-called “viral expansion loop.” This black art really was no secret. Just spam Facebook newsfeeds with obnoxious ‘stories’ about lost cows and Mafia Wars riches. Whether you were selling herbal Viagra or virtual crops, the technique was the same–Shoot out millions of messages and hope that a fraction of a fraction of a percent follow through.

In the late 2000s, it seemed like the there was a fine line between social game companies and Nigerian 419 scams. Newsfeed spam from social games got so bad that Facebook shut down all the viral channels by early 2010. Except, of course, for Zynga–with whom they have a sweetheart deal. Anyway, when the spam APIs were squelched, Facebook app virality died. This was the end of Social Gaming 1.0.

In 2011, virality still lives. Turning your players into evangelists that go out and get others to play the game as a core mechanic is a tricky thing to achieve but it can be done. The best example of this is the wildly popular (among hipsters, at least) turntable.fm.

A pivot borne out of the social shopping startup, Stickybits, turntable.fm is a music sharing game where you earn points by performing as a virtual DJ. Create a playlist of tracks from turntable.fm’s immense library, or upload your own. Then, play these songs for head-nodding virtual spectators.

Is this legal? Who cares. They’ve amassed a decent chunk of users in a few short months. turntable.fm will figure that out later when the Cease-and-Desists start showing up.

The only way to earn points as a DJ is to have a lot of virtual club-goers watch your performance. Racking up tons of points requires driving lots of users to join your room and watch you spin. The more spectators you have, the more points you earn. If you read interviews with the game’s most fanatical players, you’ll see that turntable.fm has created a group of hardcore whales who put more effort into bringing in new players than your average user acquisition manager at a social gaming company.

For fanatical DJs that desire fame, glory, and enough credits to buy cool avatar gear, the drive to bring in new turntable.fm players is strong. Compared to many other social games, there is little friction to this process as players don’t have to actually play anything. Once invited, users merely have to log-in and consume free music.

The big mystery is how this game plans on monetizing its audience–but I’ve seen few social games with viral mechanics this persuasive. It’s unclear if a game you actually have to play to participate in can emulate the same model, however turntable.fm is an example all game developers should be looking closely at.