The Era of Convenience and Why The Browser is the Next Big Thing in Games | Trip HAWKINS,

The Era of Convenience and Why The Browser is the Next Big Thing in Games | Trip HAWKINS,

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00:11
so welcome to the United Nations I'd like to represent the to introduce the delegate from Kazakhstan now seriously this is a very strange room but it's a pleasure to be here despite the blizzard conditions as for myself traveling I was stranded in London for 12 hours on Sunday got to know the airport lounge quite well material are you ready to boldly go where no one has gone before I hope you're all sci-fi fans I don't mean to promoting a particular brand here but
00:42
we're entering a period of a tremendous rate of change in the game industry and I'm going to get into that but first just a set the stage I'll tell you a little bit about digital chocolate we make games like millionaire city which came out on facebook it's been on the iPhone and we're now also operating it as an open browser game we're now starting to also do more hardcore browser games and in fact today we're launching our first such game that was developed by a third-party developer it's a game called reborn Empire and
01:13
it's now available at games digital chocolate com which is where we're kind of building up a bit of an open browser game business and we know platforms we're I think the still the only company of the world that has had over a hundred million apple app store downloads and 100 million Facebook game sessions and 100 million open browser game sessions so we've done a lot of volume on a lot of platforms we've actually done a lot of things wrong pretty maids all kinds of mistakes so we kind of know what
01:45
doesn't work in addition to figuring out what does and we know how to make good games we've made over 100 their award-winning games and we have kind of a global presence even though we're headquartered in Silicon Valley actually most of our employees are here in Europe and this is where most of our studio production is so when we look at the industry going forward it's not all decided you know Zynga of course has a very dominant position on Facebook there are other companies dominating other spaces like warcraft but here are five
02:17
categories of games that to a large extent are still brand new wide open and where there's a lot of opportunity for for new companies and of course browser games have been around for a while but even the browser as a platform is just getting warmed up because at the moment it's really only strong in the PC and I fully expect the browser to spread to tablets to continue to make inroads on smartphones and to show up on TVs and beyond just what platforming game is on we have a history in the game industry
02:47
of everyone making native games for one platform and there being one dominant platform that generates most of the revenue in a particular period of time we're now finally getting to a point where this is social media and with every social medium in history they started out as silos this is even true about roads for cars they were all privately owned in the beginning you didn't have the right to just drive anywhere you wanted you had to pay money to get access to different roads and in every case of a social medium whether
03:20
it's the phones in the first place or mobile voice or instant messaging or email or texting picture picture messages mms in every one of those cases they started as silos and of course people didn't use them very much because they didn't know who they could reach and who they could not reach and as soon as they became interoperable in every case that platform got 100 times bigger effect texting humble texting is an
03:51
industry today that's over a hundred billion dollars in global revenue so interoperability has not been important in the game industry but that's just yet another thing that's on the horizon it's going to become important as gamers change their habits about how they want to play so there's a lot of leadership opportunities available what I see happening now is the era of convenience this is what the dictionary would tell you about convenience suited to a person's needs comfort or purpose within
04:21
easy reach handy increasingly consumers are trading to give up performance to get convenience and they do this in just about everything and we've already seen this transformation in every media except games in the old days if you wanted to hear music you had to actually go hear live music and now of course you're more likely to be listening it through an earbud while you're jogging or on an airplane so the quality of the
04:53
music has gone down but the convenience of music is spectacular same thing with Phil you can see a really fabulous high performance 70 millimeter 3d movie in a movie theater but you never go to a movie theater it's too inconvenient because not only do you have to find a three-hour block of time you have to negotiate schedules with wherever you want to go with some people don't do it in fact a theatrical release revenue
05:23
it's been if you adjust for inflation it's been flat for the last 60 years but how about video viewing that's gone through the roof and we're watching all this video in the comfort of our homes on our laptop devices while we're traveling at work how often to just click on a youtube link and watch a video so again there's an example where it's not about the high performance it's about the convenience so this is happening everywhere and it's consistent
05:53
with the concept of disruptive product theory if you don't know this theory it was developed by a Harvard professor named Clayton Christensen he wrote a very famous book it's called the innovators dilemma and he framed the fact that in many industries the last hundred years you have a traditional industry serving a traditional customer base and a upstart new company comes along and they offer a lower performance product that has fewer features it's not as powerful but it offers some new
06:26
things some new feature that creates some new benefit and it attracts a new audience and eventually it tilts that market and and then later on in his research it's not as well known but he continued to research dozens of different industries and he found something else that was always true about disruption which is this trade in which even the traditional customer who was a high-performance customer gives up performance to get convenience so we've now seen it in all
06:57
of these categories and you might wonder well why is it that in games it hasn't fully happened at the same rate that it's happened with other media very simple games are the most complex media type the most complex data type so that's that's why they're coming along last when games require such high performance you have to buy a dedicated device like a console or you need to have a high-performance pc into a big download it's going to be harder to convert that into a really convenient form but it's but it's already going on that's why we have a casual game
07:29
association because the casual games are a really big part of this trend so what so what does this look like the gamers are growing up you know obviously I'm one of the older gamers shall we say and when I was a kid you know you played with your friends in the neighborhood and then when i was in college you played with your friends in the dormitory room and then you get out of school and you're a lot busier you have a job you also start to have boyfriends
08:00
and girlfriends and spouses and then you have children and you're just getting busier and busier and busier so if you're a core gamer how many of you in your heart feel like you are a core gamer okay what's happened to us as core gamers is that you just don't have the luxury to go down to your basement and spend 50 hours in a PlayStation game you don't have the luxury to max out a level 65 character in lotro or Warcraft and
08:30
you don't have time to master all the dexterity hand-eye coordination demands of a action game but you still have a heart to beat the crap out of other gamers you still like to win you still like to feel really smart and capable but it needs to come in a more convenient package so we all have smartphones we all have social network memberships to things like Facebook we're all at the office where we're
09:01
looking at all our social channels we got the browser open it's really easy to try things in the browser it's really easy to spread them virally and we find for example with our Facebook customers that most of the game playing and the money being spent is during business hours so the this a gamer as they age they're trying to fit it in to their lifestyle which is increasingly busy but fortunately they start to have money available to spend on it so that's why
09:32
they're looking for short sessions they're trying to fit them in 24 by 7 they want to come in from different access points on different networks and different screen sizes someone I know in the industry said that the Wolves go where the sheep are that's not a bad analogy but I'm going to give you a better one later but if you think about it again if I'm a core gamer I want to win I want to beat somebody and in the old days of course I'd have to invest hours and hours and do the grinding and develop the mastery to be sure i could
10:02
win and of course as you get older you're willing to substitute money for time and that's that's why we're seeing the birth of free-to-play games with virtual goods economies but the games need to be casual why because that way you get all the Sheep all of the people that have social motivation that just want the social connectivity and they want a game vacant handle but then the wolves come in and spend the money and become the big winners the dominant players and it's worth it you know even
10:35
even if one of these wolves or whales the other word from the gambling industry that's used if a whale can spend a thousand dollars or even five thousand dollars if they get to feel like they're king of that world that's worth it look at the other stuff that people spend nine and I'll spend money on luxury automobiles fashion gifts entertainment furnishings artwork they'll spend all kinds of money on stuff that is supposed to increase their social status there's social
11:05
desirability and they may still feel like a loser but you spent a thousand dollars and dominate an online game you know you feel like a winner and back in 1996 when I was at three deal we introduced a game called Meridian 59 any of you remember this game okay a lot of people think of this as the first graphical mud or the first graphical MMO and it was a totally hardcore hack and slash RPG and
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mind-boggling things happen the avatars would arrange to get married to each other and there's no reward for this you were more likely to get assaulted by a rival guild and they'd kill everyone but you'd find the nicest room in the dungeon you'd invite all the other avatars you'd pick the most prestigious avatar to be the master of ceremonies you get your avatars hitched maybe you'd split up later but then what happened is that some of these people behind the avatars they would get married in real life and have children does that blow
12:11
your mind and that's in a hardcore game so think about the social value here if people are looking for love in a game like that and finding it there's something very powerful going on so it's not a really a big shock that when instant messaging comes along when Facebook comes along when social games come along that you make it more casual you make it possible for everybody to do it then the social value is going to be that much greater and there's a lot of
12:41
people that are just doing it for the social value to be connected with other people and maybe they're looking to meet somebody who knows everybody's got different social needs but the core gamer is there to win and that's why I use this constant with casual mastery because it's consistent with this traditional statement I've always made which is a great games you need to be simple hot and deep keep it simple that way everybody can figure it out everybody can be attracted to it make it hot it was make it compelling make it
13:11
inviting do things that lure people in and excite them and get the dopamine transmission hormones going but then provide the depth so that the core gamer there's always more to do there's always more to master there's always more to get you to think and I think ultimately that's what we want as gamers is to be thinking and using that to you know manage our resources and make our tactics and our strategy decisions etc so I know fantasy football is not as big a deal here in
13:42
Europe but I think there are probably over 10 million Europeans maybe 20 million Europeans doing fantasy sports on the internet in America it's more like 40 million and I think of this as a precursor to an enormous market that I'm talking about here because if you think about the player that does that a core gamer sets up a league they invite their friends to play it a lot of their friends join because it's very casual something it can handle when they're at work they check in on their new sights
14:12
on their browser when it's the weekend and some games are being played there they're checking in maybe from their smartphone while they're watching TV or maybe they're watching their daughter play in a soccer game and they're checking on their smartphone and maybe in the middle of the week there's a deadline for setting up a lineup and now they're you know they waited until the kids have gone to bed and now they're having that lenient experience on their PC at home so they're roaming across different access points they're playing an interoperable game in effect it's a browser-based game and they're you know
14:45
the wolves you know playing with the Sheep and you know that's an example where again there's already 60 million people playing playing that kind of game of course we have phenomena like facebook but I think it's more interesting to look behind beyond a social network like Facebook and and look for examples of mass market behavior like this that extend into the future and there are 150 million households that have bought a console that means there's got to be at least one core gamer in that household and if
15:15
you think about it Zynga they have about 200 million players on Facebook only eight million have spent any money that's kind of normal 1 million of them have spent the vast majority of the money if you get 1 million people to spend a thousand dollars a year to be a whale in a social game like mafia wars or zynga poker that's a billion dollars a year so that basically describes where the money comes from if there's a hundred and fifty million
15:46
of these console homes and only a million or two of those people have migrated over just think about how much bigger this market is going to be as more of those people make that transition so again how many of you have ever purchased a console okay now keep your hand up if you've already made this migration that I'm talking about are you playing simpler convenient games in your browser on your social network or on your bow on your phone so that's a whole lot more people yet to come you know we're the early adopters right so that's that's why we're all doing it already
16:18
there's another 100 140 150 million more to come so I like to think of this as the dolphin market so let's forget about wolves and sheep and Wales let's go with a different animal why why would we call ourselves and these other people dolphins well dolphins are curious and intelligent that's how we feel about ourselves and we love to play and we like the social value and dolphins you know you knows how dolphins if a boat goes out the Dolphins will come over the boat you know they want to check it out
16:50
they like hanging around with human beings they hang around with the fish they hang around with the whales they're very social they're also very competitive yeah like right now we're around San Francisco there are dolphins killing rival porpoise in territory battle so I knew you thought dolphins are really cute really charming but they're just as carnivorous and just as nasty as killer whales there's just a smaller and more streamlined whale and of course they also have been on the
17:20
wireless internet for thousands of years they call it echolocation but that's a method of communication they've had for a while and they prefer casual short sessions so basically anybody that's a that was a console gamer that has chosen to play in this market in uniform that's a dolphin and they need to play with other fish and that's what they're doing so in honor of those of you that are German I'm just going to say for our market going forward the aesthetics is
17:50
don't fit and of course it's going to all these screens so how do you deal with that and what form will it take so again our belief is that it's the free-to-play model social with virtual goods and i don't mean social meaning it has to be in a social network i just mean that you want to be playing with other people they can be strangers they can be friends they could be gamer friends etc and virtual goods is the right way to monetize because if you think about what was wrong with
18:21
packaged goods and this includes casual game downloads basically you're trying to get a fixed fee to be paid for the game and the public doesn't want to do it if you have a free game then you're going to get an enormous audience it was virtual goods you can create an unlimited economy where these serious players will spend a lot more than fifty or sixty dollars I meanwhile gamers that only wanted to spend ten dollars they can spend ten dollars so if they only want to fill out an offer and and maybe generate two dollars of revenue they can
18:52
do that too so this model is the best way to maximize the economic income and then you want to make it more like a trip to Vegas another industry colleague at once said to me we don't want to be like Facebook they're like a church social we want to be a trip to Vegas and if you think about it trip to Vegas anybody here made a trip to Vegas or another casino okay so you know this is like you go with a group and there are the really casual people there that aren't spending a lot of money gambling but they're enjoying the entertainment the social value the drinks the food the
19:24
shows etc maybe they'll put a few coins and the slot machines and then somebody in the group really is serious about gambling and they're up all night at the poker tables or playing baccarat etc and they might lose ten thousand dollars or make five thousand you know etc so but with it but it's an inclusive form of entertainment everybody can participate and they're just involved in it in different ways so that's the that's really the style which this game is going to take place and then the browser becomes the center piece because the browser has now become the fundamental
19:56
way that people organize the way they use computers every kid over the age of five is in a school learning how to use a browser on a PC that's the one fundamental thing they're going to know about a computer and nowadays particularly you look at a lot of the revolutionary behavior going on in second world countries in Arabia etc there are people that base are going into the browser to find out what's going on in their world and even in their own town you know what when I want information about one of my employees I
20:28
use Google search it's just the fastest way to find out what's going on so it's really sort of the Newtown Square where yet you go to find out what's going on and then the customers are increasingly going to ask questions like can I get to the cloud from here can i pick up where I left off and can I communicate with everyone and that's really the key in the future about Society of interoperability is that when you send a text to someone and they don't reply in the old days it was like whom maybe their network is not interoperable with mine you're not really sure what happened and then you stop doing it
21:00
after a while but when people start contacting you through a medium and you start contacting them and getting replies all the time you realize oh everybody's doing this and then you do it more and then it takes on it the quality of being fashionable and trendy and then people want to do it even more so that's going to really help drive a lot more adoption and then from a platform perspective it starts on the pc but then it goes everywhere and let's just start with the fact that there are two billion pcs a lot of them are in internet cafes they're in shops there in
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airport lounges a lot of them are shared a lot of them are in office is being shared as well so there's probably already three billion people using these pcs every day and every day they have their social channels right there their email their instant messaging their Twitter there there other channels or social networks and the browser's right there next to it and frankly that makes it much easier to drive virality and free trial completion through the browser that gives a browser a tremendous advantage okay if you look at
22:04
the same Wall Street investors side which is at how they view the market they would basically point out that the global market in games last year's about 50 billion but what's interesting that figure is that 35 billion of it was traditional console and PC games in the remaining 15 was social and mobile now if you go back five years to 2007 just the traditional console pc part was 50 so it's it's gone from 5235
22:36
and then it's forecasted to go down to 15 in five years according to this forecast so from 50 to 15 that's a big drop you may have noticed in the last 10 years that sony has lost over a hundred billion dollars in market cap you may have noticed that Zynga now has a higher enterprise value than Nintendo or EA this is happening and investors are
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paying attention to the fact that it's happening so for all of us think about it if if it's still according to this forecast it was only 15 billion last year and it's going to be a hundred billion in five years and this is the first idiot other than me to say this so I said this will overhear oh I said yeah this is this category's give me a hundred billion and I think people thought I was well they always think I'm crazy so that's not new but now there's a respective Wall Street analysts saying it so I'm gonna just refer to him from
23:39
now on okay what does it require from a technology standpoint if you want to take advantage of this you have to learn a new set of best practices it's very different whether you're talking about the old casual game downloadable business or your time at MMOs or you talk about traditional games this is very different and you have to be thinking cross-platform moving towards being its wrapper bowl of course having a browser cloud by us and you have to learn about not just how to use social network social features but in any game how to make that game more social how to
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make that game have its own social plumbing features intrinsic to the game how to have it have game mechanics and game design that encourage social behavior you better pay attention to html5 and of course native apps are going to remain important for a while but again in my view it's much more difficult to discover and install and use native apps and you only get to use them in the place where you install them so they don't really qualify the way I think that a truly convenient browser
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game can qualify and I think in the long run the browser is going to keep getting better it's going to keep getting more ubiquitous on every platform and long run I think the browser is the big winner but apps native apps are going to remain important for a while and in particularly they'll remain viable and important in the high performance category so anybody that's doing say 3d immersive games will you know continue to prefer doing native development but for a lot of other people that's just not going to be a requirement meanwhile the business models are going to be just completely disrupted in ways that a lot
25:12
of people don't understand yet when I built electronic artists i was using distribution business model principles Electronic Arts was the first game company that sold games directly retailers I eliminated the distributors as a middleman went straight to market I did that partly because having been at Apple before that and building distribution there we had done the same thing and it had been really essential to apples business so in a distribution business model you're building up a
25:44
pipeline and you're trying to get control over the pipeline control over shell space and what matters and distribution is things like scale financial leverage and brand power again you can if you think about electronic arts you think of things like that that was a very essential part of the founding principles I had for the company but now we have a situation where a new business model is going to emerge and I call it discovery it's not like distribution because there's really no shelf space there's no channels
26:16
nobody has a chokehold over it and the reason for that is that in fact a lot of media industries they talk about the master switch you know who turns on the TV channel and controls what's on the air who controls what's on the radio who controls what's out there if you're in a distribution model somebody controls a master switch well who controls the master switch for the World Wide Web Al Gore he only wished he wishes I'll tell you who controls it the public
26:52
controls it now indirectly the public uses Google search as their proxy because they believe that Google can be held honest to provide legitimate search results the very day that Google ruins that brand value and loses their integrity then people will switch to a different search engine but what drives the master switch of the world wide web is search and discovery of links that you can click on that are not controlled
27:25
by one channel so so let's look for some examples of how this has worked youtube two guys literally in a garage in Palo Alto just create their own site started getting even mediocre stuff on it but what did they do they made a convenient up until youtube if you wanted a look at video you had to download and install a video player and then they had apps so that's a very poignant example of this this principle of convenience and being
27:56
in the browser they had to dumb down the quality something that the previous video providers didn't want to do so they had to go with basically pretty mediocre flash video quality but it was so convenient and it spreads so virally through the browser the newspaper industry recently pulled the plug on Apple because Apple start saying hey you know if you get subscribers through some other marketing channel oh yeah we want thirty percent of that too and these favors said I don't think so so now
28:29
they're running an html5 outside the App Store but maybe the leading example this is ft the Financial Times in in England another example when JK Rowling wrote Harry Potter she needed a book publisher and she needed retailers so she got a very small slice of the book value chain but she was able to build a brand and now she's ready for the e-book business so what's she doing pottermore
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calm a lot of people are looking for stuff related harry potter using search there's Pottermore click on it boom you're in the cloud you can you can read the books that way she doesn't need any help from anybody now you can say oh that's only because she's got this powerful brand but the reality is that YouTube didn't start with a powerful brand I mean you can do this whether you have a brand or not because what matters is not the brant what matters is that it's free to try it and the public is going to decide if it's relevant they're
29:33
going to decide if it's any good and it is good it will build its own brand power and if you stick a brand on it and it's not good you're going to destroy brand power there's a huge opportunity here for the creation of new brands zinc of being a very good recent example the other thing of course is that there's no gate keepers anybody can get a URL and put something out there and it's free it's open it's fair it's Democratic its competitive is there another platform
30:05
for games where any of those things are true any of them know so many developers today are really frustrated they they were promised this honeymoon period on Apple or on another closed platform and they found out that it's not like the World Wide Web it's not really open free and democratic and the rules are constantly changing because the king of that of that particular platform decides
30:37
to change the rules it's very difficult to have a stable business if you're a developer in that situation of course we've also now figured out with these internet games and this is true about the Internet in general you have to have a favorable lift-to-drag ratio between the cost of acquiring traffic and how you monetize that traffic but if you have a free game that's in the open browser you're going to get traffic to it and if that game has a good virtual goods economy it's going to monetize and as soon as you realize you have a
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favorable ratio you can use advertise to buy more traffic and generate more revenue more profit if you don't have the monetization side figured out then you're not going to go anywhere but there are obviously a numerous examples where you can get that monetization cycle to work so this is a great opportunity for indie developers to make original game content and to have a shot at being the next Inga just on the basis of how good a developer that you are so
31:38
this is a really radical change there are a lot of companies that depend very heavily and what they've learned from the past because you know what human beings have been doing distribution models for thousands of years it's probably in our genetic code you know it's a fundamental thing about agrarian economies in industrial economies it's been part of our lives since we were born this idea of discovers this is a radical change so it's basically upsetting hundreds of thousands of years of human understanding of how you do
32:08
business so a lot of traditional stakeholders that's why they're being disrupted so badly and that's why an upstart new comedy like Zynga can become so big so quickly so just to really drive this point home when I built Electronic Arts I used these ten fundamental principles of distribution business models and I'll tell you that all 10 of these principles are obsolete in e-discovery model Electronic Arts cannot use them I cannot use them you
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cannot use them amazon cannot use them it's a it's a whole new deal with a discovery mode so when you have disruption of course you're gonna have a lot of opportunity you know of course that means opportunity to learn and practice and get better at these new business models to basically compete with and take market share and customers away from the declining console market and if you look at what has happened in Japan a really big value shift there is
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Sony decline in value the Nintendo decline in value and what happened is that the phone companies did the innovation so NTT DoCoMo launched the first data phone they invented the apps they invented the mobile web they invented mobile email pretty soon to Japan there was more mobile email than PC email they invented microtransactions and they were very generous in realizing that they should give away most of the content value chain so they said to
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developers I'll put a link here and people can click on that link and then they're going to go to you and you're gonna have to host your own content and I will then do integrated billing settlement and payment by charging the customer on their monthly phone bill pretty good deal because you know what acquiring payment from a user is very difficult if docomo just has it one touch payment like it works on the iphone that's a pretty good arrangement and they only charged eight percent of
34:11
the content fees so the other Japanese carriers copied that kddi for example and then SKT copied it in Korea so it's not a big surprise that in China Korea like where in the world do we have the the greatest degree of 3G and 4G wireless networks where we have the greatest degree of mobile game adoption where we have the highest amount of data spending on mobile networks where do we have the greatest degree of money being spent on micro transactions and then if
34:44
you look at Japan you created this middle layer of companies green Mick cdna that operates mobicom and those guys created kind of a middle layer and then content could go on top of that so it was a very healthy ecosystem for everybody unfortunately nobody else anywhere in the world did it that way the mobile operators were unfortunately interested in keeping about half of the valley chain what happened in Japan is they made up the money on the data plans but the the rest of the world said well
35:17
yeah we're going to make the money in the data plans that's all ours but then we're also going to take half of the game revenue and as a result it just wasn't healthy enough for it to really move forward and of course the phone companies weren't very great at technology so it took can come to like Apple it took a company like Facebook to stir things up and to provoke the more recent changes we've seen in the west by the way feel like a China you know you'd like to think of Chinese being really advanced it's certainly the biggest world market for mmos and virtual goods
35:47
for that reason but they banned Facebook Google doesn't operate there a China Mobile is just as backward as any carrier in the world so they have not been disrupted by smartphones they have not been disrupted by social networks and they have not been disrupted by the browser but they will be I was talking to a friend of mine who licenses a 3d mmm oh engine too many of the Chinese companies and he says that they don't have enough broadband capacity to
36:19
deliver the large client downloads anymore and they have to send out guys on bicycles with a backpack full of DVDs and take them around all the shops and so you don't download them anymore you have to go down to the shop to pick up a disk how ridiculous is that but in spite of the obvious pneus that's not really workable you've you talked to a chinese developer thickness oh yeah our customers are trained to do these big downloads that's going to be great they don't see the disruption that's going to come from the convenience of the browser and then of course you know you have
36:51
different companies that are in fact you know they've either had their glory period or they're having it now but there's just many different categories where they're going to get disrupted by these changes all right so what do you want to what do you need to do if you want to be a leader in this next phase well you have to have systemic advantages a game developer cannot simply assume that they will make the best game or the only good ones a lot of us can make a superior game so you can't
37:25
just say that's my strategy I'm going to make the best game you know you see Angry Birds and you think oh I could do that receive farmville you say yeah that's not even a game I can do better than at well did you know that Angry Birds was Rovio's 43rd game and you know what the industry's hold does not succeed one time out of 43 it's more like one time added 500 in terms of getting something that's at big you know those of you that have been doing this for a while you know what I
37:56
mean it's hard to be the guy with that really super hot game because it just doesn't happen very often that's not a predictable way to plan to make a living you need to looking for a more systematic advantage so where's that going to come from it can come from one or more of these categories what intellectual property value can you create an own because that's what rovio now says about Angry Birds they say oh yeah we didn't just make a game we made a brand and they succeeded in that and that's that's better thinking it's like when George Lucas made Star Wars he hung
38:28
on to the merchandising rights and the film industry led him because they had never been able to get any value out of merchandising rights okay yeah we like this movie so sure you can keep that George knew exactly what he was up to same thing with a culture of innovation you can build an organization that has more confidence and more ability to make innovative original games because you know what most of the industry is not willing to do that they're too afraid so
39:00
what do they do they licensed brands they clone other people's games that's not going to get you as far so you know but it takes effort if you want to build a culture of innovation you can also look for technology leverage a lot of little guys have our time investing in technology because they're just trying to hustle to make one game and if that one game is successful on a software-as-a-service model then they have to support and maintain that game then it's harder to get to a second game but you know any any company that has the scale where you can invest in technology and then have code libraries
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and frameworks and components that you can pull off a shelf when you started a game and already be half finished or to have translation tools that help you reach your foreign languages and different screen sizes and different platforms more gracefully off of one product development thrust big advantage you can do that and that you know sort of relates to this idea of our in the efficiency if we don't make sure that we're efficient we're all going to lose to the guy that has the lowest cost labor who's likely to be in a place like China so
40:04
it's imperative if you're in a labor market that's more expensive than China then you figure out how to save costs through technology leverage and other forms of rd efficiency and then of course you have to be looking for efficiencies and how you acquire traffic if you're paying for too much your traffic then your cost of acquisition is high and then wow you're only going to be successful on those few games that monetize particularly well in the games that are there in a middle-range will lose money whereas if you figure out a way to bring that cost of a commotion down by adding more free traffic
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suddenly all these games in the middle of the bell curve suddenly they're profitable so it's really important for the industry to bring down the effective cpa with more sources of free traffic and of course you know once upon a time Zynga back in 2009 they got three hundred million dollars worth of free marketing for facebook that year that's how you make a company like Zynga well whenever this is likely to get that those days are over but we have to look for other ways to get more traffic
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efficiency and then finally you have to master the kind of best practices that this particular type of product requires so you have to be able to do that at scale in more than one game and with some degree of predictability so what are we doing a digital tried we're going cross-platform and I like this image this is America's first president George Washington America was losing the Revolutionary War and in the dead of winter is kind of like the humburg harbor right now so under these kinds of weather conditions Washington had his
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army cross the Delaware River upstream from Trenton New Jersey and then made the surprise attack on the British Army the British Army's thinking at the time there's no way anybody's going to attack us right now this is ridiculous nobody would be crazy enough to do that so they crossed and that's how I think about going cross-platform is it takes that kind of courage but it Nets it needs to be done of course if you are cross-platform then whatever platforms have grows you're going to be there and
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I think we all know that in the next four years the install base of tablets is going to be 1 billion tablets or more and lots and lots more people we'll be bringing the browser to the tablets and of course lots more people have smartphones and social networks like Facebook will continue to grow so if you're cross-platform you benefit from all these revenue categories we just launched a game called galaxy life and this is the first product we launched where we have a Facebook version that runs inside Facebook but when they also have a version that runs
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at our open browser game portal which is at games digital chocolate calm and you can play it on our portal and you can be logged into Facebook if you like or you don't have to be a Facebook member so it's it's really truly an open browser game where Facebook is an alternative and we started to bring some of these games to the mobile side also and this is the this is the front page of our game portal went when it matures a little bit further will have it revert to our main landing page of digital
43:10
chocolate calm and basically the notion for for us of this portal is that we can now host both games that we create as well as third-party games like reborn empire that I mentioned earlier we're going to use a lot of cross-promotion features that we've mastered in the Facebook environment and we think of this as a place for competitive games not the more peaceful kinds of games that you know we're not as interested in the lower value customers that want to do peaceful things that we want the guys
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are more competitive that are trying to up the ante with each other again you don't have to say in facebook you know everybody knows who you are and your social graph knows what games you're playing and it's you know obviously a little bit of a violation of privacy but if you're just playing on a game portal like ours you can you don't have to reveal who you are you can play anonymously you can you know have the whole screen take taken over by the game and then you can do a lot of things that we know work because we used to do them on Facebook but then facebook banned them you know things like incentives and
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certain viral features that would hants both new traffic as well as return rates and I think it's important to recognize that for all of us in the game business the game is more important than the the idea of a more generic social network and I might even go so far as to say that we are games it's not really clear Facebook's stance about games because I think they do some things that are that are better in some things that are not whereas I think what do you think about peaceful social behavior that's what facebook
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wants to be all about and that's sounds like I think of ourselves as frankly a little bit antisocial you know it's like hey let's go beat the heck out of each other and let's meet let's compete and let's spend money and really get back to that satisfaction of core gaming so I think the way we're approaching this is very unique it's not quite like what everybody else is doing and we're excited about it now we have another dimension that I'm going to mention today for any of you that might be interested in it and if this idea intrigues you feel free to email me I
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forgot to put my email address in a slide but it's just tea Hawkins at digital chocolate calm you feel free to email me if you have interest in this notion so if you think about free traffic and you think about developer choices about platforms you know developers they need a place where they can control their own fate and the one and only place where they can do that is the open browser and they also need more sources of traffic and it turns out
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there are a lot of companies that are not gigantic digital platform winners I'm talking about maybe companies that are still in console games or they're in retailing or they run wave websites that run that run game reviews for console games a lot of these guys have valuable customer relations with those hundred and fifty million console households but they're losing value because a lot of those people have switched over and are spending more time in social networks
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and other mobile devices etc so what we want to do is basically address an issue that developers have in terms of getting free traffic and that there are some strategic partners out there that may want to help us with because it helps give them a way of organizing developers outside of some of these captive platforms so that's the idea of free game leaders calm by the way if you look for this on the internet you won't be able to get into it it's not just it's not exposed to the
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public yet but the idea here is you get a bunch of indie developers who do not individually have any market power who do not individually have a cross-promotional network within their own games who don't have the kind of marketing budget or scale who can't really run and operate their own platform but collectively they have a lot of power and you have a site free game leaders calm which is truly free nonprofit that doesn't have any
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corporate agenda or any profit motive that's not dominated by any one part your company is just a collective that's operating for the benefit of its members and these are you know members that are looking for new sources of free traffic that want to build a another place that developers can that can call home but it's not trying to be a social network it's not trying to be a destination it's not trying to host games or you know deliver inventory from shelves you know
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it's not trying to offer payment methods none of that it's just a traffic interchange kind of like a yellow pages and it's focused entirely on open browser game so don't require plugins installs downloads platform memberships the kind of games that support this argument I'm making for convenience that okay here it is try it boom you're in you're playing and these would be games that need to be in Western Europe or in North America so that there's quality of
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traffic that they're sharing that has that has more value and I'd like to compare this idea to steam you know those of you that know steampowered com that was started by valve when they started that the traditional game industry thought it was really stupid well it now does something like four billion dollars a year in revenue and any pc gamer that ever went to steam looked at and said yeah I like this place these guys are talking about the games I care about and they have all of
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them this is a good place for me to come back to and then of course started downloading pc games so there really is no such clearly positioned placed today that does this in an organized fashion for multiple companies the way steam does it and I think there's a good opportunity for free game leaders to become that if enough indie developers decide to participate and it doesn't cost much of anything to participate this is just a traffic exchange because there's not meaningful
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financial obligations to be part of it okay so the concept is basically there would be three kinds of partners in it traffic partners that have a strategic reason why they want to bring traffic to it helps thing get established who would be owed a traffic credit now we're in the future for any traffic they contribute so these are companies again that today they may have valuable emails or traffic from these valuable gamers but they don't have the business products and services to monetize and they're losing that business to these
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more disruptive competitors so they might as well take some of their unsold ad inventory and drive traffic to a place like free game leaders and build it up as an alternative to what their competitors are doing so you have traffic partners then you have a couple of editorial partners so there's a little bit of game review information on the site of course those companies can have a very simple gotik relationship because they can bring some traffic in but anybody that wants more information about a game can link back to their sites so they'll get they'll get traffic back and then you have the games the
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games have to be qualifying games but they'll just get free traffic and they'll leave to get the free traffic because traffic comes in and clicks on down and they'll rank according to an algorithm based on their relevance and then once people are in playing that game will run a little banner in there to cross from other games in the network and these will be games that are targeting the same customer demographic with the same type of games and for those of you that maybe some of you have tried this in places like facebook and it's been corrupted on facebook you can tell that in some cases well there's not
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enough transparencies you don't really understand where youre clicks are coming from we would fix that with free game leaders and another problem is okay they figure out a way to provide really lousy traffic and try to take back valuable traffic or another example is you know it maybe it's an independent company that's doing it and that starts out as a really philanthropic click trade a mega you know we got to take some clicks for ourselves to pay for a cost and now we raise venture money and they told us to increase the number clicks we're taking and oh yeah now we're going to sell those clicks to
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Zynga and basically these networks then get kind of taken over by one of the big guys so the idea with some of my free game leaders is to learn from all these things that either worked or didn't work and get it to work now in the open browser in a way that protects and preserves the long-term value for the independent developers so they can feel safe in participating now some of you also may think that well why would I want to trade traffic with one of my competitors well that's the only way it works but there's a there's a little of
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a mindset that think about if this was a movie theater and we had all bought a movie ticket outside and we came in we sit down if the guy that made the movie wants to have ten minutes of opening credits he can get away with that you're not going to leave you know if you just did a hundred gig download and install and you finally got the thing working and got your character created yeah you're going to come back to that game you're not just going to abandon it but if we're talking about open browser
52:28
games right now where my friend sends me an email or it's a facebook feed or you know Oh try this Bing I click on it and I'm trying it my commitment level is not very high I'm in the browser I got there very conveniently I'm going to leave in a few seconds if that game has relevance I'm in a book market I'm going to remember to come back I'm going to tell my friends about it if it doesn't it doesn't matter what you did across remote it's going to fail so what works
52:58
perfectly in cross motion is that ok I got the guy to my game and by the way you wouldn't show this banner when the guy is doing the tutorial you would show it after he's safely in the game having finished the tutorial and then if he starts to pay in that game then he also would stop showing the banner so we're not talking about letting anybody lose their paying customer we're just talking about the free player who's about to leave that game anyway and when he leaves you want
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to get value by having them leave by clicking on one of the offers in that banner and when they do that you want them to go to the game that it's the most similar to your game because there traffic is what you want and when they get a customer from you you get a customer from them and now you have twice as many customers and if your game is any good you cannot help but be better off so we've been doing this successfully and we all we know all the things that don't work from all the volume we've done with this on on
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facebook so it's a very essential model and this kind of a site will very quickly get another source of free traffic could anybody tell me what that might be SEO because a lot of gamers in the browser they're doing game related searches and when they do a game related search what shows up organically is in fact not very much and other sites that show up a lot of those sites are very confusing they have things that require downloads they have things that required plugins things that require platform
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memberships and only some of the things are really good quality open browser games so there's an issue with the identity of a lot of these sites and the customers come in and they're they're very easily confused they don't develop a really clear brand identity for these sites and for a lot of the new searches that that gamers are doing it's just funny go type free browser MMO or free browser RPG into google and see what comes up and you're going to see that there's not like really huge brand heavy
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hitters there so this site free game leaders if enough industry participants collaborate on this it will start to show up at the top of the front page of a lot of game searches for free and it'll generate even more free traffic okay so what do you think about Europe's new world here in this game industry I'm you know it's a it's great to be here in Germany where I really feel like the competitive core browser game business got originated and and built up you know
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again you have this issue around making sure that you have that to drag ratio working well and you know I like to think about analogies about you know about how to make this work and one of these that actually happened in European history is that they found potatoes in South American brought them back to Europe and until that time when you had a crop in a European farm field you had to leave the field fallow every other year to let the field recover nutrients enough to be able to plant it again so you only really got to use the
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field half the time and when they brought potatoes back they could grow them in the fallow field so they doubled the efficiency of their farming and I think that's an example of where our industry needs to find ways to use technology leverage and then the next thing that Europeans found was this island off the coast of Chile that was piled with thousands of years of bird poop or guano and they found that if you brought that guano back and ships to Europe that you literally threw the
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nutrients in it the fertilizing benefit it tripled the productivity of your farm so look at that you know and I think of that as an area of discovery engineering if you use these discovery principles wisely if you support things like free game leaders if you find ways to invest in engineering like cross-promotional technology that gets you more sources of free traffic where social features get you more source of free traffic again there's potential to triple the amount of traffic that you get and that's what happened with the guano so just to sum
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up II we're in this era of convenience all these core gamers are coming over it's going to happen over the next few years the browser is going to be the centerpiece and the hottest platform what we all need to do is disrupt ourselves in order to be part of this think more about that dolphin profile chase those dolphins and please let me know if you're interested in free game leaders do or do not thank you you

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