Are Platform Game Lobbies the Next Social Graph?

When speaking with the larger social gaming companies and asking why mobile hasn’t been a focus (to date), the response is interesting and a validation of how fragmented the mobile device and platform landscape is. Typically, the answer is something along the lines of “…we launch an average Facebook game and we make $3M per month, we launch a hit mobile game and we make $1M per month…” – not withstanding the higher COGS with mobile because of the greater R&D costs.

A hit game on Facebook is potentially $6M+ per month (or more) and you’d be hard-pressed to find any mobile game in history that has made those kinds of dollars – I can’t think of any unless you amortized Jamdat’s acquisition of Blue Lava Wireless for the mobile Tetris license in 05 :) In any case, the reason for such a discrepancy in revenue potential is for a single reason: the size and availability of the social graph. Sure, mobile may also have greater challenges with billing but the opposite could be argued with one-click micro-transactions on iPhone and each of the platforms, operators and OEMs all caching credit cards. And yes, many mobile social games and applications have integrated with Facebook Connect but unfortunately it’s too late with the initial viral land-grab being inhibited by a new set of Facebook rules oriented around preserving the personal nature of the Facebook Wall. As one colleague over lunch put it the other day, “…Facebook is constraining the virality of new applications by introducing more and more rules whereas mobile is just finally opening-up…”

Welcome game lobbies such as the iPhone Game Center and WinMo7′s integration with Xbox. Note, I did smirk when these were first announced earlier this year – does anyone remember companies like M7 Networks which powered Sprint Game Lobby? Sprint used to mandate that each mobile J2ME game had to include the game lobby libraries to allow users to post high-scores and potentially enable head-to-head gaming. This was a grand vision but really was only the first phase – take the Sprint Game Lobby and integrate today’s viral and notification mechanics and you have the next social graph.

Little has been released about the mechanics of the new game lobbies but assuming that users can opt-into the game lobby and buddy lists can be created than a new social graph has formed. Mobile social games can then tap this social graph not to differently to how they tap the Facebook social graph using Facebook Connect. Although this social graph may be smaller (eg not Facebook’s 500M+ users but rather 50M+ iPhones or 10M+ WinMo7 est.), the reward may be greater with potentially very open virality and notification rules. Whereas social games on Facebook now rely on cross-promotion and advertising, mobile social games may be more akin to Facebook 1.0 where the Wall is saturated with application and game notifications (or SPAM to others). And as long as the platforms can continue to focus on a write-once, run anywhere paradigm (eg one way by maintaining screen geometry etc as I mentioned in a previous Venturebeat article), then this social graph will continue to expand. Couple this with the cached micro-transaction capability of mobile and you now have your next land-grab. Facebook revenue potential is going flat and mobile is about to explode!

Now assuming that publishers continue to build iPhone, Android and others, will the interoperable game lobby exist? If so, then we will have the largest potential social graph ever that is more personal than any Facebook experience through a PC.

Looking forward to playing with these game lobbies once released and selfishly hyped to be able to see my Xbox avatar on WinMo7!

Are Plugins (and Flash) Going Away?

Given my previous 2.5+ years working in the browser space with Skyfire, a lot of folks ask me two questions:

1. Is Flash going away (on its own or because of HTML5)?
2. Do web plugins go away with HTML5?

I wanted to quickly answer both of these. First, Flash is definitely not going away in the near-term. Although some (maybe all) casual web gaming can be developed in HTML5 and web video can be built with HTML5, Flash still has an ecosystem of DRM (digital rights management) tools, required by major web video publishers and supporting reporting and advertising frameworks. With the top premium video publishers, given the importance of DRM, if Flash went away, it wouldn’t be replaced by HTML5 but rather some new plugin that enables DRM. HTML5 is inherently open and thus would not work for high-end premium content.

As to the question of whether plugins go away. In an ideal world, you’d want everything to be standardized and based on W3C specifications; the obvious advantage is that your webpage could then run on any W3C compliant browser. Unfortunately, I don’t see this happening. Plugins have existed because they are the innovation delta between what developers want to do and what HTML spec enables you to do. As an example, Adobe is now talking about the use of Flash to develop 3D applications, it is unlikely that this will become part of HTML spec anytime in the next 5 years. As long as their continued innovation in the front-end, plugins will continue to exist.

Lessons Learned in Monetization

Earlier this week, at the excellent MobileBeat conference, I moderated the “Lessons Learned in Monetization” panel – thank you Matthaus.

Before jumping into the summary, quick plug, I did a guest post last week for Venturebeat on “How Can Phone Makers Differnetiate in Mobile 2.0 World” – let me know your feedback.

Ok, onto the panel, we had a fantastic group, Steven Goh from Mig33, Lee Linden from Tapjoy, Juggs Ravalia from SPB Software, Sam Altman from Loopt and Chris Phenner from Thumbplay.

Covered a bunch of topics, here is my brief summary in order:

Sam mentioned that Loopt early-on (and maybe even now?) is selling data bundles with prepaid operators (eg Boost Mobile). Interesting concept, in that prepaid operators need to incentive data packs whereas post-paid operators want you to take the unlimited data pack and then of course not use it!

• General consensus amongst the group was that prepaid content or virtual goods cards sold in retail was not worth the investment. Note Zynga recently announced virtual goods cards in 7-11 stores for Farmville.
• Lee (and the larger group) felt that the future would be some combination of free or premium apps with in-app purchases (eg virtual goods) as opposed to a subscription model which has been mostly unavailable and maybe even traditional advertising since the dollars are so small although the rumblings are that iAd is incredibly profitable, if you can get it.
• Not surprisingly, general consensus amongst the panelists and the audience was that regardless of the app, you need to test multiple price-points for any in-app purchases or virtual goods and offer items at all price-points to catpure each kinds of user.
• Steve made an interesting comment about the general commoditzation of operators in emerging markets do to dual-SIM phones. I hadn’t thought of this previously but it makes absolute sense and validates the forthcoming switch in business model that I detailed in Item #11 in my previous VB article. FYI, if you are not familiar with dual-SIM phones, there is an explanation here.
• At this stage, the audience started (and quickly ended) a debate about open versus closed gardens. As I saw at the Uplinq conference a few weeks ago, there are some developers that prefer the closed garden model as opposed to the democratized app store. Of course, most of these developers were inside the garden previously and had that key carrier relationship.
• Sam made an interesting analogy; CPC (cost per click) is for the web but CPC on mobile is CPV (cost per visit) given the location capability of the device. This isn’t the first time I’ve heard of this concept and I know some of the check-in and AR (augmented reality) companies like Layar have been exploring new ad units and click-thru concepts.
• Juggs mentioned that SPB has looked at ad-supported models and other mobile 2.0 type billing methods but still believe and has data to show that it’s existing premium application and B2B business to OEMs and operators are a much more sigifnicant revenue line. Juggs also mentioned that he doesn’t believe his audience would react favorably to mobile advertising and that he has no plans to try mobile advertising (as a publisher).
• I asked Chris with Thumbplay questions about the crazy PSMS return rates. If you are not aware, as mentioned in this post, ATT was seeing upwards of a 25% return rate on PSMS campaigns – insane! Chris called the activities “criminal” and blamed much of the problems to affilites who game; this doesn’t surprise me considering the amount of PPC (pay-per-click) arbitrage that exists.
• Not clear from my notes but I asked Steve about the roll of psychology in gifting. Mig33 allows for gifting within the social network; Steve validated that gifting has been exploding on his service. As an FYI, CyWorld based in Korea, has seen half the country buy a virtual goods gift.
• Lee talked about incentivized downloads, also known as PPD (pay-per-download). PPD is absolutely continuing to grow and IMO, as shared with many others, PPD is what made in-app advertising more lucrative since ads could finally be measuered (eg direct response), since they led to a digital ecommerce transaction.
• Speaking to Chris on the buy-side of advertising, Chris mentioned that they perform 10s of advertising tests within 48 hours as part of their on-going optimizations of keywords, ad units, metrics and so forth. Chris mentioned he’s heard of some advertisers doing upwards of 1000s of tests in short sprints – talk about multi-variate testing!
• On the topic of PSMS versus credit cards, I believe it was an audience member who said in trying both, that he never received a single sale via credit card due to the huge drop off at the credit card entry page. Andy from Billing Revolution quickly responded with some incredible stats demonstrating the success of credit card entry when the workflow is streamlined.
• Sam, not surprisingly, talked about the use of location to create location history to then draw behaviorial data to offer more targeted advertising. Loopt refers to this as the LifeGraph.
• On the topic of offers, an audience participant from OfferMobi mentioned they have tested some mobile offers and that there has been some success but there is still not enough data on OfferPal or TrialPay type offers to draw any conclusions.

Those were my brief notes; to all the panel participants, if I’m missing or misstating any data, feel free to comment below.

Understanding the Emerging Market

I recently gave a talk on some emerging market trends and themes and I figured it’d be good to share them here. With all the focus on 3G data caps and smartphone penetration, we still forget that regions like Brazil (beyond emerging market) still only have 4% data penetration and some parts of Africa (eg Nigeria) have near-4G networks but much of the rural population is still lacking a phone.

The Microprenuer

Many of you have probably heard this story but the government in Uganda wanted to enable two things: 1. Provide mobile phones and thus voice and data access to rural villagers and 2. Create more female entrepreneurs since culturally females were home wives and not enabled to work. To do this, the government in conjunction with Grameen Phone and MTN did something very clever, they recruited females from various rural villages and gave them a mobile phone, known as the VillagePhone. The females instantly became the sole owner of a mobile phone (Village Phone Operators) meaning others at the village would pay her some small fee to use her mobile phone. In one move, villagers were able to call friends and family (or the doctor!) and get limited information in real-time (imagine what it would be like without internet access) and additionally, females were now a working class, a microprenuer. The story of the phone tethered to a single pole in the middle of the village with a line to use it is not a joke – it is real!

USSD (binary SMS) and Voice Services

A search box on your home screen seems like a no-brainer and it’s definitely one of those features you don’t realize how much you appreciate until it is on your home screen. I rely on this search box all day to get information on various things whether it be local services, events and so forth. Anyways, in rural markets, unfortunately data access is often not available and thus you have to rely on alternate forms of transport. Voice is often thought of as a 1:1 communication service but can also be used as a way to broadcast information. Companies like Lexy allow content producers to broadcast channels over voice in the US and projects like the Spoken Web Project take the same concept but apply it to basic information for the third world. For example, I would call a phone number and hear an automated operator tell me the major news around me, the sports scores, the weather and so forth.

Alternatively, how do you offer a information access through an application without being able to send data. It sounds like a trick question but the answer is to use SMS for transport. USSD is effectively a fancy term for binary SMS. When you press #MIN on your mobile phone in the US, you are sending a binary SMS message from your phone to the network; the network then responds with an SMS message that appears as a popup dialog on your phone with the number of minutes available for your plan. Well imagine if you could create a simple J2ME application with a rich UI that uses SMS for transport – great idea and this is what a number of startups are doing for various emerging market operators. See solutions like Shorthand Mobile, MobileXL, Spectrum Mobile and Eyeline.mobi. The UIs feel like portals with access to various text based content. Until data access become available, this is a great interim approach and a great way for these companies to establish their brands with these users.

Mobile Payment

Not sure about you, but I completely rely on plastic (credit/debit cards) and often carry little or no cash. I only take cash out of the ATMs (cash machines) for basically the few times when I can’t pay by card in my average day usually when I know I’m going to San Francisco (and need to pay for parking :). Paying by card generally makes sense since I get an automatic log of the transaction from which I can categorize, archive and reference as a receipt. In any case, the one assumption here is I do have a bank account and I do trust my bank. Well, what do you do when you don’t have access to a local bank or a bank that you can trust.

This problem is encountered by millions of folks in rural populations everyday – welcome M-Pesa that has initially been deployed in Kenya in partnership with Safaricom and Vodafone. Effectively, a rural villager can use their mobile phone account (SIM) as a way to pay other villagers by sending money from one mobile phone account to another. This has been incredibly successful because in many cases the villager trusts their mobile phone operator more than the national banking institutions and are willing to deposit real money into their mobile account via the mobile network operator agents (of which their are an abundance of in rural regions).

In some ways, this makes absolute sense and in advanced markets such as Japan, we are beginning to see banking institutions partner with network operators to allow subscribers to make non-digital purchases via their mobile phone. That being said, even in advanced markets, we still don’t have elegant P2P (person-to-person) payment solutions although many startups are attacking this problem (eg Paypal being the incumbent). I guess once your mobile phone becomes the plastic, do the operators eventually move down-stream and become the banks? Scary thought…

Family Browsing

Having worked on browsers for the past 2.5 years, I’m always amazed at how much browsing usage comes from emerging markets. South Africa is often a top 10 browsing country in terms of usage as reported by Admob which is insane considering their population. Anyways, given the cost of data in some rural villages, it’s too expensive for every family member to have internet access and/or maybe the family has to share one phone so how do you browse the internet as if you had a PC and a larger screen. Well, duh, you get the mobile phone with a built-in projector! Samsung Galaxy Beam is one example but there are several other lower cost devices entering the market. Imagine taking it a step further and connecting your projector-enabled mobile phone to a Bluetooth keyboard or maybe a Bluetooth Zeemote. Now, you effectively have a home PC but using your mobile phone, not a netbook but a mobilebook – very cool!

Above are some example of some of the amazing innovation that is happening in the emerging markets – looking forward to seeing what is developed next!

OEMs, Please Choose

I recently did a mobile trends presentation and this is one of the graphics I had created

OEMs, please choose? Which side do you play on?

The Ad Ballot

2010: User selects their default browser

2020: User selects their default ad network

Enough said…

Is Apple Making a Mobile Wallet Play?

Probably not apparent to all folks but a fundamental reason that in-application advertising performs so much better than mobile web advertising, is because there is a very clear path to an ecommerce transaction. Most in-app ads lead back to the iPhone app store from which another app could be purchased meaning it’s truly performance-based since it can be measured and optimized. Mobile web advertising was always at a disadvantage since it rarely led to a transaction (ie Is the user as likely to purchase a product through Amazon on his phone as he is on his PC?). The answer is no, since it’s so painful to enter credit card details into a mobile device (via app or browser).

Now, you could argue that merchants could integrate with Paypal and use them to process transactions on mobile under the assumption that it is more likely that a consumer has his credit card details cached with Paypal versus the merchant itself (exceptions maybe being Amazon). However, in an informal poll amongst my friends (non-techies), a surprising number of them did not have their credit card or bank account associated with their Paypal account (and I live in the Bay Area!). In addition, Paypal may not yet have that global footprint plus merchants definitely want to process the transactions through their own system for data collection, reporting, handling chargebacks and of course lower fees.

The alternative to a cloud-based payment system (a la Paypal) would be to store the payment details on the device itself (ie credit card details encrypted and stored on the mobile device). In this model, the browser or an app could conceivably request the details from the device/OS and form-fill the credit card purchase page. There were some under-the-radar examples of pieces of this at MWC with one SIM card provider storing CC details on the SIM.

Going back to the Apple question, what’s interesting is that iTunes is similar to Paypal and Amazon in that they have a large number of registered users with cached credit card details (cloud-based payment). With the recent Quattro acquisition, you have an interesting scenario where Quattro could go to the publishers and while selling ads, offer iTunes as a payment gateway. Effectively, if Amazon (or an equivalent) wanted to buy product ads on the iPhone, they could and then process them through iTunes as the payment gateway to avoid the huge drop-off that usually occurs when the user has to enter CC details into the payment landing webpage on a mobile device. This would mean that yes, ecommerce transactions could be as likely on mobile as they would on the PC, if not greater since it’s effectively a one-click experience across the whole web. This of course assumes that Apple adjusts their rev-share for non-app store digital products to be in-line with CC fees (and of course that they are willing to deal with all the pains of being a Paypal (eg chargebacks etc) but it is quite a unique advantage that Apple, as an OEM has given all the user CC details they hold.

The same scenario is actually possible with Google Checkout and Android but they have by far fewer stored credit card details (today) but maybe that will change. Nokia with their bundling of Openbit as part of the OS, may have a play their as well.

Payments and advertising is definitely looking exciting!

Mobile Trends 2020

So I was fortunate enough to participate in Rudy De Waele’s mobile 2020 predictions collaborative. Thanks Rudy for assembling a great group of mobile visionaries, thought leaders and entrepreneurs. Check it out below:

CTIA Party Analysis

Happy NYE everyone!

Not sure if this is interesting or not but I was able to pull this together pretty quickly. I looked at my CTIA schedules for the past few years and graphed some data around the parties that I was invited to – I was curious to see if there were any trend lines and/or anything that may have pointed to the recession. FYI, CTIA attendance last year was down approximately 20% but the number of exhibitors held strong.

This first graph shows the total number of parties I was invited to – nothing too exciting there. I also graphed the number of parties that were actual parties as opposed to events organized by press, organizations etc – I figured this may more accurately represent party budgets at each of these events. The party count has remained fairly constant…

This second graph shows who is throwing the parties. The infrastructure category includes aggregators which almost always seem to throw parties (makes sense). I bundled mobile advertising into marketing, I was expecting that group to continue to grow but interesting to see it went to dead zero in the Fall of 09 (or they didn’t want to invite me :) – possibly because of the ad recession, they became much more exclusive with their invites. Content companies continue to hold strong although the mix has definitely changed (not represented in the graph). Less ringtone companies and more software companies. It also seems press / org events have grown – that doesn’t surprise me since these are cheaper to host and are probably mostly gatherings.

This last graph is very telling and shows how most companies have only thrown one CTIA party. I would imagine this is because it was their launch party and/or they couldn’t justify the ROI on throwing any additional parties. Only 2 have thrown 6 parties in the past 4 years which is almost every CTIA event.

Anyways, this is very unscientific and only represents parties that I was invited to at CTIA – please comment if you see any other interesting trends from these graphs.

Geo-Monopolies?

These past few Qs has seen some significant pain coming to some OEMs such as Nokia and SonyEricsson. Don’t get me wrong, I have friends at both of these OEMs and I think they both produce amazing devices but I’m wondering if there is an another reason for their pain.

Yesterday, I went to the T-Mobile store to look at some device packaging. I specifically wanted to see the images on the boxes. In 2005, when I last did this exercise, you’d often see details such as megapixels, video support, screen size and 3G written on a box. This time, it wasn’t a single detail about the device but actually the logos of each web service that worked (ie Facebook, Youtube, Pandora, Google, Twitter etc). I’ve knew this trend was coming and it is something I’ve been evangelizing for the last couple years – it’s about the services the device supports and not the device specs (or at least not as much).

What’s interesting though, is if you are start to look at each of these logos, you realize they are all US Web 2.0 companies. A monopoly by normal definition is usually when a company has an over-riding control of a specific vertical such that they can dictate the terms for the rest of the ecosystem (ie owning the entire operating system space, ha!). Horizontal monopolies are less common these days but I’m wondering if the US has a geo-monopoly on Web 2.0? Is that even possible and obviously not in the traditional sense.

Given that the next generation devices from TVs to vehicles to phones and other electronics are going to be differentiated by the services they include (ie access to Twitter and Facebook, or being able to search via Google or watch video via YouTube) – this points to an interesting problem. If you are an OEM and you do not have significant marketshare in the US, how do you convince the Web 2.0 folks in the US to build to your platform first (this is under the presumption that most Web 2.0 startups / companies will build for their home territory first). Sure, they may be able to pay these Web 2.0 companies to build for them or incentivize the top 10 guys but how do you convince the long-tail which easily represents 70-80%+ of all the apps / services and usage.

What’s even more painful is that the pain has a downward spiraling effect – ie, Nokia has to convince these Web 2.0 developers to build killer services to sell more phones but if the first doesn’t happen (or to the extent necessary), the 2nd issue becomes an even larger problem. I guess you see the same effect with the brains of Silicon Valley – there is no brain drain IMO, if anything, I see more and more very talented people choosing to live here.

Taking this a step further, you could being to look at Web 2.0 as a resource. Resource control spread by geo is well understood (ie gold and oil are great examples). Can Web 2.0 be considered a necessary resource like gold or oil?

Interesting thought experiment, I would love to get your feedback.