2011 Crystal Ball

Lets look into the Crystal Ball and check what's installed for the future in the online games market ... Madam X predictions and advice are as follows ...



THE SOCIAL GAMES MARKET



Consolidation, M&A will continues as the market can only sustain a few heavy weight players. However an occasional unpredicted success will come from the unexpected new players. Majority of new players will fail. More venture money will be pouring on to this area as there maybe an eventual IPO sooner than Facebook. Branded social games will be the next big hit thing in 2011, lookout for something from EA and Disney.

Social Games will become more sophisticated replacing repetitive game play and mechanics. Eventually "Viral Game Play" will need to blend in with true "PLAY VALUE".

Sorry Alex of Hi5 hard core MMO will not be replacing social games this coming year. We wont see players of Farm Ville playing ULTIMA ONLINE too on Facebook so sorry Richard Garriot !

BUT we will see some smart companies and studios blending the following together to create the next generation of social games on Facebook :

1.) Play Values
*ignore viral but put in more play values.

2.) Casual Game Play
*not hard core as casual play still rules.

3.) MMO elements
*it will be real multiplayer.

4.) Social Graphs
*never leave this one out.

WEB BASED MMO MARKET

2011 and 2012 will be the year of 3D WEB MMO online games.
UNITY engine and others will be a big hit next year, revenues on web base MMO will grow while client base MMO may slowdown. However for kids MMO and virtual worlds the Flash base world will still be the No.1 choice as a plugin is still considered an entry barrier for kids world where they are told not to install anything from the web.

VIRTUAL WORLDS MARKET

Forget about the teens and adults market as these are for MMO.
The kids market is the only market for virtual worlds but competition will be heavy certainly. China will be a new market arena for kids world and will boom sometime next year.

TBC ...

Taobao versus Ebay in China

This is a classic case study of how to fail in China ...

*Courtesy of Forbes.com ( I'm too lazy to write the story as Forbes Helen Wang wrote such a good story here ).



In 2004, eBay had just entered China and was planning to dominate the China market. Alibaba was a local Chinese company that helped small- and medium-sized enterprises conducting business online. Most people in the West had barely heard about it.


When eBay entered the China market, Jack Ma, founder and CEO of Alibaba, was alarmed that “someday, eBay would come in our direction.” He knew too well that there was no clear distinction between small businesses and individual consumers in China. As a defensive strategy, Ma decided to launch a competing consumer-to-consumer (C2C) auction site, not to make money, but to fend off eBay from taking away Alibaba’s customers.


A new Web site named Taobao—meaning “digging for treasure”—was launched free of charge for individuals buying and selling virtually any consumer goods, from cosmetics to electronic parts.
In 2004, I visited Alibaba at its headquarters in Hangzhou. It is located on a campus of three ten-story buildings in the northeastern part of Hangzhou, about a ten-minute taxi drive from West Lake. In the lobby, a flat panel TV was streaming video clips of Jack Ma speaking at various public events where his admirers, most of them in their twenties, were cheering him like a rock star. While visiting Alibaba’s headquarters in Hangzhou, I felt the same “insanely great” energy of entrepreneurship as I felt in Silicon Valley. When I asked a senior manager at Alibaba whether the company was worried that it would be bought by eBay, I was blown away by the answer: “We will buy eBay!”


EBay, on the other hand, began its most aggressive campaigns to dominate the market and thwart competitors. Soon after Taobao was launched, eBay signed exclusive advertising rights with major portals Sina, Sohu, and Netease with the intention of blocking advertisements from Taobao. In addition, eBay injected another $100 million to build its China operation, now renamed “eBay EachNet,” and was spreading its ads on buses, subway platforms, and everywhere else.


Ma fought back cleverly. Knowing that most small business people would rather watch TV than log on to the Internet, Ma secured advertisements for Taobao on major TV channels. In 2004, one could easily feel the heat of fierce competition between eBay EachNet and Taobao. When I was taking a taxi in Shanghai, I noticed the ads of eBay EachNet on the back of the driver’s seat; when I checked into my hotel, I heard the ads for Taobao popping up on TV almost every half hour. Since its name means “digging for treasure” in Chinese, it attracted a lot of attention by a smart play on words. While most people in the West had never heard of Taobao, its name was heard loud and strong in China.


Nevertheless, most industry observers were suspicious about Taobao’s future, particularly its sustainability. Unlike eBay EachNet, which charged its sellers for listing and transaction fees, Taobao was free to use. Neither Ma nor any members from the management team gave a definite timeline as to how long this “free period” was going to last. “Free is not a business model,” the doubters said. Some thought Ma was crazy and nicknamed him “Crazy Ma.”
No doubt Crazy Ma was changing the game. Taobao got a quick start with its free listings and continued to gain momentum as more and more users switched from eBay EachNet to Taobao.



According to a Morgan Stanley report, Taobao was more customer focused and user friendly than eBay EachNet. With most users not sophisticated about auctions, the majority of Taobao’s listings were for sales. Only 10 percent of its listings were for auctions, while eBay EachNet had about 40 percent of its listings for auctions. Taobao had also better terms for its customers: it offered longer listing periods (fourteen days) and let customers extend for one more period automatically. EBay EachNet did not have this flexibility.


Taobao’s listings appeared to be more customer-centric while eBay EachNet’s listings more product-centric. For example, Taobao’s listings were organized into several categories, such as “Men,” “Women,” and so on, while eBay EachNet stuck to its global platform, grouping users into “Buyers” and “Sellers.” At that time, China had about three hundred million cell phone users versus ninety million Internet users. Taobao offered instant messaging and voice mail to mobile phones for buyers and sellers because Chinese users were cell-phone savvy rather than computer savvy.


It was clear that Taobao had an upper hand against its global counterpart because it really understood Chinese customers. As a result, Taobao had higher customer satisfaction than eBay EachNet. According to iResearch, a Beijing-based research firm, the user satisfaction level was 77 percent for Taobao versus 62 percent for eBay EachNet. The experience of competing with eBay gave Ma tremendous confidence. He was determined to win: “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.”


By March 2006, Taobao had outpaced eBay EachNet and became the leader in China’s consumer-to-consumer (C2C) market, with 67 percent market share in terms of users, while eBay EachNet had only 29 percent market share. “The competition is over,” Ma exclaimed. “It’s time to claim the battlefield.”


On December 20, 2006, Meg Whitman, eBay’s then CEO, flew to Shanghai to take part in a press conference to announce a new joint venture with Beijing-based Internet portal Tom Online, which provides wireless value-added multimedia services. It was, in reality, a formal announcement of eBay’s withdrawal from the online auction market in China. EBay shut down its China site, eBay EachNet, and took a back seat to a company with only $173 million in revenue and no experience in the online auction business.


Jack Ma represents a new generation of savvy Chinese competitors who should not be underestimated. They study their markets and bring to bear their local knowledge. They learn from their competition and from their own mistakes as they move up the competitive landscape.
The case of Alibaba provides an invaluable lesson for multinationals to succeed in China market:
First, eBay failed to recognize that the Chinese market and the business environment are very different from that of the West. EBay sent a German manager to lead the China operation and brought in a chief technology officer from the United States. Neither one spoke Chinese or understood the local market. It was eBay’s biggest mistake. Second, because the top management team didn’t understand the local market, they spent a lot of money doing the wrong things, such as advertising on the Internet in a country where small businesses didn’t use the Internet. The fact that eBay had a strong brand in the United States didn’t mean it would be a strong brand in China. Third, rather than adapt products and services to local customers, eBay stuck to its “global platform,” which again did not fit local customers’ tastes and preferences.

China GOAT and WOLF cartoon success story

You cant escape without noticing China hottest animation characters the "Pleasant Goat and Big Big Wolf" on any kids retail outlets today in China from kids clothing, tricycles, toys, backpacks, candies and even Goat versus Wolf amusement arcade machines. Not since "Uproar in Heaven" in the 60's had any animations in China been so successful. Many years back there was another potential IP "Blue Cat" but due to internal conflicts, bad management and wrong business strategy they withered away to be replaced by a Goat and a Wolf.

"Pleasant Goat and Big Big Wolf" 2nd movie this year was again a huge success rivaled along AVATAR for cinema screens and ended up with the fourth highest gross of RMB 126 million, the 1st movie gross above RMB 80 million. NOTE - the movie took only RMB 10 million to make and do not feature a single celebrity or famed voice actor like many Pixar animated movies.

It was first aired in 2005 featuring a simply story about the ongoing war between a wolf and a village of goats. Huitailang ( Grey Wolf ) is determined to defeat the goats and bring home a healthy goat meat meal for his wife Hongtailang ( Red Wolf ). Its a little like Tom and Jerry for China. The humor designed into the cartoon depicts many of China daily lifestyles too such as in 2005 when Super Girl contest was hot, Hongtailang ( Red Wolf ) would enter a singing contest too in the animations. Such pop culture had help to win the show to the adults community.

The characters in the story is very well designed such as Lazy Goat is always either sleeping or eating, he'll keep his eyes closed when walking just to save extra energy. Huitailang ( Grey Wolf ) had all the 10 merits of a good husband as he loves his wife more than himself, he cooks and never argues back. It is said that girlfriends asked their boyfriends to be like Huitailang as the perfect Mr. Right.

The success of "Pleasant Goat and Big Big Wolf" had brought huge hopes for the Chinese animation industry. Almost every animation studios now wants to create the next Goat and Wolf but the success of "Pleasant Goat and Big Big Wolf" is not something that can be easily mimic overnight.

THE BIG MISTAKE

"ASTRO BOY" animation was the first casualty of the Goat Dream, the movie did not make it pass RMB 10 million and suffered a huge lost which caused the studio to close its doors in Hong Kong. More casualties will come as time past many will learn that the Goat Dream needs proper planning and strategic move to get success.

When the 1st "Pleasant Goat and Big Big Wolf" movie hit the screen they already have more than 300 episodes broadcasting in more than 100 channels. When the 2nd movie hit the screen there were 500 episodes that had been broadcasted Chinawide. The promoter SMG had used a huge marketing budget to push the movie months prior to its release (*it is a PUSH MARKETING effect that helped in its box office) without this no animated movie could gain good screen time.

THE REVENUES DREAM

Its true that connected animation studios benefits from a helping hand from the government, any animation shown on domestic TV even at midnight are rewarded by the government with funds. And as part of the protection policy for domestic cartoons, the only cartoons that national TV station can broadcast between 5pm to 8pm (*golden period) are Chinese cartoons.

The key revenues from "Pleasant Goat and Big Big Wolf" are still licensing of merchandise.

TBC ...

MYSPACE China Music Focus

MySpace.cn refocuses almost 100% on music in China in their new strategy to save their social network from failing. Will this new strategy work for MySpace in China ?

It should help them to have a good start if this were their original entry strategy into China. But today MySpace China is a little too late already. In the last 12 months MySpace China had gone through many transformation which had killed their audience practically. MySpace even said "sorry" to their members after a major face change which they eventually change it back again as many were not able to understand how to use it.

Although the original audience on MySpace China was not big but there was an audience around. Today their original audience are leaving as they felt they do not belongs to this new music community. Music is huge in China but China do not have a very huge indie music industry like the US and the West. Its a different game plan. MySpace China needs a plan that can maintain their core audience while being able to scale bigger. Music is not the key answer here as on every Chinese portal music had been a key offering. A huge chunk of Baidu traffics comes from music search and downloads, is MySpace China providing this ? Can MySpace China compete with Google music ?

A Game Discussion - THREE KINGDOM

The other day I had a chat with my CEO about game designs for movies MMO that we are producing. We discussed about our current game, its design and storyline within the game. The topic of what makes a great game storyline pop up and that our current movie game story do not allow the followings:

1.) Storyline is too short and shallow.

2.) Players takes time to understand a new storyline.

3.) Our game designer have a hard time expanding the movie storyline.

Its so unlike THREE KINGDOM where both players and designers know so much about the game. It makes it easier for both sides.

This got me thinking for a few days and went on to study the THREE KINGDOM games on the market today. WOW ! In total China have more than 150 THREE KINGDOM online games. "THREE KINGDOM" in China is really a big thing and its incarnation includes films. comics, TV shows, cartoons and even food. In 2008 movie director John Woo produce "RED CLIFF" Part 1 and 2 based on the THREE KINGDOMS and broke China box office held by James Cameron "Titanic". Even iPAD have a "Romance of Three Kingdoms" game from KOEI. There is even a restaurant theme after THREE KINGDOMS in Beijing which menu offers historical delicacies such as Liu Bei favorite dish "Liu Bei Spicy Fragrant Chicken".

There were reports that say even if a player is not familiar with history they could learn about THREE KINGDOMS from the game. "THREE KINGDOM KILLS" ( san guo sha ) is a mimic of Magic Gathering card game which became widely popular in China today. I heard the guys behind this card game is also making an online card game MMO.

BUT CAUTION

Andy Lau THREE KINGDOM movie was a complete disaster despite having top artist, big budget and a good director. Critics and viewers whom knows about THREE KINGDOMS gave it a lot of thumbs down from the fashion it uses to the lead actress and the fact that CaoCao do not have a female role in history. The movie backfire despite a good plot with lots of actions.

Only no more than 10 THREE KINGDOMS is doing good and reaping money from the market today in China. The reason could be overcrowded and/or bad storyline ... Unless you have the marketing muscle of Tencent whom can push any games upwards with its huge user base. That's why as a late comer to the THREE KINGDOMS MMO QQ still manages to be on top today.

What's next after Social Games ?

When Facebook shut down the free viral channels, started charging for advertising to replace spamming and demanded a cut of social games revenues via Facebook Credits they have changed the entire games mechanics of social games and its economics. Lets look at what's the key ingredients for social games success ?


1. FREE Virality *brings you the big numbers / spams do work no matter what you wanna think !

2. The Social Network Distribution *aka Connecting info with friends.


Why did Zynga canceled its deal with MSN to carry Farmville ?

For starter maybe MSN do not have a social network for distribution, Social Games cant succeed without the viral elements. This then presents a very interesting situation - it simply means social games cant get people to play them unless they are inside a social network such as on Facebook. I have heard this from Alex St. John *President of Hi5 whom is going big on more serious game play with Hi5 social network - "The only advantage social games have currently is that the Valley thinks they are “hot” and is willing to invest lots of money in them". Being "HOT" is not a bad thing for many studio's and companies tho' ...

It is said that outside of Facebook, Farmville simply can’t hold its own against games like Bejeweled and Scrabble when it comes to monetizing a casual audience. Well it maybe true as we dont see any farm game outside of a social network that's successful except now we have farm game on iPhone and Android phones which whom are not the top games as well *"Angry Birds" beats any farm game on the iPhone. So how do a farm game compares or competes against downloadable casual games ?

Lets check out MSN to see which are the top front page games ? If Farmville genuinely has superior online economics, it will be on the top chart. But it appears that Farmville isnt but games' like "Cubis" occupy and monetizes best on MSN.

THE ARGUMENT

Alex from Hi5 believe that - "social games” as we know them will be a forgotten internet fad, ultimately consumed by the already mature online market for downloadable and multiplayer games". Richard Garriot (*Ultima Online) and many top game experts worldwide joins in this believe and had started what is deem a more serious MMO game play for social networks or "using" social networks. Some argues that the demographics of social games consist of people whom had never played a single online games before. These are my and your mom, ladies, grandmothers and even the aunties next door. And they are spending money to pass their time. Will these people be your core audience for a more hard core MMO ?

Price and cost of operating a new game on Facebook had increased so much so that now its no longer a viable business for many to kick-start new games on Facebook. Look at the cost factors:

(a.) Facebook credits 30%
(b.) Advertising cost between USD 0.30 to 1.00 per user acquisition.
(c.) Servers and bandwidth cost.

*At the end of the day operators are paying out about 60% to 85% of their revenues if they are lucky to be able to design games that monetizes on Facebook. More than 80% of games do not monetize on Facebook today. Some are used to draw audiences and numbers that are then reused to cross promote their other games.

This means Facebook social games are now designed only for the bigger players whom have a deeper pocket funded by venture capital money.

FACEBOOK & SOCIAL NETWORKS AS A PLATFORM

Ultimately social games will still have a market on Facebook certainly but its growth will not go on forever as some gamers or players will move on to more sophisticated, highly competitive MMO games. This shift is already happening now slowly a step at a time with games like Kingdom of Camelot and we will soon see more to come.

The big boys like Zynga, Playdom, Playfish and some will eventually start refocusing their games and acquisition of real MMO studio's will begin maybe as early as mid to end 2011. At the end of the day an online game requires a more in depth game play and mechanics versus repetitive play. We can notice this "change" in China on the farm game operated by QQ where its already have more features and play methods than what Farmville is offering. The game design will continue to move towards being more complicated traditional MMO style while still maintaining the "Social Elements" whom had help rocketed social games today. Who knows maybe - "Social MMO" will be the next games revolution on Facebook !!!

MMO can use Facebook and its social graphs as a marketing, advertising and promotions tool as its extremely effective and efficient method to push and promote games. However we look at it Facebook and other social networks do have its use as a "Key Promoter" of games whatever genre it maybe. MMO companies should grab this opportunity espcially via Facebook Connect while its still unchanged today as the rules maybe rewritten again tomorrow.

"Social MMO" a EUROWEB Next Change

EURO WEBSOFT

*Social MMO Company

"Social MMO" is the new tagline and position for a Flash MMO studio I invested, the company had a tough time over the last 18 months trying hard to curn out a winner in the Chinese web MMO market. The company have a strong development team and some portfolio of games on the "COMING SOON" board and a change of direction is good to enable the company to tap into a new space.

What's "Social MMO" ?

We started off about 19 months ago as a WEB MMO company specializing on web-base MMORPG online games. EUROWEB kick started with 1 studio in Beijing but quickly added another studio in Shanghai. Both studio started to develop a similar engine ( *BUSINESS TIP - In games development the 1st chance of failure is not being able to develop a right game engine that can scale and not having a game play mechanics that works. So getting 2 teams to do almost the same work is not a stupid move but buying an insurance for the company and to increase the success chances. ). We launched our 1st game but responce was slightly "cold" so we had to take the game back into the garage and tweak / cut / patch / paste / recolor / bend it and even kick it so it can take a breath of fresh air again to be relaunched.

We just launch the 1st truly Flash MMORPG online game in Facebook embedded within the frame walls of Facebook itself. It kick started in Facebook Taiwan as we can see that the market for MMO online games had already began in Taiwan where above 50% of MMO online games are linked one way or another to Facebook. Some MMO's are already hitting good success as well. Taiwan is probably the more mature Facebook MMO market for a more serious game play.

My next blog will be telling of what's next after Social Games in Facebook ?

1.) We saw that Flash MMO games development numbers are increasing as the web-base games potentials in China increased.

2.) We also knew that today if you are not part of either Facebook or the Apps store ( iPhone / iPad and/or Android ) you are outdated for certain.

3.) We knew that the Social Graphs is a new method of pushing and creating games.

We wanted to be in this space but not as another social games studio. We wanted to be running ahead of time even today we knew we were already slow in entering this market. We want to make our next product-lines in the fore front of the social graphs and tapping upon it in a new way. So we were looking for a NEW tagline for the company which will become our future direction and position.

"SOCIAL MMO"

In our initial investors pitch we mention the fact that Facebook social games is too simply repetitive games that have little entry barrier to competitions and that Facebook is a damn good games platform to launch, promote, push games and to acquire users. And that we believe the NEXT WAVE of games on Facebook would be MMO online games which have a much deeper game play and mechanics than current social games.

And we still believe in this trend to come soon on Facebook and all social networks.

Taiwan is a good example where every hard core gamer is on Facebook. In China Kaixin.com and RenRen.com top money earner are not just "Farm Game" but traditional Web-based MMO online games link to the social networks and OAK PACIFIC is betting heavily on this area. Yes ! we may argue that the Chinese SNS is just using the platform to channel huge amount of users to these games. Isnt one of Facebook key feature the "traffic" too ?

But MMO games developer is not doing enough to create the next generation MMO online games that is designed to have the winning features and the ability to tap the phenomenon success of social graphs. EUROWEB will try to enhance our MMO games from now onwards to truely tap into the social graphs and to come up with unique next generation MMO linked to social networks and become a truely unique "SOCIAL MMO STUDIO".

China Next Games Platform - iPad and Tablets

Mobile games had never been a big hit in China simply because of piracy. The same goes for PSP and Nintendo DS as well. However the arrival of iPad and Tablets will change the mobile gaming industry tho' piracy will still be a key player for its games growth we will see ads dollars and probable multiplayer games monetizing via FREE to Play virtual items sales pretty soon.

I estimate this market will come into China sometime 2011 to 2012 where a new game platform will be born.

Its a no brainer as 91Mobile had already make a big hit out of allowing users to download FREE apps on iPhones and Android phones.