Get the newsletter · 2018 essays (PDF) · Featured · Recent

Web + Games = ?

Eyeballs moving to online games

First off, I’m very excited to see the flow of eyeballs to the games industry from other media. You might have heard the assertion that as people move online, TV dollars will move to internet advertising. The same holds true for gaming. Furthermore, in-browser web games are achieving remarkable success as internet properties in themselves.

This convergence of interactive entertainment can be seen here:

As sites like ClubPenguin, Neopets, and Habbo Hotel grow, they are creating a new model for gaming, where the value goes up over time, rather than the traditional Hollywood hits model where the value decays as soon as the media is released. Although the games industry has much to learn from the Web 2.0 world in the form of social networking, viral growth, and monetization, the games industry has much to teach the Web 2.0 about audience engagement, emergent gameplay, and other ideas. You may have seen the "I have more friends than you" game on MySpace, or the Facebook group that’s actually a "If 100,000 people join this group, this girl will date me" game.

The short of it is, if you invest in Internet, you’ll have to invest in games.

Next generation monetization of user communities
Another fascinating lesson from the GDC is that games are far ahead in their monetization of user communities, as they’ve found not one but THREE revenue streams:

  1.   Advertising (both in-game and out-of-game)
  2.   Subscription revenues
  3.   Virtual items

For me, the third is the most fascinating – Habbo Hotel claims that they’ve sold $50MM of virtual furniture in the last year, 5 cents at a time. They also charge for small feature upgrades, as well as customizations to the web versions of their user profiles. As they move closer to the web, you can imagine them bringing a considerable amount of expertise in virtual goods that MySpace or Facebook would do well to copy.

And finally, I was amazed by the raw excitement that was permeating the expo floor. It’s clear that whether it’s on the console platforms or in the Internet, you have a lot of new blood and new ideas floating around.

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.