@andrewchen

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.

Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of AH Capital Management, L.L.C. (“a16z”) or its respective affiliates. AH Capital Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. The posts are not directed to any investors or potential investors, and do not constitute an offer to sell -- or a solicitation of an offer to buy -- any securities, and may not be used or relied upon in evaluating the merits of any investment.

The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any charts provided here are for informational purposes only, and should not be relied upon when making any investment decision. Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, I have not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. The content speaks only as of the date indicated.

Under no circumstances should any posts or other information provided on this website -- or on associated content distribution outlets -- be construed as an offer soliciting the purchase or sale of any security or interest in any pooled investment vehicle sponsored, discussed, or mentioned by a16z personnel. Nor should it be construed as an offer to provide investment advisory services; an offer to invest in an a16z-managed pooled investment vehicle will be made separately and only by means of the confidential offering documents of the specific pooled investment vehicles -- which should be read in their entirety, and only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined as accredited investors and qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters. There can be no assurances that a16z’s investment objectives will be achieved or investment strategies will be successful. Any investment in a vehicle managed by a16z involves a high degree of risk including the risk that the entire amount invested is lost. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by a16z is available at https://a16z.com/investments/. Excluded from this list are investments (and certain publicly traded cryptocurrencies/ digital assets) for which the issuer has not provided permission for a16z to disclose publicly. Past results of Andreessen Horowitz’s investments, pooled investment vehicles, or investment strategies are not necessarily indicative of future results. Please see https://a16z.com/disclosures for additional important information.