Milkshakes and Surviving the Social Gaming Bubble“The trend that I see is it's probably going to be one of the biggest bubbles and explosions that our industry's seen in a long time and I think when it crashes it's going to crash very hard."- Denis Dyack, Veteran Game Developer and Founder of Silicon Knights, sharing his thoughts on Social Games with IndustryGamers.
Bubbles… Been there, done that.
Ever wish that you could go back to the 1990s with what you know now and make a few incredible investments? Perhaps you’d camp outside of the Stanford Comp Sci program with blank checks in hand? Whether you’re an entrepreneur, marketer, or a habitually bored gamer, chances are good that you’ve engaged with some form of social game in the past two years.
Right now, between astonishing VC pre-money valuations and Wall Street preparing the IPO red carpet, any astute investor can’t help but ask… Is this another bubble? Worst case scenario, let’s assume YES – The good news is like other bubbles before it, there will exist both winners and losers. So how do we figure out who will win?
"The takeaway for social gaming companies is that analytics just aren’t enough."
Social Gaming 2.0, going “Hardcore”
Until now, the leading social gaming companies have followed a successful formula of creating casual games targeting a massive audience (Farmville, Words with Friends, etc.). There’s a new breed of social gaming companies that are focused on creating deeper/more engaging games for smaller, increasingly niche audiences. The theory is that by laser focusing your efforts on a more hardcore community, you’ll increase the time spent/average revenue per user, since a more entrenched player is more likely to micro transact. The companies leading this charge are Kabam Entertainment (Kingdoms of Camelot, Glory of Rome), MetroGames (Auto Hustle), and mobile game publisher Gameloft (Nova).
Milkshake Marketing
Ninety-Five percent of new products fail any given year, according to Professor Clayton Christensen of Innovator’s Dilemma fame. In a recent article Milkshake Marketing (HBS Working Knowledge, 2/2011), Christensen suggests companies could buck this trend via segmenting their products by “jobs-to-be-done” rather than traditional consumer analytics such as age/gender. In other words, someone doesn’t wake up in the morning and say “I’m a 16-year-old male, therefore I need Axe Body Spray” - Instead they “hire” the product to fulfill a certain job, in this case they’re more likely to attract a significant other if they don’t reek of body odor.
He uses a milkshake consumer case study for an east coast fast food chain as a means to explain his argument. Instead of narrowing focus on the type of person who bought milkshakes, Christensen expanded his research to capture the reasons why or “job-to-be-done” these consumers were buying. Simply put, instead of saying Men 18-34 tend to prefer chocolate therefore we need more chocolate milkshakes, he asked customers the reasons “why” they chose to purchase a milkshake versus another product such as orange juice or a sandwich. The 'aha' moment came when he discovered that people were buying milkshakes primarily (2nd only to flavor!) because they were easy to consume during their long/boring morning commute. Makes sense, since you only have one hand free while driving. But it’s easy to understand why someone might skip over this insight if the data available to them is heavy on traditional metrics.
Armed with these new insights, the company made two changes that were more successful than simply expanding flavors: 1) They made their milkshakes thicker so they lasted longer during commutes and 2) They made their shakes more interesting by adding chunks of fruit. These strategies were a resounding success when compared to an earlier strategy of simply offering additional flavors according to a traditional customer survey.
Why most Social Games really aren’t that Social
The takeaway for social gaming companies is that analytics just aren’t enough. A quick Google search of social gaming job descriptions will show the heavy emphasis these companies place on analytical skills. Ultimately, the factor that will separate the winners from the losers, are the companies that go beyond data analytics and challenge their employees to obsessively ask “Why?”
Consider the big picture reasons why people choose to interact with games on Facebook - Is it sheer boredom? A need to connect with new people? Fun with friends? The only way to find the truth is to talk to your fans and get inside their heads. The winners in this space will be the companies who do this most effectively.
While I applaud the innovative efforts of companies such as Gameloft who have attempted to create a fully 3D environment within the Facebook platform, it’s hard to justify that what gamers really want is a simple juxtaposition of their current console or PC gaming experience. The same logic applies to why it’s more difficult to find successful “hardcore” titles on the Nintendo Wii. This is not due to lack of brilliant game developers, but perhaps it’s because there’s a mismatch between the reasons fans purchase “hardcore” titles and the “job” the Wii fulfills for its owners.
Dynamic Personalization: The Future of Social Gaming?
In a recent interview, Jimmy Pitaro of the Disney Interactive Media Group stated that their strategy moving forward is to create “personalized experiences” based on the needs of the individual accessing content.
Perhaps this is where the future growth of social gaming exists - in dynamic experiences that fulfill different jobs for different people? Unlike a physical good (such as a milkshake), web based technologies have the advantage of being dynamic. While it’s impossible to have a finite answer, the truth remains that it will be quite a thrilling ride to see where the visionaries at places like Zynga and Kabam take our social adventures.
For the social data crunching brethren… Remember to keep drinkin’ your milkshakes.
