DEEP (digital media) THOUGHTS http://deepdigitalmediathoughts.com i promise deep thinking. about digital media. posterous.com Sat, 29 Jan 2011 15:41:00 -0800 Groupon & China http://deepdigitalmediathoughts.com/41385437 http://deepdigitalmediathoughts.com/41385437

With every passing day, it seems like prominent media sites/sources are publishing rumors news about Groupon's strategy for entering the large, chinese local advertising and ecommerce markets.

First, Techcrunch reported that Groupon was using a significant portion of its recent $950mm round to hire dozens/hundreds of Harvard MBAs and China McKinsey management consultants to build out a local presence themselves in China. Given Groupon's business model, and hiring practices in the US, it is questionable at best why hundreds of Harvard MBAs and McKinsey alums might want to move to China and become a feet on the street, smile and dial team to convince local merchants to use Groupon over the plethora of local competitors.

Then came the AllThingsDigital reprint of reports that Groupon would be forming a 50/50 JV with Chinese internet giant Tencent, to build out the next dominant ecommerce startup in China. This also seemed odd, since Tencent already has their own website in this space. It is not clear what Groupon could offer Tencent in China, as Tencent already has superior engineering/technology compared to Groupon, the largest community of Chinese internet users as their existing customers, and there is no shortage of people that Tencent could hire themselves to become salespeople to call up local merchants. All Groupon could offer is their brand name, which has little/no value to Chinese users, especially since another Groupon clone already launched the website Groupon.cn in China.

Then came another AllThingsDigital update on the Groupon China saga, stating that they are close to investing in leading Chinese daily deal website Lashou at a valuation of $1 billion. The most puzzling thing about this report, is that it came at the same time as another report that Chinese Groupon competitors were forming an alliance, and promising to blacklist any/all employees that were poached by Groupon in China, including Lashou.

All of this is enough to make anyone's head spin, but one thing is clear. Groupon desperately wants to enter the Chinese market to continue to drive their growth story to investors in their upcoming IPO (no doubt wanting to swindle all of the China un-savvy American investors who have bought into recent Chinese startup IPOs like Youku, with little knowledge of how the Chinese market works, and only drawn to the fact that the companies are large, growing, and focusing on the China market). Another thing is clear, and it is that Groupon has absolutely no idea what it wants to do in China, as it continues to stumble through new announcements of changes to their strategy, which is being covered by prominent US media sites/blogs that likewise have little knowledge of how the Chinese market works.

At the end of the day, it is clear that Groupon's international strategy is based around acquiring local players, and figuring out how to leverage Groupon's existing technology and economies of scale (if applicable) to those local markets around the world. They want to accelerate the growth of local players, unfortunately due to their blatantly American corporate culture and childlike ambitions to take over the world as quickly as they have taken over the US market, they are going to be in for some serious growing pains, and cultural lessons around the world. They should focus on securing their leadership in the US market and other markets culturally similar to the US, build out real technology that makes it easier for local merchants to self serve and monitor deals, and leave markets like China alone, and let local companies figure out how best to fight for market share there.

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Wed, 17 Nov 2010 15:34:00 -0800 misconceptions about online game statistics http://deepdigitalmediathoughts.com/misconceptions-about-online-game-statistics http://deepdigitalmediathoughts.com/misconceptions-about-online-game-statistics

i will be concise, and not even link out to various stories/blogposts that have quoted these stats, but i absolutely hate it when the media take anecdotal metrics literally and publish them to define business scale or business model viability. recently, several online game publishers have converted previously paid subscription games to free to play. these games then claim to see their "revenues double". that can mean many things, including:

1) total revenue derived from the game post conversion = total revenue derived from game pre-conversion X 2 (impossible)
2) total revenue on day after conversion = total revenue on day before conversion (substitute day with week, month, etc) X 2 (probable, but unlikely)
3) total revenue by some other segmented analysis = total revenue by same segmented analysis before conversion X 2 (probable)

Note how the media seems to always assume that #1 is the case, and that these games that have been operating as paid subscription services for months or even years, are suddenly crushing it as free to play games. not likely. i am a firm believer in the free to play model but success with that model is driven by content and game design quality combined with business model, not business model alone.

second, a lot of people seem to think that WoW has 12 million subscribers worldwide each paying $15/month to play the game. this is also so far from the truth it is laughable every time i read this metric cited by reputable blogs and websites. WoW uses the subscription model in western markets, but in emerging markets like China and other parts of East Asia, they are published by 3rd parties or via JVs (Netease in China, JVs or subsidiaries in Korea and Taiwan), and none of them use a paid monthly subscription model, and more than 50% of their users come from these regions.

please do some homework already when you quote these insanely inaccurate "facts" and "metrics"!

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Wed, 01 Sep 2010 00:03:00 -0700 just replaced @flixster with @foodspotting on 1st page of iphone apps (i cheat w/5x5 winterboard theme) http://deepdigitalmediathoughts.com/just-replaced-flixster-with-foodspotting-on-1 http://deepdigitalmediathoughts.com/just-replaced-flixster-with-foodspotting-on-1

im one of those people who like to take pictures of what they eat. and i love to look at pictures of food to decide what to eat. so @foodspotting is an awesome app in my book. especially helpful since i can really "see" what food is nearby vs. getting a less useful list. additionally, foodspotting lets me check into the restaurant on foursquare. since i eat food more often than i watch movies, flixster has been bumped to page 2. 

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Tue, 31 Aug 2010 23:33:09 -0700 market size for free to play online games... will be bigger than "experts" think http://deepdigitalmediathoughts.com/market-size-for-free-to-play-online-games-wil http://deepdigitalmediathoughts.com/market-size-for-free-to-play-online-games-wil hat tip to mr takahashi over at venturebeat for pointing out a new DFC Intelligence report on the projected market size for free to play online games. after publishing an earlier report that pegged the overall global market size at $7bn in 2015, they have now predicted that the market in English language markets will be $2bn by 2015. I am not quite sure if this is a North American estimate, or North America + UK, but last time I checked, many other growing online gaming markets are English language as well (including all of Scandanavia, Singapore, Malaysia, Philippines, etc). i will go on a limb and predict that revenues generated by online game companies in English speaking countries will reach $2bn by 2013. after losing ground and users to more agile startups in 2010 and 2011, you have to believe that incumbent retail box dinosaurs will get their act together and make a stronger effort to transition their multi-billion dollar franchises to this model. additionally, it is unlikely that it will be creativity in packaging and bundling subscription-based offerings that will drive this growth, but rather creativity in design that will take this business model into account from the ground up to create a compelling user experience for players. more often than not, free to play online games run into issues around imbalance and creating a grind-based user progression to encourage players to pay for power to stay competitive or to pay to keep up. in any case, it is a fascinating business model which has proven to be very lucrative around the world, and the gaming industry is most definitely in the midst of an interesting transition.

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Tue, 31 Aug 2010 00:20:55 -0700 social game engagement & fb ad revenues http://deepdigitalmediathoughts.com/social-game-engagement-fb-ad-revenues http://deepdigitalmediathoughts.com/social-game-engagement-fb-ad-revenues anyone else look at Inside Social Games weekly fastest growing FB games by MAU list, and think that this is a reflection of how much revenues FB is deriving from game publishers? and little else? i mean, in all seriousness, when this list isn't filled with Zynga games, i feel like it is a down week in terms of ad revenues on FB. it looks like Playdom, with their new Disney balance sheet, is now spending the big bucks "acquiring" MAUs, aka paying for users to build initial crowd of players on their games. i am very curious to see what the avg lifetime of a user is for some of these social games, because across the board, their game designs are weak and do not stimulate long-term engagement or replayability. the games are definitely getting deeper, and getting more polish on the surface, but again MAU numbers are driven entirely by ad spend nowadays.

one metric that would demonstrate engagement over time would be avg DAUs over a trailing seven day period, or maybe over some smaller fixed period of time. in general, we need to stop obsessing over the MAU metric because at the end of the day, it is only an indicator for user acquisition spend. i think i am currently counted as an MAU for a dozen social games. and i don't consider myself an actual player for any of them.

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Sun, 27 Jun 2010 10:25:03 -0700 Safe to be wrong (if you are employed by FIFA) http://deepdigitalmediathoughts.com/safe-to-be-wrong-if-you-are-employed-by-fifa http://deepdigitalmediathoughts.com/safe-to-be-wrong-if-you-are-employed-by-fifa

in all seriousness, they definitely need to implement video replay if the call in question is whether or not a GOAL is scored. i am all for tradition but this is pretty ludicrous, especially in events that occur once every four years, when every right and wrong call can be analyzed by millions around the world instantaneously.

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Wed, 23 Jun 2010 23:29:00 -0700 yogurt chains and what they can teach us about product design and user experience http://deepdigitalmediathoughts.com/yogurt-chains-and-what-they-can-teach-us-abou http://deepdigitalmediathoughts.com/yogurt-chains-and-what-they-can-teach-us-abou
the yogurt craze is here. in LA, it is primarily Pinkberry and Yogurtland, in nyc there are literally dozens of knock-offs lining every neighborhood. i think it has a little something to do with Americans wanting to be healthier, and these chains supposedly providing fat free sugar free frozen treats (that is, before you pile fat and sugar filled candies and fruits on your yogurt). in any case, this blog isn't about nutrition, it is about digital media. and there is much to learn from Pinkberry and Yogurtland when it comes to product design and user experience.

Pinkberry is the incumbent, Yogurt 1.0 (or maybe 1.5). you enter the store, it looks all well lit and modernly designed, but something about the product and service is just off. you go to the counter, ask for one of four egregiously overpriced sizes, then add a bunch of toppings. only at no point do you get to handle your dessert until it is fully prepared and served to you. and boy are they stingy with their sizes and topping portions. you ask for 3 toppings, or you ask for 1 topping, and they give you approximately the same weight of toppings. and you can only put up to 3 toppings on the yogurt (because it is too hard to squeeze an equal portion of 4 different toppings into any of their cup sizes). this experience is what I would call, NOT WIN. if i really just want a bunch of crumbled heath bar pieces and pineapple, with a little bit of pomegranate yogurt, i am shit out of luck. i get a full cup of pomegranate yogurt with like 3 pieces of heath and 3 perfectly even chunks of pineapple.

Now take Yogurtland. From the moment you walk in, it is all about the customer experience and providing choice. you can sample as many flavors as you want, and when you are ready to finally make the plunge and grab a cup, you can continue to experiment to your heart's content and get as much of as many flavors as you want. you then proceed to the toppings bar where you can continue to experiment to your heart's content and get as much of whatever combination of toppings as you want. granted, much like the end result when you build that bison burger with avacado and bacon and horseradish cheddar and bermuda red onions and hard boiled eggs with apricot sauce on a honey wheat bun at the counter, your final concoction isn't always what you intended for it to be at the outset. but you have the full freedom to get exactly what you want, with nothing or no one to get in your way.

at the end of the day, if you are building a product or service for an end user, you can either think you know exactly what your customer wants and give it to them, or you can let your customers tell you what they want and offer them the choice to experience your product the way they want to. i personally believe it is always better to err on the side of giving the customers choice, and optimizing the customer experience. design your product or service in a way that allows users to create their own experience. there is no one right way to design something, but there is definitely one WRONG way, and that is where you decide what your customer wants.

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Tue, 15 Jun 2010 01:20:51 -0700 This is the start of something big http://deepdigitalmediathoughts.com/this-is-the-start-of-something-big-0 http://deepdigitalmediathoughts.com/this-is-the-start-of-something-big-0 Not to be lost among the countless other big announcements on day 0 of the 2010 E3 Expo here in Los Angeles, Microsoft & ABC made a pretty big announcement. ESPN3 (ESPN's broadband sports network which streams thousands of live sporting events) will stream for free to all Xbox Live Gold subscribers ($50/month annual). That's right - the only remaining reason to pay a cableco (seriously, these have to be some of the most hated companies not named BP or AT&T), is about to come to a close for many people in a target demo that consumes a lot of media, young to middle-aged dudes. With a combination of Hulu, Youtube, Netflix and now ESPN for Xbox Live, guys will be able to consume any kind of content they want on a TV. I have been saying this for years, but the entire idea of how cablecos price their service, by subsidizing the cost of 90% of content that a user never sees (or wants to see, or even knows about) with high prices on the content they do want to see. A la carte pricing for content and freedom from cablecos is something i am very much looking forward to. Now if only a justin.tv channel can remain online during a world cup match in the interim....

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Sun, 13 Jun 2010 23:30:20 -0700 UJAM and the future of music creation/production/collaboration http://deepdigitalmediathoughts.com/ujam-and-the-future-of-music-creationproducti http://deepdigitalmediathoughts.com/ujam-and-the-future-of-music-creationproducti

just made the connection that the startup that placed runner-up at TC Disrupt last month in NYC is one and the same as the German startup founded by non other than Pharrell Williams and Hans Zimmer (yes THAT Hans Zimmer). super excited to see just how this platform develops.

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Sat, 12 Jun 2010 01:09:10 -0700 @deadmau5 in the new dj hero trailer = awesome http://deepdigitalmediathoughts.com/deadmau5-in-the-new-dj-hero-trailer-awesome http://deepdigitalmediathoughts.com/deadmau5-in-the-new-dj-hero-trailer-awesome

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Fri, 11 Jun 2010 11:03:44 -0700 awesome start to the world cup http://deepdigitalmediathoughts.com/awesome-start-to-the-world-cup http://deepdigitalmediathoughts.com/awesome-start-to-the-world-cup

posterous, please add footytube video embeds!!!

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Fri, 11 Jun 2010 00:33:00 -0700 Future of free to play online games http://deepdigitalmediathoughts.com/future-of-free-to-play-online-games http://deepdigitalmediathoughts.com/future-of-free-to-play-online-games

Two interesting articles were published today, first by Dean at VentureBeat titled Free to play games will grow, but not as fast as some believe, and the second on Gamasutra titled Farmville Sheds Another 9 Million Users in Latest Facebook Rankings. In the first article, Dean cites a report by DFC Intelligence and LiveGamer claiming that revenues from microtransactions based online games will grow, but that it is growing at a slower rate than competing research firms are suggesting. One interesting thing to note in this relatively young space, is that numbers from the 2 research firms that conduct research in this area could be SO FAR APART. Inside Network released a report that claims 2009 saw revenues of $1bn in the space, while DFC Intelligence quotes $350mm. Those numbers are 3x apart. It reminds me of when people used to go to compare Compete and Quantcast numbers to estimate site traffic. I would guess that the number is actually somewhere in between, but likely closer to Inside Network's estimates given the reported revenues of major Social Gaming players Zynga, Playdom, Playfish and Crowdstar, and their supposed breakdown of direct revenue to offer/advertising revenue (I have always been skeptical of these company-reported percentages).

 
In any case, the other article, the one on Gamasutra, is particularly interesting because it tracks how formerly fast-growing games are faring in this new Facebook gaming ecosystem. It is clear that most of the theme-skinned sim games have seen their brightest days (in all seriousness though I am playing Frontierville, please be my neighbor, Oregon Trail + Farmville = so much awesome), but that the two games continuing to grow are Zynga's synchronous social casino and Mindjolt's casual gaming portal. Social gaming will likely never hit the scale that games were able to achieve in 2009 by wall spamming users into creating dummy accounts that counted as MAUs (in MMOs and session based games, a majority of these MAUs are called inactive players or churned trials).
 
That being said, it is interesting to see the gaming industry media's focus on social games when covering the free to play space. The only other games typically mentioned by journalists & research reports are Nexon's MapleStory or SOE's Free Realms to check the kid's focused mmo/virtual world box and Battlefield Heroes or Dungeons & Dragons Online to check the core game box, without providing much context about how those games use the free to play model (what items do they sell, how does it impact game design). The numbers for these games will never match the 75mm and falling numbers of Farmville, and thus are the reason why they get 1/10 the word count allocation in these articles.
 
One market that is interesting to look at when considering the free to play games space is China. China breaks up the games, very literally, into 3 major categories: MMOs, Social Games, and ACGs or advanced casual games. While MMOs and social games get most of the ink in the US, the most popular games list in China is actually populated mainly by ACGs (contrary to popular belief WoW is NOT the most popular game in China, nor has it been for a while). These games are typically less involved than MMOs due to the lack of a truly persistent world, but much more engaging than a social game because of the more advanced game mechanics and design. They target broader audiences than MMOs because they are perceived as less hardcore, but more focused gamers than the 45 year old Zynga moms that have replaced Yahoo Mahjong with Farmville. China is a particularly interesting market because games HAVE to be free to play to get audiences - a console market has never existed in the general public (console market in china is driven almost entirely by expats on modded consoles), and piracy is way too rampant to charge anything for software that exists on a shiny disc.
 
As such, ACGs have become the dominant category in the fastest growing Internet and online gaming market in the world. ACGs range from FPS games to racing games to Street Fighter style fighting games. And boy to players spend money in these games. Tencent (disclaimer: they are an investor in my company Riot Games) alone made nearly $1bn in virtual goods sales in their online games in 2009, which makes me question DFC Intelligence's estimate that these type of games only made $2.1bn in all of Asia in 2009 (given the virtual goods revenues of companies like Nexon, Netease, Shanda, The9, etc). This is definitely a category to keep an eye on in the US as the MMO market continues to stagnate (as PE shops and VCs continue to dump $50+mm into MMO developers looking to create WoW-killers) and as the social gaming market experiences a drive towards quality resulting in the decline of the types of games that were able to achieve massive scale and monetization in 2009 (on the backs of fb ad arbitrage and incentivized user acquisition driving meaningless signups that look good in AppData.com and on Inside Social Games but are meaningless otherwise). There are some companies doing exciting things in the ACG space and I look forward to tracking the development of this category in the US in 2010.

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Wed, 02 Jun 2010 21:53:09 -0700 No longer safe to be wrong http://deepdigitalmediathoughts.com/no-longer-safe-to-be-wrong http://deepdigitalmediathoughts.com/no-longer-safe-to-be-wrong

as i'm sure many of you have heard (AND SEEN) already - we almost had the 3rd perfect game in the past THREE WEEKS. but, as everyone now knows, it wasn't meant to be because an ump blew it (official video here http://bit.ly/cCe2Vj). The sad thing is, if this happened 5, 10 years ago, it would have hit on midnight sportscenter, or maybe the paper the following morning. and it would probably blow over (as egregious as it sounds).

but because of the immediacy of the web, and the chatter on twitter (check http://search.twitter.com/search?q=Armando+Galarraga or http://search.twitter.com/search?q=Jim+Joyce), thousands of people have not only learned about this crazy retarded ump call, but have actually seen the video proof that the ump was 100% WRONG. amazing stuff. you just can't hide, and MLB needs to catch up with the times and implement video replay because moments like this should now be allowed to happen anymore. and jim joyce should never be allowed to ump a major league game (or little league game, or any game for that matter).

one plus out of this is that it unearthed the story of harvey haddix (http://en.wikipedia.org/wiki/Harvey_Haddix), a pitcher who really got screwed in the grand scheme of things. dude pitched 12 innings of perfect baseball, 36 up 36 down. against hank aaron's braves. but his team was not able to score a run and they lost 1-0 in the 13th inning.

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Wed, 26 May 2010 08:59:00 -0700 how ABC blew the LOST finale http://deepdigitalmediathoughts.com/how-abc-blew-the-lost-finale http://deepdigitalmediathoughts.com/how-abc-blew-the-lost-finale

so i finally got around to watching the LOST series finale last night (on hulu). i know there are many mixed reactions as to how well it did or didn't conclude the series, but this isn't about that issue. This is about how a network (ABC) failed to capitalize on 6 seasons of viewer intrigue/interest, and basically tried to create an event out of a show that only drew its most diehard fans at the end (as evidenced by its 13.5mm avg viewers for the finale viewer count vs. 20-25mm viewers it averaged for Season 1 and 2 episodes). first of all, it moved LOST from it's regular Tuesday timeslot to Sunday night, and then advertised via TV & radio that the show would start at 7pm since it was a 2.5hr episode. I guess if you are one of the 10 people in the US who still reads TV Guide or checks TV listings you would know that the 2hr recap show started at 7pm, otherwise most people were probably surprised to see that the 2.5hrs they had blocked from 7-9:30pm had become a 4.5 block from 7-11:30pm. Well done, ABC. On top of that, you would have to be a bold viewer to not have followed LOST for this season alone, much less the past few seasons, to suddenly decided that it was a good day for a 5hr LOST marathon.

all in all, it just seemed like they were doing their most hardcore fans a disservice trying to capture the fringe/former viewers into this evening-long trap. LOST viewing parties already occurred on Tuesdays throughout this year, and it was a day people looked forward to (to see how unsatisfied LOST producers could make them feel with the weird Season 6 storyline, and the blatant disregard for 90% of the plotlines from previous seasons).

at the end of the day, I am sad to see LOST go. it was a great show and was definitely fun(/frustrating) to follow over the years.

i'm sort of surprised the backwards thinking execs at ABC didn't create a LOST movie, to make their 10-12mm loyal viewers drop $10 (or $15 for IMAX, or $18 for 3D IMAX!) to see how the story played out. maybe that will still happen since they left most of the story unresolved.

lastly, how funny is this Huffington Post headline and post?? Ratings soar?? Easily powered ABC to win THE NIGHT?? how sad is it that for a tentpole event like a LOST series finale, ABC has to move it to Sunday to get the highest ratings of the night. it's so sad what they turned this show into business-wise.

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Tue, 25 May 2010 12:18:22 -0700 AOL blown opportunities http://deepdigitalmediathoughts.com/aol-blown-opportunities http://deepdigitalmediathoughts.com/aol-blown-opportunities interesting post up on techcrunch (http://tcrn.ch/AolYahoo) about how AOL could have purchased Yahoo WAY BACK IN THE DAY for $2mm. This isn't really a blown opportunity per say, but just outlines one of many instances where AOL failed to transform their dominant presence, first as an ISP and second as a communications platform (AIM) to become a game-changing company. they could have easily become the US version of Tencent, a multi-media powerhouse that provides value add content and services to its users via multiple business models. AOL could've/should've become the company that provided Facebook-like networking services, twitter-like communication services and Steam-like gaming services. But they blew it.

disclaimer: Tencent led an investment at my current employer Riot Games last summer, and I will likely frequently mention their awesomeness because they are super-killing it in China

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Tue, 25 May 2010 10:45:30 -0700 Wow this looks empty http://deepdigitalmediathoughts.com/wow-this-looks-empty http://deepdigitalmediathoughts.com/wow-this-looks-empty I promise to resolve this in the near future.

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