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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    [EN] Online gamers don't like monthly fees

    Free-to-Play Becomes the Rule for Gazillion Entertainment and Other Startups

    Online Gaming Shuns Subscription Model Spawned by 'World of Warcraft'
    By Lizette Chapman

    For much of the past decade, online-gaming companies poured millions of dollars into developing, marketing and releasing their signature creations to a community of gamers willing to pay set monthly fees to play.

    That worked out well—until the gamers stopped paying.

    The shift in consumer preferences from subscription-style games to a free-to-play model has caught some startups off guard.

    Gazillion Entertainment Inc., for example, raised $151 million in venture funding over the past nine years to use the subscription model, following the lead of hugely successful games like Activision Blizzard Inc. ATVI -0.15% 's "World of Warcraft." But now Gazillion, the maker of "Marvel Heroes," is hitting the reset button, shifting to free-to-play games at a considerable cost to investors.

    The startup, which investors valued at around $300 million last year, was recently recapitalized at a valuation of $40 million. Led by new backer Roth Capital Partners LLC, the $10 million round included participation from existing investors Oak Investment Partners and Temasek Holdings Pte Ltd.

    "There are lots of companies that go through twists and turns," said Ren Riley, a partner at Oak Investment Partners and the company's earliest and largest venture investor. "We believe a lot of risk in this company is now behind it."

    Gazillion, Trion Worlds Inc. and other online-gaming companies were founded as the frenzy was peaking for massively multiplayer online, or MMO, games. Thanks to beefier servers and other technology, thousands of players were able to compete and cooperate with each other simultaneously from locations around the globe. Inspired by "World of Warcraft," whose monthly subscribers quadrupled during 2006 to six million, many startups initially pursued the subscription model.

    Such startups raised large amounts of venture funding to develop high-quality MMOs. But by the time they were ready to launch, the gaming market had changed.

    As mobile devices proliferated and free-to-play games became more common, online gamers became less willing to swallow a recurring monthly expense, and the genre largely fell out of favor. After hitting 12 million subscribers in 2010, "World of Warcraft" has steadily lost players and now hovers around 7.6 million.

    Trion, which since its founding in 2005 has raised at least $185 million from venture investors, including Trinity Ventures and DCM, has made all its games free-to-play. The Redwood City, Calif., company rebuilt its "Rift" and "Defiance" games to be free in June 2012 and plans for its next two games, "ArcheAge" and "Trove," to be free to play as well.

    Gazillion, which relied on a subscription model with its previous games, has rebuilt its primary game, "Marvel Heroes," as free-to-play. The San Mateo, Calif., startup has an exclusive deal with Marvel Entertainment LLC to use the comic-book characters in its MMO role-playing games.

    Another company, Electronic Arts Inc. EA -0.84% 's BioWare, launched "Star Wars: The Old Republic" in 2011 with significant buzz. It quickly gained subscribers but then lost some 25% of its players before embracing a free-to-play model about a year later.

    Other MMO games, including Blue Hole Studio Inc.'s "Tera" and Sony Online Entertainment's "EverQuest," also made the shift.

    Free-to-play games generate most of their revenue from a small portion of players—the most engaged ones—who purchase time-saving shortcuts, special weapons and other features to enhance the experience as they advance through different levels.

    According to gaming-research firm Newzoo BV, this shift in gaming dollars is increasing. The market for free-to-play MMO games represents the fastest-growing gaming segment world-wide, projected by Newzoo to increase to $13.3 billion in 2016 from $6.5 billion in 2012.

    Meanwhile, subscription MMOs are expected to drop to $6.3 billion from $6.6 billion over the same stretch, according to Newzoo.

    Changing business models in the gaming sector requires a major overhaul of information-technology, marketing and other departments.

    Unlike subscription games, which rely on a blockbuster launch to get a critical mass of gamers to sign up and create a community in one swoop, the free-to-play games develop in stages. Servers and other IT infrastructure are added as needed, and marketing is also gradual.

    Companies take cues from a game's early users, introducing new features, levels and characters based on data the company gathers and community suggestions.

    "These companies spend a lot more time getting to know their players before they pump up the marketing," Newzoo Chief Executive Peter Warman said.

    To that end, Gazillion has hired a head of sales and marketing and will use much of its fresh funding to expand the sales and marketing team and promote "Marvel Heroes," which lets gamers play as comic-book characters such as Iron Man and Captain America to defeat villains.

    "The nature of the market is you release it and iterate, iterate, iterate," Mr. Riley said. "Now we're adding more marketing and analytics in the company. That's the DNA that needs to be injected."

    Gazillion also plans to introduce the game to France and Germany this year, followed by Brazil, Russia and ultimately Asia. The company, which now employs around 100, is also planning to announce products related to Marvel's "Guardians of the Galaxy" theatrical release in August.

    Gazillion Chief Executive Dave Brevik said the company had $11 million in 2013 revenue and he expects $25 million this year based on the number of daily active users and the number of players converting from free to paying customers.

    He said "Marvel Heroes" has three million registered users, and the game has doubled the number of daily active users and its monthly revenue during the past five months. The conversion from free to paid users is also strong, with roughly 14% of total users now paying for special characters, time savers and other items to make the games more enjoyable. The ARPPU, or average revenue per paying user, is more than $50 a month, Mr. Brevik said.

    Roughly 85% of Gazillion's revenue comes from "Marvel Heroes," and the company's recent valuation reflects the promise of the game, Mr. Brevik said.

    "The sins of the past are going to be erased. This [recapitalization] gives us a way to put that in the past and really flourish," said Mr. Brevik, a gaming veteran who helped create Blizzard Entertainment Inc.'s "Diablo" before assuming leadership of the reorganized company last year. "We've just begun to scratch the surface."

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    How Google Can Steal Facebook's Candy


    Significantly, the largest driver of Facebook’s mobile revenue is app-install ads -- that is, ads that encourage users to download an application rather than simply promote a product. According to AdKnowledge chief executive officer Ben Legg, whose company handles about 2 percent of Facebook’s ad sales, app-install ads make up well over half of Facebook’s mobile revenue. These ad units are largely purchased by free-to-play game publishers such as King (maker of Candy Crush Saga) and Big Fish Games (the Bejeweled series), which leverage Facebook’s incredible demographic data to target the small percentage of players who will spend hundreds of dollars on in-app purchases.

    The cycle goes something like this:

    1. Publisher launches a free-to-play game, usually on the back of previous hits
    2. Some fraction of players become “digital whales,” repeatedly spending real money on in-game upgrades
    3. The publisher figures out the demographic profile of these profitable players, and uses Facebook mobile ads to reach potential players with the same profile

    The technique is so effective that there is actually a shortage of these ad slots, leading to extremely high prices. It's a reason to be bullish about Facebook’s alleged plans for a new mobile ad network.

    So, what's the problem? Actually, Facebook’s dependence on app-install ads primarily driven by free-to-play games leaves the company exposed to both Apple and Google, albeit in two different ways.

    On the Apple side, Facebook should be wary of Apple making significant changes to App Store policies around free-to-play games. There are many people in the broader Apple ecosystem who strongly disapprove of free-to-play, and the slight whiff of scamminess surrounding an industry predicated on using psychological tricks to separate people from their money could easily lead to a clampdown, especially if Apple’s management becomes concerned that having such apps is degrading their brand.

    How likely is this? Well, Apple itself is addicted to the revenue numbers generated by free-to-play games, and nearly every announcement from Cupertino is led with an update on the app store, with developer payments being front-and-center. In addition, if Apple were to re-jigger the formula for its "top" lists away from the focus on upfront costs and gross sales that favors free-to-play -- as many developers are pressing it to do -- alternative means of reaching customers, such as Facebook’s ad units, would become even more valuable.

    Google is a bigger threat; last week it announced its own app-install ad units for both search-result pages and its YouTube subsidiary. Those two locations may not be as good as Facebook’s timeline for surfacing games you didn’t know you wanted, but Google will have the best possible data driving those units: app usage. In the blog post announcing the initiative, Google explicitly called out the ability to "reach people who are your most likely customers, based on the apps they use, the frequency of use and the types of in-app purchases they make.”

    That type of data is even more valuable to free-to-play publishers than demographic data, and Facebook runs the risk of becoming the second option for the sorts of advertisers that are currently its best customers.

    Última edição por 5ms; 03-05-2014 às 15:55.

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