nPost Blog

The Future Of Gaming Consoles is Here (Duh)

See original post at Startup Whisperer:

General purpose devices are the de-facto platform for gaming.  No, I am not saying that the console is going to die.  The $20 billion dollar console market is going to be on a a slow steady decline over many years and its not going away overnight. 

But, the numbers don't lie.  Here is a chart that comprises a lot of different sources.  The net of it is that in Q4 2011 (which is the strongest quarter for console sales), there were 26.8M tablets shipped and 150M smartphone shipped worldwide.  Contrast these huge numbers with 21M dedicated game consoles and and 13M dedicated game handhelds (Sony Vita, etc) shipped in that quarter.

Game device unitsHere are the main reasons for this shift:

  • Consumers are now used to free – Consumers have been trained to play high production value and compelling games for free thanks to Apple and Android devices.  And according to this report from data analytics company, Flurry, 52% of the activity on these devices is games-related.

Today on mobile platforms over 90% of the applications are paid to download but that will        decrease to 12.5% by 2014 in a market that will expand to over $11 billion dollars.  All games will be free-to-play games monetized by micro-transactions (thru the purchased of virtual goods). 
The growth in these numbers are due to the explosive growth of the general purpose smartphone and tablets.  In addition, the friction-less integrated wallets and app stores make the consumption of these games super simple.  The days of paying $40 upfront on dedicated gaming devices are gone or will be gone soon.

 

  • Developers go where the money is – Android and iOS game revenues are already greater than dedicated game handhelds.  Developers tend to follow the money.   The proprietary devices just don't offer the unit shipments sold to attract developers.  This is another interesting study from Flurry that shows the revenue trends over time. 

Historically, the tight hardware and software integration of these closed systems has enabled large players like Microsoft, Nintendo, and Sony to build unique features as well as developer incentives.  But, today with the rapid innovations of the large players like Apple, the tablets become very powerful and portable go-to alternatives.

  • General purpose tablets are evolving faster than dedicated consoles, game handhelds -New consoles and game devices are few and far between these days with the next generation coming soon after many years without an update.  Apple is revving their product lines a couple of times a year.  The new iPad is a perfect example of how competitive it is in terms of display and performance.  The iPad's Retina Display has a resolution of 2,048 x 1,536 pixels.  That is a million more pixels than a typical high-definition TV that is used to display console games.

It also has wicked fast quad-core graphics with the new A5X processor. The new iPad has double the graphics capability of the iPad 2.

It is definitely an innovator's dilemma for the traditional games companies and publishers who have not yet adapted their strategies to contemplate the hegemonic shift of general purpose smartphones, tablets, and social networks.  I would certainly want to have an embrace-and-extend strategy that would allow me to leverage my existing brands and capital into building out a direction.  Denying that the Earth is not round is gaming in not a viable long-term strategic posture. 

The Future Of Gaming Consoles is Here (Duh)

See original post at Startup Whisperer:

General purpose devices are the de-facto platform for gaming.  No, I am not saying that the console is going to die.  The $20 billion dollar console market is going to be on a a slow steady decline over many years and its not going away overnight. 

But, the numbers don't lie.  Here is a chart that comprises a lot of different sources.  The net of it is that in Q4 2011 (which is the strongest quarter for console sales), there were 26.8M tablets shipped and 150M smartphone shipped worldwide.  Contrast these huge numbers with 21M dedicated game consoles and and 13M dedicated game handhelds (Sony Vita, etc) shipped in that quarter.

Game device unitsHere are the main reasons for this shift:

  • Consumers are now used to free – Consumers have been trained to play high production value and compelling games for free thanks to Apple and Android devices.  And according to this report from data analytics company, Flurry, 52% of the activity on these devices is games-related.

Today on mobile platforms over 90% of the applications are paid to download but that will        decrease to 12.5% by 2014 in a market that will expand to over $11 billion dollars.  All games will be free-to-play games monetized by micro-transactions (thru the purchased of virtual goods). 
The growth in these numbers are due to the explosive growth of the general purpose smartphone and tablets.  In addition, the friction-less integrated wallets and app stores make the consumption of these games super simple.  The days of paying $40 upfront on dedicated gaming devices are gone or will be gone soon.

 

  • Developers go where the money is – Android and iOS game revenues are already greater than dedicated game handhelds.  Developers tend to follow the money.   The proprietary devices just don't offer the unit shipments sold to attract developers.  This is another interesting study from Flurry that shows the revenue trends over time. 

Historically, the tight hardware and software integration of these closed systems has enabled large players like Microsoft, Nintendo, and Sony to build unique features as well as developer incentives.  But, today with the rapid innovations of the large players like Apple, the tablets become very powerful and portable go-to alternatives.

  • General purpose tablets are evolving faster than dedicated consoles, game handhelds -New consoles and game devices are few and far between these days with the next generation coming soon after many years without an update.  Apple is revving their product lines a couple of times a year.  The new iPad is a perfect example of how competitive it is in terms of display and performance.  The iPad's Retina Display has a resolution of 2,048 x 1,536 pixels.  That is a million more pixels than a typical high-definition TV that is used to display console games.

It also has wicked fast quad-core graphics with the new A5X processor. The new iPad has double the graphics capability of the iPad 2.

It is definitely an innovator's dilemma for the traditional games companies and publishers who have not yet adapted their strategies to contemplate the hegemonic shift of general purpose smartphones, tablets, and social networks.  I would certainly want to have an embrace-and-extend strategy that would allow me to leverage my existing brands and capital into building out a direction.  Denying that the Earth is not round is gaming in not a viable long-term strategic posture. 

The secret startup formula revealed!

See original post at BRYCE DOT VC:

The secret startup formula revealed!

The secret startup formula revealed!

See original post at BRYCE DOT VC:

The secret startup formula revealed!

The secret startup formula revealed!

See original post at BRYCE DOT VC:

The secret startup formula revealed!

"What’s fascinating is that there doesn’t seem to be much, if any, quantitative reason…"

See original post at BRYCE DOT VC:

“What’s fascinating is that there doesn’t seem to be much, if any, quantitative reason for why Spark stayed the course. OMGpop had been spinning its wheels for more than four years, while companies like Zynga kept churning out hit after hit. Sources say that it was simply a case of Spark being enamored with the OMGpop team – a “gut feel” sort of thing.”

Primack

"What’s fascinating is that there doesn’t seem to be much, if any, quantitative reason…"

See original post at BRYCE DOT VC:

“What’s fascinating is that there doesn’t seem to be much, if any, quantitative reason for why Spark stayed the course. OMGpop had been spinning its wheels for more than four years, while companies like Zynga kept churning out hit after hit. Sources say that it was simply a case of Spark being enamored with the OMGpop team – a “gut feel” sort of thing.”

Primack

Quora: Will CPE (Cost Per Engagement) advertising ever take off?

See original post at Andrew Chen (@andrew_chen):

Will CPE (Cost Per Engagement) advertising ever take off?
I doubt it – the reason is that it’s targeting metrics at the kind of marketers that don’t care too much about metrics.

Broadly speaking, there’s two kind of marketers in the world – a ton could be written about this, so I’ll just provide some sweeping generalizations:

Direct response marketers are companies that are typically very focused on ROI when they buy advertising – often these include companies you’ve never heard of in ecommerce, online dating, financial services, etc., where it’s easy to calculate the value of a customer and they are primarily getting their traffic through paid marketing channels. They like to back everything out to ROI by comparing lifetime value to cost per customer, and if not that, then at least cost-per-action or some similarly concrete metric.

In many cases, these kinds of marketers prefer search marketing, email marketing, telesales, and other things where it’s easy to quantify what’s going on – they stay away from Super Bowl ads though. They prefer CPA and CPC versus CPM or sponsorships.

Brand marketers are companies you’ve heard of and have seen a lot of advertising for – they are typically targeting a large consumer base, they want to position their products differently relative to their competition and don’t have great ways to quantify the value of a customer. For example, Coca-Cola doesn’t know the LTV of a customer nor what the cost-per-customer looks like for a billboard ad they’ve bought.

For these guys, they are used to hiring big ad agencies to help them advertise on billboards, television, the front page of Yahoo, etc. They may buy search marketing, but have different goals than ROI. (For example, they may just want the top ad, and don’t care too much about ROI)

Why CPE is a weird metric for both DR and brands
The reason why cost-per-engagement is a weird metric is that ROI-focused marketers (that is, direct response marketers), don’t care about “engagement.” They want to know if people are going to buy, and if their media spend is going to be profitable.

As a result, the “E” part of CPE is really only a part that brands care about. And yet, they don’t care that much about CPE because they aren’t focused on the cost of the campaign as the #1 priority. Instead, it’s more important where the ads are being placed, how strong the ad creative is being used, etc.

One scenario to demonstrate this: If they could buy the front page of YouTube, even if that had a higher CPE, a brand advertiser would be happier with that than being shown in random footers of YouTube (the “remnant”) even at a lower CPE. They are looking to establish their brand, not optimize their spend.

What will be prevalent instead?
I think even with the advent of lots of ad opportunities on social sites, the dominate business model will still be CPM/sponsorships for brand advertisers, and CPC/CPA for direct response. Basically, nothing much will change.

If it turns out that CPE correlates to CPA/CPC, then DR marketers will end up liking it.

Also, CPE might turn into a secondary metric that you use alongside really strong placement of ads- maybe as a way to establish a bonus or upside on the campaign, but I don’t think it’ll ever happen that the dominant form of advertising on the web will be that ad agencies will put in a CPE “bid” into self-serve systems :)

I answered this question on Quora – more great answers over there.

Quora: Will CPE (Cost Per Engagement) advertising ever take off?

See original post at Andrew Chen (@andrew_chen):

Will CPE (Cost Per Engagement) advertising ever take off?
I doubt it – the reason is that it’s targeting metrics at the kind of marketers that don’t care too much about metrics.

Broadly speaking, there’s two kind of marketers in the world – a ton could be written about this, so I’ll just provide some sweeping generalizations:

Direct response marketers are companies that are typically very focused on ROI when they buy advertising – often these include companies you’ve never heard of in ecommerce, online dating, financial services, etc., where it’s easy to calculate the value of a customer and they are primarily getting their traffic through paid marketing channels. They like to back everything out to ROI by comparing lifetime value to cost per customer, and if not that, then at least cost-per-action or some similarly concrete metric.

In many cases, these kinds of marketers prefer search marketing, email marketing, telesales, and other things where it’s easy to quantify what’s going on – they stay away from Super Bowl ads though. They prefer CPA and CPC versus CPM or sponsorships.

Brand marketers are companies you’ve heard of and have seen a lot of advertising for – they are typically targeting a large consumer base, they want to position their products differently relative to their competition and don’t have great ways to quantify the value of a customer. For example, Coca-Cola doesn’t know the LTV of a customer nor what the cost-per-customer looks like for a billboard ad they’ve bought.

For these guys, they are used to hiring big ad agencies to help them advertise on billboards, television, the front page of Yahoo, etc. They may buy search marketing, but have different goals than ROI. (For example, they may just want the top ad, and don’t care too much about ROI)

Why CPE is a weird metric for both DR and brands
The reason why cost-per-engagement is a weird metric is that ROI-focused marketers (that is, direct response marketers), don’t care about “engagement.” They want to know if people are going to buy, and if their media spend is going to be profitable.

As a result, the “E” part of CPE is really only a part that brands care about. And yet, they don’t care that much about CPE because they aren’t focused on the cost of the campaign as the #1 priority. Instead, it’s more important where the ads are being placed, how strong the ad creative is being used, etc.

One scenario to demonstrate this: If they could buy the front page of YouTube, even if that had a higher CPE, a brand advertiser would be happier with that than being shown in random footers of YouTube (the “remnant”) even at a lower CPE. They are looking to establish their brand, not optimize their spend.

What will be prevalent instead?
I think even with the advent of lots of ad opportunities on social sites, the dominate business model will still be CPM/sponsorships for brand advertisers, and CPC/CPA for direct response. Basically, nothing much will change.

If it turns out that CPE correlates to CPA/CPC, then DR marketers will end up liking it.

Also, CPE might turn into a secondary metric that you use alongside really strong placement of ads- maybe as a way to establish a bonus or upside on the campaign, but I don’t think it’ll ever happen that the dominant form of advertising on the web will be that ad agencies will put in a CPE “bid” into self-serve systems :)

I answered this question on Quora – more great answers over there.

Quora: Will CPE (Cost Per Engagement) advertising ever take off?

See original post at Andrew Chen (@andrew_chen):

Will CPE (Cost Per Engagement) advertising ever take off?
I doubt it – the reason is that it’s targeting metrics at the kind of marketers that don’t care too much about metrics.

Broadly speaking, there’s two kind of marketers in the world – a ton could be written about this, so I’ll just provide some sweeping generalizations:

Direct response marketers are companies that are typically very focused on ROI when they buy advertising – often these include companies you’ve never heard of in ecommerce, online dating, financial services, etc., where it’s easy to calculate the value of a customer and they are primarily getting their traffic through paid marketing channels. They like to back everything out to ROI by comparing lifetime value to cost per customer, and if not that, then at least cost-per-action or some similarly concrete metric.

In many cases, these kinds of marketers prefer search marketing, email marketing, telesales, and other things where it’s easy to quantify what’s going on – they stay away from Super Bowl ads though. They prefer CPA and CPC versus CPM or sponsorships.

Brand marketers are companies you’ve heard of and have seen a lot of advertising for – they are typically targeting a large consumer base, they want to position their products differently relative to their competition and don’t have great ways to quantify the value of a customer. For example, Coca-Cola doesn’t know the LTV of a customer nor what the cost-per-customer looks like for a billboard ad they’ve bought.

For these guys, they are used to hiring big ad agencies to help them advertise on billboards, television, the front page of Yahoo, etc. They may buy search marketing, but have different goals than ROI. (For example, they may just want the top ad, and don’t care too much about ROI)

Why CPE is a weird metric for both DR and brands
The reason why cost-per-engagement is a weird metric is that ROI-focused marketers (that is, direct response marketers), don’t care about “engagement.” They want to know if people are going to buy, and if their media spend is going to be profitable.

As a result, the “E” part of CPE is really only a part that brands care about. And yet, they don’t care that much about CPE because they aren’t focused on the cost of the campaign as the #1 priority. Instead, it’s more important where the ads are being placed, how strong the ad creative is being used, etc.

One scenario to demonstrate this: If they could buy the front page of YouTube, even if that had a higher CPE, a brand advertiser would be happier with that than being shown in random footers of YouTube (the “remnant”) even at a lower CPE. They are looking to establish their brand, not optimize their spend.

What will be prevalent instead?
I think even with the advent of lots of ad opportunities on social sites, the dominate business model will still be CPM/sponsorships for brand advertisers, and CPC/CPA for direct response. Basically, nothing much will change.

If it turns out that CPE correlates to CPA/CPC, then DR marketers will end up liking it.

Also, CPE might turn into a secondary metric that you use alongside really strong placement of ads- maybe as a way to establish a bonus or upside on the campaign, but I don’t think it’ll ever happen that the dominant form of advertising on the web will be that ad agencies will put in a CPE “bid” into self-serve systems :)

I answered this question on Quora – more great answers over there.

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