Identifying what needs to be done

Let's begin by stating the obvious. The reason the developers are going to portals in the first place is that they need customers for their games. The reason they keep going back to portals is that they can't keep the customers they initially acquired. This is a root cause that developers can address with careful application of both game design and business strategy.

• Build a service that keeps the customers you have. In the current model, developers lose their customers the moment they finish with the developer's latest game. One proven solution is to build an ongoing service that keeps those customers around, so there is no need to acquire them again for the next title. Think of what Battle.net did for Diablo, or what the ranking and comment services do for Kongregate. This is the game that portals are playing. Game developers can play it better by building their own services.
• Treat portals as a customer acquisition tool. If you are using portals as a pure revenue source, you are thinking overly short term. Your game demo is ideally built to sell itself. It is a self-contained sales machine that hooks users and encourages them to make a purchase. The only real value of a portal, marketing fluff aside, is to increase the number of people that get to experience your demo. When you start thinking of portals as a customer acquisition tool instead of your primary revenue generation channel, other opportunities emerge.

Running services need not be the exclusive domain of portals. There are limits to the community building that can be accomplished by portals. Most ultimately don't own the games and are not game developers. A far more potent online community can be built if the core game mechanics integrate tightly with the community features. The next generation of highly sticky community sites will be built by game developers, not clearing houses which treat games like commodities.

Benefits of developer-run game services

Online communities are an attractive addition to a casual game company's core competencies because they mitigate most of the dominant business strategy's obvious weaknesses:

• Predictable long term revenue stream. Users tend to stick around and they tend to keep spending money within their community. There is less worry about being only as good as your last game. By keeping your community healthy, you can keep the revenue stream steady.
• Pricing power. The ability to control virtual currency and sell items and levels within the game gives the developers far more pricing flexibility than is present in the current "$19.95" download market. This means that you can price in ways that deliver more value to more customers. Overall, this results in higher lifetime revenue from each customer.
• Extend sales of existing titles. Core casual games that serve a larger multiplayer metagame end up being played long past the time that the initial content has been worked through.
• Increased insulation from external market forces. Since the customers using the service have a deep, invested relationship with the developers, they are less likely to be influenced by the activities of other portals or the existence of other games.

Webkinz and Club Penguin are two recent examples that both demonstrate how a multiuser environment combined with competent casual games can build a highly profitable and lasting user base. Such games rival World of Warcraft in the size of their user base, are run by relatively small support teams, and exhibit impressive profitability. The sale of Club Penguin for $350 million demonstrates the financial viability of running a game developer as a service.