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Opinion: What Virtual Worlds, Facebook And Fads Mean For The Game Industry
by Leigh Alexander [PC, Console/PC, Exclusive]
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April 21, 2010
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[In an environment where investors predict social play will cannibalize the traditional game industry, Gamasutra news director Leigh Alexander looks at the passing of the virtual world fad for lessons on the future.]
The return to growth in March's NPD results showed further year-over-year strengthening of the retail games business forecast for much of the year to come. More importantly, it may also show steps toward strengthening investor confidence in what just a few months ago was pegged as an all-but-dead business.
Doom and gloom articles in the mainstream media and in financial publications pointed to explosive social media, console game development budgets at critical mass, and a Wii bubble-bust as reasons for a market contraction the reversal of which none could easily predict.
But even at our own game development events, like GDC, the prevalence of confident social venture capitalists and developers making an exodus to the Facebook and iPhone space made even the most optimistic traditional game creator -- or player -- feel a little cynical.
Certainly the gaming-lite trend is poised to continue, and it remains a fruitful space for the investment of resources and attention on all sides. But the Facebook gold rush is also highly reminiscent of another buzzworthy trend that's not too far behind us: the virtual worlds craze.
This Is My Second Self
Just two to three years ago, avatar-based social interaction was considered the wave of the future. As internet savvy rapidly went mainstream starting at the turn of the millennium, it ceased to be the province of only the early adopters, and the way users established identities online and interacted with one another began to draw a good deal of consideration.
Perhaps ironically, the rapid growth of the video game business between 2006 and 2009 may have contributed to the virtual worlds boom. The cross-pollination of two rapid-growth, high-tech areas seemed natural: Why not take the digital imagery, multiplayer environments and concepts of self-representation that made traditional video games rich and engrossing, and adapt them for a new audience seeking fresh entertainment?
Thus the virtual worlds craze was born -- online avatar-based social spaces meant to offer users accessible, immersive environments without the complexity or intimidation factor of an actual game.
Second Life and the news and commentary around it were all the rage, from TV and radio to Time magazine. Linden Lab CEO Philip Rosedale was a household name to the business world, and the word "avatar" was everywhere. Avatar-based social interaction was so integral, some argued, that the natural evolution of the Web itself would see static pages yield in favor of entirely 3D environments.
The 3D Web Fallacy
Media company Virtual Worlds Management found that in 2008 and 2009, the amount of venture capital placed behind companies working in the virtual worlds space approached $600 million in two years. There was some dispute over the data, as many companies that were primarily video game technology providers, like Havok, were included among the investments, but nonetheless, virtual worlds at one time established themselves as one of the most active investment spaces in new media.
Sony made a major effort to get behind the idea with Home, and while it maintains Home is a success as a hub for its developers and advertisers, it remains unclear how the virtual world is doing as a revenue source.
Needless to say, the "3D web" hasn't materialized. In fact, some of the most visible spots in the virtual worlds boom, such as There.com and Metaplace, ended up closing just a few years after they were established. Second Life of course still has its core constituency of users, but it's widely viewed as a representation of a particular community, rather than as a trend that will continue to expand and gain more users.
So what happened to the next big thing? The explosive success of Facebook and Twitter show that people very much want to socialize online. It's just that perhaps the simplest paradigm is the best one; your average web user desires immediacy and efficiency, and simple social tools online make it easy to create a digital "persona" simply by interacting, and without the need to spend time -- or money -- in a character editor dressing up in virtual clothing.
The Pop
The bust of the virtual worlds bubble, however, provides important lessons about what engages several different vertices of users; what they will and won't sustain interest in spending money on, and what kinds of mechanics of interaction are necessary to not just capture a rush of interest, but to sustain long-term engagement.
Many of these lessons have been integrated back into the larger video game environment that helped spawn them -- users will pay for in-game items and other incremental content, the traditional gaming world has learned. Character customization can be a meaningful value-add in an otherwise linear interactive experience.
And the social features of Xbox Live take a large share of the credit for the Xbox 360's major share of the next-gen console market. For further proof of the wisdom in simplicity, take the fact that gamers have shown they would rather glance at a leaderboard list than walk their avatar over to a virtual trophy cabinet.
And today's venture capitalists, social media professionals, game designers and investors would do well to observe the rise and fall of the virtual worlds fad before they get too comfortable with their Facebook successes. Just like the virtual worlds companies, social gaming firms tend to measure their success and their future viability solely by metrics: average revenue per user, average time spent playing, number of uniques.
But when one monetizes on metrics alone, there's a danger in missing the audience. Virtual worlds lost out in the end because they strove to predict what users would want to do, whereas simpler platforms thrived because they developed as a response to the way people were already using the internet.
But the virtual worlds bust proves that in new media paradigms, the high-growth period is often too early to to start counting dollars, at least until the dust settles -- no matter how many dollars there are. Metrics aren't in and of themselves an indicator of the long-term viability of a paradigm. Certainly social gaming is here to stay -- but the proving period that will show which companies, games and gameplay formats thrive and which ebb away is still ongoing.
It also shows that the baby ought not to be thrown out with the bathwater; social gaming will not cannibalize the traditional industry any more than virtual worlds could devour the traditional web.
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I'm not sure what is absurd about social games, other than that they are devoid of interesting interaction. But that doesn't make them any different than many traditional games.
Virtual worlds died because they got into an arms race of graphical quality and experience *before* they launched. In other words, it was incredibly expensive to produce and launch a virtual world - perhaps as much as 100x the cost of launching a social game.
I also think that virtual worlds never reached the scale of proven success that social games have already achieved: 85 million Farmville players, 120 million registered users at Bigpoint, etc.
Learning from past bubbles is sensible (and I think there are elements of bubble with social games). Believing that AAA console development is thriving is, in my view, not sensible
Why not? Because many people do not want to socialize when they go online except perhaps with people they actually know (i.e. a different form of distance communications like the telephone). Social networking appeals to certain people with certain psychological traits, but it's certainly not the norm for everyone, or even the majority. It's similar to how some people can be the "life of the party" while others (the majority, really) are much more inclined to stay in the audience, or even find a corner to quietly think about various things or perhaps talk to someone they know. Just because such people do not make themselves obvious doesn't mean they are a minority or should be discounted in any way. Not that I think Leigh was implying that they should, of course, but I thought it was worth pointing out the group that tends to get overlooked a lot.
Of course, the problem goes back to chasing money, as always, and is a fundamental flaw with capitalistic systems. Short term profit rules everything. Can you imagine creating some of the wonders of the world if all that was focused on at the time was short term profit... or any profit at all, for that matter? Many wonderful creations and inventions that we continue to marvel at and appreciate today would never have been experienced.
Thus we have the great harem-tombs of ancient Egypt in which hundreds of women were buried alive with their Pharaoh.
Or look at all the cathedrals that arose in Europe as the result of the mentality that it was greater for God/the church to prosper than the individual.
So it's not Capitalism that's the root of the "problem."
@Dave capitalism doesn't equate to short-term profit. A true believer of capitalism would want the system to continue to function and to spread and thus would avoid the dangers of short-term profit goals. What you describe is driven by greed and humans will inject greed into any economic system.
Any human system that works when it’s created eventually develops a constituency. Over time, the few constituents who benefit the most try to lock down the rules so that they continue to benefit the most, regardless of the system’s original mission. (That's not necessarily greed so much as a concern for personal comfort over someone else's.) Still later, those folks leave, at which point the system (if it’s big enough) becomes all -- and only -- about perpetuating its own survival in its current form. Then it's on the glide path to extinction because it can no longer adapt to a changing environment.
It happens to businesses; it happens to governments; it happens to civilizations. It’s a natural effect of all human organizations over time. And in particular it’s not a flaw unique to capitalism, which has done more to bring more good things to more people than any other form of human organization in history with the exception of democratic/republican self-government.
Which has little to do with the relatively low cost and higher participation numbers of social nets versus virtual worlds, which is enough to explain VC salivation over the former, but there you go. :)
These social games, like the virtual worlds, Guitar Heroes and Solitaires before them, are just meaninless, if borderline compulsive ones for some people.Most everyone that plays them only do so because these game are planned out to addict people, and not much more.Once they get over it, they will go away - and keep thinking that games are all banal, frivolous stuff.
Although you discuss social games' monetizationability, you don't mention social games' viral aspect, which separates them from virtual worlds. Virality is intertwined with monetization, which go hand-in-hand with game play. Users invite their friends to play Farmville, Mafia Wars and other games because they're fun. Fun is the main ingredient that drives virality, and with that, comes the monetization aspect that has culminated in Zynga, Playdoom, and Playfish's success.
Social games do not cater to core-gamers. In fact, most casual gamers don't consider themselves "gamers."
So what is the user base that social game developers cater to? People with friends. It's that simple.
Social games allow you to gift a zebra to your high school friend, or it lets you give an energy pack to your brother's friend (who you barely know). Social games allow a person to connect with an acquaintance, friend, or stranger on a tiny level that lets them know, "Hey, I care about you."
Facebook, MySpace, Hi5, and many other social platforms have provided fertile soil for social games to grow and allow users various ways (i.e. games) to show their appreciation for their friends and loved ones. This urge to connect and remind others that you care for them is a basic human need that resonates with these games.
Further, social games are intrinsically tied to the future of these social environments; and it's clear to see that Facebook is a phenomenon that is not going to "burst" anytime soon.
The updates from games like Farmville are becoming synonymous with SPAM. The gold rush to get the next big Facebook game is only going to compound this spam factor until we start seeking shelter on other social networking sites, much like when people fled MySpace band-spammers for the once-pure pastures of Facebook.