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A lot has been written about Zynga, where they go from here, how they need to move more aggressively into mobile, into real world gambling. But in my opinion, Zynga’s biggest opportunity and the lowest hanging fruit for them is to create IP with their games. By adding a small element of IP into the games they already have in the pipeline, they can meaningfully impact their existing business. But IP creation has never been a part of the Silicon Valley DNA, and Zynga is unabashedly a creation of Silicon Valley.
Before we get into it, let’s first establish what I mean by IP. When I talk about IP, I mean characters and stories that people love. So, Duke Nuke’em == IP. Farmville != IP. Mario == IP. Mob Wars != IP. Angry Birds == IP. Mickey Mouse == IP. Make sense? Sweet!
Why Silicon Valley doesn’t get IP
Silicon Valley likes content IP almost as much as Andy Reid likes to run the football (this is a joke for the five readers that cheer for the Philadelphia Eagles. The answer, to save you some googling, is “not at all”). Talk to any Silicon Valley VC, and as soon as you talk IP, they will get excited. But as soon as they find out that you’re talk about characters and story rather than algorithms and k-factor, their eyes glaze over (because, like, ohmygosh, who would want to talk about story).
When it comes to creating IP, investors don’t know how to evaluate good IP from bad IP. They’ll be the first ones to admit it, and that’s why they smartly steer clear of it.
They will say, “I don’t touch content, that’s a hits driven business” as if putting money into Facebook in some altruistic act that didn’t require a blockbuster outcome. In fact, when you get to the underlying argument, the concern is not whether or not you can create a hit (we’re all in the business of creating hits), but it’s whether or not you can create value beyond that hit.
Nevertheless, this idea of content feels way too warm and fuzzy for the tech investment community to get behind.
Along Came Zynga
Then, along came Zynga . Zynga spoke Valleyese. They spoke of conversion funnels and A/B testing. K-factor and virality. Finally, something Silicon Valley could better understand. Predictability. Metrics driven. That got people excited. And boy did it work. This free-to-play model people long thought could only ever work in Asia now came stateside in a BIG way, and Zynga led the charge.
But Zynga games are primarily designed without characters. This is not some great oversight by the brain trust over at Zynga HQ, it is an explicit design choice. In order for you to picture that this happy farm is indeed your farm, it needs to be your farm, not Farmer Joe’s farm. If all your friends are also playing as Farmer Joe, well, it gets a little confusing.
The brilliance of Zynga was that it was a pioneer in taking the best web practices and applying them to game development. For the longest time, game development was the opposite of the lean startup – develop for years, launch big and splashy, pray for the best. Metrics? Conversion funnels? Foreign concepts in the land of game design.
So Zynga marched forward, dominating the competition and carving out a massive install footprint and was printing money faster than a Wall Street bailout. All along, it never needed to create IP.
Why IP matters?
So why does IP even matter? To me, there are two simple reasons why IP matters when it comes to games:
While I would argue ARPU will generally always be higher in games where the player is the character, the revenue opportunity is confined to the game itself. On the other hand, you have someone like Rovio who has created IP that can generate revenue in licensing, in animation, in publishing, in plush toys. This has been Disney’s playbook since the invention of Disney. Create a character, and then send them through the company divisions: books, CDs, movies, theme park, toys, pens, lunchboxes and so on. Nobody is dying to buy a Farmville t-shirt. Nobody is dying to watch Farmville the Saturday morning cartoon. It’s a game, there’s no story or character. It’s not like you can just take something like Battleship and turn it into a mov…uh. Let’s move on.
2) Shelf Life
As we’ve recently seen, games have a shelf life. When you build a game like Farmville, it’s more about game mechanics than it is about story or IP.
Game mechanics are easy to rip off. Game mechanics have a shelf life. The very best games in the world can only be played by their most rabid fans for a year? Two years? Eventually, people will tire of mechanics. If you don’t create IP, it’s hard to cross over into other platforms. On the other hand, look at Mario. He’s in Donkey Kong, he’s in Mario Kart, Mario World etc. People fall in love with characters and will follow them wherever they go. My kids will buy a pack of tofu simply because Kung Fu Panda is on it. THAT’S the power of IP. There’s a 45 minute wait to get on the Little Mermaid ride at Disneyland for a 90 minute movie made 20 years ago. THAT’S the power of IP.
What Can Be Done?
In some ways, Zynga already understands the value of IP. They went and licensed Indiana Jones for Indiana Jones Adventure World, and the results are telling. In a Gamasutra article, they stated that people responded most strongly to any text that involved a character from the Indiana Jones world. We are relational beings by nature. We love characters, personality and story. If it’s coming from a character we love, we’ll pay attention!
So if Zynga’s games are designed to NOT have characters and story, how can they change that? Well, for starters, with Indiana Jones, they already have. They just don’t own the characters or IP. They could build a stronger cast of characters that surround your virtual world. Once they create characters with personality, they can shortcut a lot of things by simply using the characters and what they represent to communicate that. Moreover, these characters can cross over from game to game.
On the mobile side, the opportunity is even greater. Take, for example, their Zombie Smash game (made by Game Doctors before getting acquired by Zynga). They already created a main character, and have a host of zombies that have totally different behaviors. But if they simply gave the main character a name (like Halfbrick does with Barry Steakfries), and created more personality with each Zombie, it would be easier to take these characters into different games, and to have them crossover into other media.
So yes, games are a hit driven business. So are tech companies (in fact, Fred Wilson might be onto something when he said apps are like TV shows). But if you can create IP, you can continue to create value far beyond the life of the game mechanic before you have to create another hit. To the people that questions whether Angry Birds needs to prove they can launch another franchise, I’d say that they can still go for quite some time before they have to worry about that. Just ask Disney about Mickey Mouse, or Warner Bros about Bugs Bunny or Stan Lee about Spiderman. IP can go a long long way.
Zynga is already making games. If they can add elements of IP and get beyond their Silicon Valley roots, they can create many more opportunities from their hits.
I’ll leave you with this thought – as great as the iPhone is, 10, 20 years from now it will be all but gone (when Blackberry makes an unexpected surprise comeback! Yeah!). Yet 20 years from now, kids will still be playing with Buzz and Woody and the characters that were created by Pixar. Steve Jobs’ most enduring legacy will be the stories and characters he made possible through Pixar. Even he admitted as much.
 = When I say Silicon Valley, I mean the overall culture. Of course there are people who get it, but I speak of the overall attitude
Wow, it’s been a while. I did not write a single post in 2012. Oh well. So this is a hot topic that may potentially draw me some ire from my conservative Christian brethren. All I ask is that in discussion, let’s keep it civil shall we? We can be agreeable, even when we disagree.
As a young Christian, I tended to just accept widely held evangelical beliefs as gospel. However, as I’ve gotten older, through prayer and reading the Bible, I’ve started looking more critically at what “popular” evangelical beliefs really meant, and whether they fit what the Bible itself proclaimed. It’s dangerous to blindly follow what our Christian leaders preach from the pulpit or proclaim on TV and most dangerous just to follow general consensus. After all, our faith is founded on the principle that ALL have sinned and fallen short of the grace of God, and the Bible very clearly depicts people who seemed to follow the “popular” beliefs which in hind sight seem ridiculous. Those people were called Pharisees.
Gay marriage is one of those issues that I’ve changed my opinions on, and here’s why.
Many detractors point to verses in the bible condemning homosexuality. While some make the clear case that the bible is unequivocal in its condemnation, others point to cultural context to say it was written for a specific time and context. My point is this: regardless of whether you believe it is right or wrong, I don’t think the Bible calls us to fight this politically. If we want the law to uphold what the Bible is clear on, then why don’t we fight to make divorce illegal? Or adultery illegal? Or greed illegal? Do we suddenly think that by making gay marriage illegal we will lead all these gay people to Christ? Does anyone seriously think that? Of those people, how many of us are actually going out and making gay friends? It’s a lot easier to toss a vote or make a contribution than it is to get involved in people’s lives who may not share our values. But ask yourself this question: What Would Jesus Do? The Jesus I read about went around meeting people, getting to know those who were tossed aside by the pharisees, not to condemn them, but to love them. Is this what we are modeling? Is this the behavior evangelicals are exhibiting? We think gay marriage is against how God intended for marriage to be. Well, guess what, I can easily point to many a gay couple whose marriage is closer to what God intended for marriage to be than what many of my heterosexual friends marriage is. How hypocritical do we as Christians look condemning gay marriage while headline after headline catch our leaders in affairs and other sinful acts? What is our ultimate goal? Go forth and make disciples of all nations. Do we think banning gay marriage will move the needle on that? We can’t legislate someone’s faith. This is not the Taliban. It is from our freedoms that one can discover true faith, and if that is really our goal, do we really think banning gay marriage is going to make a difference?
But…But…I don’t want it forced on my kids!!
Right, so, we don’t want to have to discuss with our children homosexuality, and we don’t want these values forced upon my kids!! First of all, God forbid our kids see a committed couple involved in their children’s lives and raising them up to be men and women of strong moral character!! What will become of our society!!! Second, just because we don’t want it to, doesn’t mean it won’t exist. Whether marriage is formally permitted or not, our kids are going to be in class with kids of gay couples.
But…But…It’s not a civil rights issue! Gays are not under privileged!!
I’ve also heard many people argue, “Gay rights is not a civil rights issue! Gays are not underprivileged! Just look at how much influence and power they have in media and in business! That doesn’t sound underprivileged to me!” Well, I’m just going to assume that nobody saying that has ever had a gay friend in elementary, middle, or high school. If you think it’s easy, well, you need to get out more. That’s the same argument I get for Asian people – “they’re not discriminated against! They’re so good at math!! They’re so successful!” That, my friend, is in spite of being called “ching chang chong” and Bruce Lee buddy, not because we’ve had it so easy. Again, it is out of our unique and profound freedoms in America that people can come to know Christ, not because we’ve oppressed them or forced them to share our beliefs.
But…But…What about the poor?!
And last, but not least, I’d just like to point out that the bible mentions homosexuality 12 times. but it talks about the need to serve the sick and the poor hundreds and hundreds of times. Jesus never once directly spoke on homosexuality, but he’s spoken at length about the poor and the needy. I wish we as Christians made more headlines for helping the poor and needy than we do blocking gay marriage. But that’s messy and requires a lot of work. I can just cast a vote to ban gay marriage!!!
The little dustup going on at TechCrunch over Michael Arrington’s CrunchFund has awoken the sleeping blogging beast!!! (me, BTW, I’m the beast. I am. I’m like this big bear with claws and fangs..and this blog is like a little bunny, just cowering in the corner…). Been thinking about this quite a bit, especially with starting my own venture, about making exceptions. What TechCrunch is dealing with is a scaling issue.
To build something exceptional, you must make exceptions. To build something scaleable, you cannot make exceptions.
The truth is, most of the extraordinary, incredible things are built by extraordinary, unique, and frequently difficult individuals. They thrive in an entrepreneurial environment because they are not bound by rules. Only an organization that can embrace that uncertainty can truly leverage that brilliance. Yet most organizations are built to scale. To scale means creating rules and standards. Rules and standards usually means least common denominator. “We can’t pay this Mark Zuckerberg kid $120k! He doesn’t even have a degree!” “Salesman X you didn’t book this plane ticket 2 weeks in advance and therefore this expense report is rejected. Nevermind that it was for a client meeting that closed a $1mm deal.” These rules are made so that nobody really screws things up. But they also ensure that the truly great people never really shine. But the challenge is to build a scalable, repeatable organization. Yet at the same time, people are unique by nature, and the brilliant ones are one in a billion.
TechCrunch works despite Arrington’s eight thousand conflicts of interest because Arrington is Arrington, and the writers are who they are, and the culture is what it is. The journalist’s standards absolutely make 100% sense, but they are also standards which means they are the least common denominator, and if you took someone like Arrington and held him to those standards, he would not be who he is, and TC would not be the powerhouse that it is. Would our country be a much better place if it were run by a truly benevolent, clean, intelligent dictator that could not be corrupted and could reign for 40 years and had full authority to make all decisions? Of course. But such a person does not exist. So a system is designed with checks and balances that makes it much harder for any given president to do the right thing, but also guarantees that we never go astray. It is scalable, but very hard for that person to be exceptional.
So then, what? I don’t know that there are answers. Larry Brown recognized Allen Iverson’s brilliance and made exceptions for him and made an NBA Finals run with a bunch of has-been role players. But even that could not last for more than a year. These two things are at odds. Are you making Michelangelo’s David, or a manufacturable toy? An organization has to be one or the other, recognize it, and be transparent about it. When an organization transforms from one to another, casualties are necessary by-product.
I’m worried. Worried that we’re totally screwing it up. We’re at a point where technology is perhaps the most powerful tool for influence and change available to us, but we can’t get out of our own way. Google’s self-righteous stand against the Chinese government, followed recently by Evan Williams’ declaration of twitter’s intent to circumvent the Great Firewall to me just demonstrates an utter lack of understanding for how to get things done in China. It reflects an approach that values a sense of righteousness over the results that that righteousness demands. It’s more important to feel right than to actually make things right.
It’s easy to sit over here on this side of the world and look down upon the spotty human rights track record of China and turn one’s nose down in disgust. However, whether it’s in marriage, business, politics or friendships, I have never seen a lasting resolution to differences of philosophy come without first having empathy for the other person’s viewpoint. Shouting louder or pushing harder may give way to temporary change, but it lacks the conviction to make that change lasting.
So, how do we better understand why China does the things it does? Well, the easiest way for me to think about it is China = Apple/iPhone, and US = Android (or Windows). With Apple, Steve Jobs decides what apps are good for us. It sucks, people get frustrated, but in the end Jobs does this because he believes he’s delivering what’s best. With an iPhone, you don’t have to worry about porn, about malware and trojans. You don’t have to worry about accidentally installing some major resource hog. But you can’t run background tasks, you can’t run Google Voice (until now). Likewise, China makes decisions based on what it thinks are best for the country at large. China looks to the west and sees porn, gun proliferation, Columbine, Lindsay Lohan, and it says thanks, but no thanks, much like Jobs looks at Android and says thanks, but no thanks.
I’m not excusing China, but most of the people shaking their fists at the East think that China’s citizens are as a whole suffering under an oppressive regime, and that’s simply not true. There are things that are definitely very wrong, but there are also things that are working. Very well, in fact. So when the government moves millions of people out of their homes to build a dam, or run a major crime sweep that may net some innocent people, many Chinese would look at the progress and feel that it is an acceptable tradeoff. Calvin Chin eloquently summarizes this general sentiment in his recent post on TechCrunch.
Another important point to understand is that the US views its role on the global stage as the world’s police – if we don’t stand up for what’s right, who will? Meanwhile, China has always been an introverted country – I’ll mind my business and you mind yours. And let’s be honest, aside from a crazy Mongol named Genghis Kahn, the West has had a far worse track record when it comes to global interaction (the Crusades, Christopher Columbus and the Indians, the list goes on and on).
Again, I’m not saying it’s right, just saying that it’s important for us to come from a place of empathy rather than a place of judgment. Besides, we’re not that far removed from slavery, racism, spying on our own citizens, and we’re still the leading polluter (per capita) in the world. We still have major issues with crime and poverty. So before we point out that speck in our brother’s eye, let’s not forget the plank in our own. I’m not saying there’s not a problem, I’m just saying we’re going about it the wrong way.
p.s. For the record, I use an iPhone but am pissed about the whole Google Voice debacle and believe that in the long run I will be using an Android device.
p.p.s. The irony that I’m writing about this on a WordPress blog, which is blocked by the Great Firewall, is not lost on me.
Just had to run off a quick morning rant. ESPN.com ran this article today about Allen Iverson signing with Memphis. Their source for the info? Iverson tweeted about it. Interesting. Being a lifelong Sixers fan, I had no idea that Iverson had a twitter account. So I went to ESPN to read the article and this is what I saw:
Let’s see now, I count at least 5 problems here:
- They don’t mention his twitter name
- They don’t link to his twitter name
- In the video, they go through the trouble of reformatting his tweet, yet they don’t use his actual twitter photo, but instead substitute it for another one
- In the video, instead of mentioning his twitter name, they mention @sportscenter
- I go to the @sportscenter page, and there’s no mention of the Iverson story, much less a link to his tweet
Now, it’s not like the tweet is a side story in this article. The TWEET IS THE FRICKIN’ SOURCE and ENTIRE BASIS OF THE STORY! For this, Mr. Mark Stein at ESPN.com, you earn a coveted monkey bitch slap:
So today, Joe Stump (whom I don’t know) posted a very colorful rant that I’m sure is creating a strong fanbase at The House That Jobs Built, aka Apple HQ. To summarize – he submitted a version of the app, it got accepted, it had a major bug relating to FB Connect for “users who had nobody who were friends with the application installed” (seems like a major use case, as most people will NOT have friends who have the app installed, but I digress). Anyway, he fixed it, resubmitted it, and it eventually got approved, and then a related bug appeared once again. Now, having resolved said issue, he resubmitted, and has been waiting for forever to get it approved. In the meantime users are killing him in the reviews, he can’t get any word back from Apple, and feels helpless as he watches users get frustrated with his application while he has a fix in his hand, but has no way to get it to the user.
Apple sucks, right? By delaying his patch, they are effectively letting their users deal with a crappy piece of software when the better piece of software is just sitting on some verification dude’s desk collecting spiderwebs.
Joe sucks, right? I mean, with no real insight beyond the blog post, it sounds like he left out a pretty major use-case (unless he assumed he’d have massive scale immediately…just like I assume Megan Fox would totally be into me). He messed that up, and then likely in a rush to get a patched version to fix that issue, either broke something else or didn’t fully test it, once again. So on his third try, he thinks he’s finally got it right, and is super pissed at Apple for sitting on it.
Leaving aside those two discussions, it was really this comment on TechCrunch that got me thinking. Kyle basically said, “anyone who blames Joe hasn’t developed software cause you can never have bugfree software and anyone who tells you so is a liar or is a pompous freak who doesn’t know anything about coding” (I’m paraphrasing, but since Kyle left his twitter URL, but has a private account, I can’t find any info about him).
Anyway, to me, this is what it boils down to: we got a web developer writing a client application. Developing for the web is like dating a chick. In the web world, you release stuff at midnight Monday, realize there are 805 use cases uncovered in the first 30 minutes that you had never anticipated, rollback the changes by 1am, code until 10am the next day, and then deploy again. By Wednesday, you get some feedback and some meaningful stats, and then you can change it a couple more times and re-release by Friday. This is awesome on so many levels because of the ability to iterate fast, and make changes based on real user feedback. Sweet right? At a web company, your developer-to-QA ratio is probably something like 5:1 or 10:1 or 10:0 where the guys who wrote the code are the same guys who test the code. If on Monday the chick you meet is ugly, by Tuesday you could line up another date and start over with little or no consequence, save for a few angry text messages.
That’s all fine and dandy because of the nature of the web. BUT, the reality of the iPhone/iPod Touch is that you’re writing client side software. And when you’re writing client side software, you’re getting married. If you mess up, you just can’t patch and deploy as frequently or seamlessly as you can on the web. You can’t just line up another date. You have to fill out divorce papers. And split assets, and figure out child support, and pay lawyers, and stalk ex-wives on Facebook and…eh hem, where was I? If you’ve ever worked at a desktop software company, the developer-to-QA ratio is often 1:1, and for a 6 month development project, QA will easily take 4-6 months on top of that. Why? Cause at the end of the day, you’re printing that bad boy onto a DVD, and putting that DVD in a box, and then putting that box on a shelf at BestBuy. When you do that, you’d better damn well be sure that that version is the right one, that you’ve tested it, and dated it, and found all its flaws and fixed them or worked around them. Point is, when you’re developing for the iPhone, you have to change your mentality. I’m not saying that you need to QA the crap out of that thing and never release it, but I am saying that I bet TechCrunch commenter Kyle never built client software, and I bet Joe Stump just learned that he might want to date his app a little longer before wedding it to the App Store.
So I’ve been meaning to write a post about this for some time. There are a lot of VC and entrepreneur bloggers who write a whole lot about how to pitch a VC. There’s a ton of advice out there about term sheets, pitch meetings and demos, slide decks etc, which are incredibly useful to the entrepreneur. BUT, I rarely see any posts by entrepreneurs about what a VC should do to win the heart of the entrepreneur. And last time I checked, we both need each other to make money. And, despite the way it may seem, entrepreneurs aren’t just looking for a big fat check, but to work with someone they can trust and respect.
As I mentioned in one of my quarantine posts, I was taken away during a Startup 2 Startup dinner, shortly after Dave McClure gave his Startup Viagra: How to Pitch a VC (which is excellent, btw, both entertaining and informative). So with apologies to Dave, I’ve aped his title and turned it around to give VCs some advice about how to appeal to entrepreneurs (and in the process guaranteeing that I will never ever get funded).
We know you’re busy, but so are we
I hear it over and over again from VCs in their blogs and on panels, “we’re busy people, so when we grace you with 15 minutes of our time, make the best of it and don’t screw it up.” But here’s another news flash – starting and running a company is pretty time consuming as well. And while I appreciate the fact that my pitch is taking time out of your busy schedule, THAT’S YOUR JOB! You’re job, and the reason your LPs put money in your fund, is so that you would sit through 1000 of our boring, discombobulated pitch meetings and find the next Google.
On the other hand, an entrepreneur’s job is to build a freaking product and company, of which funding is a necessary evil. So as much as it sucks that we’re taking up your time in these meetings, believe us when we say we’re busy as well, and it’s not just so that we can get to the next pitch meeting. Here’s a tip – TAKE FEWER MEETINGS! If you find that your schedule is overrun, maybe you should scale back. If you have to be 20 minutes late to a half hour pitch meeting, and you’re gonna be pounding on your blackberry throughout the meeting like it owed you money, and then have your assistant pop in 5 minutes early with “an emergency call” so you can skip out on the rest of the meeting, then maybe, just maybe you’re taking too many meetings, and the quantity of your meetings are getting in the way of your ability to do your job right and find the next Amazon.