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Americans are so narrow-minded – a #GDC report

By on March 17, 2010
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Fresh back from GDC (I use “fresh” inadvisedly – having a small child appears to have made jetlag worse), I’ve been reflecting on what I learned at GDC.

My #1 learning?

Americans are very narrow minded. They seem to fixate on the “winner”, and pile in to follow the market leader, ignoring the other successful, profitable businesses or platforms that have got quite so big yet.

What am I talking about?

Facebook and iPhone. The entire show seemed to revolve around “social games” and iPhone games. Every panel, every presentation, every hallway conversation was talking about how these two platforms were the future.

Misguided focus

To a European, the exclusive focus on “social” games is bizarre. Sure, Facebook is a huge platform with approaching 400 million users and Playfish was bought for $400 million, but in the end, Facebook is just another distribution channel.

Admittedly, it is the best, most cost-effective, fastest growth distribution channel at the moment. I would advise all games startups to consider focusing on Facebook exclusively at first, because the capital required to build a popular game remains very close to zero.

But it is not the only platform. I was surprised to see so many VCs trumpeting Facebook, when its primary value to entrepreneurs is that it negates the need for them to raise money from VCs in the first place. It’s so cheap to launch games on Facebook that entrepreneurs can bootstrap their business with nothing more than help from friends and family.

Meanwhile, Europeans online games companies are busy building strong defensible businesses with substantial barriers to entry. Bigpoint was targeting €100 million in revenue in 2009 (I haven’t seen if they achieved it) and has built a network of over 100 media partners, giving it distribution power that is hard for other business to replicate. Gameforge, which generates revenue of “triple digit millions” (in Euros), has a strong position in local languages (I understand that 10% of all Internet users in Turkey, for example, play one of their games every month) and a clear growth strategy. Not to mention GameDuell, Ankama, Spil, Jagex…

I would understand an obsession with “browser-based” games. But an obsession with social games (which is an ambiguous term, but usually seems to mean Facebook games) is likely to perpetuate a goldrush to a seam that has already been heavily mined.

But it’s great news for Europeans, who can continue to build browser gaming businesses with multiple routes to market and strong market positions by country and language group. I think that these European businesses might be more attractive acquisition targets for major media companies than the me-too players that US VCs seem intent on building.

There’s more to phones than iPhone

I feel the same about the iPhone market. Clearly, in the US, the iPhone is the dominant smartphone. But there are other phones, and device fragmentation remains both an issue and an opportunity.

To my mind, the iPhone is the best, most effective gaming platform. It offers seamless purchasing, ease-of-use and a class of evangelists whose word-of-mouth marketing means that iPhone users buy 2.5x as many apps as Android users each month.

But Android is growing faster than iPhone in the US, iPhones represent only 25 of the smartphone market and there is a whole world of opportunity outside the US.

Again, like for Facebook, I can understand why startups prefer to focus on a single, known platform. But the logic is less clear to me for investors. Making games for iPhone is no longer disruptive; the financial killing has already been made.

To be fair, not all companies were so narrow-minded. ngMoco, for example, is keen to be a leader in mobile gaming, (although the iPhone remains the most viable platform).

But my message to all attendees at GDC is this: having a big market is only part of the business opportunity; having the ability to stand out and get your games noticed is key.

If you think you are able to do this on Facebook and iPhone, great. But remember that there are other routes to market which may offer greater opportunity for your business.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com